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Endowed with isolated, unspoilt nature and nomadic Buddhist culture, Mongolia has managed to develop a small but potentially profitable tourism sector that is expanding through support from the government and a focus on the adventure and nature segments. The country’s main sources of genuine leisure tourism over the past decade have been more affluent countries, including Japan, South Korea, North America and Western Europe. Tourist arrival numbers have fluctuated in recent years, although the country continues to attract visitors from across the globe. Some 460,360 tourists arrived in 2011, up 0.9% from 2010. The expansion of tourism may have been overshadowed by fast economic growth, but it remains a tribute to the country’s vibrant private sector and the attractions of the pristine landscape. While the development of new hotel infrastructure in Ulaanbaatar is necessary to cater to growing business travel, the government will certainly need to pay close attention to supporting smaller ecotourism projects and initiatives in the countryside in order to preserve options for tourists. This chapter contains interviews with Ts. Oyungerel, Minister of Culture, Sports, and Tourism, and U. Jalsa, President and CEO, Nomadic Expeditions.

Mongolia’s real estate sector is likely to feature fast-rising rents, land values and sales prices for at least the next several years. Per capita GDP is forecast to triple by 2016, creating a jump in buying power that will add to an already short supply of homes in the capital. Thus Ulaanbaatar seems poised to experience major price hikes. There is an increasing demand for housing as the nation’s young population is moving from extended-family households to nuclear ones. There has been little interest in building low-cost or middle-income housing so far. According to some estimates, another 175,000 housing units are needed in the capital alone. However, the construction sector’s present building capacity is estimated at around 6500 apartments per year. Mongolia’s construction industry is young and growing and thus far has been unable to keep up the demand generated by the mining boom. Should Mongolia succeed in firming up its legal environment, it can expect a great deal more foreign interest and investment. This chapter contains interviews with D. Battur, President of Jiguur Grand Group, and J. Od, President of MCS Group.

With an overall population density of only two people per square mile, and 40% of the nation living nomadically, providing 3G services has been more challenging than in other countries. However, as of December 2012, 3G services became available in all provinces. With 27% of the population under the age of 15 and a GDP that grew 15.7% per capita in 2011, the number of 3G users is expected to increase in the years to come. Debate is ongoing over which technology will prevail, however, with 4G demand expected to be highest in Ulaanbaatar and other large cities. Prospects for the telecoms sector are generally good. Also promising is the IT sector, thanks to a new corridor and fibre-optic networks. At the end of December 2012, the nation was ranked ahead of other players in the region, such as China and Indonesia, in terms of download speeds. The country is quickly becoming wealthy, benefitting from the fact that the market is relatively open and free. More competitive operators are expected to meet the market’s needs. Crucial to development will be how the government manages its dealings with the private sector. Companies must also ensure that employees are well-trained and qualified to work with rapidly evolving technology. This chapter contains a roundtable with B. Byambasaikhan, Chairman, Mobicom; D. Bolor, CEO, Skytel; and R. Granbold, CEO, Unitel.

Although it may never compete with neighbours with well-established manufacturing sectors and economies of scale, Mongolia has the potential to meet domestic needs and produce goods, such as meat and cashmere for export. The move into mass production faces a host of constraints: Mongolia has a small domestic market, poor infrastructure, a growing minerals sector competing for labour and capital, and its neighbours, China and Korea, are world leaders in low-cost mass production. At the same time, Mongolia is an open economy, with low tariffs and limited non-tariff barriers, and as such, goods can easily enter from abroad. Nevertheless, Mongolia has the potential to develop a strong and healthy industrial sector: domestic demand is climbing, quality is improving and interest rates have, over the long term, been falling. If the programme to improve cashmere manufacturing and the investments to raise the quality of meat production pan out, exports of manufactured goods could become a meaningful economic contributor. This chapter contains an interview with B. Chuluunbatar, President and CEO, Monnis Group.

Its sparse population, landlocked location and extreme climate make developing Mongolia’s transportation and logistics infrastructure a challenge. The government is tapping into international markets to address its transportation and infrastructure issues, and in late November 2012 the country raised $1.5bn in a two-part bond offering. Diverse efforts are under way to improve transportation and logistics via roads, sea, and sky. Plans for a new airport are on the nation’s agenda, as an increase in air traffic is anticipated. Perhaps the most notable development, however, is the total of 5683.5 km of new railroads set to be built in three phases. These rail lines will link to existing tracks in eastern Russia, providing access to a key Pacific Ocean port. Enhancing rail transport capacity is vital to realising economic potential, both to facilitate exports of minerals and to import other goods. This chapter contains an interview with A. Gansukh, Minister of Roads and Transport.

Outdated power plants and grids, alongside a legal environment and tariff regime in need of upgrading, has made investment difficult. However, several efforts, focusing on boosting and diversifying supply for electricity and fuels, and establishing a positive track record for Mongolia as a viable destination for private investment in large-scale energy projects, are under way. The good news is that Mongolia does not lack domestic sources of energy. Coal is plentiful and supply is available to meet the needs of electricity production. The country’s first wind farm is due to begin feeding into the central grid in early 2013 and solar power is already leveraged on a small scale. While most energy is still produced by burning coal, growing energy needs could be met by a more diverse mix, including the possibility of hydrocarbons and nuclear energy. The government appears intent on opening electricity generation to private investment. This chapter contains interviews with M. Sonompil, Minister of Energy, and Willem Van Twembeke, CEO and President, GDF SUEZ Energy Asia.