Companies need to proceed with ­caution when investing in Mongolia, despite recent government efforts to improve regulatory and investment conditions, an Australian economist has warned.

The latest Australian company to encounter troubles in Mongolia is Perth-based ­mining contractor ­Macmahon ­Holdings. An ongoing payment dispute between Macmahon and the operator of the Tavan Tolgoi coal mine in ­Mongolia resulted in Macmahon announcing a three week standstill agreement on Thursday.