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Mongolia Report

Mongolia Report

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Published by AAOI2

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Published by: AAOI2 on Oct 16, 2012
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01/25/2013

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mongolia 
THE ULTIMATE FRONTIERMARKET INVESTMENT OPPORTUNITY 
 
MONGOLIA 
THE ULTIMATE FRONTIER MARKET INVESTMENT OPPORTUNITY 
Introduction
We must say that sitting down to pen this report was one of the more difficult tasks we’ve undertaken inthe last couple of years.It’s not that the story is obscure. By now many have heard about Mongolia’s incredible boom, to be sure.We’ve discussed it almost ad-nausea in the pages of our blog,www.capitalistexploits.com.It’s clear that we believe in the opportunity to invest in the country’s growth.Pinning down the people that we needed to talk to wasn’t easy to coordinate. These guys are themovers and shakers of Mongolia, and frankly they are busy creating their fortunes.Alas, your editors don’t give up that easy. Over the course of the last couple of months we’ve strungtogether phone interviews, emails, personal conversations and on-the-ground intelligence from some of the most well-connected players in Mongolia’s ongoing re-formation.From our research and conversations with residents of Mongolia, it’s certainly true that the country is asclose to the Wild West as an entrepreneur can hope for these days. Those that have dared to lay theirclaim are nothing short of modern-day 49’ers, armed not with pick axes, but rather a boat-load of capitaland a battle plan that is textbook, post-Soviet satellite state free-market reform.Before we get into the interviews we’ll give you a brief overview of where Mongolia has been, and whereit’s likely headed. Feel free to skip this part and jump right to the interviews if you think you already havea grasp of the story.
Mongolian History – The “Cliff Notes” Version
Mongolia is a fascinating country with a rich and ancient history. Humans have inhabited this land forover 800,000 years, modern humans about 40,000. Yet it is only in very recent times that Mongolia’s trueriches have been discovered.
 
MONGOLIA 
THE ULTIMATE FRONTIER MARKET INVESTMENT OPPORTUNITY 
It’s hard to think about Mongolia without immediately envisioning its ancient leader, Chinggis Khan.Genghis Khan, as he is known in the West, was born in 1162. His birth name was Temujin. Mongols referto him as Chinggis Khan (Universal King). Temujin took the title of Chinggis Khan in 1189, and spent thenext 6 years uniting the nomadic Mongol tribes. In 1206 he declared himself ruler of the new MongolEmpire.Khan and his ‘hordes’ conquered most of Asia and European Russia. Their armies extended their reach intoSoutheast Asia and into central Europe. In 1215 Beijing was conquered by the Mongols. Later China itself would be taken by Khan’s grandson, Kublai Khan, who established the Yuan dynasty (1279-1368).All dynasties inevitably collapse. The Yuan dynasty’s eventual demise returned the Mongols to theirearlier ways, which included a lot of internal feuding and strife.By the end of the 17
th
century most of Mongolia was under the rule of the Qing dynasty. This lasted until1911, when the Qing dynasty collapsed and Mongolia declared its independence. Although declared,de-facto independence was not established until 1921, ten years later. The international community didnot recognize Mongolia as an independent nation until 1945.Due to its proximity to communist Soviet Russia, the political system of Mongolia was strongly influencedby its neighbor. As a result it endured 70 years of one-party communist rule until economic reforms wereembraced in 1990, after the fall of communism in Eastern Europe.One of the benefits of the Soviet’s tutelage, so to speak, which is being realized now, was the build-outof Mongolia’s industries and infrastructure. This also included exploration of natural resources in the1960s and 1970s, complete with extensive mapping and reconnaissance.The country embraced democracy after the fall, however, losing the support of its communist neighborsled to an economic collapse, poverty and widespread unemployment. Despite the introduction of a newconstitution, a multi-party system and privatization moves, Mongolia would remain stuck in a malaiseuntil very recently.
Fast Forward to 1990 and Beyond...
During the last 10 years or so, Mongolia’s economy has benefited from high commodity prices globally.GDP grew around 9% per annum from 2004 to 2008, and the IMF estimates Mongolia’s economy will bethe fourth fastest growing in the world over the next four years in terms of dollar GDP, expanding by 80%over that period, with an expected GDP growth of 23% in 2013.Mongolia today, for our money, is one of the most promising economies on the planet. Its revenue ismainly derived from the production and export of natural resources, accounting in fact for over 80% of total exports.As you might guess, China is the main market for Mongolia’s exports, responsible for over 70%.Estimates are that approximately 75% of China’s imports from Mongolia are natural resource based. Infact, Mongolia exports to China all of its coal, zinc, copper concentrate, oil and most of its molybdenum.Mongolia, although larger than all of Western Europe, is a country of only 3 million people (The CIA FactBook and the UN differ in their estimates), most of which live in the capital city of Ulaanbaatar.It hosts some of the world’s largest resource deposits, yet it remains virtually ignored by retail investors,who until recently lacked vehicles to invest directly in Mongolia’s growth.
We’ll introduce you to someof the people that can help you create a Mongolian portfolio.

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