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Executive Summary 

Mongolia’s frontier market and vast mineral reserves represent potentially lucrative opportunities for investors but vulnerability to external economic and financial shocks, ineffective dispute resolution, and lack of input from stakeholders during rulemaking warrant caution.  Mongolia imposes few market-access barriers, and investors face few investment restrictions, enjoying mostly unfettered market access.  Such franchises as fast food and convenience stores, outperforming expectations, suggest that investors can bring successful international business models to Mongolia.  The cashmere-apparel and agricultural sectors also show strong promise.  However, investing into such politically sensitive sectors as mining carry higher risk.

Mongolia attracts investors’ attention but has trouble converting interest into actual investments.  Unless and until Mongolia embraces a stable business environment that both transparently creates and predictably implements laws and regulations, many investors will find its market too risky and opt for more competitive countries.  An essential step to mitigating these risks is for Mongolia to implement the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment (known as the Transparency Agreement), which requires a public-comment period before new regulations become final.  Mongolia has implemented some of this agreement but is five years behind full implementation of public-notice commitments.

2021 also saw resolution of some of the disputes hampering progress of the Oyu Tolgoi copper and gold mine, expected to provide 25 percent of Mongolia’s GDP as soon as 2024. Agreements over cost- and debt-sharing of a portion of the mine’s development, and commitments to more transparency by Oyu Tolgoi’s partners over management and development decisions, signals that Mongolia can and will work out disputes within the terms of its contractual obligations.

Government and parliament continue to address threats to judicial independence by implementing 2019 constitutional amendments and 2020 statutory judicial reforms that have improved transparency and reduced political influence in the appointment and removal of judges.  Investors, however, continue to cite long delays in reaching court judgments, followed by similarly long delays in enforcing decisions, as well as reports that administrative inspection bodies, such as the tax authority, will fail to act on politically sensitive decisions or cases involving politically exposed Mongolians.  Businesses note substantial and unpredictable regulatory burdens at all levels; and cite an excessively slow tax dispute resolution process as an indirect expropriation risk.  In June 2022, parliament streamlined procedures for, and reduced the required number of, permits and licenses.  Government effort to move delivery of most services onto digital platforms may also increase the efficiency of its business registration processes.

COVID-19 and Russia’s invasion of Ukraine are stressing Mongolia’s economy.  In late 2021, Mongolia’s parliament passed its New Recovery Policy, a 10-year development plan to increase national productivity by improving transport logistics, energy production, industrialization, urban and rural infrastructure, and green development.  This program depends on restoring market access for mining exports, the primary revenue source. However, as of early 2022, China’s zero-COVID policies continue to create bottlenecks along the Mongolia-China border.  Meanwhile, Russia’s invasion of Ukraine, prompting unprecedented international sanctions on Russia, has created uncertainty about access to imports of petroleum products, electricity, and such key commodities as wheat and fertilizer.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 110 of 180
Global Innovation Index 2021 58 of 132
U.S. FDI in partner country ($M USD, historical stock positions) 2021 662 USD   Bank of Mongolia
World Bank GNI per capita 2020 6,957 USD


1. Openness To, and Restrictions Upon, Foreign Investment 

3. Legal Regime 

4. Industrial Policies 

5. Protection of Property Rights 

6. Financial Sector 

7. State-Owned Enterprises 

Mongolia has state-owned enterprises (SOEs) in the banking and finance, energy production, mining, and transport sectors.  The Ministry of Finance manages the State Bank of Mongolia and the Mongolian Stock Exchange, and the SOE Erdenes Mongol holds most of the government’s mining assets.  The Ministry of Roads and Transport Development manages the Mongolian Railway Authority.  The Government Agency for Policy Coordination on State Property ( ) publicly stated that it administers 106 non-mining and non-financial assets but does not provide a complete, official list of its SOEs.  State Property Agency representatives have publicly said their SOE count does not include aimag (provincial) and soum (county) level locally-owned enterprises (LOEs), which number in the hundreds.

Investors are concerned SOEs crowd out more efficient private-sector investment.  Investors can compete with SOEs, but an opaque regulatory framework limits competition.  Businesses have observed that government regulators favor SOEs, such as streamlining processes for environmental permits or ignoring health and safety issues at SOEs.

Mongolian SOEs do not adhere to the OECD Corporate Governance Guidelines for SOEs.  Although legally required to follow the same international best practices on disclosure, accounting, and reporting used by private companies, SOEs tend to follow these rules only when seeking international investment and financing.  Many international best practices are not institutionalized in Mongolian law, and SOEs tend to follow existing Mongolian rules.  At the same time, foreign-invested firms follow the international rules, causing inconsistencies in corporate governance, management, disclosure, minority-shareholder rights, and finance.

8. Responsible Business Conduct 

The practice of responsible business conduct (RBC) in Mongolia has improved.  Most international companies make good-faith efforts to work with local communities.  Larger domestic firms tend to follow accepted international responsible business conduct practices and underwrite a range of related activities, while smaller companies, lacking resources, often limit responsible business conduct actions to the locales in which they work.  Locally, firms adopting responsible business conduct are perceived favorably by the communities in which they operate.  Nationally, responses range from praise from politicians to condemnation by certain civil-society groups alleging responsible business conduct nothing more than a cynical attempt to buy public approval.  Public awareness of responsible business conduct is limited, with only a few NGOs involved in responsible business conduct promotion or monitoring, and those concentrated on such large private-sector projects as the Oyu Tolgoi mega-mine, while shying away from state-owned entities.

Given Mongolia’s high social media penetration, businesses should be aware that discussions regarding their activities could be ongoing on international and domestic social media sites; and should monitor social media discussions to ensure their activities are portrayed accurately.

The government attempts to enforce legislation on human rights, labor rights, consumer protection, environmental protection, and other laws protecting individuals from adverse business impacts.  While the Company Law articulates rules of corporate governance, accounting requirements, and shareholder rights, it has no rules for executive compensation.

Mongolia has no official position on OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas and no domestic legislation on due diligence for companies sourcing minerals originating from conflict-affected areas.  The government has not adopted the Organization for Economic Co-operation and Development (OECD) and UN principles on responsible business conduct: ).  Mongolia is a member in good standing of the Extractive Industries Transparency Initiative ( EITI ).

There have been no alleged/reported human or labor rights concerns relating to RBC of which foreign businesses should be aware.  However, businesses should be aware that a disorganized system for granting and enforcing use rights for land, timber, water, and mining assets has given rise to the perception among local communities that central, provincial, and municipal governments are improperly granting rights in contravention to local customs and statutes.

Mongolia has a private security industry, and many public and private entities avail themselves of private security services.  However, Mongolia has neither signed the Montreux Document on Private Military and Security Companies nor supports the International Code of Conduct or Private Security Service Providers (ICoCA).

9. Corruption 

Investors have acknowledged that corruption is widespread in Mongolia, leading some to curtail additional investments or to exit Mongolia entirely.  Given the level of corruption, U.S. businesses are advised to be especially diligent in complying with the U.S. Foreign Corrupt Practices Act.  Although Mongolian law penalizes corrupt officials, the government does not always implement the law effectively or evenhandedly.  Private enterprises report instances where officials and political operatives demand bribes to transfer-use rights, settle disputes, clear customs, ease tax obligations, act on applications, obtain permits, and complete registrations.  NGOs and private businesses report judicial corruption is also present.  Factors contributing to corruption include conflicts of interest, lack of transparency, limited access to information, an underfunded civil-service system, low salaries, and limited government control of key institutions.

Mongolia does not require companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.  U.S. and other foreign businesses have reported that they accept the need for and have adopted internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.  (For Mongolia anti-corruption efforts:

The Independent Agency Against Corruption (IAAC) has primary responsibility for investigating corruption, assisted at times by the National Police Agency’s Organized Crime Division.

Mongolia has signed and ratified the UN Anticorruption Convention ( UNAC ) but not the OECD Anti-Bribery Convention.

10. Political and Security Environment 

Mongolia’s political and security environment is peaceful and stable.  Crime is low in the capital Ulaanbaatar but fluctuates seasonally.  Street-level petty theft and assault occur with some regularity, while more complex financial and fraud-based crimes are rising.  U.S. investors are generally welcomed by the Mongolian people; however, in small numbers and in specific areas, anti-foreign sentiment fueled by fringe nationalist groups occurs.  These sentiments do not focus on U.S. investors exclusively and are subject to current events.  Resource sector investors have reported that disputes between those with legal rights to utilize local resources and residents can lead to protests, disorder, and, in rare cases, violence.

11. Labor Policies and Practices 

The National Statistics Office of Mongolia reports official unemployment was 8.1 percent (99,400 people) of Mongolia’s 1.23-million-person labor force (December 2021).  Youth unemployment hovers around 18 percent of total unemployed.  42 percent (519,420) of the labor force lives in Ulaanbaatar and 58 percent (707,084) in rural areas.  Women accounted for 47.6 percent (583,621) of total labor, with women’s unemployment at 7.4 percent; women compose 43.6 percent (43,333) of total unemployed.  The latest statistics on labor-age disabled workers from 2019 put the total pool of workers at 98,166, of whom 9,179 were employed.  5,617 foreign workers from 77 countries are officially registered with the Ministry of Labor and Social Welfare, of whom two-thirds work in construction and mining.  63 percent of registered foreign workers are from China, despite COVID-19-related travel restrictions.

Unskilled labor is abundant, but chronic shortages persist in most professional categories requiring advanced degrees or vocational training, including all types of engineers and professional tradespeople in the construction, mining, and services sectors.  Foreign-invested companies address shortages by providing in-country training, increasing salaries and benefits to retain employees, or hiring expatriate workers with expertise unavailable in Mongolia.

Mongolia’s 2021 Revised Labor Law (RLL) came into force January 2022.  However, the Ministry of Labor and Social Protection, responsible for enforcing this statute, has not adopted all necessary regulations to support enforcement.  The RLL formalizes most practices described below, which had heretofore been customary between employer and employee or achieved through regulatory fiat.  It also creates a new system for employers using long shifts for their crews, mostly in the resource extraction sectors.  The RLL stipulates that work and resting shifts must be equal—for example, 14 days on must be balanced by 14 days off—and that overtime must be limited.  Employers report these new rules effectively require them to hire more employees to achieve the same staffing levels under old rules and with more administrative burdens.  As Mongolia faces chronic shortages of skilled employees, employers are concerned the RLL will lead to rising costs as headcounts might have to increase while productivity per worker decreases, threatening the commercial viability of those businesses with limited capacity to absorb or pass on these additional costs.

The RLL retains the requirement that companies employ Mongolian workers in all labor categories where the Ministry of Labor and Social Protection determines a Mongolian can perform the task as well as a foreigner.  This provision primarily applies to unskilled labor categories.  Investors can locate and hire workers without hiring agencies, if hiring practices follow the RLL.  If employers want to hire expatriate laborers and cannot obtain a waiver from the Ministry of Labor and Social Protection for that employee, the employer can pay a monthly waiver fee.  Depending on a project’s importance, the Ministry of Labor and Social Protection can exempt employers from 50 percent of the waiver fees per worker.  However, employers report difficulty in obtaining waivers.  (For details on Mongolian labor law:

Because Mongolia’s winters limit operations in infrastructure development, construction, and mining, employers tend to use a higher degree of temporary contract labor than companies operating year-round.  The RLL allows employers and employees to use short-term contracts; however, such contracts are limited to work lasting less six months comprising less than 30 percent of an entity’s labor force.

The RLL allows most workers to form or join independent unions and professional organizations and protects rights to strike; but denies these rights to foreign workers, certain public servants, and workers without formal employment contracts.  However, all groups have the right to organize.  The law protects the right to participate in trade union activities without retaliation, and the government has protected this right in practice.  The law provides for reinstatement of workers fired for union activity, but this provision is not always enforced.  Some employees occasionally face obstacles to forming or joining unions, and some employers have taken steps to weaken existing unions.  For example, some employers prohibit participation in union activities during working hours or refuse to conclude collective bargaining agreements in contracts.

The RLL allows employers to fire or lay off workers for cause.  Depending on the circumstances, however, severance may be required, and workers may seek judicial review of their dismissal.  Under the RLL, retirement is no longer a legal justification for firing an employee, and mass redundancy layoffs require 90-days’ notice.  Employers and legal experts report that Mongolia’s courts usually support employee claims, especially if the plaintiff or defendant is a foreign business.  The severance laws require employers to pay laid off workers one month of the contracted salary, but fired workers receive no severance.  Laid off or fired workers are entitled to three months of unemployment insurance from the Social Insurance Agency.

The Law on Collective Bargaining regulates relations among employers, employees, trade unions, and the government.  Wages and other conditions of employment are set between employers (whether public or private) and employees, with trade union input in some cases. Laws protecting the rights to collective bargaining and freedom of association are generally enforced.  The Mongolian Confederation of Trade Unions represents most workers in the resource extraction and construction-related sectors in collective bargaining activities but not government and agricultural sector employees.  The Confederation of Trade Unions also mediates specific grievances through government-sanctioned Tripartite Labor Dispute Settlement Committees.  Tripartite Labor Dispute Settlement Committees resolve most disputes between workers and management and consist of representatives Confederation of Trade Unions, employers, and the government.  Cases not resolved by these Committees may go to court.

The International Labor Organization (ILO) is concerned about child-labor practices and variations between Mongolian law and international labor standards.  Authorities report employers often require minors to work more than weekly permitted hours, paying them less than the minimum wage.  The General Agency for Specialized Inspections ( GASI ) enforces all labor regulations but is understaffed.  ILO conventions ratified by Mongolia:   Mongolia ( 

14. Contact for More Information 

The Economic and Commercial Section
U.S. Embassy
P.O. Box 341
Ulaanbaatar 14192, Mongolia
Telephone:  +976-7007-6001
Email:  Ulaanbaatar-Commercial 

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