Austrade: Mongolia – the new frontier

More and more Australian businesses can be using China and Hong Kong to launch into Mongolia – and it’s not just restricted to the mining sector, Austrade’s Martin Walsh tells Sophie Loras.

Landlocked by Russia to its north and China to the east, south and west, Mongolia boasts an area of more than 1.5 million square kilometers making it the world’s seventh largest country. With a population of approximately 2.7 million people, Mongolia also has one of the lowest population densities in the world.

But despite Mongolia’s isolation and hostility, its land, rich in mineral resources and with some of the world’s major mineral deposits including gold, copper, uranium and coal, the country offers a new frontier in opportunities for Australian businesses in a range of sectors, particularly in the mining sector.

Martin Walsh, 
Austrade’s Country Manager Korea & Mongolia in Seoul, says many Australian companies are already very proactive in Mongolia.

“Not all of them are currently in Mongolia but there are many actively looking at the market,” he says.

There are over 200 foreign-owned and joint venture companies currently operating in Mongolia. And over the past 18 months, Austrade has assisted more than 100 companies with their Mongolian queries.

Mining and resources

The mining sector remains the backbone of the Mongolian economy – accounting for between 20-30 percent of the country’s GDP. In 2008, prior to the collapse in commodity prices, mining accounted for over 20 percent of gross domestic product in Mongolia, 56 percent of industrial output, and 69 percent of export earnings.

Post GFC and the mining sector in Mongolia has rapidly picked up again, not least from its location on China’s doorstep and its ability to accommodate China’s insatiable demand for minerals and energy.

Currently there are at least nine major mining projects in the pipeline and the sector employs more than 14,000 people.

The Erdenet mine alone accounts for over half of the country’s export revenue and 25 percent of government revenue. These figures are set to dramatically increase once the US$6 billion Oyu Tolgoi copper gold project commences operation in 2013. Driven by this project, GDP growth forecasts for Mongolia are set to average 7 percent between 2010 and 2012.

Mongolia is not without its challenges. Its harsh climatic extremes, evolving political landscape and strict government regulations on local labour requirements can be impediments for foreign ventures. However there are still many advantages for Australian businesses operating in Mongolia.

Launching the recent Mongolian Mining Projects Report 2011, Australian Trade Minister, Dr Craig Emerson, said Australia enjoyed a warm relationship with Mongolia – crediting the hard work of the Australian private sector and strong linkages formed through Australia’s world-class education system.

“The Australian Government’s scholarship program, for example, has helped large numbers of Mongolians study in Australia and they have returned to prominent positions in government and business – these former students are strong advocates for Australia in the same way Australia’s world-class mining equipment and services companies offer the emerging Mongolian industry access to leading-edge techniques and technology,” Dr Emerson said.

Mr Walsh is quick to point out that while “it’s all about resources and energy in Mongolia,” the business opportunities extend to development, financial services, legal services and consulting services more broadly.

Opportunities for Australian businesses include:

– Equipment & consumables supply

– Technical services

– Vocational and technical training

– Mining J/Vs

– Consulting to NGOs

“Equipment and consumables includes coal preparation, coal seeming, coal washing, while technical services include geotechnology, social impact studies and water,” Mr Walsh says.

With a substantial amount of non-government money coming into Mongolia to help develop the country, Mr Walsh says there are also opportunities for consultants in areas such as women’s issues, livestock and social impact studies.

Australian companies already based out of China play some key roles in Mongolia’s mining sector. These include engineering consultancy firm Sedgmen, software technology firm Micromine, design and construction firm Spaceframe and GroundProbe, which provides radar technology for open cut mines, all based out of China. Leighton Asia, which is headquartered in Hong Kong but set up an office in Ulaanbaatar in 2007, is a key player on a number of Mongolian mining projects, assisting with mining and infrastructure construction.

“Being based in China or Hong Kong is very handy,” says Mr Walsh.

However, he warns, that once businesses reach a certain level, a more permanent presence in Mongolia needs to be considered.

Mr Walsh encourages new players to Mongolia to speak to Austrade and access its guide to doing business in the region at: www.austrade.gov.au/mongolia.

In addition to studying the history of Mongolia, Mr Walsh says Australians should visit Mongolia “to really understand the place.” 

*Austrade will open a Mongolia Trade Office in the capital Ulaanbaatar by years end.

For more information about opportunities in Mongolia, contact your local Austrade office: www.austrade.gov.au

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