Chapter 1. Country Profile
1.1 Geography and Climate.
Mongolia has located Eastern/Central Asia, it borders Russia to the north and the People’s Republic of China to the south, east, and west. The total land area is 1,553,560 sq.km, the 18th largest country in the world.
Mongolia is also known as the “Land of the Eternal Blue Sky” or “Country of Blue Sky” because it has over more than 250 sunny days in a year. The symbol on the flag means letter “A” which was one of the alphabets they used in a long time ago, and color represents fire and sky. Mongolia is divided in 21 aimag/provinces, which its self-divided in 329 sums/district.
Ulaanbaatar has the lowest average temperature of any national capital in the world. It has an extreme continental climate with long, cold winters and short summers, during which most of its annual precipitation falls. Average temperatures over most of the country are below freezing from November through March and are about freezing in April and October. Winter nights can drop to around ?40 °C in most years, and in summer extremes reach as high as 38 °C.
In 209 BC a great leader called Modun united the people of Mongolia. This early state was called Hunnu. The Hunnu were a powerful empire and they were often at war with China. The Mongols has little inclination to ally with other nomadic people of northern Asian and until the end of 12th century, they were little more than a loose confederation of rival clans.
Then in 1162, the boy named Temuujin was born, in 20-year-old started emerged and managed to unite most of Mongol tribes. In 1189 he was given the honorary name of “Chinggis Khan”, meaning “universal king”. Under Chinggis Khan and his successors, the Mongols conquered a vast empire. They conquered China and Russia and advanced into Europe as far as Poland and Hungary. They also conquered Persia. However, the Mongol Empire soon fragmented after Chinggis Khan’s death, the empire was subdivided into four khanates (a political entity ruled by a khan) One of the khanates, Kublai Khan, established Yuan Dynasty, consisting of the Mongol homeland and China, and ruled from 1271 till 1368.
The Mongol court returned to its native land, however, centuries of internal conflict, expansion, and contraction brought them to fall into Manchu Qing dynasty. They conquered Mongolia in 1636, and for the next two hundred years Mongolia was ruled by the Qing Dynasty until 1911 but had to struggle until 1921 to firmly establish de-facto independence from the Republic of China, and until 1945 to gain international recognition.
Mongolia subsequently came under strong Russian and Soviet influence, in 1924, the Mongolian People’s Republic was declared, and Mongolian politics began to follow the same patterns as the Soviet politics of the time. After the breakdown of communist regimes in Eastern Europe in late 1989, Mongolia saw its own Democratic Revolution in early 1990, which led to a multi-party system, a new constitution in 1992, and the transition to a market economy.
1.3 Government Structure
Mongolia is a parliamentary republic. The Parliament is elected by the people and in turn, elects the government. The President is elected directly. Mongolia’s constitution guarantees freedom of expression, religion, and others rights. Mongolia has a number of political parties, the largest two parties known as the Mongolian People’s Party and the Democratic Party. Mongolian politics can be turbulent, with frequent changes in cabinet members and coalition partners.
The Great State Assembly (Great State Khural), which is a unicameral parliament of 76 members, which are elected for terms of four years. It elects the Prime Minister upon nomination by the President and confirms the Cabinet members upon nomination by the Prime Minister in consultation with the President. Although Mongolia’s President has a largely symbolic role, the president can block the Parliament’s decisions through veto powers, which requires a two-thirds majority of parliament to override. Mongolia’s constitution provides three requirements for taking office as president; the candidate must be a native-born Mongolian, be at least 45 years of age, and have resided in Mongolia for five years prior to taking office. The President is also required to formally resign his or her party membership.
On July 7, the new President was elected Khaltmaa Battulga, who was a former artist and first Judo Olympic Champion in Mongolia. During the election Battulga made ambitious pledges to reduce unemployment, free citizens of debt, and balance Mongolia’s trade dependence on China, he could solve pressing social issues. He will confront political reality, a semi-presidential constitution will significantly constrain what he is legally permitted to do with and without parliament’s cooperation.
Mongolia has not yet achieved the translation of its Constitution’s main principles into a clear, long-term vision for the nation, nor has it a cohesive set of medium and short-term policies assisting the development of one. Its institutions are generally characterized as inefficient, exhibiting weak institutional memory and a lack of coordinating ability. Participation in policy building, decision making, and leadership are characterized by a strong dominance of informal channels and networks. In fact, most decisions at different levels are heavily influenced by informal channels. So-called ‘Home Councils’ are examples of organized groups founded on broader kinship ties, exercising strong influence across political parties and groups using informal channels and networks, it same as to many members of parliament and business owners. It is common for inappropriate payments to be made to election candidates in every level of government, with leadership positions requiring additional payments.
The financial resources, networks and informal networks that are required to succeed in leadership positions and are weakening Mongolian governance systems, are also impacting upon women’s ability to stand for parliament.
In October 2014, the Mayor of Ulaanbaatar, in a public statement, noted that networks of informal channels improperly penetrating formal layers of power to the extent that non-transparent decision making has become an accepted norm, affecting authorities’ ability to act in the interests of the public and undermining the principles of democracy.
The overwhelming majority of media is owned by the private sector and politicians who have a direct influence on agenda setting and practice censorship over their own editors and journalists. External agents, such as Russia and China, are alleged to have undue influence over economic policy issues, including transport infrastructure and mining. Access to unbiased information is undermined, affecting democratic processes in Mongolia. Since Mongolia’s independence, the prevailing view has been that the majority of citizens not only accept but respect, the legitimacy of the nation-state. Also it same time gives the freedom to access all international websites and hardly any blocks, limitation to information.
The current population of Mongolia is 3,113,904 as for May 2nd, 2018 and ranked 137th in the list of countries by population.
The Government and the constitution both provide for freedom of religion, so more than 55% follows the Tibetan Buddhism and rest Shamanist, Christian and Muslim.
The official language of Mongolia is Khalkha Mongolian and is spoken by around 95% of the population. A variety of different dialects are spoken across the country, which mostly in the countryside. Today, Mongolian is written using the Cyrillic alphabet which same as Russian except Mongolians have two more letters “?, ?”, second Mongolian script which oldest one among of other alphabet existed in Mongolian history and the traditional alphabet is being reintroduced through schools.
The most frequently spoken foreign language in Mongolia is Russian, followed by English, though English has been gradually replacing Russian as the second language. Primary and secondary education last to 11-years. But from 2008-2009 school years, new first graders are using the 12-year system. As such, full transition to the 12-year system will not happen until the 2019-2020 school year, when the current first graders graduate.
Since 1992, Mongolia has transformed from a closed society ruled by a single party Communist system into an open society and a dynamic multiparty democracy. This transition has been accompanied by the gradual introduction of free-market reforms and relatively well maintained political stability. While improving overall relations with the U.S., Japan, and South Korea, Mongolia has also maintained strong ties with Russia and China. President Tsakhiagiin Elbeg-Dorj, whose Democratic Party coalition controls parliament, is serving his second term.
Mongolia is developing a country since 2013 has started experience high rate of economic growth. To this the development “Oyun Tolgoi” finding copper and gold being a big influence.
The last 20 years, Mongolia has transformed from an agricultural based economy to a resource-dependent economy. Like other resource-dependent countries, Mongolia has a highly volatile two-speed economy, those exposed to the mining sector experiencing increased real incomes, and those outside the sector experiencing a fall in real incomes. The challenge for Mongolia will be how it manages its resource dependency in a way that stabilizes the economy and transfers wealth in an equitable way.
The growth has allowed a large expansion in both recurrent and capital expenditure and continues to support the growth in nominal GDP. Mongolia became reliant on high rates of investment, and especially FDI-fueled economic growth, and would like a return to previously high rates. Two factors: 1) a dispute between Oyun Tolgoi and the Mongolian Government needs to be resolved, 2) there will need to be a sustained improvement in commodity prices.
Trade is important to Mongolia’s economy; the value of exports and imports taken together equals 87 percent of GDP. The average applied tariff rate is 5.0 percent. The judicial and regulatory systems impede foreign investment, and state-owned enterprises distort the economy. The limited availability of long-term loans and costly collateral requirements make access to credit a challenge for small and medium-sized firms.
1.6 Mining in Mongolia
Mongolia has rich mineral resources and exploitation of these has been increasing in the transition period to the market economy.
By definition of the Law on Minerals, mineral resources naturally occurring on and under the earth’s surface in Mongolia are the property of the State. Therefore, the State, as the owner, has the right to grant exploration and mining rights.
The State also has the right to own a certain percentage in a mineral deposit of strategic importance a deposit which may have a potential impact on national security, national or regional economic or social development or that is producing or has the potential to produce more than 5% of the total annual gross domestic product. If the deposit qualifies as a mineral deposit of strategic importance, then the State may acquire a certain percentage as follows. The State may participate up to 50% jointly with a private legal person in the exploitation of a mineral deposit of strategic importance where the State can prove that it has conducted State funded exploration and that the State funded exploration was used to determine the proven reserves. However, the legislation does not prescribe what form this equity interest might take and it is unclear what the drafters mean by “participate”. The percentage of the State share shall be determined by an agreement on exploitation of the deposit considering the amount of investment made by the State. The State may own up to 34%of the shares of an investment to be made by a license holder in a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the State budget. The percentage of the State share shall be determined by an agreement on exploitation of the deposit considering the amount of investment made by the State.
The Mongolian government has identified a number of the largest deposits that have strategic importance for the country and where a development of the mining industry should be focused. Currently, there are fifteen deposits that have been classified as “Strategic Deposits”. These are currently held either by the State Property Committee, through established state-owned enterprises, or in some cases by the private sector. There is an addition of thirty-nine deposits under consideration for classification as “Strategic Deposits.”
Chapter 2. Hofstede 5 Dimensions
2.1 POWER DISTANCE
This dimension deals with the fact that all individuals in societies are not equal – it expresses the attitude of the culture towards these inequalities amongst us. Power Distance is defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.
China by the chart is 80, it’s a society that believes that inequalities amongst people are acceptable. The subordinate-superior relationship tends to be polarized and there is no defense against power abuse by superiors. Individuals are influenced by formal authority and sanctions and are in general optimistic about people’s capacity for leadership and initiative. People should not have aspirations beyond their rank.
In another hand, Mongolia is 18 which has a very low power distance score, meaning that equality across gender class and social roles are preferred a phenomenon which is rare for Asian cultures. Part of this may be traced back to Genghis Khan who was known for challenging social norms to promote his generals and successors based on competence and not a birthright. In ministry, a low power distance may mean that congregation power distance is more willing to voice their through and opinions and relate to ministry leaders on equal terms. This suggests that power-sharing is important and status differences are not desirable in Mongolian culture. Thus, guidance and direction might not be expected and Mongolians are less receptive to it.
The main issue affected by this dimension is the degree of interdependence that society supports among its members. This is due to whether the will of the people is defined in terms of “we” or “I”. Individualism is the about that a person’s life belongs to themselves and that they have the right to live and to act in they own opinion, to store and use the product of their efforts and pursue the values if they choose. Collectivism is the about that a person’s life does not belong to only themselves, but to the society or group of which they are a part, that they have no rights and that they must sacrifice his values and goals for the “greater good” of the group.
With 20 points, China is a multicultural and multicultural culture, which is a matter of people’s interests. Affordable services and incentives for family members, such as families, are provided at a discount. The commitment of employees, but not necessarily the organization of the organization. When relations with colleagues work with groups, they are sexually offensive or even hostile. Personal relationships dominate the work and the company.
For Mongolia 71 score for individualism is again relatively high for Asian nations, indicating that an emphasis is placed on individual rights and responsibilities, including the freedom and independence of religious belief. This suggests that it is important to be independent and self-reliant, which shows that they usually prefer to overcome their problems/crisis without taking or relying on others. Same time it because of the independent and self-reliant they look cold and selfish.
A high score in this dimension indicates that the society will be determined by competition, achievements, and successes, and success is determined by the winner or the best in the field – the value system that starts in the school and continues throughout the life of the organization. A low score or femininity in size means that the dominant values in society take care of others and about the quality of life. Women’s society is one where the quality of life is a sign of success and stands out from the crowd is not delicious. The main problem here is that it motivates people, wanting to be better (masculine) or to love what you are doing (feminine).
Looking at 66 scores, China is more a Masculine society which success oriented and driven. The need to ensure success can be shown by the fact that many Chinese will sacrifice family and leisure priorities to work. Service people will provide services until very late at night which one of a simple example like on the street people cook food or hairdressers like spare time is not so important. Another example is that Chinese students study constantly and almost always in a library which shows how much they care very much about their exam scores and ranking as this is the main criteria to achieve success or not.
But for Mongolia score 103 which is extremely high. This suggests that Mongolian culture emphasizes the importance of competition, aggressiveness, assertiveness, achievement, and material goods This again may be rooted in the warring of the Mongols, but instead of producing competition or disunity among churches and believers, ambitions and heroic spirit is a fitting asset in charring out the great commission. Also, it easily is related to individualism score.
2.4 UNCERTAINTY AVOIDANCE
Measurement Uncertainty Avoidance is related to how society is concerned that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings anxiety, and different cultures have learned to deal with this anxiety in different ways. The degree to which members of a culture feel threatened by ambiguous or unknown situations and created beliefs and institutions that try to avoid it are reflected in the assessment.
At 30 China has a low score on Uncertainty Avoidance. The truth may be relative though in the immediate social circles there is a concern for Truth with a capital T and rules, not necessarily laws abound. None the less, adherence to laws and rules may be flexible to suit the actual situation and pragmatism is a fact of life. The Chinese are comfortable with ambiguity; the Chinese language is full of ambiguous meanings that can be difficult for Western people to follow. Chinese are adaptable and entrepreneurial. At the time of writing the majority around 70% to 80% of Chinese businesses tend to be small to medium-sized and family owned.
But for Mongolia, 92 score on uncertainty avoidance is high, which indicates a preference for known, established methodologies, rather than new ideas, progress, and change. This is not surprising given the century-old traditions of nomadic life. Considering Russia’s even higher score which 95, years of a Soviet rule may be also had an influence. Missionaries should be aware of this and not be discouraged if possible changes cannot be made quickly. This suggests that change is perceived as undesirable, while policies and rules that facilitate stability are considered valuable.
2.5 LONG TERM ORIENTATION
This dimension describes how each society should maintain some links with its past, dealing with the challenges of the present and the future, and societies – priorities for these two existential goals in different ways. Normative societies. who value a low value in this dimension, for example, prefer to adhere to respected traditions and norms when viewing social changes with suspicion. On the other hand, those who are praised have a more pragmatic approach: they encourage thrift and effort in modern education as a way of preparing for the future.
In this dimension, China has 87, which means that this is a very pragmatic culture. In societies with a pragmatic orientation, people believe that the truth depends largely on the situation, context and time. They demonstrate the ability to easily adapt traditions to changed conditions, a strong propensity for saving and investing, thrift and perseverance in achieving results. In Mongolia, 41 scores mean a short-term oriented culture, which means that immediate concern often occurs here and now. Planning for the distant future, as a rule, is not so important, unlike its neighbors, Russia and China, where highly valued especially long-term financial planning and provision to family members. This suggests that their people look at life and participation in transactions from a short-term perspective.
Chapter 3. Business practices
During doing the business with different, one of most important thing to know is ethics of opposite country. Because of not paying attention to this failing the project or job happens frequently.
3.1 FIRST INTRODUCTION
Both Chinese and Mongolians are similar concerning first introduction:
• They prefer working with friends and family
• It is better if you are introduced by a third party who knows both of you
• Building a strong and long term relationship is more important than terms of a contract
• Connections is really important and you should know beforehand whom is connected to whom
• A handshake is expected but wait for you Chinese counterpart to initiate it
• Greet people by saying their titles followed by their name
• Chinese will enter a meeting room by order of importance. The first to enter is the first one you should greet
• A firm handshake while keeping eye contact is expected
• Greet people by saying their titles followed by their name
• Address people by “Noyen” which means “sir” or “the respected” and “Hatagtai” which means madam
• The first person you should greet is the higher in the hierarchy of the oldest one
3.3 FIRST MEETING
Same rules apply for both countries:
• Punctuality is important
• The first meeting has to be a formal one
• Men should wear a suit and tie; women should wear a pantsuit or mid-length skirt with a suit jacket or formal blouse
• Small talk is highly encouraged before getting into the meeting
• The meeting should be well-prepared in advance
• You shouldn’t say “no” or confront your business counterparts
• For Mongolians, the person who initiated the meeting must be the mediator
3.4 EXCHANGING CARDS
Business partners from both countries will expect to exchange business cards.
• Present and receive business card with both hands
• it should have an English and a Chinese side (this side should be on top)
• It is better if your business card as gold letters (gold means prosperity and riches)
• Don’t put it away and study a business card upon receiving one.
• Present your business card with both hands or the right hand
• Receive business cards in the same manner
3.5 GIFT GIVING
• Strongly discouraged
• Gifts are considered bribery by the Chinese
• If you still want to give a gift, it should be done in private and not in front of everyone
• The receiver will not open the gifts in front of you but after
• Gifts are appreciated by Mongolians
• They should not be expensive as it would be
• seen as bribery
• The small gift should be something from where you are from (ex: a Yankee cap if you are from the New York)
• It should be wrapped
• The receiver will open the gift in front of you as a show of goodwill and appreciation
3.6 HOSTING BUSINESS MEALS
• Chinese like to have business meals
• Seat at the table are designated by order of importance you should wait for your counterparts to be seated before sitting yourself
• Too much food will be ordered, you are not expected to eat everything
• You might drink a lot during those business meals
• Mongolians are very generous people, they will likely host meals for you
• It is rude not to accept their invitations
• You should reciprocate when you can invite them
Chapter 4. Investment
4.1 LEGAL ENVIRONMENT
The Mongolian legal system is based on the Roman-German (continental) legal system. The principal legal act is the Constitution (1992). In many cases, laws are worded widely or vaguely leaving latitude for alternative interpretations.
State bodies can issue regulations, some of which are considered as regulatory legal acts. Sometimes regulations contradict (are not in compliance with) laws. Authorities applying regulations are generally reluctant in applying more general provisions stipulated by laws and are more comfortable in applying more detailed/specific regulations.
The Arbitration Law of 2003 regulates arbitration disputes. In the drafting of contracts in Mongolia, in most cases parties are free to select international arbitration as the method for the resolution of disputes of certain types of international trade, contractual and non-contractual civil disputes. Mongolia is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which mandates that arbitration awards made within the Territory of Mongolia are enforceable in Mongolia and other countries that are parties to the New York Convention.
The Arbitration Bureau operated by the Mongolian National Chamber of Commerce and Industry, is sometimes regarded by Mongolian business people and government agencies that deal with foreign investors as politically not independent and unfamiliar with commercial practices, prompting a preference for international arbitration. However, support for binding international arbitration has not penetrated local Mongolian agencies responsible for executing judgments.
4.2 FOREIGN INVESTMENT
In general, Mongolian law does not discriminate against foreign investors. Foreigners may invest with as little as USD 100,000 cash or the equivalent value of capital material (office stock, structures, autos, etc.).
4.3 LATER DEVELOPMENTS
Mongolia passed the Law On Strategic Entities Foreign Investment (SEFIL) in May 2012. The intention of the law was to regulate foreign investment in entities of strategic importance (mining, finance and banking, media and communications sectors). The law specified that if a foreign investment in those entities exceeded a threshold of 49%, such investment would need the Parliament’s approval.
However, in less than a year, i.e. in March 2013, the Parliament approved amendment to the law whereby investment by foreign private companies in “strategic entities” would no longer need the Parliament’s approval.
The possible reason behind this amendment could be the recent drop in the volume of foreign investment in Mongolia. According to the Bank of Mongolia, the foreign direct investment (FDI) in Mongolia decreased by 58% as of February 2013 as compared to the same period in the previous year.
As of December 2014, FDI steadily decreased by 76% as compared to the same period in the year 2013.18
Further, the SEFIL was cancelled following the issuance of the new investment law.
4.4 NEW INVESTMENT LAW
In October 2013, the Mongolian parliament passed the Investment Law and the Law On Implementation of the Investment Law (effective from 1 November 2013). The purpose of the Investment Law is to protect the legitimate rights and interests of the investors in the territory of Mongolia, establish the common legal guarantee for investment, support investment, stabilize tax environment, determine the powers of the state organizations, and rights and obligations of the investor and regulate other relations concerning investments.
The Law applies to both domestic and foreign investors that had made investment in Mongolia. Investment incentives provided by Law are divided into tax and non-tax incentives. Tax incentives include exemptions from tax, tax credits, possibility to use accelerated depreciation for tax purposes, tax loss carry-forward and deduction of employee training costs from taxable income. Non-tax incentives include favorable conditions such as longer period to possess land, incentives for conducting operations in free trade zones and technology and science parks, increase of quota of foreign employees, simplified visa arrangements etc.
The Law also introduced “Stabilization Certificate” to make more stable tax environment in Mongolia. By obtaining a stabilization certificate, investors can stabilize applicable rates of the following taxes:
• Corporate income tax;
• Customs duties; ?
• Value-added tax;
• Mineral royalty tax. ?
The holder of a stabilization certificate will stabilize tax rates for period from five to eighteen years depending on amount of investment, industry of investment and geographic location of investment in Mongolia (Please see Appendix B for details). Under valid period of this stabilization certificate, investors will also have the right to apply effective tax rates provided in general legislation if such rates are more beneficial for investors. The criteria of issuing a stabilization certificate are:
• The total investment amount specified in the business plan and feasibility study reaches thresholds specified in the law; ?
• Environmental impact assessment should be carried out; ?
• The investment should create new permanent jobs; and ?
• The investment should introduce innovative technology. ?
Investors who made investment in tobacco and alcohol related activities cannot benefit from tax stabilization. If certain conditions are met, the stabilization certificate period may be extended by 1.5 times for some projects. The conditions are: ?
• Produce products that substitute for imported products or export -oriented which are important for the long-term social and economic development of Mongolia; that will require investment of more than MNT 500 billion; ?
• Have development period of more than 3 years; and ?
• Produce value-added, processed products for export. ?
In addition to above, the law provides for incentives with respect to customs duty (exemption) and value added tax (zero rate) on imported equipment and machinery during construction period of specific projects, as below: ?
• Construction of factory for processing construction materials, petroleum, agricultural products and products intended for export;?
• Nano, bio and innovation technology plant construction;
• Construction of power plants and railroads.
The Law on Implementation of the Investment Law specified that investors, who previously invested in Mongolia and meet the conditions to obtain the tax stabilization certificates, can also apply for the tax stabilization certificate. The certificate can be obtained based on the investment amount made on projects for the previous 5 years from the date of enforcement of the Law on Investment and this investment amount should be confirmed by the audited financial statements.
For those investors who already have in place investment agreements with the Government of Mongolia in accordance with the old Foreign Investment Law and Law on Minerals, the effective investment agreements will stay in force.
Chapter 5. Tourism Industry
Tourism demand in Mongolia is increasing year by year, as tourism is important for the Mongolian economy. In addition, the depreciation of the tugrug is cheaper and more attractive for tourism products. The richness of the country is one of the major growth factors in the tourism market. According to recent reports by the World Tourism Travel Council (WTTC), the tourism sector contributed almost 4% of GDP. The direct contribution of the plant directly or indirectly is equal to 9% of GDP of Mongolia.
In 2011, the sector invested $ 400 million. According to the National Tourism Authority of Mongolia, this year half a million tourists arrived. However, the government plans to increase up to 1 million by 2020. Historically, the tourism sector constituted 30% of GDP. In other emerging economies, there are many countries where the economy is more dependent on tourism. In addition, the tourism sector will have a significant impact on the labor market. Therefore, the importance of tourism in Mongolia should not be overlooked.
Successful participation and involvement of government, non-governmental organizations and the private sector for the purpose of developing Mongolia as a global tourism hub. Over the years, tourism has shown steady growth over 15 to 25 years, and hospitality and service quality is improving.
5.1 Tourism sector
The unique culture of Mongolia, the ancient hospitality of Mongolia, the beauty of nature, rich animals and vegetables are attracted by tourists. Since the transition to the Mongolian market in 1990, tourism has become an important part of the country’s development. It has become an important factor in integrating Mongolia into following the global trends of globalization. Mongolia’s tourism sector is steadily growing over the past 15 years, currently over 534 private companies are operating in the sector, of which 60 are foreign. The number of tourists arriving in Mongolia is increasing year by year. About 12,000 people are involved in tourism.
Most tourists come from Japan, France, England, South Korea, Germany and the United States. Mongolia is a favorite tourist destination because of its vast steppe, hills, deserts, unique culture and history. There are a number of opportunities to invest in the tourism sector within the government’s privatization program, including hotels, camps, and management that meet international standards.
5.2 The policy of the Ministry
The Government of Mongolia considers tourism as a priority sector as a great opportunity to contribute to socio-economic development. Thus, the government has taken steps to invest in the tourism sector and to increase private sector participation. Currently, there are approximately 700 tour operators, 350 hotels, 375 tourist camps and 65-star hotels. Investments need to be created for the tourism industry. The government is working to partially finance mining revenues from the part of the International Airport financed by the country, which will play a key role in the development of tourism and the improvement of domestic links.
Hopefully, Mongolia will receive 1 million visitors per year by 2020. The number of people arriving in Mongolia is increasing, with the number of tourists increased by 11% and revenue by 30% over the last three years. However, experts believe that the Government of Mongolia will need more action and investment to increase the tourism industry by 2020 to achieve 1 million annual foreign tourists. As a result of the strengthening of the Mongolian economy, tourism is expected to flourish, with the result that tourism will create a favorable investment climate.
There is a need to take major measures to increase the number of international visitors to Mongolia. These measures should focus on improving the current situation. In order to understand the current situation as compared to other nations, the Tourism Travel Competitiveness Index is a benchmark and can offer future solutions. According to the following index, Mongolia’s tourism infrastructure is ranked 116th. Infrastructure is a bad infrastructure that makes it difficult to attract foreign tourists in Mongolia. So increasing the number of 4-5 star hotels in UB helps improve your scores. The following figure shows that the number of 4-5 star rooms is expected to grow to 1,300 in 2010 from 1400 to 2020.
In addition, spending on business travelers is 60 percent higher than leisure travelers, and the number of entrepreneurs will increase significantly. And they spend four times more than their vacationers. At the same time, business travelers do not have leisure time during summer. So they will help to increase the use of this sector.
5.3 Disadvantages of the sector
There are several disadvantages in the country that are developing more rapidly in this sector. These include:
Due to heavy and long winter seasons, the tourist season is concentrated in June, July and August. Although the small breeding season (from early June to June to June, from mid-September to mid-October), it is unlikely that tour operators should be open during the main season. The high cost of cold weather is limiting the way to attract tourists by extending seasonal times and price promotions.
Limited access to international aviation is a barrier to tourism development. The main grievance of travel service providers in Mongolia is the limited number of flights (high-cost air transportation without national air transport policy). Weather deviations (particularly in the spring and autumn), seasonally scheduled changes are related to international access. Some of these issues will be resolved after the completion of the international airport. Because the frequency of the flight increases 3-4 times. In addition, increase the number of business customers.
There are no symbols and tags, and this may be another way of using the existing earthwork and enhancing its security. Multiple machines will leave their existing roads, which will have a negative impact on the environment. It sometimes takes into account the condition of the road and it does not know the consequences of such behavior among local drivers and tour operators. Improve local transportation security, better use of GPS equipment, improve mobile communications, and improve search and rescue services. The survival potential of domestic service providers is especially advantageous for growth, especially in emerging market markets.
Quality of service is ambiguous. On the one hand, there is no public policy or sector-oriented guidance that will support quality standards or contribute to the preservation of the standards of tourism facilities. On the other hand, there is little understanding of what kind of quality and service culture are. In some cases, it may explain seasonal and rapid turnover of workers in this sector, relatively young and inexperienced laborers (mostly young people of students or colleges) and temporary characteristics of employment in this field. Tourism is a step forward for young people interested in international language and international education. The competitiveness of human resources with mining companies is worsening in comparison to the average salary of $ 150 tourisms.
Education and education of the tourism sector do not meet standards. All professional service providers do not rely on their own curricula and rely on the knowledge gained by formal schools. In order to improve the situation, the ministry’s leadership will help improve industry standards.
5.4 Possible solutions for the problems
The greatest obstacles for the sector are related to the productivity of the sector. To increase productivity, this sector will increase spending on this sector. This sector includes 1. Increase the availability of bandwidth. 2 Increase the business traveler 3. Improve the level of service
At the same time, the government should do the following: 1. Create industry directives. Travel budgets spend more money on tourist infrastructures, such as historical monuments and museums. In any case, the government pays more attention to the tourism class in Mongolia and seeks to increase productivity for each cluster.
IFC is an example of investing in the sector
Since 1956, IFC has invested 2.6 billion dollars. The USA. 260 projects in 89 countries (including syndicates); More than half of this investment falls on the countries of the International Development Association (IDA) from the world’s poorest countries.
The hotel plays an important role in the development and development of tourism and business infrastructure. In addition, the hotel creates jobs, raises tax revenues, increases foreign currency earnings and opens up opportunities for small businesses. Being able to promote local, regional and national economic growth and contribute to poverty reduction, IFC actively participates in hotels and tourism. Their commitment is to protect the environment, preserve cultural heritage, preserve cultural heritage, preserve cultural heritage and increase the interests of historical significance.
5.5 IFC’s investment in Mongolia
• Business: Shangri-La Hotel is a luxury hotel and resort in all corners of the world.
• Variety of markets: this is the first hotel and shopping center in Mongolia, which promotes the development of business and tourist infrastructures in Mongolia.
• IFC financing: a loan of $ 50 million.
• Impact of development: the project aims to improve hotel services and create direct and indirect jobs to meet the needs of a five-star hotel in Ulaanbaatar. It will also support SME support, including the construction and operation phase, as well as labor and materials from local sources of materials and services, including the procurement of goods and services. In addition, the Shangri-La hotel in Ulaanbaatar offers a positive signal to foreign investors planning to invest in Mongolia.
The project hopes to increase productivity:
1. Professional level high
2. International degree
3. Quality of construction.
5.6 Advantages of Mongolia
Mongolia has many advantages over many other countries, so the tourism sector has vast potential. Mongolia has the advantage of unique history, culture, nature, and even weather as you know it.
However, these advantages should be to investigate and inspire foreigners in foreign countries, especially in Southeast Asia. One good example is Hokkaido’s brand of success in Hong Kong, Singapore, and Southeast Asia. It is also important to learn how to attract these travelers by learning more about Hokkaido.
In addition, some deficiencies can be considered as an advantage. For example, poor infrastructure is one of the biggest challenges in the industry. Quality road networks and other supporting infrastructure impede the acceleration of tourism, but limited infrastructure is not considered a deficiency.
5.7 The tourism law
The Mongolian Tourism Law was approved for the first time since May 5, 2000, when Mongolia was transferred to a market economy. To regulate the relations between the state, citizen, and business entities in the tourism business. The law defines punishments and penalties for the violation of this law by tourism, responsibility, state obligations, tourism organizations, human structures and tourism-related tourism sectors related to the state administrative and governing body of the tourism sector and infrastructure development. This creates a favorable legal environment for further development of the tourism industry. The favorable tax deductions and deductions in the tourism sector also apply to the tourism sector that creates favorable investment conditions. More information can be obtained through the Ministry of Railways, Transport, and Tourism and the Tourism Council of Mongolia.