An improving investment climate, supported by a raft of transport infrastructure upgrades, should help to boost Mongolia?s tourism sector this year, with the upper end of the market set to enjoy above-average growth.
Business sentiment is expected to improve in Mongolia, following the news that the government and Rio Tinto have reached an agreement on the expansion of the Oyu Tolgoi mine. Delays to the project had previously dented investor confidence in the country, and the deal should produce knock-on effects across the economy, once momentum builds.
Promising outlook
The World Travel & Tourism Council (WTTC) said in its 2015 report that Mongolia?s tourism industry was on course for a period of sustained growth.
Last year, tourism?s total contribution to the economy reached MNT695bn ($364m), representing 3.2% of GDP, according to the industry organisation. Revenue is forecast to rise by 7.8% this year, before increasing by an average of 5.7% annually through to 2025, producing earnings of MNT1.29trn ($674m), the WTTC reported. While tourism is expected to account for a modest 2.6% of GDP at the end of the 10-year period, its contribution in absolute terms will rise significantly on the back of anticipated economic expansion, driven by growth in the mining industry.
The WTTC added that the industry would benefit from a steady expansion in capital inflows in the coming years. While investment this year is expected to rise by just 2.2% from last year?s total of MNT1.2trn ($630m), the council anticipates inflows to grow by an average of 7.4% through to 2025.
Visitor numbers are also on course to top last year?s figures, the WTTC said, with the estimated total of 408,000 up 3.5% on arrivals in 2014. The report pointed to business tourism as a segment showing considerable promise, saying it expected spending in this category to rise by an annual average of 8% over the next decade, well above the overall average of 5.4%.
Mine deal provides a boost
The Oyu Tolgoi copper mine expansion project may well prove to be a catalyst for a surge in business tourism growth. In mid-May the government and mining giant Rio Tinto struck an agreement that will clear the way for progress to be made on the MNT11.5trn ($6bn) underground phase of what is by far Mongolia?s largest single resource project.
The commitment to resolving a number of disputes, including differences over tax payments and investment contributions that had delayed work on the project, is expected to help restore confidence in Mongolia as an investment destination.
Speaking after the deal was finalised, Prime Minister Ch. Saikhanbileg said he expected the development of the mine to encourage investment in other areas of the economy. ?Unlocking Oyu Tolgoi?s underground mine will have a significant impact on the Mongolian economy, which will benefit Mongolian citizens for generations to come,? he said in May. ?Our joint agreement clearly positions Mongolia as an attractive country for investment and underscores the fact that Mongolia is open for business.?
Tourism is already showing signs of growing activity, with several high-end projects either completed or in the pipeline. The Shangri-La Hotels and Resorts chain opened a new 290-room luxury hotel in Ulaanbaatar at the beginning of June, while three overseas firms of architects have been shortlisted by the Mongol Corporation, a local developer, to design a mixed-use complex in the centre of the capital worth MNT590bn ($309m), which includes a hotel, residential units and commercial space.
The two initiatives are set to incorporate conference facilities, in line with a current drive to target the business segment of the tourism industry.
Improving connectivity a priority
Plans to strengthen Mongolia?s transport networks will provide an additional boost for tourism. Work is set to begin later this year on a 1000-km-long highway linking Russia and China that will run through six provinces via Ulaanbaatar.
A new MNT962.5bn ($504m) international airport, currently under construction outside the capital, will play a pivotal role in taking Mongolia?s tourism industry to the next level. Ground was broken on the project in mid-2013, with the airport scheduled to welcome its first aircraft in 2016. Initially, the facility will have the capacity to handle 3m passengers annually, although there will be potential for increasing the number to 12m.
Several of the country?s 22 regional airports and its internal road network are also earmarked for upgrades, which will improve access to Mongolia?s more remote regions.
In a separate development, the government has indicated plans to make a MNT481.25bn ($252m) investment in its iconic Trans-Siberian Railway, suggesting that Mongolia is keen to use tourism interest as an opportunity to broaden its offering.
source: oxfordbusinessgroup
