Mongolia is a large country geographically and placed right between China and Russia. Despite this, it’s also the most sparsely populated in the world with a population of just over 3 million.

Being rich in natural resources has drawn China to invest in Mongolia. The much larger neighbor needs many of Mongolia’s resources as it depletes its own.

Once isolated from the global economy, Mongolia has benefited from a massive amount of Chinese capital flowing in. China has in some ways overwhelmed the much smaller frontier market to its north.

The result has made Mongolia one of the fastest growing economies in the world. Double-digit annual growth was common in the 2000s, but global economic issues and inefficiency in government has led to a slowdown. Mongolia had “only” 7.8% growth in 2014.


Small Country, Big Opportunity

Mongolia is vast country and takes up an area larger than area larger than Japan, Germany and France combined. Yet 45% of its population live in just the capital of Ulan Bator. The city is growing by around 40,000 people per year, but infrastructure development has not kept up – something China is now helping with.

The commodities boom in Mongolia supports a rapidly growing middle class among Ulan Bator’s population of 1.3 million. Combined with thousands of Chinese foreigners in the mining sector, this has strained the city’s infrastructure. Ulan Bator was planned as a town for less than 600,000 when originally designed by the Soviets.

These problems have not gone unnoticed by the Mongolian government. It has a number of projects aimed to help Ulan Bator’s overcrowding. Perhaps the most ambitious is the construction of an entirely new capital, Maidar City, which is designed for 300,000 people and will be located 30km from Ulan Bator.

Another plan involves billions of dollars worth of infrastructure enhancement in the ger districts, poorer communities in the hills of Ulan Bator. But some doubt Mongolia’s government, which is democratic, will be able to pass the legislation.


How to Invest in Mongolia

Because of the massive scale of these projects, the lack of a certain timeframe, and doubts they will provide a comprehensive answer, the private sector has a large window of opportunity to offer other solutions. Mongolia is an ideal place for innovative entrepreneurs. Those who can make life easier for Ulan Bator’s surging middle class will benefit.

For investors, Mongolia has a stock exchange of 332 listed companies and a market capitalization of around US$3 billion dollars. As of 2011, it was the second best performing stock market in the world with gains of over 57%.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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