Source: The Australian                           Date: 21 September, 2011

Rapid and extensive growth from the mining industry has allowed Mongolia to skip steps on the traditional path to development. However as life changes quickly, Mongolia is feeling pangs from growing pains.Mineral wealth is transforming Mongolia from a remote and desolate destination to a global investment magnet, principally in Ulaanbaatar where luxury brands such as Louis Vuitton have opened shops. The economy grew around 17 percent over the past year ended June. Last year the Mongolian tugrug was one of the fastest appreciating currencies against the U.S. dollar and its stock exchange in Ulaanbaatar was the world's best performer. The two mineral projects mostly responsible for growth, Oyu Tolgoi and Tavan Tolgoi, have employed 48,000 people thus far.However, royalties and taxes has been a lingering issue between the Mongolian government and foreign mining firms. Rio Tinto Country Director and Oyu Tolgoi's CEO Cameron McRae warned the government that undermining investor confidence in the country could risk Mongolia losing all it has gained. The tensions from government reflect a growing animosity towards mining firms and expatriates living in Mongolia from the public.

The concentration on the mining sector may hurt other industries such as tourism and cashmere production as well. The rising value of the tugrug makes exports more expensive and only the mining sector attracts Mongolia's best and brightest.Meanwhile, bureaucracy and corruption continue to weigh heavily on the mining sector. The most recent Transparency International corruption list ranked Mongolia at 116.“Bureaucracy has been the biggest hurdle; it's the biggest issue you face,” said Peter Akerley, the chief executive of Erdene Resources at the recently held Discover Mongolia mining forum. “On the positive side, I'm not sure there's anywhere else in the world where you can go out and find world-class deposits just outcropping from the terrain.”Although infrastructure lags behind growth, progress is being made. The government plans to build or renovate about 5,000 kilometers of road and to construct USD 5 billion worth of or railway from southern Mongolia to the northeast, spanning 1,800 kilometers.