A small nation with vast reserves of natural resources… sustained and stellar GDP growth despite a challenging operating environment… tension between foreign investors and those in the local population who believe their birthright is being sold off too cheaply… a copper and gold mine large enough to contribute a third of the nation’s GDP.

Mongolia’s capital city, Ulan Bator

Sounds familiar? In fact the description actually applies just as well to the land-locked Central Asian nation of Mongolia as it does to Papua New Guinea.

Despite a population of just three million, Mongolia has very large deposits of copper, coal, gold, silver and uranium which have only recently begun to be exploited.

Well-positioned for minerals

Its geographical location has helped: despite being used as a byword for ‘remoteness’ by some (with its former prefix ‘Outer’ included), Mongolia shares a land border with China, by far the largest global market for most minerals.

Its transformative ‘PNG LNG-style’ mega-project is the Oyu Tolgoi (‘Turquoise Hill’) mine – you guessed it, ‘OT’ – led by Rio Tinto, which is expected to begin commercial production later this year. The peak of its construction phase helped make Mongolia the world’s fastest growing economy in 2011.

Familiar names

With market profiles so similar, it is unsurprising that an increasing number of service providers, predominantly from Australia, are operating in both PNG and Mongolia.

The familiar names of Leighton Holdings, Monadelphus and Golder Associates have an established presence in Mongolia, and in the past year Brisbane-based recruitment firm JDA Applus Velosi (which has operated in PNG for two decades as JDA Wokman) opened an office in the capital of Ulan Bator, while ANZ last year announced plans for a representative office there.

Comparisons with PNG

Yet if the economies of PNG and ‘Mine-golia’ (as it is sometimes referred to) appear to be running in parallel, the institutions that underpin them could not be more different.

Whereas PNG is a former colony, with a strong democratic heritage and solid legal framework, Mongolia’s Communist past means that its legal and regulatory frameworks are immature, and its government notoriously prone to populist policy-making and knee-jerk reactions. For instance, new foreign investment legislation hastily introduced last year has put a sudden halt to capital inflows.

On the other hand, when it comes to government capacity, regarded by many as the most powerful brake on PNG’s development, Mongolia rates very highly. It also has a much more developed private sector.

As one international analyst familiar with both puts it: ‘Mongolia and PNG are both difficult places to do business, but for very different reasons.’

It seems an increasing number of companies will need to keep that assessment firmly in mind in the years to come.