Attracting Chinese FDI To Mongolia-Actual Challenges And Perspectives For Improvements

This study analyses the actual challenges for Mongolia to attract foreign direct investments (FDI) from China and discusses which perspectives for improvements exist.In the past years Mongolia’s nomadic herders culture and the country’s traditional economic focus on breeding livestock and agriculture experienced far-reaching changes through the development of a strong mining industry that nowadays dominates the Mongolian economy.92percent of the mineral products are exported to China. Huge inflows of FDI, about one third from China, helped to finance the Mongolian mining boom. Mongolia today belongs to the group of resource-rich countries with a one-dimensional economic structure.The main objectives of the study are to analyze scope and significance of Chinese FDI for Mongolia’s economy, to elaborate the main challenges that Mongolia faces with regard to the goals to attract further FDI from China and to reach a better diversification of these investments among sectors and regions, and to make suggestions for improvements.The author identified the following main challenges that Mongolia has to tackle with regard to the mentioned two goals:i)"geopolitical fears" in Mongolia, ii) shortcomings of the legislation on foreign investments, iii) inadequate railway infrastructure, iv) deficiencies of the human capital and skills shortage and v) environmental impacts and requirements.The study covers China’s FDI inflow to Mongolia in the period from2000to2011and it uses academic research methods of comparative analysis, selection, and descriptive analysis.