Government of Mongolia has launched several efforts to get foreign investments and priorities in such areas as construction, information and information technology (IT), where agriculture is at the bottom of the priority list.
With the 2002 amendment to the Act on Direct Investment, Government of Mongolia is seeking to create a more favorable investment environment for investors. Investment and Foreign Trade Agency (TIFF), which was established in 1996, is primarily responsible for direct investments under the Ministry of Industry and Commerce. Law recognizes companies and foreign invested company, where foreigners account for 25 percent or more of the investment.
To attract more foreign investment, investment in social infrastructure such as roads, electricity, telecommunication facilities are 100 per cent tax-free within 10 years of profits and 50 percent for exempt next five years. For other sectors, where more than 50 percent of products exported, there will be tax exemption on profits for three years, and 50 percent for the exemption of the next three years.
Since early 1990, the inflow of FDI has increased steadily, and recently, the rate is increasing. China is the largest investor in Mongolia, in terms of amount of investment with 40 percent of total FDI, followed by Canada (14 percent), United States (10 percent), Korea (7 percent) Japan (5 percent) and Russia (3 percent). The mining sector has the most investment flows, while the sectors of food and beverages, and agriculture received 16 million and 10 million between 1990 and 2004, taking up only 2 percent of total investment.
With the exception of land, all companies can invest 100 percent foreign-owned and operated without a partner of Mongolia.
Indeed in 2005, the Government of Mongolia passed the Law for the Free Trade Zone and other relevant regulations to construct complex near the free economic zones bordering Russia and China, for example. Altanbulag, Zamyn-Uud and Tsagaan Nuur.