To the untrained eye, a 20-year-old democracy with a third of its population living in poverty would appear to offer very little to the Western world. But as Briana Everett discovers, Mongolia is a mineral-rich land of opportunity for Australian firms

Mongolia has long, harrowing winters, with mostly sub-zero temperatures, a chronic lack of infrastructure – not to mention a lack of IT infrastructure – as well as an ongoing atmosphere of uncertainty as the emerging economy grapples with an undeveloped legal framework and an ongoing reliance on foreign aid.

But despite these seemingly daunting conditions, Australian energy and resources lawyers are practically falling over themselves to get a piece of the action in Mongolia.

Last year, the country’s GDP of just under $9 billion grew by a massive 17.3 per cent (up from a growth rate of just 6.4 per cent the year before). Government spending, fuelled by a jump in revenue from resources, increased by 56 per cent in 2011, with a further 32 per cent expected this year.

While China has been getting most of the attention from the Western commercial world during what’s been dubbed ‘The Asian Century’, Mongolia has been quietly forging ahead and has developed as a force to be reckoned with.

The country’s growing economy and natural resources have increasingly piqued the interest of Australian and Canadian mining and resources companies as well as developers in Japan, Korea and the US.

Although Australia established diplomatic relations with Mongolia back in the early 1970s, it took until 2007 for Australia to appoint an honorary consul in Ulaanbaatar, Mongolia’s capital.

In 2011, Prime Minister Julia Gillard announced that Austrade is opening a trade office in Ulaanbaatar to service the needs of Australian business. This move is indicative of the growing interest in Mongolia and increasing recognition of the vast opportunities on offer for Australian companies.

Further demonstrating the efforts to strengthen ties between Australia and Mongolia, the Prime Minister of Mongolia, Sukhbaatar Batbold, made his way to Australia in 2011 – the first Mongolian head of government to do so since Australia and Mongolia first established diplomatic relations in 1972.

According to the World Bank, Mongolia’s development has in the past been hindered by its landlocked position, its lack of infrastructure and uncertain regulatory environment. However, Mongolia’s economy recovered strongly from the global financial crisis thanks to high commodity prices and strong demand for its resources from China (Mongolia’s major trading partner), and between 2008 and 2010, Australia lent a hand to support the country’s booming mining industry, providing $750,000 to Mongolia to help build local capacity and legal expertise in mining policy and law.

Australian mining company Rio Tinto recently gained control of the Mongolian Oyu Tolgoi mine (one of the world’s largest undeveloped copper-gold resources). Rio has been operating in Mongolia for years, yet it wasn’t until the last six months that two national Australian firms announced they would be setting up a physical presence in the region.

In November 2011, Allens Arthur Robinson announced its plans to broaden its Asian network by opening an office in Ulaanbaatar.

“During the past 12 months work levels have intensified significantly,” said Erin Feros, an Allens board member and Brisbane-based energy and resource partner, at the time of the announcement.

“The partnership’s decision to establish a formal presence in Mongolia is therefore very much client driven. Having had a number of partners and lawyers working on the ground for some time, we’ve been approached by a range of other international clients, with existing or planned operations in Mongolia, who have asked us to assist them.”

Shortly after Allens planted its flag in Mongolia, in February this year Minter Ellison announced the opening of an office in Ulaanbaatar, with chief executive partner John Weber claiming the firm’s partnership voted “overwhelmingly” in favour of the decision.

“Mongolia is the logical next step for us,” said Weber in February. “It is an increasingly strategic market with a substantial resources-based economy and is attracting the attention of the global resources industry, including Australian companies. Many of these are Minter Ellison clients.”

Paving the way for Australian firms hoping to set up shop in Mongolia, UK-based Hogan Lovells became the first global law firm to establish a permanent presence there after receiving approval in August 2011.

American firm Anderson & Anderson also has an office in Ulaanbaatar, and in March 2011, DLA Piper announced the establishment of an alliance with Mongolian firm C&G Partners LLC.

“Mongolia has always been a market that the firm has closely monitored,” says DLA Piper’s managing director of Asia Pacific, Middle East and emerging markets, Alastair Da Costa.

“Mongolia is going through a phase of economic development in renewing its infrastructure facilities, especially in relation to heat and power, and partners at DLA Piper felt that it was the right time to strengthen the firm’s involvement.”

Opportunity awaits for Oz

When Minter Ellison partner Elisabeth Ellis first visited Mongolia before relocating from the firm’s Hong Kong office as a full-time resident partner, she was excited by the sheer number of Australians and Australian clients that were already present in the country, which currently has a population of just less than three million.

“As you get out of the airport there’s a big sign for Leighton and when you go into the pub on a Sunday night, as you do here, there are lots of Australian miners,” says Ellis, whose three young children, born in Hong Kong, have quickly become used to the Mongolian climate and happily play outside, even though it’s minus 10 degrees.

“I just got incredibly excited about the opportunities and the fact that it’s a place that doesn’t have McDonalds, it doesn’t have Starbucks, but it does have Louis Vuitton … Just to feel that you can be a part of something that’s developing so quickly and there is so much opportunity. Clients that are on the dream list in Australia … The top names are here.”

Having only recently opened the firm’s Mongolian office, Ellis’s team currently consists of four Mongolian lawyers and she will “hopefully” have an Australian senior associate on board shortly.

“Even before we got here we were getting instructions, and now that I’m here, I’m getting work, even though I don’t have all the lawyers to do it,” she says. “We move into our new office in a month and I’m worried that we’re going to outgrow it before we’ve even got there. It’s exciting”.

There’s no doubt that exciting times are ahead in Mongolia for Australian law firms, with a constant flow of foreign companies looking to enter the booming energy and resources market.

Given Mongolia’s rich deposits of gold, copper, uranium and coal, Australian firms are honing in on the extensive energy and resources work available, but the development of the necessary supporting infrastructure is also providing significant opportunities.

“There’s a hell of a lot of infrastructure work. There are the big projects – the pipeline work – which absolutely has to happen in order to develop the resources. That’s road, rail, water and power,” says Ellis.

“Where ever you turn, whatever you want to do, there is an opportunity to focus on that and there will be work. The big challenge for us is actually working out where to focus and where to position ourselves in this market.”

In comparison to China, which has limited cultural similarities, both Ellis and Feros note the likeness between Australians and Mongolians.

“I feel like the Mongolians are very Australian, in a funny sort of way,” laughs Ellis. “They are so laid back … The people are very welcoming and they’re very open with information.”
Feros says she fell in love with the country on her first visit, also equates the “very direct, veryopen, and unstructured” nature of Mongolians, with Australians.

“I think they love Aussies … I think our cultures are quite easily gelled in terms of working together, so it’s been easy,” says Feros, mentioning the growing number of “Mozzies” – Mongolians who have studied at Australian universities - a relationship the Australian Government has promoted through its Mongolia-Australia Scholarships Program. Allens has had Mongolian interns working in its Melbourne and Brisbane office, with Brisbane intern Manduul Altangerel currently working alongside Feros.

According to China-based King & Wood Mallesons partner Carolyn Dong, who grew up in Mongolia, it is unlikely that Australian firms and Australian lawyers would not be welcomed by the Mongolian people, given that Australians are English speaking and work within a common law system.

“For international law firms - and Australia is, in a way, part of the international family … I think it should be easy if you would want to set up a branch in Ulaanbaatar and build up your business there,” says Dong.

“From my personal connection over there, I believe that an Australian law firm could attract very good, local young talent to work for the firm, given that the decision-makers and middle class people in Ulaanbaatar all have [a] good education [gained] in the UK, US and also Australia.”

Being a part of the action

While DLA Piper’s Da Costa expects it will becoming “increasingly difficult to work in Mongolia” on a fly-in, fly-out basis, in response to questions about whether the firm plans to eventually set up a physical presence, he says the firm will “continue to work with G&G Partners on how we can further develop our relationship and our offering to clients”.

But for Ellis, being on the ground in Mongolia was “a no brainer”.

“It’s such a small business community and the expat community is tiny,” she says. “Whether it’s building relationships or knowing what’s going on, you’re just so much more plugged in to it all by being here … I’m getting a lot of referrals from other law firms – international firms – and I think that’s because I’m here.”

According to Feros, whether Australian firms can adequately service their clients in Mongolia on a fly-in, fly-out basis depends on the firm’s strategy and focus.

“For us, we were doing fly-in, fly-out for close to a decade. It was just that in the last 12 months, as more and more work was coming through, we thought we needed to increase our presence … For other Australian firms it really depends on what their priorities are. A lot of firms are focusing more on China and other places,” she says.

“We have lawyers rotating in and out of there from Beijing and Hong Kong, while me and the other partners who’ve traditionally done the work for the clients continue to go up … We’re looking at those who have the relationships and who are the specialists, continuing to hold the hands of the clients who are up there.”

Allens’ strategy in Mongolia, according to Feros, is focused on inbound investment and “following their clients” that are involved in Mongolian energy and resources and infrastructure, as well as building construction.

For Minters, Ellis says the firm’s strategy in Mongolia is to focus on inbound work for the time being.

“Whilst the Mongolian conglomerates are starting to look beyond their borders, our strategy is very much to do the work here on the ground,” she says.

For the remainder of 2012, Ellis expects an increase in infrastructure projects following Mongolia’s upcoming election in June.

“Post election, there will be movement in infrastructure projects,” she says. “I think there will be newcomers in the mining services industry … I understand from other lawyers in town that there is a bit of a trend of Europeans focusing on here, where traditionally it has been the Australians and Canadians.”