BCM November Monthly Meeting: Panel Meeting On Economic Corridor Between Mongolia, Russia, And China

The Business Council of Mongolia’s monthly meeting was held on Monday, 12 November 2018, at the Ministry of Foreign Affairs with BCM Chairman B.Byambasaikhan hosting for an audience of around 80 members.

PRESENTATION BY AMBASSADOR-AT-LARGE N.CHIMGUUNDARI: “CURRENT STATUS OF THE ECONOMIC CORRIDOR, THE RESEARCH CENTER BASED IN ULAANBAATAR AND ITS ROLE”

Click here to view the full presentation.

Back in June 2016, the Mongolia, Russia, and China signed an agreement to implement an Economic Corridor comprising 32 projects, including 13 infrastructure projects, as regional connectivity is the main purpose of the initiative. This proposed Economic Corridor is one of the six routes in China’s Belt and Road initiative and is in alignment with Mongolia’s Development Program, and Russia’s Eurasian Economic Union. 

Priority projects of the 32 overall include a central railway corridor and the road transit corridor (Asian Highway-3). The third priority project is an energy transmission corridor.
To implement these projects, the three countries have agreed to establish the Joint Center for Investment Planning and Projection based in Ulaanbaatar. A draft document setting up the joint center is under discussion among the three countries.

The first objective of the joint center is to facilitate smooth and effective implementation. It will also conduct research and suggest more projects to be implemented, as well as serve as a focal point for private sector engagement with the Economic Corridor. The Center will study proposals from the private sectors of the three countries and make decisions on potential contractors of the 32 projects.

Another important aspect of the Center, especially in the earlier stages, is the establishment of a database of the projects, with potential investors and private sector stakeholders. It will also facilitate coordination between line ministries.

Essentially, the Center is expected to become a single-window solution for public-private partnerships and engagements.

Lastly, although this is a trilateral initiative, investment and engagement from third parties are welcome.


PANEL DISCUSSION ON THE ECONOMIC CORRIDOR


After the presentation, the panel discussion took place, with Chairman Byambasaikhan serving as the moderator. On the panel were:

  • Dr. V.Enkhbold, Director-General of the Foreign Trade and Economic Cooperation Department of the Ministry of Foreign Affairs
  • L.Khangai, Ambassador
  • D.Bayarkhuu, Ambassador
  • A.Batbold, Director-General of the Railway and Maritime Transport Policy Implementation and Coordination Department of the Ministry of Road and Transportation Development
  • Maxim Vasiliev, Trade Office Representative of the Russian Federation
  • Chairman Yang Xiaoqi, “Zun Hua” Chinese General Chamber of Commerce in Mongolia
  • N.Chimguundari, Ambassador-at-Large

Statement by V.Enkhbold:
The government is paying great attention to this initiative, especially given the fact that Mongolia is a land-locked nation.

There is one key issue, which is that progress on this initiative has been slow, even slower than expected. This is related to the fact that decisions must be made by the unanimous consent of the three countries. In Beijing, it was decided that there shall be an investment and research center based in Ulaanbaatar. This is a trilateral mechanism, not a Mongolian initiative.

At the Moscow meeting in August, what organizations are to represent the respective countries were decided. The Ministry of Foreign Affairs of Mongolia will represent Mongolian interests in the partnership.

As of now, three priority projects of the 32 have been selected: the railway corridor, road corridor, and power transmission corridor.

In September at the Eastern Economic Corridor in Vladivostok, an MoU was signed by which each of the organizations representing the countries will establish a working group, and work has begun on studies to establish the joint research center.

A program has been suggested from the Mongolian side, and the Chinese and Russian side will suggest additions or modifications. As mentioned before, any actions or decisions must be under trilateral consensus.

Continuation of discussion by Maxim Vasiliev
In Beijing, Russian Ambassador Denisov remarked how cooperation between the three has been remarkable, despite the need for trilateral consensus.

The Russian side agrees that Mongolia certainly provides comparative advantages, as Mongolia and the trilateral corridor are a part of Russia’s ambition to increase trade turnover with China to USD 200 billion.

Regarding infrastructure development in Mongolia, the infrastructure and capacity of Ulaanbaatar Railway must be improved significantly, Mr. Vasiliev said. Russia aims to help Ulaanbaatar Railway triple its capacity over the coming years.

“This is not some wishful thinking of the three states,” he said. The economic foundations are self-evident, he added. “China and Russia are the economies, and Mongolia is the corridor.”
Russia and China are relying on Mongolia to ensure the healthy business environment necessary for such a major initiative. Russian state-owned enterprises and private companies are ready to cooperate with Mongolia and China on Mongolian soil. This entails not only transport, and imports or exports, but also other sectors such as tourism.

Question for Mr. Yang: The Belt and Road initiative provides great opportunities for Chinese and other businesses. Would you please say a few words regarding opportunities for businesses to be involved?

Given the importance of this Economic Corridor, the Chinese side will work with businesses to implement the goals under the overall Belt and Road initiative. The Chinese government also seeks to expedite the works of the trilateral partnerships and is willing to support Mongolian businesses to realize the objectives.

One major issue is the speed at which goods are transported, especially at the border. Expanding trade connections (railway, roads) with Russia is also an important part of Chinese foreign trade objectives. Transportation, whether by land, air, or sea, has been an integral part of China’s rapid economic growth.

From the Chinese side, the central railway corridor between the three countries is of utmost importance. The infrastructure and capital of Ulaanbaatar Railway is very outdated. The methods of loading and transportation are too outdated. If possible, a trilateral solution to this problem would greatly benefit the domestic situation in Mongolia. If the standards were improved and brought to alignment with Chinese standards, Mongolia’s economy would greatly benefit.

In the future, the Chinese side will continue to support the activities of organizations such as BCM, as well as other state organizations involved in the realization of the trilateral corridor, said Mr. Yang. In addition, he also agreed that implementation has been slow and that we should do more to hasten results. Getting started on infrastructure development will do much to benefit SMEs in Mongolia.

State-owned enterprises, as well as private firms, could perhaps these discussions, as it may help to bring about faster progress.

Statement by A.Batbold
Working groups have been conducting various studies since the signing of the agreement to establish the Economic Corridor in Tashkent in 2016. More so than quick development, the right development is key. Technical alignment (or harmony) is a key issue. Mongolia does not want to be the bottleneck in the corridor. The key problem lies here, and there is no way around it. There is a dire need to improve capacity in Mongolia, starting with capacity upgrades to Ulaanbaatar Railway.

Experts are engaged in high-level discussions regarding solutions to the railway issue, as well as upgrading road capacity.

Statement by D.Bayarkhuu
There is no question concerning benefits to Mongolia. It has been four years since Mongolia proposed the “Steppe Road” program, which has not seen one kilometer of progress.

How are the Chinese seeing Mongolia? China has not proposed a project and just left it. They are carefully monitoring progress, seeing who is leading initiatives from what country. Over the past two months, Latin American and African countries have even expressed their desire to be involved in the Belt and Road. By now, around 100 countries are in some way involved in the Belt and Road initiative.

Of the four categories in evaluating 63 Belt and Road partners, Mongolia is rated better than one might expect, being rated as having positive indicators. Regarding political agreement, the rating was 9.6/10. However, the infrastructure rating was below 5.

“The Chinese side has laid all their high cards on the table,” said Mr. Bayarkhuu, in a metaphor using playing cards. Basically what the Chinese are relaying is that if their production and you can export it, then the Chinese are ready to buy just about anything. “But look at the composition of Mongolian exports,” he dismayed.

Statement by L.Khangai
Discussions on the Economic Corridor should happen frequently. The question of the Economic Corridor is a question of infrastructure. Mongolia is a vastly wealthy nation in terms of resources, and China is the biggest market with the biggest population. The logical conclusion of this must be resolved through investment in infrastructure. “The real mega projects must be in infrastructure.”

The program for the Economic Corridor is agreed on for 5 years at a time. Since 2016, a couple of working groups have met, and some agreements have been signed, but nothing really substantive has been achieved.

Article 5 of the program points out the organizations responsible for cooperating to achieve the objectives of the trilateral corridor. They are also tasked with organizing a conference at least once a year. “The Ministry of Foreign Affairs has not worked well when it comes to its responsibilities under the trilateral agreement,” he stated.

“I believe it would be better to involve businesses and investment firms, more so than government bodies,” he added. Erdenes Mongol being involved is a good idea, as well as banks. Erdenes Mongol is state-owned yet has the capitalization and capacity to undertake such major involvement on behalf of Mongolia. From the Russian side, there could be companies such as Gazprom. Russia wants to represent Eurasian interests. As such, the Eurasian Development Bank being involved would be good.

Similarly, from the Chinese side, there should be an analogous large company that engages in a wide range of activities.

Only by doing so can this joint research center be successful. Studying and deciding what projects to prioritize should not be the decisions of ministries, but rather the joint research center.


Q&A

Question to Mr. Bayarkhuu and Mr. Khangai: At what stage is the progress on Mongolia joining the SCO?

Mr. D.Bayarkhuu
People wrongly believe that the SCO is an integration platform. In my opinion, I believe it is better to continue under an Observer status in the SCO. Since the recent public discussion regarding Mongolia becoming a member of the SCO, not much has changed for Mongolia. Azerbaijan has applied to be an Observer, and Saudi Arabia has also applied.

Mr. L. Khangai
Mr. Bayarkhuu wrote an article for baabar.mn a few days ago titled “Expectations.” I suggest people read this article. (Click here to read the article he is referring to - Mongolian only)

Question for Mrs. Chimguundari: Regarding the central railway corridor, I saw a map regarding possibilities to connect Khuvsgul and Bulgan Province to the railway. There are various ports which are underutilized. I believe connecting these to the transport corridors will be good for Mongolian exports. What are your thoughts on this?

Mrs. N.Chimguundari
This is more a question of domestic railway capacity. Mr. Batbold from the Transport Ministry will better answer your question.

Mr. Batbold
The Transport Ministry is talking with the National Development Agency in producing a national transport development policy. As Mrs. Chinguundari stated, there are 32 projects, but we must decide which, when, and how to start projects based on economic feasibility. Railways require a great amount of investment. For example, the railway for Aspire, one kilometer of railway requires about USD 3 million. Regarding the economic corridor, we are talking thousands of kilometers of rail.

Mr. L.Khangai
The first question regarding establishing the railway is what will be transported and to where. There was a feasibility study regarding the route you asked about, spanning about 800 km in Mongolia. This route would be connected into Russian networks all the way to Kyzyl, so the question is, is there going to be cargo?

Question for Mr. Bayarkhuu: You introduced a report by the Chinese on the Belt and Road. Where can we find this report?

The source can be found referenced in my book which was published recently.

Question for Mrs. Chimguundari: Is there an approximate timeline for when the joint research center is to be established.

In the MoU signed in September, it is stated that the establishment of the research center is to take place when the first project is begun. So the timeline is related to the implementation of the project. When the first project begins to be implemented, that is when the joint research center will be established.

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