Economic Globalization And The Growth Of FDI In Mongolia

832 Words 4 Pages
One of the key parts of economic globalization is Foreign Direct Investment (FDI). According to Todaro and Smith, who are economic development professors at New York University and the George Washington University, the growth of private FDI in the developing world has been extremely rapid - though it has came in waves - in recent decades (Todaro & Smith, p685). This paper explores what has been happening with regards to FDI in Mongolia since 2005. It analysis a recent trend in FDI in Mongolia and its causes of change. Also it investigates who gained and lost from the change in the FDI and private sectors during the last decade.
Mongolia is a landlocked country in central Asia, bordered by Russia and China, with land area of about 1.6 million
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The Asia-Pacific Trade and Investment report by United Nations ESCAP states that “the decreasing FDI in 2013 in Mongolia may be due to new Strategic Foreign Investment Law (the SFI Law) passed in March 2012, stating that the parliament must approve foreign takeovers in strategic sectors, such as mining. Investors have stated that this law has brought about regulatory uncertainty that weakens Mongolia’s position in attracting FDI.” The Parliament of Mongolia enacted the SFI law on May 17, 2012 due to formal complaints, which were filed by a civil society organization about the quality of the environmental impact assessment after the Oyu Tolgoi Agreement in 2010, which is the largest investment in mining in Mongolia (UNESCAP, 2013). The SFI Law increased the levels of taxation on companies in mining sector. In addition to that the SFI Law was imprecise and unclear, which became one of the reasons of the decrease in FDI in Mongolia after 2012. The second main reason in the dramatic fall of the FDI in 2013, according to recent Mongolia Economic Update by World Bank Group in Mongolia , was due to completion of the first phase of the largest investment of Rio Tinto project to Oyu Tolgoi in 2012, same time as the SFI law enacted. Due to the strict regulations of the new law, most of the investors had stopped their investments in Oyu-Tolgoi and refused to continue their projects

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