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Doing Business in Mongolia is the first country in this project, which will also feature other Asian countries. We hope you can use some of the featured information about Mongolia to achieve your goals.

We are on the lookout for local partners in respective countries who are our vision for sharing local entrepreneurship on the world stage. Want to be involved? info@doingbusinessin.asia

Featured Image: By Sebastian Münster [Public domain], via Wikimedia Commons. This his map of Asia, published in 1945

Interview – Onchinsuren Dendevsambuu

Onchinsuren Dendevsambuu is a Managing Partner of Deloitte Onch, Deloitte’s Mongolia arm and she is a tax consultant with extensive experience in Mongolian tax laws.

This thoughtful interview provides a fairly detailed treatment of the realities of tax assessment in Mongolia. In addition to evaluating the underlying tax laws with their implications and example of cross-border trade taxation issues, Ms Onchinsuren also reveals some of the procedural aspects of filing taxes.

Is a Mongolian tax advisor worth it? Probably.


Interview Transcript

Enkhzul Orgodol: Ms. Onchinsuren D has over 20 years of experience in tax and auditing services industry in Mongolia. She’s inevitably one of the most influential female business leaders in the country. Currently she’s working as a managing partner of Deloitte Onch, subsidiary for one of world’s biggest four professional services firms in the world.

Ms. Onchinsuren, welcome. Thank you for agreeing to talk to us. Just now I was actually asking you about the branches or the main activities of your company, of your Deloitte Onch firm. Could you explain the business structure to the viewers?

Onchinsuren D: Deloitte opened in Mongolia in 2012. We as an Onch Audit formerly, I have opened my practice in 2004, and then we became Deloitte in 2012. We are one of the longest-operating professional services firm in Mongolia, and most importantly, truly led and managed by locals.

We have three partners here in our Deloitte Mongolia office. Two of them are locals, me, myself, and Norjinbat, who is leader of consulting advisory services, and then we have the third partner who is Italian, Max Vergani, leading our audit services. Whenever there’s challenges and needs in any of the professional services area, we serve and we always welcome.

Enkhzul Orgodol: I would really high recommend your firm out of the similar firms I think mainly because of it’s run by or managed by a local, because I found if this kind of special service firm is run and managed by a local, then she or he would be more knowledgeable and better doing the nuances, finding the nuances and kind of overcoming the cultural differences.

Onchinsuren D: Won’t be lost in culture, yeah.

Enkhzul Orgodol: Right. Exactly.

Onchinsuren D: Yeah.

Enkhzul Orgodol: Could you tell us some of the government’s tax policies that are designed for such people as I just mentioned to attract more investment into the country?

Onchinsuren D: Yeah. Government is doing a lot, actually, to attract investment, specifically foreign investment for the last few years. Basically, government is doing a lot, but government is wishing lot, too. I have analyzed whether really the government wishing this policy is reflected in tax laws and how they are attracting through tax policy, which I had analyzed. Of course, we should be grateful there are number of incentives, but it could have been better and also better implemented, the issues, because although there is a policy for attracting investment, the implementation side is always left behind.

Enkhzul Orgodol: The problem with the implementation side, is it correct to understand that while there are a lot of interest and a lot of intention from the decision-makers to attract more investors into the country, that’s why they are ready to pass laws that are supporting the investment inflow to the country, but at the same time, the implementation part, the most important mechanism is left out mostly due to political instability or not so much of sustainable workflow in the administrative or implementing agencies of the government. Do you think that that’s where the problem is coming from?

Onchinsuren D: Yeah. I think it’s a hard question, too, but in my observation, the policymakers are really willing, wishing to improve the situation. The issue comes always with the implementation is because I think this process and planning well and preparing it, and then the implementing those processes, and then following up, monitoring whether these new policy is being implemented, and the beneficiaries, the intended beneficiaries are receiving it or not is really lacking, which means basically it’s administration and operational practices need to be really improved, specifically for tax.

I think our government, from our perspectives of government, they are actually happy that we have the lowest tax rates in Asia. For example, personal income tax is 10%, but by the way it’s going to be increased now, just the last week announced. The intention is announced. Corporate tax rate is 10% and 25%. It sounds like a very low tax rate, and it is, actually, and so investors and clients are always so happy to know that we have the lowest tax rates.

The expectations are, talking about expectations, I think, as I said, because the tax laws are very not clear the implementation could be a challenge.

Enkhzul Orgodol: I see.

Onchinsuren D: Do please talk to tax advisors.

Enkhzul Orgodol: I would definitely do that.

Onchinsuren D: Let me promote myself, too.

Enkhzul Orgodol: That’s valid. Talking about some low tax, the incentives, tax incentives, like the low tax for certain industries, I’ve heard that dairy producers enjoy, for example, VAT tax exemption. What other kinds of sectors, you mentioned about construction or maybe in general import substituting industries, but could you name the other sectors that are exempted from certain tax such as VAT?

Onchinsuren D: Instead of by sector, I think the tax incentives are applying to types of the operations, like whether you are manufacturing innovative products, producing innovative products, or whether you are producing a goods …

Enkhzul Orgodol: Any products.

Onchinsuren D: … that can substitute imports.

Enkhzul Orgodol: I see.

Onchinsuren D: That’s how it’s regulated or legislated. Milk and meat, I think that’s only for the purposes of consumers. These are dairy products and meat products are main consumption of food items, so just to reduce the cost on the …

Enkhzul Orgodol: Consumers.

Onchinsuren D: … consumers, this exemption, this incentive is available.

I also actually happen to see some statistics, so how many, for example, entities operating in Ulaanbaatar, registered in Ulaanbaatar and operating in Ulaanbaatar area, about more than 130,000. Out of that, more than 80% is SMEs, which means, who are the SMEs? It’s basically who has less than 50 employees and whose income is not higher than one billion tughrik, or the gross turnover sales is not higher than one billion tughrik. It’s about $400,000. The one billion is $400,000. That means the entire nation is really SMEs.

Enkhzul Orgodol: SMEs, yeah.

Onchinsuren D: The corporate world is.

Enkhzul Orgodol: The kind of tax incentives or also the requirements, et cetera, incentives, exemptions, requirements, do they all apply to locally or with a foreign-owned company is equally the same?

Onchinsuren D: Same.

Enkhzul Orgodol: I see. As long as they registered and incorporated in Mongolia. I see. Besides the tax incentives, of course there are other types of the agreement or documentations that government signs with other countries in supporting the business environment here. Of course, that includes the double tax treaty as well as the Free Trade Agreement. Could you tell us a bit about that?

Onchinsuren D: Yeah. Mongolia had more than three bilateral double taxation treaty. I think four years ago, more than four years ago, government decided to cancel four of them. These are Luxembourg, UAE … What else? Four canceled the tax treaties. Now we have maybe about 25 or 26 double taxation treaties.

I think the government is looking forward also to sign more double taxation treaties like Japan, because we had also entered into a bilateral agreement, trade agreement, so naturally, the double taxation treaty agreement is needed. The implementation is again an issue. Of course we have these treaties. Then, how do you apply these provisions of the treaties? It is another always a challenge sometimes. No, it’s most of the time, because when there is provision how to apply, for example, how do you describe, determine permanent establishment, which means this permanent establishment pays tax in Mongolia, so when do I pay tax in Mongolia, when I do not pay tax in Mongolia under this bilateral agreement? These are questions.

Then, normally, what we need to look at is, okay, what is permanent establishment under Mongolian tax laws? There is a definition, but not enough, so there’s always questions and always we refer it to the Tax Authority, and Tax Authority is also not in position to add or explain what is in the law so it’s always so challenging, the implementation.

Enkhzul Orgodol: Does it mean that although there are actually quite a number of double tax treaties signed, the implementation part is still lacking, so businesses have not been able to benefit from it as much as it was intended?

Onchinsuren D: Not exactly. The tax law allows you to assess your own tax. For example, as a taxpayer, I have a right to assess my tax. Whenever I have a transaction, a trade with, for example, let’s say, my supplier in Singapore, and my supplier provides goods and services to me, and Singapore, we have a double taxation treaty, so as a taxpayer and tax agent on behalf of the government, I have a right to assess my tax. I say like, okay, using the double taxation treaty between Singapore and Mongolia, you don’t need to pay tax in Mongolia. This is my right, but the thing is, it can be challenged by the Tax Authority later on during the tax audit.

Issues can be like, okay, my Singaporean supplier might have sent me a bank account in Hong Kong and say that, okay, “I need to collect this money in my Hong Kong bank account,” and I remit, I sent the money to Hong Kong, the Tax Authority might raise that, “Oh, you sent to Hong Kong, so you have to withhold 20% tax on this,” while I’m saying that no, because my supplier is Singaporean tax resident and we have this contract. They just instructed me to send their bank account in Hong Kong and we remitted it to Hong Kong. Therefore, I can’t charge the 20% withholding tax. There’s no tax should be, and that is double taxation treaty. Like that, this could arise.

Enkhzul Orgodol: You must advise your clients on such kind of, for example, double tax treaties and how they can benefit from it, don’t you?

Onchinsuren D: Yes. Yes, yes, we do. It’s a double taxation treaty. It’s a law, so how do you apply that, but we always advise our client that because of the implementation difficulties, challenges, you might still be questioned by Tax Authority, and there’s a risk of tax assessment, too.

Enkhzul Orgodol: To me, it seems like, for example, if I think of myself as a potential investor or a business person who’s interested in doing business with regard to Mongolia, I feel more and more like I should do my research and I should have my expectations both in the negative and the positive ways as much as possible before entering the market, or do you think it might be actually beneficial for some businesses to come in and learn while they’re doing?

Onchinsuren D: I think what drives their interest to come to Mongolia is the business opportunity. I think the business people would make decision based on their business profit opportunity and how profitable it could be. Then, the tax challenges is always there. Even if you go to operate in the U.S. or in U.K. or in Mongolia, it’s the same. Tax challenges, tax compliance is always on top of the one of the important, the priority issues for any businesses entering into foreign country. I think nothing very special about Mongolia tax, not that very scary. I do not want to scare away, but tax advisors are here.

Enkhzul Orgodol: What are the tax risks do you think the businesses should keep in mind?

Onchinsuren D: For any businesses, tax risk is, as I said, that businesses and taxpayers, they have their right to self-assess taxes, so when tax risk arises is that I assess it. I assess my tax by myself based on my reading of tax laws. Based on my suggestions, advice given by my tax advisor, I assess my taxes. There is crisis when Tax Authority does not agree with tax assessment. That’s the only thing. When this Tax Authority can be not agreeing with you is also, that’s the thing that taxpayers or any businesses need to understand.

One of the factors that are influencing different assessments by Tax Authority and taxpayers is that the tax inspectors have very big power to assess tax, assess additional tax. Those tax inspectors have this exclusive right, power to assess your tax, and that’s actually can be like one person’s judgment involves, and then also it involves the person’s knowledge and experience.

Specifically when we are discovering all these big deposits and starting, these big national, international companies started to operate in Mongolia, we are having more and more cross-border transactions. The experience of our Tax Authority and tax inspectors, understanding and handling audit in these cross-border transactions is one of the biggest factor that they may see it very differently than normal Western business person sees it or Western business practice.

That’s where biggest gap can be between this taxpayer and businesses coming from Western country, where they have all these rules and the regulations are in place and then where they have these cross-border transactions has been incurring maybe more than 100 years. They used to deal with it, they know how it happens, why it happens versus our Mongolia side, we have only experience of more than 25 years of experience in the market economy. We don’t know many of the things the trades, yeah, practices, like financial instruments that Western countries use in everyday. These are the new things to us to learn. While we are in the learning curve, people can be …

Enkhzul Orgodol: They leave the curve.

Onchinsuren D: Yeah, yeah. We can be judging it wrong.

Enkhzul Orgodol: We’re mostly talking about the tax-related issues that might be more applicable to businesses before incorporating their businesses in Mongolia. Could you tell us a bit more on after they are maybe incorporated or partnered with a Mongolian and start their businesses in Mongolia, how does the process is like? For example, there are certain countries that have digitalized their tax system or all these tax procedures. How easy or difficult it is to deal with tax-related issues after incorporation in Mongolia?

Onchinsuren D: Incorporation is, so process of registering with the state registration system takes about two weeks. Then, you can start operations. After you incorporated, you are given a taxpayer’s ID and you register as a taxpayer. Then, you need to start your compliance.

What is required is that tax returns are required to be filed quarterly basis and also you need the investors that foreign businesses or any businesses need to prepare a financial statements, statutory financial statements, and these are prepared in accordance with International Financial Reporting Standards, because our accounting law requires that we adopted IFRS as a national [cap 00:22:46], so businesses need to prepare international IFRS-compliant financial statements.

These financial statements are submitted or filed with the finance authority semi-annually. It’s been actually for also quarterly, but to ease these compliance processes, procedures, the government made it into semi-annual submission. Tax returns are now also can be submitted only through internet. You don’t need to submit it in hard copies and go in person, which we used to be. Last two, three years, the Tax Authority automated this system and we can submit this on through internet.

Enkhzul Orgodol: Please tell us a bit more on how difficult it is or please compare the situation of employing foreigners whereas employing locals in Mongolia in terms of the tax.

Onchinsuren D: I think our tax laws and social insurance law both apply to, it could be applied to foreigners and locals, but the expectation is that by businesses’ side is that if we employ foreigners and these foreign expatriates are only for short period of time and they would expect that they should not be paying as much as taxes that they are paying for employing locals, but the law is applying equal.

Yes, there are some clients do share with us that these expatriate employees are only for two years or three years or maximum five years and on abscondment, on assignment basis, but the employer at the Mongolian companies, they’ll need to pay Social Security while the employee will not be benefiting out of the Social Security. They would not get any pension here in Mongolia.

From that perspective, some businesses think it’s unfair, but we have done a number of researches and consultations and discussions with the Social Security, and I think the law was written in 2000 early and then amended subsequently in 2009 and 2008. Probably the government just, the Social Security fund needs basically a lot of contribution. We are now …

Enkhzul Orgodol: That’s also another learning curve.

Onchinsuren D: in a shortage more with, yeah. We probably need to assess taxes, tax, or have these foreign employees to pay taxes in Mongolia.

Enkhzul Orgodol: I see. Last two questions. The first one is, it’s not directly related to tax, but it’s one of the hottest topics in the country, I think. There has been lots of debate whether usage of offshore accounts should be allowed for Mongolians or for foreign companies operating in Mongolia. I think it’s a different matter when it comes to the politicians or the politically-related people, but how is the situation like for businesses? Are they allowed to have offshore accounts?

Onchinsuren D: Yes. Any foreign investment companies or any local company can open a bank account in foreign countries. It’s not prohibited in Mongolia by Mongolian laws. Opening a bank account is a contract and Mongolia laws acknowledge the freedom of contracting. Any person, any businesses can enter into any contract with any business parties.

Enkhzul Orgodol: I see, I see.

Onchinsuren D: No prohibition there. The only requirement is that the businesses need to register the foreign bank account with the State Registration Office. You have this business license, business certificate, incorporation certificate, and the State Registration Office actually registers all the bank accounts and some exact use in that state certificate, at the back of the certificate. Businesses need to have that foreign bank account registered there on that certificate. That’s it.

Enkhzul Orgodol: My last question is more to do with, I guess, your personal, how do I say, work style, because as I briefly mentioned to you, we’ve been interviewing, you’re now the eighth business leader we are interviewing, actually ninth. We’re interviewing three more. In total we will have 12 business leaders from different sectors throughout Mongolia, excluding mining, because mining has been the hottest topic for so long. We would like to show or reveal some of the hidden opportunities and under-tapped potentials of the country in other sectors.

By doing that, we want to talk to the people, the business leaders who have succeeded in the country. Besides all the technicalities we discussed about, and of course you obviously are a very knowledgeable and very experienced in your field, but what other kinds of advice or the kind of tips you think the business people or mainly the newcomers should keep in mind when they want to do business in Mongolia in successful and sustainable way?

Onchinsuren D: I think foreign businesses need to understand and explore more deeper about Mongolian culture. We have culturally nomads and we are very independent people. Sometimes there could be some misunderstanding, miscommunication when doing business in Mongolia maybe with your local business partner or maybe with your local employees due to these cultural differences.

The businesses need to be remind that Mongolians are, first of all, independent, and the secondly, very talented people. The third one factor may be, which can be in any other countries, any other nations, there could be miscommunications due to the language differences. Also there’s always communication challenge, too.

I think communication is the most important thing. Better have a very good open and face-to-face communications with your local partner. Mongolians are very actually have a good heart, specifically towards to any foreigners. They always know that you are away from your home country and you’re in a foreign land and we need to we are actually should be hosting well. There’s always such a big heart with Mongolians.

If there’s any challenges, it’s just need to be openly communicating, talking to your partners. I really wish successful partnership between Mongolian businesses and foreign businesses because we need to learn a lot in bringing high technology in the country.

Enkhzul Orgodol: Ms. Onchinsuren D, thank you very much for your time. It was a great pleasure and also great opportunity to hear the insights in your sector. Thank you.

Onchinsuren D: Thank you.

Interview – Achit-Erdene Darambazar

Achit-Erdene Darambazar is a pioneer in Mongolia’s financial sector and is the founder and President of Mongolia’s first Investment firm, Mongolia International Capital Corporation. Fluent in many languages, he has facilitated Mongolian cross-border deals and raised hundreds of millions of dollars for his clients.

In this interview, Achit-Erdene looks retroactively at Mongolia’s mining industry and forward to agricultural. He also shares his experiences with Mongolia’s stock market and the prospects for Mongolia’s leading public listed companies.

Interview Transcript

Enkhzul Orgodol: Mr. Achit-Erdene is the president of Mongolian International Capital Corporation offering comprehensive inbound and outbound investment, brokerage, and research services. We will focus our discussion on the past, the present, and the future trends of Mongolian investment climate. So Mr. Archit-Erdene, welcome.

Achit-Erdene Darambazar: Thank you.

Enkhzul Orgodol: Although mining sector has been the low-hanging fruit or the cash cow for Mongolian economy to leverage since 2000, because of not only its internal politics, but world commodity price fluctuation. We have been forced to start making the country’s other economic sectors more attractive. Which other sectors have the biggest potentials of attracting foreign investors to Mongolia based on your observations and predictions?

Achit-Erdene Darambazar: Yes, the mining has been, really, the growth engine of Mongolian economy for the last 10 years. If you look at the historical data on the exports. For example, in 2005, the Mongolian commodity export was only half a billion dollars. Today it’s over 5 billion dollars more, exactly 5.8 billion dollars. And you could really say that Mongolia opened its treasure chest. We were exporting only copper ten years ago. Now we export coal, iron ore, and lots of other minerals. So I think this has been really success story of Mongolia.

What I see in the next ten years is kind of similar. Big growth in the agricultural industry of Mongolia, because like other countries with the big land and fewer people like Canada and Australia and New Zealand, Mongolia has good potential for the agriculture. Both growing crops and also exporting meat.

Enkhzul Orgodol: Animal Husbandry.

Achit-Erdene Darambazar: Animal Husbandry. Of course many things need to be done, especially on the government’s side, there needs to be right policies and also the, maybe on animal husbandry more like the …

Enkhzul Orgodol: Hygiene and more standards, right?

Achit-Erdene Darambazar: Yeah, veterinary, yeah. But I think there is a huge potential and I think you already can see that the agricultural industry in the last two, three years picked up, because we are also next to a very big market.

Enkhzul Orgodol: China.

Achit-Erdene Darambazar: China. And that imports the crops and even hay from America and Canada. So I think there could be just matter of time before Mongolia starts exporting these huge commodities. Agricultural commodities, volumes, to China.

Enkhzul Orgodol: But with regard to mining sector, in spite the abundant resource, there has been lots of challenges with regard to infrastructure development as well as not having the right policies in place as a precedent to investment, etc. Do you think similar kind of challenges can be faced for investors interested in agricultural sector as well?

Achit-Erdene Darambazar: Yes. Like you said, I believe the government policy is quite important, I think. So if you look at New Zealand, we recently did a research on this industry, if you look at New Zealand, New Zealand has a similar number of sheep and cattle. So 33 million. Mongolia has 32 million, and New Zealand exports about 3.8 billion USD worth of meat all over the world including and probably mainly to China. Whereas Mongolia is exporting only 17 million dollars worth of meat. So if you look at it, I think the main bottleneck is the dangerous, contagious diseases like foot and mouth disease and other diseases that are kind of , that prevents it. Because there is a worldwide ban on importing from these countries where there is a FMD outbreak.

So Mongolia needs to government, probably it can be done only through the public sector that we need to introduce good hygiene standard as well as introduce the big vaccination program all over the country.

Enkhzul Orgodol: Which is already in place though, right? It’s certain amount. Probably not fully implemented, but still on the way.

Achit-Erdene Darambazar: Yes. So I think this needs to be done systematically like it’s done in other countries like Turkey in the last 10 years. And I think it needs to be country-wide and systematic and over three to four years. And Mongolia, the meat industry can export after that.

But it’s like, in mining, it’s more in the infrastructure issue, but there is big demand on the other hand so it justifies this investment.

Enkhzul Orgodol: What else can you say about Mongolian investment environment? Especially in terms of legal and maybe even taxation aspects?

Achit-Erdene Darambazar: Right. So, Mongolia has one of the lowest corporate income tax rate in the region. It’s 10% if your revenue is less than 1 million dollars but 25% after that. And also personal income tax is about 10%. And I think Mongolian company law and investment laws are quite well-drafted and so I believe there is a general.

Enkhzul Orgodol: It’s generally welcoming or favorable to the investors. And I think because of this economic downturn we’ve experienced over the past few years, now the new government or the newly-established government is trying harder than ever to make the investment environment or climate even more favorable. Do you agree with that?

Achit-Erdene Darambazar: Yes, I agree with that. I think in the past that Mongolia introduced some controversial laws limiting investment in strategic sectors such as mining. But since, like I said, we’re a very vibrant democracy, so we learned from that mistake and changed that investment law again. And now there’s no more limitation in strategic sectors except for the foreign government-owned institutions. I think it’s kind of similar to when you invest in Australia, you have to get an approval from the investment board. So if you were a state-owned company, there will be similar process, but for other private investors, it’s a quite easy process. You don’t need special approval from anyone to make an investment.

Enkhzul Orgodol: It’s not only applicable to strategic sectors, but also to the other sectors, isn’t it? Could you share some of the projects you’re currently working on? Which sectors are they mostly from? Where are they headed to?

Achit-Erdene Darambazar: Yeah. So, the deals we have done, the transactions we have done, kind of reflective of the Mongolian economy and foreign investment trend, you could say, so, we started doing a lot of mining sector deals and up until 2012 there were lot of new mines starting, new exploration companies starting and listing in Australia and Hong Kong and Toronto stocks exchange. These were really interesting, exciting times.

Then you could say that because of, maybe, commodity downturn and also government policy of that strategy investment law I mentioned that mining became less attractive for foreign investors. So you see more decreased activity in the mining. But nevertheless, I mean, just in terms of investment, but also, Then in the last four years, you can see a lot of investment in agricultural sector, so we have, for example, we have Worked on expansion of the largest chicken farm in Mongolia. Where they had about 100,000 chickens and they expanded to include 300,000 more chickens, so becoming almost half a million chicken farm.

Enkhzul Orgodol: Right, right. Yeah, that’s quite a rapid expansion.

Achit-Erdene Darambazar: Right. Expansion. But still they cannot supply . They will supply only 30% of the Mongolia’s total consumption, so I think there is lot of potential in this sector for import substitution but also for export. But also, now we’re working with cashmere company to expand its production line, but also to attract strategic investors into the sector. So offering equity sales. also, we work, it’s our principal investment, but we built a successful farming company in eastern Mongolia, so we see a lot of deals in agriculture sector through recently, but also starting this year, late last year, the mining sector is picking up again. So again we’re working with mining entrepreneurs starting new companies, maybe listing on Toronto.

Enkhzul Orgodol: Besides agriculture and mining sector, which other sectors do you think have the biggest potential so far catching up with these sectors, mining and agriculture and others that you just mentioned.

Achit-Erdene Darambazar: So we have, again, I forgot to mention we work with a lot of mining service companies because as you noted Rio Tinto is the largest investor in Mongolia. So they’re investing last four years about 5 billion dollars and investing 5 billion dollars more in the next five years. So there is lot of opportunity to supply materials, goods, and services to this big mine. And that’s just one mine. Then there’s lot of other coal mine and small-scale gold mine starting. So we see a trend in the mining service industry that first it was focused mostly in exploration services. It was geophysics, initial stage, drilling companies, but it’s more like, now, more stable business like catering services and also the machinery. And then there are so many things that you can supply to the big mines that can be produced in Mongolia so more and more entrepreneurs find these opportunities and then come to us to raise money so that’s quite interesting sector.

Enkhzul Orgodol: Yeah, sounds like we might be able to see similar trend happening in the agricultural sector in the next few years as well, because you just mentioned that agriculture sector is trying to catch up with mining sector, but they’re still in the initial stage in terms of becoming or meeting international standards, etc. So maybe after several years, they would be also requiring supplementary services like the mining services you just mentioned. Would you agree?

Achit-Erdene Darambazar: Yes. I would agree. I think once you started producing big volumes of agriculture products, there would be, necessarily,. They will require logistics services and marketing and trading and there will be a lot of other opportunities.

Enkhzul Orgodol: Your company provides multiple services besides the capital financing … Corporate financing. Could you share your typical revenue structure so that we can see which kind of services are more popular among the corporations interested in Mongolia and also upgrading in Mongolia?

Achit-Erdene Darambazar: So we are like a small investment banking firm. So our main businesses is our corporate finance advisory. So we advice companies in debt and equity raising. And also their foreign inve, like you said, the inbound investment when foreign investors want to come in, they require due diligence services, et cetera, so these are primarily ourr,maybe, 70-80% of our revenue comes from this. And then we have a small brokerage arm that is mostly outbound Mongolian people wanting to buy shares outside. And because the Mongolian capital market is still very very small but still, we’re working on that. We’re trying to find new companies to list so over time I think this brokerage will pick up.

Enkhzul Orgodol: Speaking of the immaturity of Mongolian stock market. In 2011, as it 2011 when the Mongolian stock exchange started working with the London stock exchange? Yes. 2011, right?

Achit-Erdene Darambazar: Mm-hmm.

Enkhzul Orgodol: How much has this partnership helped in terms of the growth of MSE, you think?

Achit-Erdene Darambazar: So, it was both good time and bad timing for that initiative. It was good time that we were able to attract London Stock Exchange and many other exchanges offered their services to cooperate with Mongolian stock exchange, but we chose London Stock Exchange and brought in new IT software system and I think people, officials got training in abroad and even brokerage, our companies and people to train in London.

So there was some, lot of improvement, but again the commodity market kind of went down again starting 2012, so lot of the expected IPOs in the market didn’t happen. But again as I said, we’re seeing, again, renewed activity in the mining sector. Commodity prices going up. And lot of the biggest companies in the future, that will be listed will be state-owned and also mining companies, we believe so.

For example, there is a ET-,Erdenes Talvan Tolgoi, we just call it ETT, I think eventually when it lists, it will be, like I said, worth several billion dollars. But I think it’s kind of a early stage of development. And we’ll see listing of this and other companies on the stock exchange in the coming years.

Enkhzul Orgodol: I see. In one of your interviews back in 2011, you said many Mongolians with significant savings are interested in investing but feel uneasy because they can’t easily find quality information on investment ideas. Has it changed?

Achit-Erdene Darambazar: I think, still, in the Mongolian Stock Exchange, there are not too many qualified companies for investment. And Mongolian stock exchange market capitalization is still very low. Several hundred million dollars. So people with significant savings want to invest in stock market, but they would investing in abroad. So mostly they would follow the Mongolian companies but listed in Toronto and Hong Kong and also in Australia, so we offer these services facilitating this investment.

Enkhzul Orgodol: Right. You also train your clients or the public as well, right, in this regard?

Achit-Erdene Darambazar: Yes. One of the things we do is we organize this event with the mining companies or other listed companies and invite our clients. And they introduce their plans and activities for the next year. So that’s, yeah, has been quite popular, useful, for our clients.

Enkhzul Orgodol: Right. Based on your client portfolio, you mostly consulted for major companies and investors. But I think you know among other viewers, there are different sizes of companies or even individual entrepreneurs who are looking at Mongolia and thinking “what kind of investment I can do that can bring me my money back in the short term, mid term?” What is your advice for them?

Achit-Erdene Darambazar: Yeah, for any good investor, you need to do a lot of studying. Read about it. The country and economy and talk to the people and investment firms like ours are very good source of information and we have a good network in the business community and I think will be good start to start talking to us.

Enkhzul Orgodol: Right. Right. If they could not, have the accessibility to talk to you directly, they could at least access the reports, market reports, or some of your intelligence services online, can they?

Achit-Erdene Darambazar: Yes. That’s correct. We do provide monthly industry intelligence reports. And the purpose of these reports are to identify the opportunities and challenges in the sectors, so we have done an energy sector report and we are now doing an agriculture ,just published agriculture sector report, of course, so. And along that, we also do company-specific reports. Like a quarterly research reports, so focusing mostly on Mongolian stock exchange listed companies. But I would be also good start to look at, understand the financials of the companies and network in Mongolia.

Enkhzul Orgodol: Are they accessible online for free? Or do they … Can they be?

Achit-Erdene Darambazar: Yeah, I think we publish some parts of it,excerpts. But you can email us and get the full content.

Enkhzul Orgodol: Okay. That’s great. That’s great to know. MICC created the Mongolian Mining Index back in 2005 and was informed to be picked up by Bloomberg and the writer’s knowledge, is it still available?

Achit-Erdene Darambazar: Thanks, that’s very good point. I think it’s been ten years we’ve published this report, so we’re going to update and do a major update and publish a whole report on this mining. And I think you could see, really, the trend, if you compare this mining index in 2005 and 2016. You could really see what has happened in the last 10 years. So …

Enkhzul Orgodol: And have you already updated, or, sorry, Or are you still working on this?

Achit-Erdene Darambazar: Yeah. So you should, yeah, keep an eye for this. We will be publishing very soon and it will be quite interesting.

Enkhzul Orgodol: So, though you’re an investment banker, I would like to hear your opinion on development of commercial banking in Mongolia. Do you think Mongolian banking and financial sector have the infrastructure development required for international businesses that would require transactions swiftly … Swift transactions, online payment across borders, etc. Do you think we do have the sufficient infrastructure already developed for such kind of banking and financial duties?

Achit-Erdene Darambazar: Yes, I think the commercial banking sector is well-developed in Mongolia. Where you’ll have no problem in transferring money and doing transactions online or in person. Some services, what we do in the for big funds buying Mongolian shares, we’ll sometimes need, It looks like we’ll need to have in foreign big-name custodian banks. But I think the government is acceptable, willing to bring and welcoming foreign banks to establish branches and I think it will be even more developed after that.

I should also …

Enkhzul Orgodol: That’s one of the hottest topics at the moment, right? Which banks to welcome, whether we should welcome at all, or not?

Achit-Erdene Darambazar: I think it also helps the over-all development of the financial industry. So once you have a foreign bank, there will be more competition and also the foreign businesses, the big companies that are coming in, they also always look for their partner banks in the country, so I think it will be helpful for the overall economy and us brokerages when we try to bring big hedge funds and big funds to invest in Mongolia.

Enkhzul Orgodol: Okay, Mr. Archit-Erdene, thank you very much for your discussion and all the best to you and hope to see you again.

Achit-Erdene Darambazar: Thank you.