Group 2- Section 2- Mini Report 1

SECTION II: POLITICAL AND LEGAL ANALYSIS

A. Political Ideology

1. Wide participation

Politics of Mongolia takes place in a framework of a semi-presidential multi-party

representative democracy. It means that Mongolia’s politial system is a system in which
government leaders are eleted diretly by the wide participation of the people or their
representatives.

2. Democracy

The politics of Mongolia takes place in a framework of a semi-presidential multi-

party representative democracy. Executive power is exercised by the Prime Minister, the
head of government, and the Cabinet. The President is the head of state but holds limited
authority over the executive branch of the government, unlike full presidential republics
like the United States. Legislative power is vested in parliament. The Judiciary is
independent of the executive and the legislature. A full democracy like Mongolia
generally tends to support free trade and entrepreneurship more. It'll also be more
responsive to the changing needs and circumstances of a business, and operate
transparent and fair laws and tax rules. This system helps a country become wealthy.
From a broader perspective, by using its uniquely important place in the culture to create
a more informed and engaged citizenry, the business community can help strengthen the
democratic institutions that help ensure more solid outcomes over the long term by
helping to reduce market and political instability. Put more simply: democracy is good
for business. From this point of view, entering democratic economies like Mongolia is a
good chance for Vietnam because of the market sustainability.
 B. Political risk

1. Level of political risk

According to the “Coface for trade” country risk assessment map, Mongolia is a high risk
political and economic country until Q4 2022.

Very high High Moderate Low Very Low

Low

Political risk 0-49.9 50-59.9 60-69.9 70-79.9 80 or more

2. Sources of political risk

In the last two decades, money and personal wealth has become increasingly
influential in the Mongolian party system. Consequently, friction and political bargaining
between clientelistic networks have led to political instability and unpredictability. Public
trust in political parties reached a historic low in recent years.

Corruption has become the major hindrance to prosperity in the country. While
significant legal and institutional frameworks, such as the Anti-Corruption Law and the
Independent Agency against Corruption, were put in place in the last decade, the
implementation of anti-corruption policy has been plagued by deep-seated conflicts of
interest in politics. Fighting against corruption at lower levels of government has
produced positive results, but justice remains elusive when it comes to prosecuting high-
profile and political corruption.

The Mongolian government has proven unsuccessful in addressing socioeconomic

inequality and corruption, and it has a poor record of engagement with youth, low income
communities and other disadvantaged groups. A high level of public dissatisfaction and
frustration regarding the lack of democracy and accountability within the major political
parties persists. Public opinion surveys have continuously confirmed that the majority of
Mongolians do not trust political parties even when the latter are ostensibly committed to
democracy.

3. Main types of political risk

Political instability: Mongolia’s political instability and unpredictability.can

disrupt everyday business transactions. Political instability also causes heavy financial
losses for businesses This may simply be because government changes the legal
framework. This may result in less 'business-friendly' policies, changes in business
taxation and regulations or, perhaps, political changes that affect the firm's marketing

Corruption : Those business owners who can use their connections or money to
bribe government officials can manipulate policies and market mechanisms to ensure
they are the sole provider of goods or services in the market which can lead to toxic
competitors to our firm. In a corrupt economy, small businesses are not widely spread
and are usually discouraged because they face unfair competition and illegal pressures by
large companies that are connected with government officials. When corruption takes
place, infrastructure facilities will have less chance to be developed, for instance, there
will be less public market, building that host malls and stores which will affect the chance
of our product to reach its customers. Moreover, corruption leads to over-tax which can
increase the price of the product, complicated policies and bureaucracy that can affect the
reach of our product in one way or another.

Socioeconomic inequality: It limits productivity and has the potential to constrain

consumer spending and growth, destabilize supply chains, trigger political instability, and
jeopardize their social license to operate.
 Russia- Ukraine war: Mongolia is not directly involved in the Ukraine-Russia
conflict. Mongolia maintains a policy of neutrality and non-alignment, focusing on
peaceful relations and cooperation with its neighboring countries.

However, it's important to note that geopolitical events can have indirect effects on
neighboring countries and regional stability. Mongolia shares borders with both Russia
and China, and any significant geopolitical tensions or conflicts in the region may have
some impact on Mongolia's economic or political situation

4. How to adapt to the political risk

Political instability : Political instability in an area where a firm operates will

mean that the firm has to be very flexible and adaptable; ready to change their operations
at very short notice to reflect changes in the political environment.

Corruption: 6 steps

+Commit: Make anti-corruption part of your company culture and

operations. Show your employees, customers and suppliers that your company has
a zero-tolerance policy on bribery & corruption

+Assess: Know your risks and prepare for them. Recognize opportunities to
improve your business by improving compliance

+Define: Define what success means for your company. Develop goals,
strategies and policies and get buy-in from colleagues by clearly showing the
importance of these policies

+Implement: Make anti-corruption programmes and policies integral

throughout your company, including your value chain
 +Measure: What gets measured gets done. Monitor and measure the impact
of your anti-corruption policies to identify what’s working and what still needs
work

+Communicate: Consistently communicate your progress to stakeholders,

always striving for continuous improvement

Socioeconomic inequality: contribute due taxes, promote non-discrimination,

adhere to social and environmental regulations, and honour and uphold human rights

C. Legal system

1. Civil law

Despite the fact that in theory all Mongolian laws are of equal status within a
unified system of law, the Mongolian legal system has been influenced by the Romano-
Germanic legal system division between civil and public law.
Mongolian law is based on codified laws. Codes such as the Civil Code, Commercial
Code, Criminal Code and Procedural Codes form the basis of the system. Principle of
respect for statute became the supreme principle of the activities of the State. Statutes or
codified laws are the main sources of law in Mongolia. As of 2008, more than 305 laws

[1]
exist . The source of law is written law and the courts apply laws only in settling cases
or disputes. The State Great Hural only reserves the right to adopt law. Only members of
the State Great Hural, the Government and the President of Mongolia may initiate a draft
of a law.
As precedent and legal doctrines is not considered to be a source of law, the courts
in the Mongolian legal system play no formal role as a source of law. But legal customs
are considered to be a limited, not principal, source of law, while interpretation of laws
are to be considered a part of the laws.
2. Similarities and differences of home and host nation’s legal system

Mongolia Vietnam

- The country's highest judicial organ is the Supreme Court

- The parliamentary (Mongolia)/National Assembly (Vietnam) election holds
place every four years, directly elected on a democratic basis through secret
ballots
- The legal system of both countries has all the characteristics of a civil law
tradition, which is essentially based on the written law

- Executive power is exercised by the - Executive power is exercised

Prime Minister, who is the head of
government
- Politics of Mongolia takes place in
a framework of a semi-
presidentialmulti-party
representative democracy
- The Supreme Court provides
official interpretations related to
the correct application of all laws
other than the Constitution
- Law is the legislation enacted
solely by the State Great Hural
pursuant to its constitutional
authority, by prescribed means and
such that it becomes the law
governing conduct within its scope.
- Mongolian law originated from the
by the government and the
President of Vietnam.
- The politics of Vietnam is
dominated by a single party,
the Communist Party of
Vietnam and and the
democratic centralism
principle
- Vietnamese legal thought
with regard to the treatment
of criminals is the result of
three major influences:
classic Confucianism, the
Napoleonic Code, and
Marxism-Leninism and
based on communist legal
theory and French civil law
 Romano-Germanic, or continental,
legal system. The source of law is
written law and the courts apply
laws only in settling cases or
disputes.

3. Incidence of intellectual property violations

Cao Sao Vang was first manufactured in 1969, it was based on a balm of
Singapore. Since it was manufactured, it became a must-have item of every Vietnam’s
citizen with its uses and portable size until now. With its low price (7.000 VND in
Vietnam and $7,99 in foreign countries), Cao Sao Vang is seen as the most effective
aromatic balm with lowest price. Which is very challenging for other companies to
compete with the same product. The intellectual property infringement rate of the product
is very low

4. National enforcement of property rights

Law of Mongolia on trademarks and geographical indication published on 2nd
May 2003 to protect the rights and legitimate interests of their owners and users, and to
govern relations arising in connection with the ownership, use and disposal of
trademarks. Mongolia supports intellectual property rights (IPR) in general, and as a
member of the World Intellectual Property Organization (WIPO) has signed and ratified
most relevant treaties and conventions, including the World Trade Organization
Agreement on Trade Related Aspects of Intellectual Property Rights (WTO TRIPS).
Mongolia’s Parliament has yet to ratify the WIPO internet treaties. Nevertheless, the
Mongolian government and its intellectual property rights enforcer, GAIPSR, make a
good faith effort to comply with these agreements.
 5. Presence of product safety and liability laws

5.1.Presence of product safety

5.1.1. Process of selling medicines, medical devices and bioactive products

LAW OF MONGOLIA ON MEDICINES AND MEDICAL DEVICES 2010
16.1. Local administrative body shall be responsible for determining location and scope
of service of pharmacies, to suit for the local peculiarities, and coordinating the services
to provide medicines and medical devices.
16.2. Pharmacies may sell medicines, medical tools and devices, bioactive products,
health, cosmetic and sanitary products.
16.3. Soum and bagh doctors may provide service to the population of a catchment area
by medicines and medical devices bought from local pharmacies of the jurisdiction.
16.4. Veterinarians may provide service to the people with animals by medicines for
animal use and veterinary devices bought from pharmacies.
16.5. Following activities shall be prohibited in pharmacies:
16.5.1. to hand out prescription medicines without or with invalid prescription;
16.5.3. to sell compulsory vaccination, medicines prescribed to use exclusively in
hospitals, and medicines and medical devices received as grant and designed to distribute
free of charge;
16.5.4. to dispense medicines, except traditional ones, in places other than pharmacies or
branch pharmacies.
16.6. Bioactive products shall be sold at pharmacies and food stores, which qualify to
standard requirements.
5.1.2 Quality assurance and control of medicines and medical device
1. The quality of medicines for human and animal use and of medical devices shall be
assured in Mongolia under the relevant laws and regulations.
2. The quality assurance of medicines and medical devices shall be based on the
pharmacopoeia and other equivalent documents.
3. National pharmacopoeia of Mongolia and procedures of developing, approving and
numbering it, forming, structure and internal operational rules of the pharmacopoeia
committee shall be approved by the Government members in charge of health and
agricultural matters respectively.
4. The central state administrative bodies in charge of health and agricultural matters
shall have a non-staff pharmacopoeia committee, which is responsible for discussing
draft pharmacopoeia monographs and drawing conclusions. Secretary of the
pharmacopoeia committee shall be a fulltime employee.

5.2 Liabilities imposed on violators of the Law on Medicines and Medical

device
29.2.5. in case of violations of provisions 16.2-16.6 of this Law, a citizen shall be
punished by a fine of MNT 100000-150000, an official by a fine of MNT 150000-200000
and a legal entity punished by a fine of MNT 200000-250000; 29.2.6. in case of
violations of provisions 15.1, 15.6, 15.7 and 15.9 of this Law, a citizen and an official
shall be punished by a fine of MNT 150000-250000 and a legal entity punished by a fine
of MNT 250000-300000 and medicines, medical devices shall be confiscated for
transforming into state own or abolished, if sold, the illegally earned income shall be
confiscated and transformed into state revenue;
29.2.8. citizens who violate provisions 17.2 and 6. Level and focus Tax
a. Personal income tax

Annual taxable income Applicable tax rate (%)

(MNT)
Residents Non-residents

0-120 million 10 20
(0-10 million per month)
 120-180 million 12 million MNT plus 15% on 20
(10-15 million per month) income exceeding 120 million MNT

More than 180 million 21 million MNT plus 20% on 20

(more than 15 million per income
month) exceeding 180 million MNT

b. VAT tax

Cao Sao Vàng is a product subject to VAT. According to the VAT Law, a person
(covering legal entities, individuals, and PEs) whose sales income has reached MNT 50
million or more has to be registered as a VAT withholder. The threshold for voluntary
registration is MNT 10 million of sales income. A sale of fixed assets is not considered
for the VAT registration thresholds.
VAT at the rate of 10% is imposed on the supply of goods, services, and works imported,
exported, and sold in Mongolia.
c. Tariff
Cao Sao Vàng is subject to 5% tariff. A flat customs tariff of 5% applies with respect to
most goods imported into Mongolia, except for renewable energy equipment, information
technology and medical equipment and pure-bred livestock, which are zero rated.

d. Impact

When adding tax to any product or service, it means that the price to consumers will be
pushed higher. In case Gold Star Cao products are subject to 10% VAT and 5% tariff, the
product will be priced slightly higher than the Vietnamese market. But in general, this
does not change too much consumer behavior of shoppers. Because the product has a low
fake, because when applying tax, the price changes only slightly.

D. International relations
 1. General relations with other countries

Since the development of political pluralism and transition to democracy and

market economy, Mongolia has pursued peaceful, open, independent and multi-pillared
foreign policy. As of 2021, Mongolia has diplomatic relations with 191 countries in the

[2]
UN states ( Member states of the League of Nations),the Holy See , the State of
Palestine and the European Union. Its main directions include prioritising relations with
China and Russia, diversifying its relations through its ‘third neighbour’ policy, actively
contributing to international organisations and forums, and strengthening its position in
Asia, particularly in Northeast Asia.
Vietnam and Mongolia established diplomatic ties in 11 July 1954.Since then,
Vietnam and Mongolia friendship has been continuously consolidated and developed in
the fields of politics, diplomacy, economy, trade, investment, agriculture, and education.
Saikhanbayar Gursed- Mongolian Minister of Defence, declared that Vietnam has a
special place in Mongolia's foreign policy and is an strategic partner in the region.
Mongolia government has implemented policies to help expedite trade between the two
countries. In 2022, Mongolia and Vietnam Embassy connected 20 business groups of the
two countries operating in the field of manufacturing modern drugs, biological products
and medical equipment to promote trade. In the past, there were companies cooperating
with Mongolia successfully, for instance, Chu Viet Company and Mongol Food ventured
to create ChuViet-Go company specified in investment, import-export, trade, food
production, catering services, and tourism. Therefore, Mongolia is no longer a new and
strange market for Vietnamese businesses.
However, China is Mongolia’s first priority. They will receive more benefits ( reduce
tariffs, favourable trade policies,..) if entering Mongolia’s market. Currently, China's
pharmaceutical industry is extremely developed, they’re planning to export
pharmaceutical products to Mongolia in the near future. Therefore, their products will be
much cheaper compared to Vietnam’s.It going to be a challenge for Vietnam
pharmaceutical Corporations to compete with such a strong competitor.
 2. Multilateral agreements with other nations
As of 2022, Mongolia participates in 6 Multilateral trade agreements with other
nations.

Number Name Date of adoption

1 United Nation October 27, 1961

2 Shanghai Cooperation Organization (SCO) 2004

3 Shanghai Cooperation Organization (SCO) 2008

4 Conference on Interaction and Confidence- 1992

Building Measures in Asia (CICA)

5 Central Asia Regional Economic Cooperation ( 1997

CAREC)

6 Northeast Asian Cooperation Dialogue 1993

(NEACD)

Sources

1. Enkhsaikhan, J. et al. (2014) Mongolian foreign policy: A small state

with Big Aspirations, East Asia Forum.
2. VNA, Vietnam treasures relationship with Mongolia: Prime minister:
Politics: VietnamPlus (2022)
3. Foreign policy (2017), Embassy of Mongolia.
4. Foreign relations of mongolia (2023) Wikipedia. Wikimedia
Foundation.
5. News, V.T.C. (2022). Người Nga xem cao Sao Vàng Việt Nam như
‘thần dược’. [online] Báo điện tử VTC News. Available at:
https://vtc.vn/nguoi-nga-xem-cao-sao-vang-viet-nam-nhu-than-duoc-
ar712501.html [Accessed 26 Feb. 2023].
6. opcpharma.com. (n.d.). CAO SAO VÀNG | OPC. [online] Available at:
https://opcpharma.com/san-pham/dung-ngoai/cao-sao-vang.html
[Accessed 26 Feb. 2023].
7. (n.d.). Эрх зүйн мэдээллийн нэгдсэн систем. Retrieved February 27,
2023, from http://www.legalinfo.mn
8. Doljin, S., Purevdorj, B., & Boldbaatar, G. (n.d.). An Introduction to
Modern Legal System of Mongolia: Problems and Solutions.
9. Fenwick, S. (n.d.). The Rule of Law in Mongolia – Constitutional Court
and Conspiratorial Parliament.
https://search.informit.org/doi/pdf/10.3316/informit.627259751649210
10. Phan, H. (2019). OVERVIEW OF THE VIETNAMESE LEGAL
SYSTEM. Keio University Press.
11. Politics of Mongolia. (n.d.). Wikipedia. Retrieved February 27, 2023,
from https://en.wikipedia.org/wiki/Politics_of_Mongolia
12. Politics of Vietnam. (n.d.). Wikipedia. Retrieved February 27, 2023,
from https://en.wikipedia.org/wiki/Politics_of_Vietnam
13. Tseveen, O., & Ganbold, B. (n.d.). The Mongolian Legal System and
Laws: a Brief Overview. GlobaLex. Retrieved February 27, 2023, from
https://www.nyulawglobal.org/globalex/Mongolia.html
14. Vietnam - Law Enforcement. (n.d.). Country Data. Retrieved February
27, 2023, from http://www.country-data.com/cgi-bin/query/r-
14747.html
 15. ‌LAW OF MONGOLIA ON TRADE MARKS AND GEOGRAPHICAL
INDICATIONS. (2003).

[1]
http://www.legalinfo.mn
[2]
The Holy See ,also called the See of Rome, Petrine See or Apostolic See, is the jurisdiction of the Pope in
his role as the bishop of Rome. It includes the apostolic episcopal see of the Diocese of Rome, which has
ecclesiastical jurisdiction over the Catholic Church and sovereignty over the city-state known as the Vatican
City.