NFC in Mongolia
(8 pages of text)
NFC was a state-owned company listed on the China stock exchange. It had operations in Zambia, Iran and Kazakhstan before entering into Mongolia. Most of the prior projects were turn-key operations. Mongolia was the first country in which it had an international joint venture (IJV). The joint venture (JV) agreement was signed in 1998. Due to many delays, it was not until 2005 that it finally started operating. In mid-2007, the Mongolian parliament notified the JV that its 5-year 0 per cent and 5-year 50 per cent of income tax term (starting from 2005) had been cancelled. Not only would it need to pay full tax starting from 2007, it had to pay the exempted tax amount from 2005 and 2006. Inside the JV, the union desired another pay raise despite the fact that salaries had been increased 10 per cent just six months ago. Outside the JV, local shipping companies threatened to block the factory gate if the JV did not sign a shipping contract with them on their terms.
This case presents the challenges a Chinese state-owned company is facing when operating in Mongolia. The issues presented in the case include:
- Introducing the history of a Chinese state-owned company going abroad
- Illustrating difficulties multinationals may encounter when entering a less developed country like Mongolia
- Discussing cultural difference and its impact on measures an expatriate can choose when dealing with unexpected issues
This case is suitable for courses in General Management, Cross Cultural Management and International Business.
Mining, Quarrying, and Oil and Gas Extraction
Asia/China/Mongolia, Large, 2007
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