Under the surface, Mongolia has it all. Coal, copper, gold, iron, oil, uranium – a veritable periodic table of opportunity. When China’s voracious appetite for resources drove up the prices of minerals, Mongolia seemed an investor’s paradise: stable, democratic, but underdeveloped. But its potential still remains largely unfulfilled.
I was looking forward to going back to Mongolia. It had been two years since I last visited Ulaanbaatar and I was eager to see how it has changed. When I first visited in 2012 the city was buzzing. There was plenty of activity, with miners digging ever deeper in search of precious deposits and developers building ever higher office towers. Locals and expats alike seemed intoxicated, on both the expectation of fabulous profits and on the local vodka. In the space of several years Ulaanbaatar had been transformed from a steppe camp dotted by yurts to a busy capital with glass towers housing shiny offices and designer boutiques.
The enthusiasm was contagious, but it did not last. Although it was not apparent to a casual observer at the time, 2012 was a turning point for Mongolia. After a decade of fabulous growth, the country’s economy slowed markedly for reasons that had as much to do with external as internal factors. Commodity prices tumbled, foreign investment stalled amid economic and political uncertainly in Europe and the US, and legislation discriminating against foreign ownership caused many investors to look elsewhere. Three years on, economic activity is still minimal and with so many issues at play, it is impossible to predict when the trend will reverse.
Over coffee in the familiar surroundings of the Blue Sky Hotel, an iconic crescent-shaped building across the street from Mongolia’s imposing parliament, I discuss the country’s prospects with one of the few expats I know who still lives in Ulaanbaatar. Those like him who have stuck around genuinely believe in Mongolia’s vast potential, but even they are downcast. “These streets are littered with the corpses of those who didn’t make it,” he observes. Everyone I meet seems to have tales of deals gone wrong and partnerships gone astray.
Mongolia is not a place for the faint-hearted; it’s for those who are prepared to play the long game. There are opportunities, plenty of them, but investors must prepare for the worst case scenario. Agreements are always subject to renegotiation and without control over a business, one has little influence. There is no sympathy for those who got cheated.
My departure from Ulaanbaatar is delayed by many hours because of heavy wind and snow. It’s not unusual for snow to fall in Mongolia in October and there should be no need for the airport to close. But we are held back by the airport’s lack of resources and the infrastructure to deal with adverse conditions. A sadly familiar tale in Mongolia.