Once a source of excitement among frontier market enthusiasts, Mongolia is now struggling to stir up investor appetite. “The amount of empty seats in this room gives an idea of the apathy that surrounds the country today,” James Passin, fund manager with US private equity firm Firebird Management and one of the pioneer investors in Mongolia, said addressing a half empty conference room during the Mongolia Projects and Investments Summit held in Hong Kong on November 16 and 17, 2015.

Mongolia hit the headlines as the world’s fastest growing economy in 2011, when economic growth leaped to 17.5% and FDI exceeded $4bn on the back of the development of Rio Tinto’s massive copper and gold mine, Oyu Tolgoi. The mining bonanza continued for another couple of years, but the tide eventually turned as investors came to terms with the country’s political and legal capriciousness, and the global commodity super-cycle came to an end. As a result, FDI evaporated and it did not exceed $382m in 2014, and amounted to only $15.9m in the first nine months of 2015.

“We are here to rebuild trust among investors,” Erdene Bat-Uul, mayor of capital city Ulaanbaatar, said during the conference in Hong Kong.

Authorities pin their hopes on a long-awaited, multi-billion underground expansion of Oyu Tolgoi to reignite the investment boom experienced just a few years ago. With a $4.2bn project in the making, Rio Tinto’s board is expected to issue a final investment decision in the first half of 2016. Another $4bn development at coal mine Tavan Tolgoi by a consortium comprised of China's Shenhua Energy, Japan's Sumitomo and Mongolia’s Energy Resources is also awaiting the final green light by the State Great Khural, the Mongolian unicameral parliament. Both projects combined would quickly breath new life into the $12bn Mongolian economy.

However, the country’s short-term outlook remains bleak.

“We haven’t bottomed yet; some high-profile bankruptcies loom large ahead,” Ulambayar Bayansan, senior advisor to emerging market investment firm Melbury Capital, tells fDi Magazine. “They will likely signal the bottom of the current cycle,” he added, not failing to highlight that the current short-term challenges do not compromise the long-term potential of the Mongolian economy. 

Public finances will come under severe stress in 2017, when more than $1bn in external debt repayment is due – credit rating agencies Fitch and Standard & Poor’s both downgraded the country in November. Political risk is also on the rise. Economic crisis is hitting the popular consensus of the ruling Democratic Party and the outcome of the June 2016 general election is more uncertain than ever.

Until then, investors will hardly make a move, as Joe Yuen, managing director of investment advisory firm Peace Field, points out. “We are all in wait-and-see mode until elections.”