Merchandise Trade

• Mongolia joined the World Trade Organization (WTO) in 1997, which opened the door to equal rights to trade with many countries worldwide and, in addition, has enabled Mongolia to contribute to decision-making in the rules of global trade and economic cooperation.


• Mongolia currently has a 4.57% average tariff rate that applies to most imported goods. A zero tariff rate is applied to 49 other tariff lines, including live animals for breeding, information dissemination equipment, machines for information development, transistor diodes and various types of medical equipment. Additionally, the seasonal import duty rate of 15% is applied on flour and vegetables to protect domestic producers between August 1 and April 1, yearly. Outside this period, the rate is 5%.


• There are some goods that are prohibited in Mongolia, usually for health and safety reasons, including drugs/narcotics, narcotic plants, equipment used to manufacture drugs/narcotics, devices, spirits and scrap metal. Highly toxic chemicals, organs and donor blood for medical purposes, guns, rifles, weapons, military equipment and devices and their spare parts, and explosives face high import and export restrictions in Mongolia.


• Licence requirements – Mongolia also requires a licence for importing and exporting certain food and agricultural products that are defined as critical to national security. Strategic goods, as defined in the Law on Food, include: liquid and powdered milk; cattle, goat, camel and sheep meats; flour and potable water. The licensing of the above products is based on an open tender for any given year.


• There are existing Bilateral Investment Treaties (BITs) between Mongolia and the following 37 countries: Austria, Belarus, the Belgium-Luxembourg Economic Union (EU), Canada, Mainland China, Cuba, the Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Indonesia, Israel, Italy, Kazakhstan, Kuwait, Laos, Lithuania, Malaysia, the Netherlands, the Philippines, Poland, Romania, Russia, Singapore, South Korea, Sweden, Switzerland, Tajikistan, Turkey, Ukraine, the United Kingdom, the United States and Vietnam. Six others are signed but not yet in force.


• Mongolia, the EU and Argentina initiated the Alliance for Torture-Free Trade, on September 18, 2017, which aims to end the trade in goods used for capital punishment and torture.


• Mongolia has double taxation agreements with 25 countries.


• On September 20, 2018, Mongolia and the United States declared they had agreed an expanded comprehensive partnership. The two reiterated their commitment to implementing their obligations under the WTO agreement on Trade Facilitation and reaffirmed their interest in regional economic cooperation and bilateral trade and investment, and to closely cooperating in future in the areas of agriculture, water, energy, mining, financial services, infrastructure, development cooperation and supporting private businesses.

Sources: WTO – Trade Policy Review, UNCTAD, US Embassy in Mongolia, Ministry of Foreign Affairs of Mongolia, Fitch Solutions

 Multinational Trade Agreements

Active

1. Japan-Mongolia Economic Partnership Agreement (EPA): The deal was entered into on February 10, 2015, but entered into force on June 7, 2016, with a view of liberalising and facilitating the flows of trade and investment and to create a regulatory framework for further cooperation on the improvement of the business environment between the two countries. The EPA promises room for growth and the chance to balance a trade relationship that is currently skewed towards Japanese exports.
2. EU-Mongolia Partnership and Cooperation Agreement (PCA): The Agreement was signed in 2013, endorsed by the respective parliaments by February 2017 and entered into force on November 1, 2017. The PCA replaces the 1993 Agreement on trade and economic cooperation and provides a general framework for promoting bilateral, regional and international cooperation between Mongolia and the EU in all areas of cooperation, such as trade and economy, development aid, agriculture, rural development, energy, climate change, research and innovation, education and culture. The agreement consists of 65 Articles, which include areas of cooperation of mutual interest in the economy, financial services, tax, industrial policy and small and medium-sized enterprises, science, technology, education, culture, energy, transport, the environment, agriculture, the development of rural areas, public health, social protection and statistics. The decision of the EU to establish this PCA reflects its desire to support the building of a strong free-market economy in Mongolia and a healthy climate for business and foreign investments, as well as to provide aid to foster trade relations.

Under Negotiation

1. Mainland China: In 2018, Mainland China accounted for over 90% and 30% of Mongolian exports and imports respectively. A free trade agreement would cement trade ties between the two nations.


2. Russia: Mongolia is creating transport infrastructure between Russia, Mongolia and Mainland China. Trade volumes between Russia and Mongolia have been increasing greatly in recent years.


3. South Korea: Mongolia would benefit from trade preference in terms of tariff exemption or reduction under a trade agreement with South Korea that would allow Mongolia to export its abundance of primary commodities and foster investment from South Korea, thus building a base for industrial diversification and value addition in the country.


4. Mongolia and EAEU: According to the European Commission, Mongolia was considering seeking membership in the EAEU, which entered into force in January 2015 and ends its implementation period in 2025. At present, the EAEU consists of the Russia, Kazakhstan, Kyrgyzstan, Armenia and Belarus.

Sources: WTO Regional Trade Agreements database, Xinhuanet, European Union, Ministry of Foreign Affairs of Mongolia

Foreign Direct Investment

• Value Added Tax: 10%
• Corporate Income Tax: 10-25%

Source: Mongolia General Department of Taxation

Localisation Requirements

The government of Mongolia sets a foreign worker quota (updated annually), for both locally owned and foreign invested companies operating in Mongolia. In 2019, the quota ranged from 10% to 60% depending on the industry sector and number of employees. For some sectors that are not directly mentioned in the Resolution, the total number of foreign employees should not exceed 5% of the total headcount. In general, the quota is high for businesses seeking to import skilled labour as well as for businesses in the construction industry, whereas it is low for low-skilled occupations, such as agriculture, fishing and hunting.

Visa/Travel Restrictions

Foreigners are required to have a Mongolian visa to enter the country. However, the Mongolian government has an open policy towards outside investment and the requirements for a work permit are comparatively less strict and the cost is relatively not high.

An organisation employing workers and specialists from abroad is required to pay a fee for employing a foreigner. Unless otherwise noted in trade agreements with specific countries, the fee must be paid on a monthly basis. The fee is linked to a minimum concentration amount that is periodically updated and approved by the government. The revenue generated from this fee is used to fund government programmes designed to combat unemployment in Mongolia.

Nationals from many countries around the world can generally access Mongolia visa free, especially for stays less than 30 days. Business visitors must generally limit their activities, such as attending business meetings, negotiations, participating in exchange programmes, conferences, seminars or congresses and taking part in workshops on trade and economic questions.

Foreign employees must be sponsored by a local Mongolian company in order to obtain permits for the country and work legally.

There are different types of visas in Mongolia. Expatriates wishing to enter employment in Mongolia require a work permit from the Labour Office, an HG visa and a long-term residency permit. HG visas will be issued for as long as the work permit has been issued, up to a maximum of 12 months, with the possibility to extend each year.

A T visa is a special visa given to either an investor or a foreign executive director of a foreign company. A maximum of three may be issued per company ­­­­– ­­­two for individual investors in a company and one for the executive director of the company. Like an HG visa holder, a T visa holder will need to register with immigration within seven days of arrival or face stiff penalties. T visas are valid for a year and can be renewed annually. The advantage of a T visa is that the holder does not need to have a work permit to work (or pay the associated workplace fee), and the T visa holder does not count against a company's quota of foreign workers. If the foreign invested Mongolian company has a corporate shareholder, that company is limited to a single T visa for the executive director.

Sources: Ministry of Foreign Affairs Mongolia, Mongolia Immigration Agency, Reuters, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Hong Kong’s Trade with Mongolia