Country risk in Mongolia is high with an OECD country credit grade of 6. This is akin to a speculative grade sovereign rating, which indicates an elevated risk of Mongolia being unable and/or unwilling to meet its external debt obligations. But economic reforms under the IMF program are a positive for Mongolia’s rating.
Mongolia’s business climate generally outperforms the regional average, ranking 74 out of 190 economies on the World Bank’s ease of doing business gauge — which measures regulation and red tape relevant to a domestic small to mid-sized firm. It scores well on most metrics. But getting electricity connected and resolving insolvencies are difficult.
Mongolia scores in the bottom half on most of the World Bank’s governance gauges. Corruption remains a problem, while the government’s growing nationalistic tendencies could be a worry for investors. This is keeping political risk at moderate to high levels.
The risk of expropriation in Mongolia is moderate. The delineation of authority across different tiers of government around property rights makes it difficult for investors to enforce private property rights. The independence of the judiciary has also been in question—though the recent Supreme Court ruling against the government in the case involving the expropriation of the Erdenet mine suggests investors can get a fair hearing.