Foreign Workers Quotas: Limiting Expats in Mongolia
The Government of Mongolia imposes foreign worker quotas on businesses operating in Mongolia, both foreign-invested and Mongolian-owned companies. The quota ranges from 5% to 80%, depending on the sector, the amount of investment and the total number of employees a company has. For all foreign-invested companies the default business activity is “foreign trade,” which carries with it a quota of 5%, meaning a company must employee 20 Mongolian employees for every expat it employees. Quotas go up from there depending on the sector – for example any company with a mining or exploration license has a quota of 10% while a company that extracts oil or natural gas can employee up to 80% of its workforce as expats.
A Mongolian is considered an “employee” when an employment agreement has been executed between a Mongolian-registered company and the person and the company withholds personal income tax and social health insurance (SHI) contributions. When a company is applying for a work permit and HG-type visa (the visa type needed to work in Mongolia), in addition to quite a few other documents, a letter issued by the SHI Office is needed. This letter will show the number of people the company transfers SHI payments on behalf of, which is how the number of a company’s employees is determined. On the basis of this letter the Labor Office will then decide whether or not to approve the issuance of a work permit.
As long as the company falls within the quota there will not be a problem getting the work permit issued. Once permission for the work permit has been granted application must then be made at the Immigration office for an entry HG visa. The consul at the Ministry of Foreign Affairs will then fax the letter to the applicant’s embassy of choice. After arrival the expat is free to begin working immediately while the long term work permit and visa are being applied for.
As I post this new foreign worker quotas are being considered by Parliament. There are rumors that the quotas are likely to become more restrictive rather than remain the same or increased. As opposed to industry-wide quotas, for example a mining company having a flat 10% quota, the list may be broken down into specific jobs within a sector. Without seeing the actual numbers it is difficult to give too much commentary but hopefully the quotas will not be so restrictive as to affect much-needed foreign investment. It would seem decreasing the number of foreign workers would be counter-intuitive, especially at this crucial time in Mongolia’s development. At the moment Mongolia simply does not have a large enough workforce with the experience necessary to run such large projects such as Tavan Tolgoi or Oyu Tolgoi.
I can only hope that Mongolia will take advantage of having foreign workers in country in a more constructive and productive way. I can understand the government not wanting the country to be overrun with foreign workers, but on the other hand it is an excellent opportunity to exploit the situation. It could be an easy way to increase the amount of taxes paid and contributions to the Social Insurance fund as expats generally have higher salaries that the average Mongolian. Additional money could also be raised through fees for employing an expat instead of a Mongolian. One fee currently charged is a “workplace fee” the Labor Office charges in the amount of MNT216,000 per month per work permit. The government could also charge a fee if a company wants to bring in a larger number of expats than allowed by law.
I also think Mongolia is missing a golden opportunity to have its workforce trained in the areas that are most crucial to its economy at the moment, free of charge. Regulations could be imposed that would require a company to train a Mongolian in every position in which an expat currently works. The expat would simultaneously train Mongolians while effectively working themselves out of a job – thus reducing the future reliance the Mongolian workforce has on foreign knowledge and increasing the number of jobs for Mongolians.
Being from the US, I do not really see an issue with allowing expats in to work. Granted the situation has changed recently, but America was built on the backs of immigrants who came in, worked hard and helped the US develop in the 19th and 20th centuries. Few countries can completely meet the demands of its labor needs using only its citizens, including the US, the UK or Australia to this day. Hopefully the government will realize there is nothing wrong with needing outside help and will use this opportunity to the country’s benefit.
yes, this is an important topic – but again it reminds us about another thing, absorptive capacity , that is the country need to allow foreign investment in the amounts it can actually absorbe and able to manage. perhaps we do not need to depend to much on large scale minign projects – the country is small fully self-sufficient and, therefore, does not need huge amounts of money
All your points about the practical aspects of allowing more ex-pats in Mongolia are good ones but I think there is a larger context you have missed. The history of this region is deep and entangled with centuries of territorial aggression and control on all sides. Today, Mongolia is surrounded by two extremely powerful modern nations – Russia and China. Each of them is focused on Mongolia’s natural resources and is actively engaged in attempting to secure a wide variety of investments to increase access to these resources. In addition, China long ago took over part of what Mongolians consider their national territory which is now the so-called Autonomous Region of “Inner Mongolia.” Mongolians have only to consider that and then observe the takeover of the Tibetan state and culture by the contemporay infux of Chinese, to want to be extremely careful about any influx of nationals from far and near.
Hi Bold, thanks for your comment. I agree 100%, Mongolia can make great strides forward with small amounts of money due to its small populace. I think a Pandora’s box has been opened with the signing of the OT agreement and there is no going back from these large-scale minerals projects at this point. Hopefully these will be managed in the best interest of the country and not only to the benefit of the very few at the top.
Hi Nancy, thank you for reading. I understand to a certain extent the reticence Mongolians have with letting foreign workers enter. Perhaps I am being too naive, but in today’s geopolitical environment and era of the “3rd neighbor” policy I would like to think pressure from the US, the EU or Japan and Korea would prevent a Tibet-type scenario from ever occurring. Foreign workers will come in, in most cases legally but some illegally, and hopefully they will be used to maximize the benefits to Mongolian companies and workforce.
There is a popular belief among Mongolians that they do not believe our lovely third neighbours would come rushing for help in case any of our neighbours invade Mongolia. To think that the US, for example, will impose an embargo say on China because they sent in its troops into is naive. You don’t bite the hand that is feeding you.
Hi Bayar, thanks for reading. In the post I do not mention any type of invasion scenario and perhaps used a poor choice of words in a previous comment on “Tibetan-type scenario.” It was not meant to imply that I think the Chinese are planning an invasion, but was simply referring to an influx of foreign workers in general. The point of my blog was that Mongolia, like every other country in the world, needs foreign workers. As a Mongolian who, I believe, works overseas, I think you have a better understanding of that than many.
Hi Bobby, I did not take your comments as implying any invasion. I was just stating the popular belief among Mongolians.
Hi Bayar, thanks again for your comment. Of course my perspective is very limited, my being an expat living in Mongolia, and obviously differs from the average Mongolian. It is good to hear from the Mongolian point-of-view and have added insight into why certain choices have been made. I hope you keep coming back to the site. thanks
Lets consider something different. Expat company sets up business in Mongolia in late 90′s. Expat company trains local people and now utilize the skilled Mongolian employees in Pakistan, Australia, Korea and any other place we may operate. Once local Mongolian’s have now become expats themselves.
Hi Bobby. If you purely talking about employment of skilled and experienced foreigners I totally agree with you we Mongolians have lots to learn(skills of management). However, considering mongolian environment it seems people live wages to wages thus voluteery experience not really practical. In instance, in developed countries at least supply transport fee and may be include lunch as well but in Mongolia does not. Also for expats, of course, will be differed from average mongolian because of they rated as US or …. countries. Anyways thanks for your article and I personally happy to grab every single experience from professionals either don’t mind volunteering because really looking for it as well here in London xxx