Reflecting the improvements to the Mongolian economy, Moody’s Investor Services upgraded the country’s credit rating from a Caa1 to B3 in January 2018, citing the government’s debt refinancing and political reforms, which are expected to mitigate the impact of price swings in the commodity market. The upgrade signals to foreign investors that Mongolia’s economic and political institutions are strengthening, reducing investor uncertainty for the relatively young democracy.

Inbound FDI in the country got off to a solid start in 2018 with Rio Tinto, the Australian-British multinational mining corporation, announcing plans to open a new office in Ulaanbaatar, Mongolia’s capital city.  Rio Tinto’s new office strengthens its position in Mongolia after a $5bn investment in 2015 to excavate the metal-rich Oyu Tolgol mine in partnership with Canadian company Turquoise Hill Resources.

Although Oyu Tolgol will not begin full production until 2020, the metal deposit is estimated to hold 11.3 billion kilograms of copper, 2.2 million kilograms of gold, and 2.2 million kilograms of silver. Originally, investors viewed Oyu Tolgol as a potential challenge to the investor environment in Mongolia, as the government charged Rio Tinto $155m in back taxes. However, this tax disagreement has not seemed to slow Oyu Tolgol’s business plans.

In addition, Xanadu Mines, an Australian mining corporation, reported that its Mongolian copper and gold mine, Kharmagtai, has far more recoverable metal than previously anticipated. The recent announcements from both Rio Tinto and Xanadu are yet another vote of confidence for Mongolia’s mining industry.

Mongolia received $815.9m in greenfield investment in 2017, including from Singapore’s Poh Golden Ger Resources, according to greenfield investment monitor fDi Markets. The Singaporean corporation is constructing a plant that will generate power by burning both coal dust and gas. The vast majority of Mongolia's inbound greenfield FDI since 2003 has gone into its metals sector, followed by, its coal, oil and natural gas sector.

There are a number of factors that continue to impede more increased foreign investment into Mongolia. Like many resource-dependent countries, it struggles to diversify its economy and avoid the effects of Dutch disease, making it difficult to support its agricultural industry, which employs roughly 31% of the country's workers.

Mongolia’s dependence on China is another risk; China consumed 48% of the world’s copper in 2017, much of which came from Mongolia’s raw copper reserves. Once Oyu Tolgol reaches full production, there is an added concern of commodity oversupply.

The country’s connection to China is further exacerbated by their shared border, which Mongolia relies on for many of its other exports. Earlier in 2018, while protesting increased taxes and regulation in Mongolia, Chinese truckers blocked copper shipments from Oyu Tolgol into China requiring the deliveries to halt and the mine to declare force majeure.

In spite of these challenges, Mongolia seems well positioned to receive further attention from foreign investors in the next few years thanks to its improving institutions and rich natural wealth.