(Corrects first and sixth paragraphs in April 19 story to show
private firms will still require government approval but not
* Private firms no longer need parliamentary approval
* Curbs on foreign SOEs to be tightened
* Law blamed for deterring foreign investment in Mongolia
ULAN BATOR, April 19 Private firms looking to
invest in Mongolia will no longer have to seek the approval of
the country's parliament after lawmakers amended a controversial
foreign investment law on Friday.
Mongolia's Strategic Entities Foreign Investment Law
(SEFIL), passed in May 2012, was designed to restrict foreign
investment in firms in sectors like mining to just 49 percent,
and came amid concerns about the growing role played by overseas
capital in the country's mining-led economic boom.
But the law, passed shortly after China's Chalco
made a bid to buy a majority stake in the Mongolia-focused coal
miner SouthGobi Resources, was heavily criticised by
investors worried about the growth of Mongolian "resource
Partly as a result of the law, foreign investment in
Mongolia fell 17 percent to $3.9 billion in 2012, and in
February this year, the country saw its lowest monthly inflow of
foreign investment since at least 2010, according to the
Mongolia International Capital Corporation.
"The SEFIL was one of the key factors holding foreign
investors back," said Vidur Jain, an analyst at the local
investment firm Monet Capital.
The amendment passed on Friday will exempt privately-owned
foreign companies from the approval of parliament, but they will
still need approval from both the minister of economic
development and the department minister for the industry in
which the company operates.
The approval process will be triggered by any transaction
involving 33 percent or more of a strategic entity, according to
the original law.
But the amendments also tightened the restrictions on
foreign state-owned entities (SOEs), removing a 100-billion
tugrik ($71 million) threshold triggering government
That means all foreign SOEs will need the approval of
Mongolia's cabinet in order to buy into a Mongolian firm,
regardless of the size of the stake.
For purchases of stakes of more than 49 percent, the
approval of parliament will also be required.
Sereeter Javkhlanbaatar, an official in charge of foreign
investment at Mongolia's Ministry of Economic Development, said
on Monday that the country was now drafting an entirely new law
designed to encourage direct foreign investment in sectors other
The foreign investment law, launched by a number of
nationalist backbenchers in Mongolia's parliament last year, is
widely believed to have been primarily targeted at state-owned
firms from China.
Many politicians and citizens in Mongolia have been
increasingly alarmed by their southern neighbour's growing
economic hegemony, with China responsible for around 90 percent
of the landlocked nation's export trade.
(Reporting by Terrence Edwards; Editing by David Stanway and