THE BUSINESS OF BEING

A THIRD NEIGHBOUR

David Landers

General Manager

East Asian Growth Markets

Presentation to Mongolian Mining Summit

Perth, Australia

31st of October 2013

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Topics

• Austrade‟s value

• Bi-lateral relationship

• Environmental settings

• Opportunities for Australian business

Austrade’s value

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Who we are

• 80 offices in 48 countries, with 44 of those offices in 15 markets in Asia.

• An „inverted pyramid‟ – more than 60 per cent of our 1,000 people are offshore, and 60 per cent of those are in Asia.

• More than 400 of our staff have one or more Asian languages.

• Of the people we send overseas, and our executive officers, two-thirds have experience working in the private sector

• Work at the „market & firm-specific‟ level, not the lead on trade policy & negotiation

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Where we are

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What we do

Our role is to advance Australia’s international trade, investment and education

interests. Specifically, we:

• Assist Australian companies to grow business in international markets, including

through administration of the Export Market Development Grants scheme, the

TradeStart program and the Australian Century Business Engagement program.

• Provide coordinated government assistance to attract productive foreign direct

investment (FDI) into Australia.

• Promote the Australian education sector in international markets and assist

Australian education providers with market information and services.

• Provide advice to the Australian Government on its trade and investment policy

agenda.

• Deliver Australian consular, passport and other government services in 16 designated

overseas locations.

• Manage the building Brand Australia program to enhance awareness of

contemporary Australian skills and capability, and to enrich Australia‟s global

reputation.

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Our great strength -- sustained on-the-ground

presence in offshore markets

• We identify opportunities in market

• We can interpret the business climate and local commercial practice,

and provide language support as well

• We can brief you in-depth on the market and the companies involved

• We can refer you to potential customers in market

• We can develop a visit/contact program for you

• We can set up, and direct you to your appointments

• We can provide ongoing in market assistance to assist in

establishing your business presence.

Bi-lateral relationship

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Mongolia’s ‘Third Neighbour’ policy

• Defined by current Mongolian president as neighbors

with a “values” rather than land connection

– Rule of law

– Human rights

– Market economy

• Strategic balance to potential overreliance on Russia and

China for trade and investment

• Third neighbours include Australia, Canada, Japan,

Korea, Britain, EU and the US.

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Australia – Mongolia relations

• Diplomatic relations established 1972

• Mongolian Embassy opened in Canberra 2008

• Australian Consulate-General opened March 2012

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Australian engagement

• Australian engagement focused on development assistance and commercial activities in Mongolia's resources sector

• Since 1995, Australia has provided more than $81 million in aid to Mongolia with significant expansion in the last two years

• One current minister and three serving members of parliament have studied in Australia.

• Since 2008, 51 Mongolian MPs have visited Australia

• Mongolia looks towards Australia when setting new standards.

• More than 120 young Australian volunteers have contributed to Mongolia‟s development, including Austrade‟s Trade Commissioner to Dubai, Anna Lin.

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‘Mozzies’ in Mongolia

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The Australian Mission in Mongolia

• Austrade services commenced via Seoul in 2009

• A permanent Austrade office established in Ulaanbaatar in May 2011

• Office upgraded to Consulate-General in March 2012

• Two permanent AusAID Staff commenced April 2013

• Consulate supervised Australian election ballots in September where 122 Australian citizens voted.

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The Australian Mission team

Environmental settings

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Mongolia’s strengths

• Commitment to peaceful democracy

• Aspirational population

• Strong bilateral political and economic relationships

• Abundant, high quality mineral deposits of gold, copper, uranium and coal

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Key dimensions of the Mongolian economy

• The mining sector is integral to the Mongolian economy – 20 per cent of GDP

– 67 per cent of industrial output

– 91 per cent of export earnings

• Mongolia is very closely correlated with China: 92% of exports are destined for China

• China and Russia are the major counterparties for Mongolia‟s imports – imports from Russia (mostly oil) are 24.5% of Mongolia‟s imports

– imports from China (consumer goods) are 30.8% of Mongolia‟s imports.

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Potential for continued high growth exists

Source: The Economist& World Bank Mongolia Economic Update April 2013 f = forecast

-5

0

5

10

15

20

2009 2010 2011 2012 2013f 2014f 2015f

World Bank: GDP growth % 2009-2015

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FDI finding a new level post the OT spike

Source: World Bank and EIU f = forecast

FDI and service imports

0

1

2

3

4

5

2009 2010 2011 2012 2013f 2014f

$U

S b

illi

on

FDI Net services imports

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What an investment spike looks like: the Oyu

Tolgoi Concentrator Complex

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Competitive with peers at similar stage of development

Economy Overview (out of 185 economies)

Source: The World Bank Group, Doing Business 2014 data for Mongolia

Some room for improvement …

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Example -- establishing a business in Mongolia

• Key laws: Company Law, Civil Code and a new Law on

Foreign Investment (effective 1st November)

• Registering a business takes 4-12 weeks

• Foreign companies can establish a representative office,

but parent company typically liable

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Skills shortages, infrastructure and bureaucracy

the biggest challenges

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Improvements in human capital

• US$126 million has already been spent on training & education in the past 3 years and demand is expected to remain strong.

• Within the next few years, up to a thousand Mongolian students will have received an Australian certified vocational qualification in-market, in fields such as OH&S, basic trades and mining operations.

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Mongolia slated to spend US$40B improving

infrastructure over next 5-8 years • Road

• Rail

• Power

Opportunities for Australian business

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0

5

10

15

20

25

30

35

40

45

50

2008 2009 2010 2011 2012

US

$ M

illio

n

Australia’s merchandise exports to Mongolia

A small but growing export market for Australia

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The challenge makes the opportunity

• METS

• Contract mining

• Mine-to-market rail design

• Construction and operations

• Urban planning

• Health and medical infrastructure and professional services

• Vocational education

• Professional services

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Australian companies are well placed

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Success Factors

• Are you Mongolia ready?

• Check your assumptions: climate, transport and

infrastructure difficulties require careful planning

• Conduct due diligence on potential partners

• Invest in relationships and staff training

• Enjoy the journey of Mongolia‟s transformation!

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A very good place to start the journey…

Australian Consulate-General

Australian Trade Commission (Austrade)

4th Floor, Naiman Zovkhis Building, 21 Seoul Street, Ulaanbaatar -14251 Mongolia

Telephone: +976 7013 3001

Fax: +976 7013 3014

Email: mongolia@austrade.gov.au

Website: www.austrade.gov.au/mongolia

Key contacts:

Tony Burchill Consul-General and Trade Commissioner Tony.Burchill@austrade.gov.au

Ijilmurun Yalalt Office Manager and Consular Officer, Ijil.Yalalt@austrade.gov.au

Solongo Dashdendev Business Development Manager Solongo.Dashdendev@austrade.gov.au

Bart Gurbazar Business Development Manager Bart.Gurbazar@austrade.gov.au