T.Lkhagvadorj: Geographically apart Mongolia and Singapore brought closer by digital business opportunities
On the occasion of the 50th anniversary of the diplomatic relations between Mongolia and the Republic of Singapore, Mongolian Economy magazine brings you the interview of the Mongolian Ambassador to Singapore, T.Lkhagvadorj.
The interview was conducted at the “The Mongolia-Singapore Business Discussion” which was held on July 7, 2019 in Singapore.
-The Foreign Minister to Mongolia D.Tsogtbaatar has visited Singapore and during this time, the business operators of the two countries met. What are the aftermaths and follow ups that this has lead to?
-Next year is the 50th anniversary since the establishment of diplomatic relations between the two countries. For this reason, Foreign Minister D.Tsogtbaatar made his first official visit to Singapore and organized the business forum. The way I see it, this event was very successful; and we could see where the interests of the two countries lie.
My job is to represent Mongolia in a correct and positive way. An aspect of it is business operators meeting face to face and discussing their problems without filters. We took on the role of constantly being in touch with business operators, gathering information, understanding the situation, answering questions fast, and assisting if any problems arise. In doing so, our relations are strengthened and we will be able to work actively together.
During Minister D.Tsogtbaatar’s visit, Mongolian ministers in Laos and Vietnam also gathered in Singapore and spoke about the policy directed at Southeast Asia. In particular, it was about proposing Mongolia as a main partner of the discussions in the Association of Southeast Asian Nations (ASEAN). This was because the main discussion partners of ASEAN are India, Russia, America, and Australia, etc. Therefore, it is important for Mongolia to treat the ASEAN countries with more soft force. The process of becoming an official partner is very lengthy. Thus, we agreed to keep the cooperation in culture and economics more active.
-Though there were business operators from many different sectors, the majority were from real estate. Is this an indication of Singapore’s interest in Mongolia?
-Wealthy Singaporean business operators are very much interested in the real estate sector. In Singapore, real estate is always increasing. Investment funds such as the “Real Estate Investment Trust” as a corporation are always rising. Experienced players in this market can see how much their investment in real estate pays off and how much profit is made annually. Real estate investment funds in singapore approximately give a five percent profit and further, their stocks increase in value. These finds work with a 5-15 percent profit. Therefore, they are interested in seeing if there is a real estate environment with more profits than this in Mongolia. Our real estate companies have a minimum 8-10 percent profit and has much more profits than that. That is why they are interested.
For instance, China’s largest investor is Singapore. In this sense, they are used to operating business. China’s Belt and Road Initiative is 80 percent funded by Singapore. However, Singaporean investors do not put their money emotionally because something has a large potential. Due to how there are international banks there, they can collect information from every country in many different ways.
-Business operators prefer to invest in a sector that they know well. In addition to real estate, which sectors do you think Singaporeans would be interested in?
-Singaporeans are experts in engineering, design, logistics, and health, etc. They are people who have core merchant mentalities. They take cheap goods and services from a country, improve it to a height and sell it at a larger price saying that it is Singaporean. For example, they would participate in improving the design and engineering of a project and conduct a feasibility study. Once this is done, any international bank and NBFIs would accept it and approve financing. Singapore is one of the conservative countries. As for Singaporean business operators, they first visit the place and if they like it, then try to find dependable partners. Afterwards, building trust with them takes a lengthy amount of time as well. Once a partnership is established, then they attempt to invest in the sector in the fields that they are knowledged in including real estate, technology, and health, etc. On the contrary, Mongolians are always in a hurry. They treat it as if they meet today and get investment tomorrow. Singaporeans do businesses based on connections and trust built over time.
They are also experts on hotel and hospitality management. All hotels in Singapore are packed and filled with people. This is an indication of their ability to partner in the tourism sector. Alongside this, Singapore’s education is internationally acclaimed and hence forth, they are interested in exporting this. The country is a small market with 3.5 million people. Therefore, they are also looking into how they could enter the neighboring markets. This particularly include rapidly increasing countries such as Vietnam and Laos. Our country also needs to direct its policy towards Southeast Asia. In this sense, the Foreign Minister D.Tsogtbaatar has visited and met current Deputy Prime Minister Heng Swee Keat (who will become the prime minister next) and requested a training for our people. He has asked for training in the stock market and strengthening government employees, to which, the Singaporean side was favorable to. Singaporeans do not just throw their money into the air. They only help by sharing their knowledge, refrain from giving aids in the form of donations.
-At what level is the economic cooperation of Mongolia and Singapore?
-It is weak. It is insatiable looking at the number of products that Singapore is importing from Mongolia. There are mutual agreements between Mongolia and Singapore such as the “Mutual Protection and Promotion of Foreign Investment” and “Avoiding and Freeing from Double Taxes”. For this reason, a person who opened their company in Singapore is able to invest into Mongolian companies. There are a number of advantages to this. First is avoiding double taxes, the second is that Singapore has a well adjusted judicial order meaning that in case there are disagreements between the two sides, the Singaporean court will come to a fair conclusion. Moreover, there are no political conflicts in the relationship between the two countries. In this regard, we have a large potential in business partnerships. In the past, it used to be highlighted that Mongolia is geographically further from the Southeast Asian countries, but partnership consensus have changed since then. The rules of the game changed and the tables have turned. Therefore, the main issue now is of how the business operators of the two countries have trouble communicating with each other. In 2015, the “Singapore-Mongolia Business Forum” was organized in honor of the 45th diplomatic anniversary between the two countries. Many people actively participated and were interested in Mongolia. Since then, many Singaporean business operators came to Mongolia and did their research. They saw that Mongolia was not yet at the stage for their investment. Mongolians are not able to explain the change in their legal environment adequately to foreigners. One of the main reasons why investors turned back from Mongolia are the negative press on the internet and the comments from business operators whose investments in the country were unsuccessful.
-During this business forum, two companies shared with us about registering in Singapore. What do you think about this?
-Throughout the past two years, I noticed a trend of Mongolian fintech companies registering in Singapore and being interested in this. By doing this, it gives them the opportunity to pass through Singapore and be recognized in Southeast Asia. It is more about that than getting government support. In brief, the advantage in this is the central hub in which the investors gather in. Through Singapore, it gets easier to get access to large markets in Southeast Asia, in particular Indonesia with the population of 260 million, Philippines 100 million, and Malaysia 30 million, etc.
-How much does the Singaporean Government support Start-ups and the fintech sector?
-The National Research Foundation that we visited during the foreign minister’s visit is the prime minister’s office that does work equivalent to the Ministry of Science. In the past five years, Singapore invested 20 billion SGD into science and technology. Additionally, they invest into sectors that will determine the future such as defense and technology. The Central Bank enables the timeframe and legal regulation for companies to test new products and services in Singapore to support innovation. Since this regulation is understandable, high quality, and is under the supervision of the Central Bank, those who overcome it are confident in all places when they explain their operations. The Singaporean Government supports their companies with growth potential for the development of Singapore and on the international scene in many ways. If a startup company can get a million dollars worth of investment from the private sector, the government gives a million dollars as well. For example, a business operator that I know conducted training in Laos and presented their results back in Singapore. After analysing the effectiveness, the government gave the company all their expenses back.
-What should Mongolian companies do in order to export their products to Singapore or expand the company in the country?
-Singapore is home to 5.7 million residents. The country receives around 17 million tourists, which could reach 30 million in coming years. World might consider Singapore to be a small country, however entering and introducing a product to this market is very difficult. If your product succeeds to gain certain recognition in Singapore, that would certainly be huge opportunity to establish its position in the international market. The reason is that Singapore is a model country and magnet of Southeast Asia.
The country imports most of its products hence it imposes very strict criteria on imported products. Therefore, Mongolian companies shall study international standards and prepare English introduction of their products at least and production of meat and dairy products shall meet international standards at best. Besides, the products and brands should boast Mongolian distinctive heritage, tradition and culture for example and suitable for its hot climate. Yet the most important issue is specific hygiene requirements for imported meat. For example, a meat shall have specific data on parent animals, medical history, processing technology, storage conditions, transportation type and other detailed information in order to be approved for import.
Singaporean agencies have all presented requirements for import products on their official websites, which makes it easier for Mongolian companies to analyze the data and make appropriate preparation. In Singapore, bureaucracy almost doesn’t exist, document processing is fast and reliable.
-What specific products could have competitive edge over other products?
-Though Singapore has a warm climate, they are really interested in cashmere and wool products of Mongolia. Air conditioners make rooms considerably cold and working in such a situation for long period makes people uncomfortable. Therefore, Mongolian thin shawls and scarves could be bestseller here in Singapore.
Mongolian cashmere products are considerably cheaper compared to similar products in international market and it gives us huge advantage and competitive edge. If we could attract more international markets and customers, then Mongolian cashmere products could be sold at a rate similar to world known brands. Certainly, great effort and hard work are needed for this.
-In your opinion, what are the advantages and qualities we should learn from Singapore?
-There are so many things we should learn from Singaporeans. Minister and ordinary citizen receive exactly the same service from virtually all organizations. In this country everybody is equal. Another advantage is that civil servants are trained and prepared in a proper way. Take an example of civil servant who works in a South East Asian department of the Ministry of Foreign Affairs. She knows that if she performs her duties honorably for a long period, then she could be appointed as an ambassador to South Korea or China. It means civil servants never consider their work as temporary duty. Singaporeans distinguish state and business matters and based on such assumption make their important decisions.
-What are common questions asked by Singaporeans about Mongolia? On the other hand, what are the main problems for Singaporean business people working in Mongolia?
-Singaporean business people who invested in Mongolia state that political as well as legal instability are the main setbacks for them. Mongolian tax legislation could be amended or updated at any time. When the government is replaced by the new government, it is certain that the regulations approved by the previous government shall be nullified. Singaporeans don`t understand it and it worries them so much.
Another problem is currency rate. Singaporeans make their investment in USD. Let’s assume that currency exchange rate of USD at the time was 1200 MNT. After 5 years, such investment would not generate virtually no profit, because of currency fluctuation and tugrik devaluation.
Finally, there is the issue of trust. I`ll tell you one really unfortunate event where one Mongolian businessman successfully attracted investment from Singapore and established a joint venture in Mongolia. Somehow, Mongolian partner established a new company and was secretly exploiting equipment of the joint venture for his own company. Such examples lead Singaporean business people to become desperate and scare away future investors.
It might seem that Mongolia could have a great potential to invest in for foreign business people, however our country lacks sustainable political, legal and business environment that ensure profitable business.
-Could next year`s Singapore-Mongolian business forum in Mongolia attracts large number of participants, investors and business persons from Singapore?
-We will do our best to increase the number of participants of the forum. However, we must constitute agendas and determine possible outcome of the forum at first. In other words, perfect preparation ensures active participation of Singaporean business persons. This year, joint effort by the Business Council of Mongolia and Mongolian National Chamber of Commerce and Industry and active participation of the Embassy have contributed to the successful forum. It also enabled Singaporean entrepreneurs to directly contact and create fruitful cooperation with these two organizations.
It should be noted that many companies missed the forum announcement or registration deadline and could not participate due to scheduling. Many people contacted us to receive information on the forum and requested transcription or video of the speech by Minister of Foreign Affairs of Mongolia. Therefore, we must attach attention to the importance of information. Magazines and information channels such as special edition of the “Mongolian Economy” and “Business.mn” magazines shall be numerous. Reliable, timely and constant flow of information about Mongolia could be very useful for Singaporean business persons.
-There are many business associations and organizations in Singapore. Could you give our readers more information on their policy and strategies?
-Mainly producers and manufacturers constitute Federation of Manufacturers and the federation is authorized to issue a certificate of origin. Singapore Business Federation conducts broader activity and representatives from various business sectors joined the federation. One of the main functions of the federation is to be bridge between Singapore`s business community and the Government.
Take for example the “Nominated member of parliament”, a select 10 representatives from the business world specifically invited to the Singaporean parliament.
Another influential organization is “Enterprise Singapore”. The agency supports Singaporean companies to invest abroad and internationalise. Finally, an organization that should be mentioned is the Singapore Economic Development Board, whose objective is to transform operations and boost activity of the Singaporean companies.
-Embassy of Mongolia in Singapore was opened 10 years ago. What have been developments and transformations within this period?
-More than 270 Mongolians, including people who married to Singaporean nationals, students and specialists who work for Singaporean companies live in this country. Many qualified Mongolians employed by the companies that operate in the technology, banking and legal sector. Their number might be substantially few compared to other Southeast Asian countries, however most of them hold very respectable managerial positions. Around 5000 Mongolians visit Singapore each year and this number has increased twofold in the last 5 years.
What Singaporeans now want is direct flight between the two countries. I hope both Civil Aviation Authority of Mongolia and MIAT has been analyzing this possibility. From Singaporean side, Air Asia and Changi Airport Singapore are considering such a possibility.
Let me remind you that direct flight between the two countries was continued for 6 months in 2014 and cancelled in part due to insufficient preparation from the Mongolian side. For Singaporeans, who like to plan their business in a year advance, that was too short a period to arrange something to take such an opportunity. I understand that Changi Airport Singapore plans to start negotiations on the theme of direct flights between the two countries once the new international airport in Khushig Valley is opened.
Singaporeans love to visit new countries and discover new places. They know that Mongolia has ancient and rich history and beautiful nature, though there is widespread gossip among them that Mongolia is unbearably cold, extremely remote and tough to travel to. Therefore, we need to eliminate such information barriers by delivering actual and useful information on Mongolia through every possible channel. When Singaporean look at extreme temperatures of +40 celsius degree and -40 celsius degree, they are afraid to visit Mongolia. That is of course a misunderstanding.
In January 2016, I met with Prime Minister of Singapore, when there was some delay regarding his response to the invitation from Mongolian side on the ASEM11. I asked him, “Have you made your decision on your official visit to Mongolia” and he replied to me “I heard that it is really hot in summer”. In response, I explained to him that the average temperature is around +25 celsius degree and it is a wonderful time to visit Mongolia. Thankfully, he not only participated in the 11th ASEM Summit but also paid an official visit to Mongolia. It was an example of what can correct information do.
The latest important event was official visit of D.Tsogtbaatar, Minister for Foreign Affairs of Mongolia. I believe it is of utmost importance to continue these high-level talks and visits in the future. The reason why I say this is many influential Singaporean entrepreneurs told me at that time “Our Prime Minister doesn’t pay an official visit to every country he was invited. It was a strong message from him that Mongolia is a country worth to cooperate and pursue economic and trade cooperation. Therefore, we need to explore business opportunities to work with Mongolian entrepreneurs and companies”.
During his visit, Minister of Foreign Affairs of Mongolia invited his Singaporean counterpart to Mongolia. His official visit would be an enormous advance in the relationship between the two countries.
This interview was published in the 154th issue of Mongolian Economy magazine in July, 2019.