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Client Update: New developments in Mongolia – government restructure and new permitting regime

21 October 2014

In brief: The Mongolian Government has been particularly active in the first half of October, introducing changes to Ministerial responsibilities and a draft Law that, if enacted, would reform the nation's permitting regime. These developments will be of interest to existing and prospective investors in Mongolia. Partner Igor Bogdanich (view CV), Consultant Manduul Altangerel and Associate Tess Fitzgerald report.

Ministerial restructure

On 7 October 2014, the Plenary session of the State Ih Hural (Parliament) of Mongolia adopted laws and resolutions that change the structure of the Government of Mongolia. Notably for foreign investors in Mongolia, the reshuffle affects the powers and functions of the Ministry of Economic Development and the Ministry of Foreign Affairs. While the Prime Minister is to assume responsibility for general investment policy, the new Ministry of Foreign Affairs and Economic Cooperation will be responsible for policy and regulation of foreign trade and investment, leaving the Ministry of Finance responsible for policy regarding negotiations between concessionaires, the State and the private sector.

The Prime Minister of Mongolia, Mr Altankhuyag, publicly announced his plans for the restructure to the Parliament in early September, citing as his main objectives improving efficiency, eliminating overlapping functions and excess positions and improving the state budget.

The restructuring affects the following Ministries:

  • the Ministry of Economic Development, which is being folded into an expanded Ministry of Finance (with certain functions going to the new Ministry of Foreign Affairs and Economic Cooperation);
  • the Ministry of Foreign Affairs, which will become the Ministry of Foreign Affairs and Economic Cooperation;
  • the Ministry of Construction and Urban Development and the Ministry of Roads and Transportation, which have been combined into the Ministry of Roads, Transportation, Construction and Urban Development; and
  • the Ministry of Mining and Ministry of Energy, which now form the combined Ministry of Mining and Energy.

The Government has further announced that new Ministers will be appointed to lead the restructured Ministries, with the appointments to be announced in coming days. 

Draft law on permits

Another development that will be watched closely by domestic and foreign investors alike is the proposed new draft Law on Permits. On 10 October 2014, the Plenary Session of the State Ih Hural (Parliament) of Mongolia voted to table a draft Law on Permits in Parliament. Together with the draft Law on List of Permits (which is to be separately drafted and considered by Parliament), this law will replace the current Law on Business Permitting upon its entry into force. The current draft seeks to streamline the process to apply to all permits by introducing three categories of permits (ie Exclusive, Special and Regular permits), with the same application review period, validity period and granting authority to apply to permits within a given category. We understand that the draft Law on List of Permits will set out in detail the specific activities that will require permits. It is reported that currently Mongolia's permitting regime includes more than 900 different types of permits, which would be reduced to 300 permits under the proposed new law.

Key aspects of the proposed new regime are set out in the following table.

Category

Definition

Granting authority

Application review period (from receipt of application)

Validity period (and extensions)

Exclusive

Business activities, possession and use of goods and items that pose risks to the national security, public interest, environment and public health, or that relate to possession or use of public property or rights of limited resources

Government or Cabinet Member

Within 45 days

Three years
(extended by three years each time)

Special

Business activities, possession and use of goods and items that pose risks to public interest, environment and public health

Ministry or Aimag or Capital city level Governor or persons authorised by such authorities

Within
a) statutory 30 days
b) 20 days (expedited regime

At least five years
(extended by five years each time)

Regular

Business activities, possession and use of goods and items that pose risks and hazard to a limited degree, or that requires common regulation at a certain level in the interest of the public good

Agency or soum or district level Governor or persons authorised by such authorities

Within 15 days

  1. At least five years
  2. Without expiry

(Either single or multiple extensions, depending on permit)

The Economic Standing Committee of the Parliament is scheduled to commence preparing the draft Law on Permits for discussion by Parliament this week. It is expected that the draft Law on Permits will be considered and enacted shortly afterwards.

Allens is an international law firm which practices throughout the Asia Pacific region. It advises on international legal issues in Mongolia but does not provide Mongolian legal advice. Allens regularly works with Mongolian counsel where Mongolian legal advice is required.

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