In 2013, the country’s GDP grew by 17.5%, one of the largest in the world at that time. Due to change in legislation, the country’s largest mine, Oyu Tolgoi  (pictured) came to halt. In 2012, the country’s GDP only grew by 7.6%.  The importance of Oyu Tolgoi to the economy was obvious and it was essential to have the legislation changed to allow phase two of the mine to commence.

At the investor forum last year in Hong Kong, this legislation was apparently imminent and expected within a month.  At the investor forum this year, we are still talking about when the legislation would be forthcoming. The Mongolian government last month voted their president out with a vote of no confidence and this could be viewed as a positive step toward passing the required legislation.

Although the importance of Oyu Tolgoi is not disputed for the country, there are many projects, mines and construction which can be supported with additional FDI. Hopefully the country would take this opportunity to build upon their infrastructure to allow movement of products by roads and rail. 

Equipment leasing is therefore an integral part of this growth.  High interest rates domestically are forcing borrowers to look for cross border transactions.

There are numbers of problems facing the growth of equipment leasing in Mongolia today. This includes the political instability, the lack of a registration system for movable equipment and transparency of financial accounts.

In my previous Asset Finance International article on equipment leasing in Mongolia, written four years ago, (Yaks, Gers and Equipment Leasing) this was exactly the same problem. At some point, an emerging market needs to do just that, emerge. Unfortunately, Mongolia is still held back by the same factors which were there four years ago. 

When and if, Oyu Tolgoi commences Phase 2 of its mining project, demand for equipment leasing will increase substantially. The question is still remaining - if the domestic funders have the knowledge and financial capacity to respond to such demand.

We can only hope that at the investor forum next year we will not be having the same discussion.

Paul Errington is CEO of Connaught Finance Investments;