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Mongolia expanding investment, ties with Kuwait -- Kuwait China Investment

Company By Miyoko Ishigami BEIJING, Feb 19 (KUNA) -- Mongolia is receiving massive foreign investment inflows and is developing bilateral ties with countries like Kuwait and other GCC members to foster economic links in a time when the developed economies are treading water, the government-affiliated Kuwait China Investment Company (KCIC) said Sunday.
Mining has opened the doors for investments in many of the economy's sectors that are still quite underdeveloped, KCIC said in its weekly analysis.
Mongolia's economic potential is enormous and the International Monetary Fund (IMF) forecasts an average growth of 14 percent for the next five years. When most of the world's economies are facing slowing growth, and Europe a likely recession, Mongolia emerges as one of the few countries that will grow at a staggering pace, it said.
"In 2011, we expect its economy to have grown 11.6 percent year over year, higher than 2010's 6.4 percent and its highest annual rate in 21 years." The wealth of coal, copper, gold, silver, and other minerals are source of 80 percent of Mongolia's yearly exports, and expected to grow to 95 percent. Soon, Mongolia will be one of the top five producers of copper in the world. "Over the next few years, the country will need to rapidly develop its infrastructure, financial sector, real estate, and other industries to meet the growing needs of a nation on the path to becoming one of the richest in the world (in per capita terms)," it said.
This bright future, however, is not without serious potential risks that stem from an overly rapid growth driven by resource-exploitation, the firm said.
"Mongolia's democratic government will undergo elections in 2012 and populist movements have been pledging the nationalization of mining projects that had been promised to be open to foreign investment," it said. "There is a lot of doubt as to whether the government will be committed to spending wisely, " it said, adding that the Asian nation still faces the major task of steering its rapid growth and avoiding asset bubbles and high inflation.
The dependence on Chinese demand is also risky, it pointed out. "China has a growing domestic economy, but it is still susceptible to rapid declines in foreign demand, especially from the West, and the adverse effects would directly transfer to Mongolia." The nature of the mining industry, however, allows a certain level of stability, as investments in mines take several years of development and orders for resources tend to be large. Mongolia is a land of opportunity, but investors must be aware of the possible land mines along the way.
KCIC was founded in 2005 with a capital of KD 80 million by an Amiri Decree with a mandate to develop investment opportunities in Asia towards building an Asia focused asset management company. The public company employs a team of specialists in markets in Asia and currently manages assets in excess of USD 600 million.
Key shareholders include Kuwait Investment Authority, the Sovereign Wealth Fund of Kuwait, National Investment Company, one of the leading investment banks in the Middle East, and Al Ghanim Industries, one of the largest conglomerates in the Middle East.(end) mk.wsa KUNA 191336 Feb 12NNNN