Mongolian Sandwich

Being a landlocked country between Russia and China is a huge disadvantage for Mongolia.  Chinese and Russian influences are growing, sparking concerns among investors and the Mongolian people.  The Chinese already dominate Mongolia's exports, having bought 90 percent of Mongolia's exports in the first half of 2012.  According to Mine Web, Mongolia needs to expand its trade with China in order to ease its long-term dependence.

Dependence on Russia and China also poses a risk to the mining sector.  Mongolian mines rely on Russian and Chinese fuel, power and transportation to operate.  If a major disruption occurs in Russia or China, then Mongolian mines could shut down.  Furthermore, if Mongolia wants to export to other countries like South Korea or Japan it must rely on Chinese and Russian transportation.  In theory, Russia and China could coordinate their policies by limiting Mongolia's access to their railway networks in order to keep the Mongolian extraction economy under Russian and Chinese control.

Corruption is also a major issue.  Chinese and Russian businesses are viewed as some of the most corrupt in the world.  With their increasingly overbearing influence in Mongolia, it is not unlikely that corruption could spill across the boarder and into the Mongolian economy.

For these reasons, the Mongolian government has pursued a third neighbor policy, trying to build strong relationships with Japan, South Korea and the US.  In July, the government rejected a proposal that gave the development rights of the Tavan Tolgoi coal project over to Shenhua of China, Peabody of the United States and a Russian-Mongolian consortium.  The government is now trying to devise new deal that would include Japanese and South Korean partners.  This move, though disruptive to the launch schedule of TT, will probably pay off in the long term by promoting economic relationships with fellow democratic market economies in the region.

Day one on the job

Just got to the office for my first day about two hours ago...  So far its very quiet.  I have been researching about Mongolia's economy, reading a lot documents about Mongolia's equity market, economic growth, political system, currency performance, IPOs (initial public offerings), FDI (foreign direct investment), M&A, (mergers and acquisitions), exports and geopolitical relations.  Did you know that Mongolia has the second best performing currency in the world?  Last year Mongolia's tugrik outperformed all the world's currencies for most of the year until the Australian dollar (AUD) surpassed it with only a few weeks left before year's end.  When I say it was the best performing I mean that it appreciated in value relative to other currencies.  That would mean that Mongolian purchasing power in the global market increases, but it became more expensive for other countries to trade with Mongolia...right?

Mongolia is also the second fastest growing economy globally and it is expected to be the fastest growing economy in 2013 with a projected growth rate of 20% when the Oyu Tolgoi copper and gold mine comes into operation.  If I had a lot of money I would definitely invest in Mongolia.