Foreign investors abandoned one-time frontier-market darling Mongolia over the past 18 months amid a dispute over a mine development, but the country hopes a resolution and its new investment law can lure them back.
Rio Tinto's $6.6 billion Oyu Tolgoi mine in Mongolia has been at the center of a prolonged dispute over revenue sharing between the government and its private sector partners, including concerns the company disagreed with demands that all revenue remain within the country at a Mongolian bank.
The dispute "greatly undermined foreign investment," while a "restrictive and unpredictable" investment regime deterred foreign investors, Moody's said in an October note. Foreign direct investment (FDI) fell 17 percent in 2012 and then fell a further 42 percent in the January-to-August period this year.
But now, Mongolia appears to have both issues licked.
In mid-December, Rio Tinto is sending a high-level delegation to Mongolia to finalize negotiations on developing the Oyu Tolgoi mine, Saikhanbileg Chimed, chief of the cabinet secretariat of Mongolia, told CNBC.
"Hopefully we're going to announce the timetable for next year when this project financing starts and when the second phase is going to start," he said. Rio Tinto didn't immediately return a call requesting comment.
(Read more: Frontier markets: Top opportunity or too risky?)
In addition, Saikhanbileg expects the country's new investment law will restore foreign investors' confidence. The law eliminates distinctions between foreign and local investors and offers long-term tax stability. With a two-thirds majority in parliament required to push through any changes to the law, it might be considered very nearly written in stone, easing uncertainty over changes to regulations.