Woo - ing back investors
UPDATE 2-Mongolia woos back miners after investment slump
Wed Apr 17, 2013 3:45pm EDT
* Mongolia sees Oyu Tolgoi dispute settled soon
* Oyu Tolgoi CEO sees "constructive progress" in talks
* IPO of state-owned Tavan Tolgoi seen delayed
By Clara Ferreira-Marques
LONDON, April 17 (Reuters) - Mongolia, hoping to arrest a slide in foreign investment into its critical mining sector, is planning a new law that it says will increase stability by reassuring investors their money will be protected from future rule changes.
Foreign direct investment into Mongolia dropped 17 percent to $3.9 billion in 2012, coinciding with a string of moves by the government that deterred investments in copper and coal.
Regulatory concerns peaked earlier this year when Rio Tinto threatened to delay the start-up of the $6.2 billion Oyu Tolgoi copper and gold mine until it resolves differences with the government over their investment agreement.
Ochirbat Chuluunbat, deputy minister for economic development, said the government was confident of resolving the dispute with Rio within as little as "several weeks".
Mineral-rich Mongolia is also seeking to woo investors with a law that will make all new investments subject to legislation, rather than governed by bilateral deals which might be challenged or reinterpreted by the parties at a later date.
"In the last six months we have noticed a slowdown of economic growth in Mongolia due to the reduction of foreign direct investment," Chuluunbat said, speaking on the sidelines of a London conference on Mongolian investment.
"So we have drafted a new law. We want to send a very strong message on the stability and clarity of the treatment of foreign investors in the future in Mongolia. If you invest today, your investment will be regulated over five, 10, 20 years by laws of today; future amendments will not affect the rules of today."
Mongolia's central bank governor, Naidansuren Zoljargal, told Reuters the law, which many investors said could replace existing legislation, was designed so that it could only be amended by a two-thirds parliamentary majority.
"It's going to be like an investment constitution," he said.
Chuluunbat said it could be put to parliament before July.
Mongolia is currently pushing through separate rules on foreign investment in strategic sectors, regulating investment by foreign state-owned investors.
Investors at the conference welcomed both government moves to scrap distinctions between foreign and domestic investors, and early indications of a further boost.
"Will everything go up the next day? No. But it will help the rebound in foreign direct investment, and it will help people like me raise capital," said fund manager James Passin of Firebird Management, which invests in Mongolia.