Weeks before a parliamentary election, Mongolia has approved a draft law that bans or limits the potential ownership of any foreign state-owned companies of its massive natural resources.

The proposal, which is seen to be passed into law by June, blocks foreign investors from owning more than 49 per cent of companies to be put up in the resources, finance, telecommunications and media industries in Mongolia. Should foreign investors pursue, they will be required to first secure government review and parliamentary approval.

The draft law specifically zeroes in on potential deals worth $75 million and above, The Wall Street Journal reported.

Foreign-investors backed by state-governments, aside from the government review and parliamentary approval, will also require special approval to buy into their preferred sectors.

In an interview with Bloomberg News, Mongolian Vice Finance Minister Ganhuyag Chuluun Hutagt said the list of strategic assets and industries will be released later. Uranium and rare earths minerals will be likely included in the list, he said.

If there's anything fortunate, existing companies in Mongolia that are above the 49 per cent ceiling are safe from the draft law, such as the $6 billion Oyu Tolgoi copper mine of the Rio Tinto Group.

"Investors don't like it when the rules of the game are changed after the game has started, and changed often at that," chief investment strategist Dale Choi said in Bloomberg News. "It would be in the interests of Mongolian people to make a decision based on commercial factors, rather than geopolitical factors."

Unless barred by the president of Mongolia, the law takes effect 10 days after, he said.

The people of Mongolia, from as far as two years back, have pressured the federal government that albeit being a nation abundant with coal, copper, gold and other natural resources, the populace believed they and their country are still at the losing end as foreigners will just usurp their assets, get rich and once depleted, leave Mongolia and its people poor and potentially jobless.

The Mongolian populace, currently registered at 2.8 million, also wants that foreign investor presence in companies in key assets are composed of entities representing several nations, instead of solely owned.

"We don't want to be faced with one sovereign," Mr Ganhuyag said. "Our struggle to get political freedom was a long one and we cherish that. We will not let foreign government-owned entities control strategic assets in Mongolia."

Mongolia, known for its coal reserves, currently have key mine projects but are however still in their infancy.

According to a February report by the World Bank, total world sales of coal in 2011 hit $2.2 billion, half of which came from Mongolia's exports.

Latest data from the Customs General Administration of Mongolia showed that 89 per cent of Mongolia's total exports in April were mostly made up of mineral resources.

Exports to northeast Asian countries were $389 million of a total $409 million, the data show.