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Valuable copper, gold, and coal deposits enticed international investors to put $1.4 billion into the Mongolian economy in 2010. As production in China expands, Mongolia is well positioned geographically to capitalize on demand for raw materials. Although small in terms of population, Mongolia saw its national currency (the tugrik) outperform any other global monetary unit over the last year. Will this upward trend continue, or will Mongolia fail to capitalize on a promising opportunity for economic growth?
Many Mongolian mines were first discovered over the past decade and are finally being tapped into. The wealth of valuable resources waiting to be mined has given many investors great hope for the future. For a country in which the barter system is still very popular, it may seem improbable that international investors should pay Mongolia the time of day. In reality, global businesses have found significant earnings potential in recent years.
The great debate regarding Mongolia is whether it should be considered as a viable long-term market, or simply a short-term source of natural resources for global powers. New gold and copper deposits will only remain untapped for a limited period of time. Only time can tell whether investors will milk Mongolia for all that it is worth, or use this period as an opportunity to develop sustainable infrastructure for a growing nation.
Currently the success of the Mongolian economy is as volatile as the global market for commodities. Relying on a minimal number of resources is far from the best method to develop a diverse and resilient economy. Other profitable enterprises will have to be developed in the country for it to withstand future recessions. In the past, the Mongolian government has not saved enough money from the good times to withstand tougher ones.
Regardless of Mongolia’s long-term future, it will inevitably be a very intriguing nation to follow for international businesses and investors. If smart decisions are made now, it could set the economy up to expand exponentially. If not, there may be a brief period of economic viability followed by an equally dramatic downturn. While it is definitely too soon to tell, it is never too early to speculate.
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