Major factors affecting foreign investment policy implementation effectiveness : the case of Mongolia
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2015
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2558
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eng
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Batsuuri, Gunjidmaa (2015). Major factors affecting foreign investment policy implementation effectiveness : the case of Mongolia. Retrieved from: http://repository.nida.ac.th/handle/662723737/4533.
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Major factors affecting foreign investment policy implementation effectiveness : the case of Mongolia
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Abstract
Developing countries would like to attract foreign investment for the many
benefits it provides, such as the adoption of high technology, increased employment,
and expanded exports. Without effective usage of foreign investment inflows,
however, foreign investment also brings side effects (e.g., environmental damage).
Good foreign investment policy and its effective implementation could increase the
benefits and decrease the side effects of foreign investment in the host country.
In Mongolia, foreign investment inflow has been increased a lot fast, especially in the last decades. As a result of the promotion policy implemented from 1993 to resent years, the percentage of foreign investment in the GDP has rapidly increased. According to the statistics, foreign direct investment in the country covers almost 40% of the GDP and 65% of total investment in the country after two decades. However, compared with other countries in the region, Mongolia remains the lowest recipient of foreign investment inflow. Also, the majority of foreign investment is invested only in the mining sector, which does not promote long-term sustainability of economic development. Moreover, foreign investment inflow has been dramatically decreased in the last two years because of frequent changes that have occurred with foreign investment laws and standards; it dropped respectively by 22% and 51% in the years 2012 and 2013 compared with previous years.
This research aims to analyse the factors affecting foreign investment policy implementation effectiveness in Mongolia based on foreign investors’ perceptions. The study is important given the practical benefits that the Mongolian government can realise by improving the country’s foreign investment policy.
Data were collected through mail surveys and telephone interviews and analysed using a variety of methods, including descriptive, correlation, and regression analysis. Three sets of 13 independent factors that determine foreign investment policy implementation effectiveness were considered in this study. The findings of this study suggest that foreign investment policy would be implemented effectively and foreign investors would be satisfied with foreign investment policy implementation if clearer policy objectives and standards were defined, implementing agency capacities were improved, higher quality public services were provided, compliance with implementation regulations by foreign investors was ensured, and a more stable political environment was offered. Also, the study shows that foreign-invested companies will be re-invested in more if they have bigger amounts of foreign investment, fewer years of experience, and if a more stable political and legal environment is provided.
The most important factor for increasing foreign investors’ satisfaction regarding foreign investment policy implementation is the capacity of the implementing agency, followed by the clarity of policy objectives and standards and political stability. The clarity of policy objectives and standards and political stability also increases foreign investors’ compliance with implementation regulations and the capacity of the implementing agency. Also, a crucial factor for promoting reinvestment in foreign-invested companies is political stability.
This study recommends developing strategic plans for promoting foreign investment in sectors which need to be developed or where local investors perform weakly, such as infrastructure and industry sectors. Aside from promoting foreign investment, the study also recommends that the government has more clear policies on the regulation of foreign investment in strategically important sectors or sectors where local investors perform well. Examples of these sectors are the mining and banking sectors. Strategic plans should be developed for the improvement of infrastructure and the stabilization of the political and legal foreign investment environment. In addition, this study recommends modification of policy objectives and standards and increasing the capacity of implementing agencies.
In Mongolia, foreign investment inflow has been increased a lot fast, especially in the last decades. As a result of the promotion policy implemented from 1993 to resent years, the percentage of foreign investment in the GDP has rapidly increased. According to the statistics, foreign direct investment in the country covers almost 40% of the GDP and 65% of total investment in the country after two decades. However, compared with other countries in the region, Mongolia remains the lowest recipient of foreign investment inflow. Also, the majority of foreign investment is invested only in the mining sector, which does not promote long-term sustainability of economic development. Moreover, foreign investment inflow has been dramatically decreased in the last two years because of frequent changes that have occurred with foreign investment laws and standards; it dropped respectively by 22% and 51% in the years 2012 and 2013 compared with previous years.
This research aims to analyse the factors affecting foreign investment policy implementation effectiveness in Mongolia based on foreign investors’ perceptions. The study is important given the practical benefits that the Mongolian government can realise by improving the country’s foreign investment policy.
Data were collected through mail surveys and telephone interviews and analysed using a variety of methods, including descriptive, correlation, and regression analysis. Three sets of 13 independent factors that determine foreign investment policy implementation effectiveness were considered in this study. The findings of this study suggest that foreign investment policy would be implemented effectively and foreign investors would be satisfied with foreign investment policy implementation if clearer policy objectives and standards were defined, implementing agency capacities were improved, higher quality public services were provided, compliance with implementation regulations by foreign investors was ensured, and a more stable political environment was offered. Also, the study shows that foreign-invested companies will be re-invested in more if they have bigger amounts of foreign investment, fewer years of experience, and if a more stable political and legal environment is provided.
The most important factor for increasing foreign investors’ satisfaction regarding foreign investment policy implementation is the capacity of the implementing agency, followed by the clarity of policy objectives and standards and political stability. The clarity of policy objectives and standards and political stability also increases foreign investors’ compliance with implementation regulations and the capacity of the implementing agency. Also, a crucial factor for promoting reinvestment in foreign-invested companies is political stability.
This study recommends developing strategic plans for promoting foreign investment in sectors which need to be developed or where local investors perform weakly, such as infrastructure and industry sectors. Aside from promoting foreign investment, the study also recommends that the government has more clear policies on the regulation of foreign investment in strategically important sectors or sectors where local investors perform well. Examples of these sectors are the mining and banking sectors. Strategic plans should be developed for the improvement of infrastructure and the stabilization of the political and legal foreign investment environment. In addition, this study recommends modification of policy objectives and standards and increasing the capacity of implementing agencies.
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Dissertation (Ph.D. (Development Administration))--National Institute of Development Administration, 2015