Foreign direct investment has been the engine of Mongolian economic growth and is highly dependent on commodity prices. According to UNCTAD World Investment Report 2020, FDI flows to Mongolia amounted to USD 2,4 billion in 2019, up from USD 2,2 billion in 2018 (+12,4%), mostly due to continued large mining projects, especially the Oyu Tolgoi copper-gold mine. The total FDI reached USD 22,6 billion in 2019. With the improvement in the macroeconomic situation, mineral prices are expected to increase and the expansion of the Oyu Tolgoi mine could further boost FDI inflows into Mongolia. Australian mining firm Rio Tinto completed development of Shaft 2 at the Oyu Tolgoi mine in November 2019, bringing the site one step closer to full commissioning. Output at Oyu Tolgoi is expected to rise to 560,000 tonnes by 2025 from 125,000-150,000 tonnes in 2019. Two-thirds of Oyu Tolgoi's capital is owned by Turquoise Hill Resources - a Canadian-owned company indirectly owning Rio and the Oyu Tolgoi mine - and 34% of the Mongolian government.
The World Bank assisted Mongolia with its capacity to apply international standards on future mining investment schemes. The assistance, dubbed Mining Infrastructure Investment Support (MINIS) Project, was completed in December 2019. Mongolia is also building its first oil refinery, which is expected to be commissioned by 2022. The project received financial and technical assistance from India in October 2019.
Mongolia's main investment partners are China, Canada, Russia, Great Britain and the United States. The sectors attracting the most foreign investment are mining, oil and construction.
Mongolia is ranked 81st on the World Bank's Doing Business 2020 list, losing 7 spots compared to the previous year. The country made some progress with regards to resolving insolvency, but other countries have shown a better improvement in the business environment. However, the instability of economic policies and regulations, geographical isolation, corruption and inefficient transportation system are significant obstacles. The Mongolian government has launched a programme to improve the country's legal framework in order to boost FDI flows. In particular, it lifted the moratorium on new mineral exploration licenses and to increase the maximum duration of exploration licenses from 9 to 12 years. All sectors of the Mongolian economy are open to FDI, including raw materials, livestock and many other sectors with high development potential (mining, food processing, telecommunications, tourism).
