Strategic Planning to Promote more FDI in Mongolia

Abstract

Mongolias economy suffered from high inflation, a weak exchange rate, and depletion of monetary value after the collapse of the Soviet Union. Since then Mongolia has done divers policies to open its doors to welcome foreign investment and especially in the mining sector. However, fluctuations in raw material and global demand made its economy more vulnerable. Mongolia, thus, has been more exposed to external risks. For these reasons, the government of Mongolia attempts to transform its raw material based economy to a more diversified economic structure through foreign direct investment (FDI). FDI is a very efficient and effective means of economic renovation. FDI induces cooperation between investing firms and the host country, thereby produces numerous positive effects on technology transfer, increase in employment, business transparency as well as on structural upgrade of the host countrys industry. In order to promote more FDI, fostering favorable business environment for foreign investors is crucial. In this sense, Mongolia should evaluate its overall national competitiveness to figure out how to enhance its strengths and improve its critical weaknesses. However, it is unfortunate that most existing studies on national economic development tend to reflect only partial picture of the competitiveness; or sometimes give policy recommendations that are not applicable to the current stage of the countrys economic development. To give more realistic and strategic policy suggestions, it is critical to analyze Mongolia from important aspects by using the most comprehensive analytical tool, Porters Diamond model. And then the drawn result of analysis recommends suggestions according to the level of economic development based on policy priorities and terms. This paper rigorously reviewed most of important existing studies and improved their limitations. Furthermore, this paper applied the most comprehensive model to give realistic policy suggestions comprehensively