Posts Tagged ‘Mongolia business’

Expats in Mongolia: You’re Not in Kansas Anymore

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.

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Doing Business in Mongolia: Potential Business Challenges, Part Two

Following up on Part 1 of some challenges to be prepared for when working or doing business in Mongolia, here is Part 2. This list really focuses on more practical things that many people who have worked in foreign countries may have already experienced, such as occasional electricity or internet outages or translation issues.

Electricity and Internet Outages

As I have already mentioned above, Mongolia, like many developing countries, has at times issues with electricity. This is due, in no small part, to the construction boom that has been going on for the past several years, but which came to an abrupt halt almost exactly a year ago. Mongolia is a very centralized country, with virtually everything coming through UB before being sent out into the aimags, and electricity is no exception. Of course is doesn’t help matters when all of the power plants are also located in the capital city.

Because of the huge surge in demand for electricity, mostly from new apartment and office buildings throughout the city, electricity outages are prone to happen. That said, more often than not they are caused by construction crews not really knowing what they are doing and cutting through the line. Power outages are occasional, but when they do happen they can last for a half a day or longer. My advice…have some good old fashion non-computer work on hand, or a laptop with a long battery.

Internet outages similarly occur.  Internet outages seem to occur more often but usually last for shorter periods, usually ranging from ten to 30 minutes. Internet service interruptions are sometimes caused by problems with lines from China or Russia but are usually a result of someone cutting through the line. If the intertubes are an absolute necessity for you Mongolia’s internet service providers are offering better and faster service every day and USB modems are available from several ISPs. Read the rest of this entry »

Doing Business in Mongolia: What They May Not Tell You

Some Realities of Doing Business in Mongolia

When attempting to talk up a place for investment, tourism or attracting people for some other reason the difficulties of a country is often downplayed or completely ignored, and Mongolia is no exception. At many of the numerous investor’s conferences that pop up here in Ulaanbaatar or in Hong Kong, London, or New York I think many panelists simply pay lip service to the fact that some aspects of doing business here are just plain difficult while ignoring the reality of the situation.

While I believe Mongolia has much to offer an investor or business person, in the interest of full disclosure I would like to present some of the difficulties of doing business in Mongolia. I was originally going to make this two parts, with part one will focusing on the way things actually operate in Mongolia and why this might make things difficult and part two focusing on why running a business may seem difficult to expats because things don’t work like they think they should. But it kept growing so now this is going to be part one of an unknown number in a series . Read the rest of this entry »

Oyu Tolgoi Investment Agreement To Be Signed Within Weeks

ULAANBAATAR, MONGOLIA – Along with the sounds of groaning children, school bells and homework assignments being handed out on this traditional first day of school in Mongolia, there can also be heard a quiet sigh of relief due to reports of the imminent signing of the Oyu Tolgoi (OT) Investment Agreement.

An unnamed government minister has said in The UB Post newspaper that he expects the Oyu Tolgoi agreement to be signed within two week’s time by both sides.  While we have all heard this time and again during the past five years of negotiations, it looks like these words may actually come to fruition this time.   In the past the Investment Agreement has sought to alter current laws in order to make the agreement more favorable to one side or the other.  The current incarnation of the agreement complies with all current Mongolian Laws, thus making it much more likely to be accepted by the Government. Read the rest of this entry »

Light At the End of the Tunnel for Oyu Tolgoi?

August 13, 2009

There has been an update in the Mongolian media on the latest in the on-going saga that is the Oyu Tolgoi Investment Agreement.

According to news outlets in Mongolia the Cabinet and National Security Council have approved the latest changes that have been forged during the last round of negotiations.  These include:

  • Project investment reduced to US4 billion from a previous US5 billion;
  • Mongolia’s investment for its 34% shares will be US816 million, half the amount of previous discussions;
  • There will be a prepayment loan to the Government of Mongolia in the amount of US250 million, with 5% annual interest rate, which is a lower interest rate than in previous negotiations; and
  • No exemption from Customs Tax or refund of VAT already paid by the companies. Read the rest of this entry »

Doing Business in Mongolia: What to Expect

August 4, 2009

Foreign Expectations of Doing Business

Often foreign businessmen come into Mongolia with the expectations that doing business in Mongolia is going to the similar to working in the US, Europe, or Australia, or at the very least like China or Russia.  While there are definitely similarities between Mongolia and the rest of the world, doing business here is usually very different from what many foreigners expect.

Companies often expect Mongolia to be similar to China or Russia because of the proximity to these countries.  There are definite similarities, especially bureaucratically, to the old Soviet system, and there are hints of Chinese business practices, in no small part due to the amount of Chinese investment in Mongolia.  Despite this, Mongolians maintain their own brand of doing business that is a blend of past influences mixed with future ambitions.

Many people lose sight of the fact that Mongolians have only really been doing business in a fully capitalist system for 20 years.  The West has been practicing capitalism for centuries, making it very easy for those of us who have grown up in capitalist societies to forget about the newcomers.  Capitalism is ingrained in most of us who grew up in the West and therefore we perhaps have fewer problems with capitalist business models than those who grew up in different systems.

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