Mongolia’s Mining Boom Attracts Foreign Investment, But Risk of Money Laundering Threatens
Ulaanbaatar, Mongolia - A Surge in Foreign Investment
The Mongolian government’s decision to grant mining licenses to foreign companies has led to a surge in foreign investment in the country’s mining sector. This influx of capital has brought significant economic benefits, but it also raises concerns about money laundering and the risk of illegal activities.
Mining Sector Accounts for a Significant Portion of Mongolia’s Revenue
According to statistics released by the Mongolian Government, 19.9% of the country’s territory is now eligible for mining licenses, with 9.5% already granted to companies. The mining sector accounts for:
- 20% of Mongolia’s total revenue
- 24% of its tax revenue
- A staggering 78.4% of its export revenue
World Bank Identifies Mongolia as a Top Destination for Foreign Direct Investment in Asia
The World Bank has identified Mongolia as one of the most attractive destinations for foreign direct investment in Asia, with 71% of all FDI attributed to the mining sector.
Experts Warn of Money Laundering Risks
Experts warn that this rapid growth also increases the risk of money laundering and other financial crimes. “Criminals often use cash-intensive businesses like casinos or real estate to launder illegal funds,” said an economist at the Asian Development Bank. “With the influx of foreign capital, we are concerned about the potential for money laundering and other illegal activities in Mongolia.”
Vulnerability to Money Laundering
The country’s low-income status and limited financial infrastructure make it vulnerable to money laundering. According to the World Bank:
- 46.1% of Mongolians live below the poverty line
- The average annual income is just $4,000
Measures to Improve Payment System
To mitigate this risk, the Bank of Mongolia has implemented measures to improve its payment system, including:
- Increasing the number of debit cards and point-of-sale terminals
- Cash in circulation was 706.7 billion togrog (approximately $330 million) at the end of 2015
External Money Laundering Threats
Despite these efforts, experts warn that the country’s small population and financial sector make it vulnerable to external money laundering threats. The majority of foreign tourists and laborers who enter the country do so through border crossings in western Mongolia, which are considered high-risk areas for money laundering.
Countries with a High Risk of Money Laundering Activities
The government has also identified China, Russia, South Korea, Japan, and the United States as countries with a high risk of money laundering activities in Mongolia. In 2015, citizens from these countries accounted for over 75% of all foreign workers in the country.
Conclusion
In conclusion, while Mongolia’s mining boom has brought significant economic benefits, it also poses risks to the country’s financial stability and integrity. The government must take steps to address these concerns and ensure that the country remains an attractive destination for foreign investment while maintaining its reputation as a transparent and stable financial hub.