In a surprise announcement last week, the Prime Minister of Mongolia S. Batbold reported that Mongolia will cancel the auction of the exploration and mining licenses associated with the Tavan Tolgoi (TT) coal deposit in the Umnugovi province of Mongolia.  The TT deposit is located in southern Mongolia and is considered one of the largest untapped coal deposits in the world.

Previously it was understood there was going to be a 51%/49% ownership structure between the Government of Mongolia and the private company(ies) awarded licenses to exploit the TT site.  Based on the understanding that TT was to be developed as a joint venture, much like Oyu Tolgoi (OT), a number of high profile companies were in the running for receiving a license to develop a section of the TT deposit, including USA’s Peabody, China’s Shenhua, BHP Billiton, Vale of Brazil, as well as Jindal from India and consortiums from both South Korea and Russia.

It seems the Mongolian public feels as if it received very little from the OT deal, despite the fact that the agreement was signed a few short months ago and production is still years away.  So instead of the private sector bearing at least half of the risk in the TT project, the government of Mongolia, and more specifically the citizens of Mongolia, are now going to have to worry about market fluctuations, the availability of credit and all of the other associated risks of owning and running a project of this size.

To me this begs the question:  where will the money come from?  The government has already been spend-happy during the past few months with the handing out to every citizen MNT70,000 (USD50), which does not seem like much on an individual basis but when multiplied by the entire population of 3.7 million it comes out to be about USD180 million.  Add to that the MPs (there are 76) voting themselves MNT1 billion to use as they sees fit in their constituencies, and you suddenly have the makings of massive inflationary issues when the country can least afford it, during the Tsagaan Sar lunar new year holiday when spending and purchases spike.

I am all for assisting the poor and ensuring the citizens of Mongolia get their fair share of the minerals Mongolia is lucky (or unlucky, depending on your perspective) to have.  I simply think a more targeted and long-term approach to the situation should be taken,  Instead of giving each individual the same amount, whether they are walking around with a Louis Vuitton bag on their shoulder or digging through the trash for plastic bottles.  The MNT70,000 comes from the Human Development Fund.  It seems to me Mongolia would do well to upgrade its schools, hospitals, and infrastructure (especially running water, heating and electricity to the ger districts) before handing out free money, which is probably going to do very little to actually develop anything.  When the Mongolian Minster of Health goes to Korea for treatment, something is seriously awry.

As pessimistic as this may sound, I do have hopes for Mongolia.  The country is in a position to benefit enormously from its minerals as long as they are handled with care and an eye on the future.  It would be nice to see Mongolia benefit more from taxes, royalties and profit-sharing schemes instead of having an equity stake in these huge, money-intensive projects.  The people of Mongolia deserve more from its elected officials than the paltry sum they have received thus far, namely education, healthcare and safety and security.  With such a small population the benefits derived from the gold, copper and uranium underground could help support the building of world-class hospitals and universities in the country.  Here’s hoping the politicians of Mongolia focus on bettering the lives of their constituents instead of padding their own bank accounts.

Visas – those little bits of paper in our passports that allow us to enter and leave the country.  If you happened to be lucky enough to be born in the US, Europe, Australia or other countries considered the “West” then you can probably travel fairly freely without the worry of getting a visa.  Of course when it comes to employment we all need visas in order to live and work in a foreign country.

While it would seem to make sense that Mongolia would make it relatively easy for people to apply for and be approved for visas, this is not necessarily always the case.  Mongolia, especially during the summer season, actively seeks to increase the number of tourists that visit the country each year.  In a country that has a viable tourist season of only three to four months, one would think applying for a tourist visa would be made as easy as possible.  This, frustratingly for many, is not always the case.  A friend of mine applied for a tourist visa in September at the Mongolian embassy in Vienna to come for a fishing trip.  The embassy required him to present a letter from a Mongolian tourism company confirming he had a hotel reservation.  Luckily I work above a tourism company and this was not much of an issue.  Meanwhile, in London, another person was applying for a tourist visa for the same trip and was not required to provide additional documentation outside of the visa application.  Needless to say, as a company providing visa services this type of discrepancy in policy from one embassy to another makes it extremely difficult to advise clients on visa matters.

I know of several other cases involving work permits and visa issues.  In one case an expat was working as a teacher for a school here in UB.  When the owner of the school began to make teaching there unpleasant he decided to leave, as most people would.  Well, it turns out the owner is the wife of a powerful figure in Mongolia and she was able to single-handedly persuade the Mongolian Immigration Department as well as the Labor Office to deny him a work visa and work permit.  This denial was not based on any actual infraction or breaking of Immigration rules, but was simply imposed on the back of a letter to these agencies.  At a time when Mongolia could use well-trained teachers, of any nationality, she was able to make life very difficult for this teacher because of a grudge.

Another case I am aware of is of an expat worker who was also here teaching.  He had a multi-year visa that was nowhere near expiring and ended up taking another job on that visa but neither he nor the company registered this with Immigration.  When he tried to leave he found out the hard way that somewhere along the way the rules had been broken.  He spoke with the head of Immigration, who ended up fining the company for not properly registering him and telling the expat that there would be no problem for him in the future.

Well, you guessed it.  He subsequently tried to return to work for a company here in Mongolia but was told he had violated not one but two Immigration laws.  He went back and spoke with the same person at Immigration, who feigned not remembering the situation although it had taken place just a few months before, who said there was nothing he could do, even though he is the head of the Immigration Department.

So at a time when Mongolia should probably be actively seeking to increase tourism numbers and the amount of foreign investment, and thus expat workers, it seems to be doing just the opposite by making a visa more difficult to obtain.  While I fully understand and support a country’s right to give visas to anyone it pleases, I also see a need for Mongolia to have exposure to international best practice in any number of sectors of the economy.  A great way to get this exposure is to allow foreign employees to work in Mongolia and pass knowledge and skills on to Mongolian workers.  Mongolia already practices a foreign worker quota system, so there is little fear that foreign employees are going to overrun the country.

This blog has morphed into a different beast than originally intended, but the moral of the story is to always follow the rules.  The Mongolian authorities will definitely seize an opportunity to deny a visa, registration or some other application.  At the end of the day, as tempting and easy as it may be, it is better to follow the letter of the law.  It may take a bit longer, but following the law is going to be your best defense against future problems.

Mongolian and English are hardly two of the most compatible languages.  Vastly different in their origins and structure, translation from one to the other can be a difficult prospect.  Mongolian is a Turkic-Altaic language that generally uses a subject-object-verb structure, which takes some time for Westerners learning Mongolian to get their heads around.  Translating from one language into the other takes a certain amount of care and finesse. 

If you or your company is going to offer translation in Mongolia you need to have a stiff upper lip.  As I said, not only is the act of translation itself difficult but many Mongolians are notoriously picky, for lack of a better word, when it comes to translation.  My boss often tells of her experience of having the Mongolian Minerals Law translated into English.  A group of five or so Mongolian translators were brought together to translate the law into English.  The translators were from various mining companies, mining-related NGOs and law firms and the idea was to bring in a group in order to ensure the best translation possible was made.  Well, weeks later a consensus was finally reached but not without much gnashing of teeth and hair-pulling.  Nobody could agree on wording, one translator wanted “contract”, for example, while another wanted to use “agreement.”  Needless to say such nitpicking is going to cause translation time to slow down considerably.

Technical translations, like the Minerals Law that combines legal, mining, and geological terminology, can prove to be extremely difficult and can leave the translator open to much criticism.  Whichever end of the translation you may be on, whether it is ordering the translation or actually doing the translation, both sides need to be prepared for a little give and take.  The translator is going to need to accept the fact that someone out there is going to disagree with her translation and the client must understand translation is not an exact science and thus should be willing to work with the translator to produce the best possible document.

Another issue to keep in mind is when a translation is finished it will rarely sound as if it was written by a native speaker.  A reader of a translated document will invariably find what s/he considers a mistake in the translation.  This can occur due to any number of reasons, including differences in language patterns, cultural differences, or differences in ways ideas are conveyed.   For example, I think English is more of a direct, to-the-point language, especially in business matters, while Mongolian seems to be a little more descriptive, taking its time to get to the point.  Most translators also translate documents quite literally instead of imposing too much of themselves or their interpretation onto the translation, which may also lead to further perceived problems in the translation.

So while on the face of it translation seems as if it should be a fairly straight-forward Point A to Point B process, it rarely is, especially in the case of such differing languages as Mongolian and English.  Translation in Mongolia is a balancing act that tries to convey the idea and meaning from the original language while simultaneously attempting to make it sound as natural as possible in the translated language.

Visas are the bane of travelers everywhere, except possibly diplomats, especially if you are a business traveler. W hen you are traveling you may spend as much time queuing for a visa as actually enjoying your trip.  Visas to visit, live, or work in Mongolia are somewhat readily available but advanced planning is definitely necessary.

The visa and immigration system of Mongolia is covered by the Law of Mongolia on the Legal Status of Foreign Citizens. This law covers everything from diplomatic immunity to the deportation of foreign citizens and everything in between. The English language translation of the law is a short 9 ½ pages, so needless to say the Mongolian Immigration system is quite basic at the moment, which is actually nice in many ways.

When applying for a visa to Mongolia the simplicity of the system will keep you from going crazy trying to figure out the Immigration Office’s rules and regulations. On the other hand when a situation arises that is outside of the scope of the Immigration Law, things get a little bit stickier, although the simplicity does make my job of dispensing visa advice that much easier.

Most visitors will really only have the need for four visa types – a J (tourist), B (business), HG (work) or T (Investor’s) visa.  In the following, text, we will cover these visas as well as some common Mongolian visa issues.

Tourist visa – J

Let’s start with the run-of-the-mill tourist visa. It pretty much does what it says on the tin. If you are coming just to travel then this is all that you will need. A J visa is generally issued for 30 days with the possibility of extending for another 30 days. Unfortunately the Mongolian embassies/consuls like to play by their own rules so there is no overriding procedure for how to apply for a J visa. I know that the London embassy will issue a J visa very easily, with little or no supporting documentation from a tourist agency in Mongolia. On the other hand a friend recently applied for the same visa in Vienna and I had to get him a letter from a Mongolian travel agency stating he had a hotel reservation booked. Go figure.

If you are lucky enough to be a US passport holder then you get 90 days, visa-free, to roam around the country. I presume it is still as easy as it once was for a US citizen to enter Mongolia without a visa. I know when I arrived two years ago I passed through Immigration no questions asked. Of course now I have a visa and long-term residency permit, so it is no longer an issue.

As the name implies, the J visa is for tourism purposes only. A J visa holder is not allowed to engage in any type of work or business activities while in Mongolia.

Business visa – B visa

A B visa is intended for very specific purposes when visiting Mongolia, including attending business meetings, negotiations, exchange programs, conferences, seminars, congresses and workshops on trade and economic questions and auctions, exhibitions, shows and other events commercial in nature.

B visas should be applied for before entering the country at any consul or embassy of Mongolia. The applicant must have a Mongolian company apply on his/her behalf at the Immigration Office here in Mongolia. If Immigration approves the request it will send an approval letter to the Ministry of Foreign Affairs, which will then fax it to the relevant consul. The applicant can apply for the visa at any consul, not just the consul in their home country.

A B visa is good for 30 days with the possibility of extending up to another 30 days. Multiple-entry 6 or 12 month B visas can be applied for once the person has entered Mongolia. These are also good for 30 days per entry with the possibility of extending an additional 30 days perhaps once during the 12 month period. Any further extension attempts and the Mongolian Immigration officials become suspicious that the B visa holder is actually here working.

While a B visa can technically be applied for upon arrival (through the same procedure as above, except Immigration will send its letter to the airport, not fax it to a consul) I do not suggest it. In my experience Immigration Officials are too fickle to risk waiting until the airport to apply for a visa.

US citizens do not need to apply for a B visa if they will be here less than 90 days. Please check the visa requirements for your country.

HG Visa – Required for Work

There are actually three components required for an expat who has an HG visa to work – a work permit from the Labor Office, an HG visa and a long-term residency permit.

Before arrival the expat’s Mongolian company will need to obtain approval from the Labor Office first and the Immigration will then issue an approval letter to be faxed by the Ministry of Foreign Affairs, like the B visa.  The  Mongolian company should allow 3-4 weeks for this stage.  The expat will then apply for the visa at the consul, enter Mongolia and will need to be registered within seven (7) days of arrival in Mongolia, including weekends, with Immigration.

Once they have arrived the work permit will need to be applied for from the Labor Office. Once this has been issued the yearlong HG visa will be applied for from Immigration, at the same time applying for the expat’s long-term residency permit as well.  This stage may take another 2-3 weeks, but the expat can begin working immediately after arrival.

HG visas will be issued for as long as the work permit has been issued, up to a maximum of 12 months, with the possibility to extend each year. A work permit must be obtained for any foreign worker who is coming to Mongolia to work (with the exception of an investor or executive director – more on that below). Expat workers are also liable for Mongolian income tax and social insurance contributions on any income earned while working in Mongolia, subject to double taxation treaties your country may have with Mongolia.

There is also a foreign-worker quota in Mongolia that is issued annually by the Government of Mongolia. While the quotas do vary, generally 5-20% of a company’s workforce can be foreign, with the default quota being 5%.

In conjunction with an HG visa H visas can be issued for dependents of an employee. They can be applied for at the same time as the HG visa. Please note original birth certificates/marriage licenses will be required by the Immigration Office in Mongolia to issue long-term H visas to dependents.

T visa – Investor’s visa

A T visa is a special visa given to either an investor or a foreign executive director of a foreign invested company. A maximum of three may be issued per company, two for individual investors in a company and one for the executive director of the company.

First the investor or ED will need to apply for an Investor’s Card from the Foreign Investment and Foreign Trade Agency (FIFTA) in Mongolia. Once this has been issued a T visa is applied for in the same way as other visas. First permission must be obtained from the Immigration Office and the approval letter will be faxed to the person’s consul of choice. While procedures do vary from consul to consul the employee will most likely be issued a single-entry T visa which will need to be converted to a yearlong T visa upon arrival. At the same time the long-term residency permit will be applied for at Immigration. Like an HG visa holder, a T visa holder will need to register with Immigration within seven days of arrival or face stiff penalty.

T visas are good for a year and can be renewed annually. The advantage to a T visa is that the holder does not need to have a work permit to work (or pay the associated workplace fee) and the T visa holder does not count against a company’s quota of foreign workers.

If the foreign-invested Mongolian company has a corporate shareholder that company is limited to a single T visa for the ED.

Visa issues

Of course the flip side to the Mongolian Immigration system being fairly simple means that there is little room to maneuver within the system for any outliers, such as consultants or non-married partners of expat employees.

In the case of short-term consultants it makes little sense to apply for an HG visa and work permit as the entire process takes several weeks, although to legally work in Mongolia a work permit is necessary. While it is often tempting for companies to try to get away with a consultant on a B visa, that is technically breaking Immigration law in Mongolia. In addition to needing a work permit any expat employee who works in Mongolia is liable for income tax and social insurance contributions on any amount earned in Mongolia, even if the employee only works for a day. The Immigration system is fairly rigid on this, which makes it difficult for consultants or other short-term contractors who may be coming to work in Mongolia.

Another area that is unaddressed is a visa for an expat employee’s unmarried partner. Basically the partner is going to be out of luck without either a job in Mongolia or a marriage license showing s/he is married to the employee. There are options that can be explored, but without a job here themselves the partner is going to have a difficult time securing a visa in order to stay in Mongolia for the long term.

In our experience the Immigration Office can be one of the more difficult agencies to deal with, like bureaucracy everywhere, I suppose. At the end of the day it is necessary to deal with them at some point for most foreign visitors to Mongolia and their bark is usually worse then their bite.

Well, the Actual Plague, For One

As the title implies, you will probably want to actually avoid the plague in Mongolia. While Mongolia has definitely not reached this level…

…the fact of the matter is that the plague is present in the country.  Much of Mongolia is still open pasture and grazing land, largely uninhabitable by the small population and marmots, or groundhogs as we know them in America, are relatively common in the countryside.   While most of us in the US wouldn’t be caught dead eating a groundhog (we have too much good stuff like prairie oysters), in Mongolia, although it is illegal, hunting does still occur.  Although Mongolian hunting methods supposedly prevent an infected Marmot from being shot and eaten, I’m still not taking my chances.

After killing your prized, illegal rodent, next comes the preparation.  Usually marmots are hunted and killed from afar but traps are also used to capture live marmots.  If caught it a trap the savage beast is usually bonked on the head with a stone, sort of a David and Goliath in reverse.  After that all the guts are pulled out, of course, to make way for the hot stones, sort of a kalua pig in reverse.  So while the bad boy is cooking from within someone is usually blow torching all of its valuable hair.  Or, if you enjoy your meat boiled to death, you can plop that sucker into a boiling cauldron for a mouth-watering treat.

Crazy Little Thing Called Buuz

While buuz are not going to kill you like the plague, you might wish you were dead after eating eight or ten of them.  Buuz are traditional steamed dumplings eaten year-round in Mongolia but are especially popular around Tsagaan Sar, the lunar new year.  The small, round piece of dough is usually filled with minced mutton and an equal amount, if not more, of mutton fat.  The dough is then pinched and steamed for about 20 minutes.  If you’ve never experienced the smell of steamed mutton there is little comparison I can make.  For some unknown reason very little seasoning outside of salt and maybe some pepper is used.  And vegetables?  Fugidaboudit!  Although in Mongolia you can find more and more places that serve vegetable buuz or buuz that are more palatable to the Western tongue, hardcore traditional buuz are pure mutton and fat all the way.

The Wikipedia entry on buuz makes me laugh because they list other, and I’m sure much better, Asian variations on the Mongolian buuz.

But the coup de grace is when you finally get to bite into one of these scrumptious little bundles of joy.  I would recommend having a burn unit stand by as most likely you’ll be getting a face full of scalding grease when you sink your teeth into one.  The Mongolians have perfected a sucking technique, but unless you want a mouth-full of mutton grease, I would not recommend this maneuver.  Of course this means it’s probably going to end up running down your arm or all over the front of your shirt, but that’s a small price to pay.

Watch Out for that Hoooolllleeee…

Winter’s coming.  In order to prepare for those -40C winters what do you do?…pop off all the manhole covers and watch the hilarious hijinks begin.  I personally have never seen someone actually fall down an open manhole, but of course you see people tempt fate all of the time walking over them like there’s no chance they might trip and fall.  In some sort of sadistic way you may want to see someone actually fall down one, but not really.

I do know of a former Peace Corps volunteer who actually fell down one, although I didn’t actually witness it.  This comes straight from the horse’s mouth, so I gotta believe it’s an accurate portrayal.  He was walking along the streets of UB yapping away, as he is wont to do, and all of a sudden “the world just got bigger.”  Luckily he had the presence of mind to put his arms out and catch himself before he was eating corn on the cob with no teeth.  It would have been priceless to have a video of it, but alas, this was in the days before ubiquitous mobile phones in the hands of every Tom, Dick and Harry.

Vodka:  The Ambrosia of Mongolia

Oh, we have the Soviet Union to thank for this one.  The ever-present bottle of vodka even manages to find itself in Buddhist ceremonies here in Mongolia…I’ve never been exactly sure how that one happened.

Most, if not all, of the Mongolian-made vodka is made from grain.  Even the high-end stuff is not particularly high-end, if you are a connoisseur of vodka.  Pick a party, any party, and there will be at least one bottle on the table, usually several.  And once a bottle has been opened, that is it, nobody is leaving until it has been finished.  It generally works like this:  everyone has their glasses filled up and you all neck it at the same time and on and on until he bottle has been finished.  If you’re lucking enough you may be in a group with only one cup, which gets passed around and refilled after it has been drained.  If you’re last in line I would definitely make sure it has been drained…you don’t want any of the backwash dregs.  If you really cannot handle the vodka simply touch the glass to your lips and that should be enough.

For reasons that have never been fully explained to me Mongolians will not drink out of the bottle.  One might think it would be for reasons of civility or sanitation, but I beg to differ, especially considering what I have seen and/or actually used as a cup.  I have seen vodka drunk out of a lipstick lid and have heard of the ashtray of a Russian jeep being used, although I’d like to think someone just made that one up…I mean, an ashtray.

UAZ:  The Cadillac of the Steppe

Two types of these are common in Mongolia, a jeep and a van.  While were probably the most common vehicles in Mongolia one, in the city at least the Land Cruiser  and Hummer (ugh) have become more common.

Don’t get me wrong, these are great vehicles and can go virtually anywhere in Mongolia.  They are mostly mechanical and have very little in the way of electronics, so they are great for the cold weather.  If the engine won’t turn over on the battery they come equipped with a crank to manually start the engine.  And if they get stuck in a river or bogged down in the mud the crank can be used to move them along centimeters at a time until they can be started again.  Case in point…

But like many things utilitarian, the UAZ 469 jeep (see the above-mentioned ashtray) and Forgon van are not the most rider-friendly vehicles on the road.  They pretty much will get you anywhere you want to go, but your insides will definitely be shaken and not stirred.  If you have the slightest hint of a weak stomach, steer very clear from these cars.  If you are hung over from the above-mentioned vodka, either come prepared with an airsickness bag or wait until the next day.

This list is obviously just for fun.  Most people who visit the country cannot help encounter at least a few of the entries on this list, and most actively seek them out…well, probably not the open manholes.  So the next time you visit Mongolia good luck avoiding, or enjoying, as the case may be, these things.  And for those of you who have had the pleasure of actually traveling or living here I would love to hear your particular stories on fun in Mongolia.

The Ouy Tolgoi Investment Agreement was officially signed on the auspicious day of October 6, 2009.  The ceremony was broadcast live throughout Mongolia on Mongolian television and can be seen here:

The stars finally aligned on October 6, 2009 as senior members of the Mongolian Government hosted senior officials from Ivanhoe Mines Mongolia Inc and Rio Tinto International Holdings. October 6 was chosen as the signing day because according to Buddhist lams it is an auspicious day on the Buddhist calendar.

The Oyu Tolgoi site (Turquoise Hill in English) is predicted to be one of the largest reserves of gold and copper in the world, with an estimated mine life of 40 years.  It is also the largest development project and foreign investment in the history of the country.

On a related note, it has been reported that one of the signers of the investment agreement, Mineral Resources and Energy Minister D. Zorigt, yesterday won the by-election for the Parliament seat left vacated by the current Mongolian President Ts. Elbegdorj, who was elected in June of this year.

After continued negotiations for the better part of the decade the Oyu Tolgoi Investment Agreement has finally been signed by the Government of Mongolia, Rio Tinto and Ivanhoe Mines Mongolia.

There have been numerous false starts to finalizing the OT agreement this summer. It was rumored that it would be signed before the Naadam national holiday held each summer on July 11-13. An Extraordinary Session of Parliament was held in late August which modified or repealed several laws that paved the way for the signing of the Agreement followed by report that it would be signed by the end of September. Well, September came and went with no movement.

The stars finally aligned, literally and figuratively, yesterday, October 6, 2009 as senior members of the Mongolian Government hosted senior officials from Ivanhoe Mines Mongolia Inc and Rio Tinto International Holdings. October 6 was chosen as the signing day because according to Buddhist lams it is an auspicious day on the Buddhist calendar.

One can only guess what conditions would currently be in Mongolia if the agreement had been signed five years ago and Mongolia had been able to take advantage of the commodity boom.  Hopefully the long wait will be worth it with great changes to both the country and the people of Mongolia hopefully being realized.

I am personally very excited to see what this means for Mongolia’s business community.  With an estimated $30 billion to be generated in tax revenues over 50 years Mongolia is in an enviable position to be financially able to drastically improve the lives of the Mongolian people.  To that effect, Mongolia is setting up a sovereign wealth fund that will be run by professional managers, according to Bloomberg.  The aim of the fund is to disburse a part of the profits from mine sites to everyone in Mongolia, either through cash or non-cash means.

Following up on my previous two-part blog on difficulties and challenges of doing business in Mongolia, this blog will focus on why some expats may experience difficulties because of the way they think things should be done in Mongolia but aren’t.

That’s Not How We Do It

A major difficulty I see foreigners dealing with here, especially as managers of companies, is their wanting to run their companies according the legal system they are familiar with.  While we are all guilty of saying “Well, in the US we do this” or “In the UK we do that” unfortunately this just does not translate well to doing business in Mongolia.  The legal system in Mongolia is undeniably a product of the Soviet system, and while Mongolian lawmakers have pretty much rewritten most laws since the transition nearly 20 years ago, the major influence on many of the politicians remains the Soviet Union.  So while it is easy to fall into the mindset of “that’s not how we do it in…” you will only end up driving yourself mad thinking that way.

Laws in Mongolia can be extremely different from what we are used to.  For example, the Labor Law in Mongolia is extremely employee friendly.  The employer cannot really dictate anything to the employee as everything must be mutually agreed upon.  There is also no at-will termination, and based on Supreme Court interpretations of the law it actually leans towards lifetime employment.  That can be difficult for many foreign HR people to get their heads around.

Many expat workers also expect the Mongolian legal system to be comparable to either China or Russia’s legal system as well.  I am no expert in either one of those systems but I do know that Mongolia has a unique legal culture unto itself.  While the Mongolian legal system would share some characteristics from these countries, one no definitely not come expecting to understand the Mongolian legal system based on either one of these countries.

You Mean We Need it in Mongolian?

Many expat workers, unless they have experience working in foreign countries, also tend to forget about the translation issue.  While the Civil Code does allow for freedom of contract meaning contracts and agreements can be executed in any language, whenever your company is dealing with a Mongolian government agency, which will be fairly often, they require everything be translated into Mongolian.  For foreign-invested companies agencies usually want to see the original in English and a Mongolian translation.

It is also easy to forget that every Mongolian does not speak English equally well as the employees most foreigners work with.  Whenever meeting with Mongolian clients or doing business with other Mongolian companies, pretty much everything will need to be translated into Mongolian if originally produced in English or another foreign language.  The same rule applies equally to Mongolian documents.  It can easily slip the mind of an expat that the working language is not your native language and documents will probably need to be translated from Mongolian.  My bit of advice on this is to allow plenty of time to translate documents before meetings to make sure they get done in good time.

The Personal Touch

In our world of 24/7 connections via our computers, iPhones or Blackberries it often seems to slip our minds that we can actually meet face to face.  Well, in Mongolia they still believe in the art of the in-person meeting.  That takes a lot of getting used to for most foreigners who feel that their time may be better utilized by sending an email or making a quick phone call.

This is especially true when dealing with Mongolian government agencies.  Virtually everything, from submitting monthly tax reports to simply requesting the steps and documents necessary to apply for a license will require a trip to that office.  This drives more than a few expats mad as it seems like an enormous waste of time, as indeed it is.  But try calling Immigration for the procedure to apply for a tourist visa and see where it gets you.  There’s nothing like some good ol’ face-time in Mongolia to accomplish your mission.

We Don’t Need No Stinkin’ Employment Agreements

Well, yes you do.  As I stated above the Mongolian Labor Law is very pro-employee.  As such it is illegal to have someone work for you without an employment agreement/contract in place.  Although many companies in Mongolia are guilty of doing this and usually do not think twice about it, it can come back to haunt them if the employee were to ever bring legal proceedings against the company.  Dollars to donuts the employee will be returning to work if s/he were to sue the company for wrongful termination and there was no employment agreement in place.

It is very easy not to execute employment agreements when hiring a new employee.  Even companies with a dedicated Human Resources department can fail to properly comply with the Labor Law in this respect.  Most employees are most likely not that familiar with the Labor Law and do not know the company is legally bound to sign an employment agreement with them.  On the other hand, the company may think they are getting away with something by not having an employment agreement.  This definitely is not an idea that will work and will only be trouble in the future.

To deal with this issue it is highly advisable to simply have an employment agreement template that your company signs with every employee upon hiring.  A foreign contract/employment agreement could be used as a base but it will definitely need to be vetted by a law firm or an HR consulting firm in order to ensure it complies with Mongolian law.

The Mongolian Labor Law also makes a distinction between a contract, which can only be used for high-level employees, and employment agreements, which would be used for the majority of your employees.  These two documents have different regulations and procedures in the Labor Law.  There is also a Government Resolution that defines which positions can actually be contracted.  Yet another issue to contend with.

Foreigners Need Not Apply

Another issue many foreign-invested companies are often surprised by is the foreign-worker quota in Mongolia.  The quota is regulated by an annual Parliamentary Resolution that defines, by business sector, the number of foreign employees a company can have.  It can be as high as 90% of the workforce for petroleum exploration, but generally varies from 10%-20%.  The default quota, for a sector that is not listed in the resolution, is 5%.

This quota is based on the number of people the company has listed as paying social insurance for.  Every time a company applies for a work permit for a foreign employee it must get a Social Insurance reference letter that shows for how many employees social insurance is paid and how many expat employees the company has.  If the company has reached its quota then the Social Insurance office will not approve a work permit being issued.

Visit Early and Often – Getting Legal, HR and Other Advice

In more cases than I care to remember I have seen companies come to ICMC after a situation has already gone pear-shaped.  While most of the time there are no issues when a company relies on its own staff to handle matters, for some issues, especially those legal in nature, or those dealing with specialized areas such as labor matters, HR matters, immigration problems or company registration issues it can be better to consult with another party who may have more experience in the area concerned.

I probably see this most often relating to tax issues or labor matters.  A company may try to use its own employees to handle problems as they arise, which is perfectly understandable, but many times these issues are too complex for the average employee to be able to handle well.  Usually it comes down to having a law firm or another consulting firm help solve the problem.  All too often I have seen companies realize they will need outside help when it is almost too late to achieve good results.

The best advice I can give if your company is new to Mongolia, or even if it is not, is to find a good law firm to consult with when those pesky legal issues pop up.  It is also a good idea to find a firm this is able to assist with immigration issues, tax problems or company certificate renewal and other compliance issues.

We’re Going To Need That in Writing

My final topic is on corporate registration and any changes to a company’s State Registration Office (SRO) certificate or its Foreign Investment and Foreign Trade Agency (FIFTA) certificate.  Mongolian agencies require a Shareholder’s Resolution in order to register any changes on either certificate, including registering a new Executive Director, increasing the capital, changing shareholders (in which case you will need resolutions from the old and new shareholders), and adding a new business activity of the company.  Regardless of whether the shareholder of the Mongolian company is located here or not, the authorities will require an original signed resolution from the parent company.

In a similar vein official request letters are needed for virtually everything your company will want to do in Mongolia.  To open a new bank account, a request letter is needed.  To have a telephone line installed, a request letter is needed.  Even to get a detailed phone bill listing numbers dialed, you guessed it, a request letter is needed.  It can get out of control at times but at least you can’t accuse Mongolia of not continuing its socialist background of needing paperwork for everything.

This is a small list of what I see expats struggle with when working in Mongolia.  Some issues, like the legal system, are usually just a person falling back to what they are familiar and comfortable with.  Others, like translation or request letters, usually takes a little getting used to and then it ceases to be much of an issue.  Working in any foreign jurisdiction has both its challenges and its rewards and Mongolia is no different.

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