Parliament supported to discuss a draft amendment to the Law on Foreign Investment, submitted by lawmakers Kh.Gankhuyag, D.Unurbolor, Kh.Bulgantuya and P.Anujin, during its plenary session on October 7. However, the bill has been receiving many criticisms.
Some lawmakers and the public believe that the bill includes provisions that could cause serious harm to Mongolia’s national security.
Initiators of the bill then raised the issue of withdrawal on the grounds that they were unaware of these provisions in the draft amendment.
The Law on Foreign Investment was passed in 1993 to encourage foreign investment, protect the rights and property of investors, and regulate matters relating to foreign investment. Under the current law, a business entity with foreign investment must be an entity established in accordance with the legislation of Mongolia. It has to have capital equivalent to 100,000 USD in Mongolia and no less than 25 percent of its equity be owned by a foreign investor.
Parliamentarian Kh.Gankhuyag believes that this threshold is unnecessary for the establishment of a foreign-invested entity, but appropriate to specify a minimum amount of investment to Mongolia if the investor and their family apply for a permanent residence visa in Mongolia.
According to a survey on foreign-invested companies in Mongolia, about 900 companies were established in 2013, 79 in 2020 and 35 in the first half of 2021. The bill initiator views that the capital threshold has affected this. Therefore, the legislators developed the bill, which eliminates the requirement for a foreign-invested entity to invest at least 100,000 USD in Mongolia, and stipulates that foreign nationals and their family are required to have invested in Mongolia to apply for a permanent residence visa.
Kh.Gankhuyag said during the plenary session, “The principle of non-discrimination is not exercised in terms of the 100,000 USD criteria. We do not want to discriminate against foreign investors.”
LAWMAKERS AND CITIZENS RAISE ISSUE OF NATIONAL SECURITY
The majority, or 51 percent, of members of the Standing Committee on Economy supported the draft amendment to the Law on Foreign Investment for parliamentary consideration and the bill was approved for discussion at a plenary session.
In other words, almost half of the parliamentarians did not support the new bill. Legislators, including B.Enkh-Amgalan, J.Bat-Erdene, Ts.Davaasuren, B.Bat-Erdene, J.Batjargal and B.Enkhbayar, opposed the provision that permitted foreign investors to reside in Mongolia permanently during the plenary session. Article 12.1.6 of the bill states that a foreigner who invested 50,000 USD into Mongolia is eligible for permanent residence with his or her family.
With money more than sufficient to buy a two-room apartment in the city center, any foreigner can become an investor and even get to live with his or her family in Mongolia, lawmakers complained. This concern started protests against this provision and bill.
Ts.Davaasuren, one of the legislators who oppose the provision, noted at the plenary session, “The bill is only about the issuance of permanent residence visas in Mongolia. It eliminated the investment threshold. If the bill is approved, anyone can get a permanent residence in Mongolia as long as they spend 50,000 USD locally. For instance, investment of 1 billion USD into Mongolia will allow 20,000 foreigners to reside in our country. One billion USD is a considerable amount of investment for the Mongolian economy, but not so large for other economies. What will happen to Mongolia if 20,000 foreigners come to live here every year? We must not destroy our country like this. The bill should be discussed by the National Security Council.”
Like Ts.Davaasuren, many Mongolians were worried that the bill would allow foreign corrupt or convicted people to escape to Mongolia. Bill initiator Kh.Bulgantuya explained that a permanent residence visa in Mongolia will not be issued to “any foreigner”. This permission shall be granted in accordance with the applicable law, she said.
Legislator J.Sukhbaatar highlighted that the revised minimum investment requirement of 50,000 USD is “too low”.
Some argued that the bill should be more specific to judiciary than a visa or investment threshold. They raised the issue of regulation on land tenure, real estate ownership, arbitration of contracts and disputes between parties, uncertainty in bankruptcy proceedings, bribery, corruption, fraud, fairness of law and justice, and stability of the legal environment.
For instance, lawmaker S.Odontuya emphasized, “The biggest fears of foreign investors are corruption and robbery of government officials. There have been a number of reports in the foreign media alleging that investors do not trust Mongolia’s legal and judicial system and that they’ve suffered from fraud.” She suggested that in order to increase foreign investment, Parliament needs to pay attention to this matter and make appropriate decisions.
Parliamentarian G.Temuulen noted that foreign investment will not increase as a result of the bill’s regulations, and stressed that Mongolia is considered a “risky and vulnerable country” at the international level.
On the other hand, citizens and private companies are expressing their position that it could lead to risk of job reduction for Mongolians and that the bill could pose a threat to national security. Moreover, as this is an important matter concerning the national foreign policy and security, lawmaker B.Enkhbayar proposed a closed-door discussion of the bill, but the majority of parliamentarians did not support it.
Local citizen Ts.Bat tweeted, “A foreigner who invested 50,000 USD will contribute much to Mongolia’s small and medium-sized market. As a result, jobs will not increase, but decrease. They need to be allowed to invest at least 1 million USD, and create new jobs that are not available in Mongolia.”
As Ts.Davaasuren and J.Sukhbaatar proposed, Article 12.1.6 should be removed in upcoming discussions of the bill. Many believe that it is necessary to remove the provision on the permit to permanent residence from the bill, which could lead to a sharp increase in the number of foreigners permanently residing in Mongolia.
The Mongolian market is small. The 100,000 USD threshold may limit investment, but it is a matter concerning the national security and interest. According to some lawmakers, Mongolia will not benefit if it does not attract more investment to a completely new field that it hasn’t engaged in.
If more small business investors come to Mongolia, domestic businesses might go bankrupt, they feared.
SOME BILL INITIATORS DEMAND WITHDRAWAL OF DRAFT AMENDMENT
Lawmakers D.Unurbolor and P.Anujin, who signed the bill and submitted it to Speaker of Parliament G.Zandanshatar, expressed very “strange” positions on the bill on social media.
D.Unurbolor posted a statement on her Facebook account, saying, “My opinion was not included in the draft amendment to the Law on Foreign Investment. This is an intentional act of lawmaker Kh.Gankhuyag.”
“During the drafting process, there were no meetings to consolidate members’ opinions and positions. I was not informed that the bill would be discussed at the meeting of the Standing Committee on Economy. (Kh.Gankhuyag) submitted the bill directly to the plenary session. I do not know whether this action of Kh.Gankhuyag is intentional or accidental. In recent days, I’m starting to suspect that this action was intentional,” she wrote.
The lawmaker added, “I have become a national enemy because of this irresponsible act that I did not know about. I did not initiate words, provision, or content related to the investment threshold. I regret that such dirty politics is playing out. The initiator and leader of this bill, Kh.Gankhuyag, be ethical! I demand him to give the public a proper understanding and explanation for his irresponsible actions. I will continue to propose the withdrawal of the bill.”
P.Anujin also demanded co-initiator Kh.Gankhuyag to withdraw the bill immediately. “Lawmaker Kh.Gankhuyag and some bill initiators secretly submitted the bill to the plenary session of Parliament without consulting or introducing any of the serious provisions affecting national security, independence, territory, unity, and fundamental national interests to me. Withdraw this ‘legal scam’. These provisions were not reflected in the bill when I signed the draft amendment to the law. That’s why I call it scam,” P.Anujin explained.
In his response, Kh.Gankhuyag said that Mongolia has a special legal framework to protect its sovereignty. “There is no legal basis for granting citizenship or direct residence rights to any investor. I apologize for the intimidation and other attacks on other bill initiators,” he stated.
This shows that lawmakers, who were elected to Parliament by earning the people’s trust, can sign anything. Some are even signing bills without seeing or hearing anything about it. The public is appalled that some members of Parliament are not reviewing or understanding bills before submitting them.
In any case, the bill, which has been criticized by the public, may not be discussed further as some initiators of the bill have proposed to withdraw it. Chairman of the Mongolian People’s Party caucus in Parliament D.Togtokhsuren noted, “If 50 percent of bill initiators do not participate in its drafting, it will be repealed. So I think this bill is going to be withdrawn.”
