ULAN BATOR May 18 Mongolia's parliament passed
a controversial law aimed at capping foreign ownership in
"strategic" industries like mining on Thursday, but investors
expressed relief that the legislation was weaker than first
The bill has been watered down considerably since it was
first drafted by a group of backbench MPs alarmed by a decision
by Canada's Ivanhoe Mines to sell its 58 percent stake
in coal miner SouthGobi Resources to the Aluminum
Corporation of China (Chalco).
The law stipulates that foreign investors are allowed to own
a maximum of 49 percent of companies involved in the mining,
finance, media and telecommunications sectors before being
subject to scrutiny by a government panel.
But it only applies to deals valued at above $75 million, or
ones involving state-owned companies like Chalco.
Aspire Mining, which owns the Ovoot coking coal
mine and rail project in northern Mongolia, said the new law
would provide more certainty for investors in Mongolian
"The only impact for us is in terms of adding a layer of
time in the approvals process," Aspire managing director David
Paull told Reuters.
He said it was not likely to limit potential funding sources
for Aspire's mine and rail project, expected to cost a total of
"If there's a foreign SOE (state-owned enterprise) in the
funding structure, we will need to have that approved... It's
really about finding the package the Mongolian government's
comfortable with," he said.
Stakeholders said they were encouraged by the way parliament
responded to the concerns of foreign investors about the law.
After the bill's first draft appeared, Mongolia's private
sector banded together to lobby parliament, criticising the
failure to define key terms like the "minerals" and "finance"
sectors and its catch-all provisions about what is "strategic".
"The FI (foreign investment) Law bill caused an overwhelming
coming together of the business community including key
Mongolian entities affected as well," said Jim Dwyer, executive
director of the Business Council of Mongolia. "I never have
seen anything like it over the last 10 years."
Among the improvements was the reduction of the number of
strategically important sectors to just four, headed by mining,
SouthGobi, whose planned sale to Chalco first prompted
lawmakers to act, declined to comment on how it would be
affected by the new law.
SouthGobi Resources' licences are now believed to be
suspended, but the company said it has not received any official
According to Xinhua news agency, citing local media, the
office of SouthGobi Resources' Mongolian subsidiary, SouthGobi
Sands, was sealed off by authorities pending an investigation
(Reporting by Terrence Edwards in ULAN BATOR and Sonali Paul in
MELBOURNE, Editing by David Stanway)