Cost of Business

Creating a FIFTA (Foreign Invested) company is a straight forward process but is subject to certain requirements, such as having a minimum of 100,000USD in working capital as well as submitting various business plans and feasibility studies for the business proposal. The prices listed below are the pure administrative costs and do not include time and costs of agents that may be used.

A list of the general prices of office rent in Ulaanbaatar for 2010. Generally speaking a 2 to 5 year lease contract is essential with a 1 to 2 month deposit. Renovation costs are usually the responsibility of the tenant while a building maintenance fee is expected, in particular with Grade A office space. Building maintenance fees range from 5 to 10% of the monthly cost of rent.

Wages in Mongolia are still considered to be relatively low but are growing quite fast. Mongolian workers are well protected under Mongolian law and employers must follow strict employment standards. There are few headhunters in Mongolia and even fewer job centers. Hiring is generally done through word of mouth as well as advertising in national newspapers. Prices below are average prices for workers for a Mongolian company, executive positions listed are for a small to medium company. Owners or large stakeholders in considerable companies within Mongolia may earn considerably more than listed. Foreign owned companies tend to better pay their workers. Please also notes that costs below do not take into account such aspects as social insurance payments, obligatory health-care payments as well as pregnancy payments. Staff turnovers are relatively high in Mongolia and it may therefore be necessary to give employees regular bonuses to retain their loyalty.

The cost of utilities for businesses in Mongolia are still relatively cheap as utilities are very much subsidized by the state and charged below their real costs. Most utility services are centralized and thus the cost is “shared” amongst the office building or business premises rather than individually metered. Below is a brief table exploring some of the general costs of utilities within Ulaanbaatar.

Insurance is not yet prevalent within businesses in Mongolia and insurance companies are still nascent. It is often complicated to obtain compensation and insurance prices are still volatile. Services within the insurance industry are still relatively basic with only a few companies underwritten by large international insurers.

The Mongolian Financial Industry is still in its infancy and it is still too expensive for the vast majority of businesses to obtain financing locally. The terms of the loans are still relatively short but slowly increasing. The rates below are an average taken across the advertised rates of the majority of the banks operating within Mongolia.

The cost of fuel and transport within Mongolia is very competitive when compared internationally. As fuel comes directly from Russia, the cost of fuel is directly linked to political and economical relations between Mongolia and Russia. It is expected that a refinery will be built within Mongolia in the coming years thus giving Mongolia greater autonomy and control on fuel prices. Costs of transport by rail and truck within Mongolia and from China are still cheap while airfreight on the other hand is very expensive due to its remote location.

While it is certainly true that corruption is a fact of life in Mongolia, it is not a necessity but rather a catalyst. It is absolutely possible to carry out business in Mongolia without having to pay any forms of bribe or corruption. If the business interests relies on government permits and licensing then a business is more likely to encounter some form of corruption but this is not a steadfast rule.

As in most Asian countries, some form of gift giving as well as banquets and dinners to celebrate the signature of business agreements is expected within some industries. This should not be considered in any way as corruption or bribery but rather as a cultural necessity.