Mongolian gov't approves rail link from coal mine to Russia
On 24 June 2010, the Mongolian government voted in favour of building a rail link between a mining site in the south of the country and Russia. This comes just weeks after mining firm SouthGobi Energy Resources Ltd decided in May to suspend plans for a 26 mile rail link from its Ovoot Tolgoi mine to the Chinese border, due to uncertainty over government policy (see our related article on the suspended rail plans).
Despite the fact that the Tavan Tolgoi coking coal deposit in the south Gobi region is located just 200km from the Chinese border, the authorities took the decision to construct a 1,100km railway to the Russian border. In the long run it is hoped that the project will enable Mongolia to export coal via Russia to South Korea and Japan, opening up new markets and reducing the country's reliance on China. Transportation Minister Battulga Khaltmaa said: "The policy will greatly boost the economic development of Mongolia. Instead of shipping raw materials directly to one market [China], jobs and value-added production will be created in Mongolia."
Mongolia is economically reliant on Russia and China. Currently, for example, around 65% of the country's exports go to China (see our related article on Mongolia's economic dependence). Mongolia is wary that such a reliance may leave it at the mercy of its neighbours, particularly if competition between China and Russia for Mongolia's resources intensifies. This analysis is supported by Maplecroft's China Integration Index, which ranks Mongolia 2nd out of 185 countries, and Russia Integration Index, which ranks Mongolia 15th out of 184 countries. These indices assess the extent to which a country is integrated with China and Russia, respectively, and its subsequent exposure to related risks from its dependence on these countries. Both indices show that Mongolia is at extreme risk given its very close relationship with China and Russia.
On 19 June 2010, Mongolian President Tsakhia Elbegdorj said that relations were good with China following Chinese Premier Wen Jiabao's official visit earlier in the month. The primary purpose of Mr Wen's visit was to discuss increased economic and trade ties. However, other recent developments suggest that the Mongolian government is taking pains to diversify its economic partners. For example, on 28 June 2010, Mongolian Prime Minister Sukhbaatar Batbold and the speaker of India's lower house of parliament, Meira Kumar, agreed to enhance parliamentary and economic cooperation. Mongolia is particularly interested in engaging with India on information technology, mining exploration and nuclear energy.
The Mongolian government's approach to economic policy demonstrates its uneasiness over how to make the best use of its wealth of natural resources. It is evident that it does not want to over-commit itself to any one market, particularly China or Russia. However, hesitancy in managing its resources may serve to increase uncertainty amongst current or potential investors to the detriment of the country's development.
Despite the fact that the Tavan Tolgoi coking coal deposit in the south Gobi region is located just 200km from the Chinese border, the authorities took the decision to construct a 1,100km railway to the Russian border. In the long run it is hoped that the project will enable Mongolia to export coal via Russia to South Korea and Japan, opening up new markets and reducing the country's reliance on China. Transportation Minister Battulga Khaltmaa said: "The policy will greatly boost the economic development of Mongolia. Instead of shipping raw materials directly to one market [China], jobs and value-added production will be created in Mongolia."
Mongolia is economically reliant on Russia and China. Currently, for example, around 65% of the country's exports go to China (see our related article on Mongolia's economic dependence). Mongolia is wary that such a reliance may leave it at the mercy of its neighbours, particularly if competition between China and Russia for Mongolia's resources intensifies. This analysis is supported by Maplecroft's China Integration Index, which ranks Mongolia 2nd out of 185 countries, and Russia Integration Index, which ranks Mongolia 15th out of 184 countries. These indices assess the extent to which a country is integrated with China and Russia, respectively, and its subsequent exposure to related risks from its dependence on these countries. Both indices show that Mongolia is at extreme risk given its very close relationship with China and Russia.
On 19 June 2010, Mongolian President Tsakhia Elbegdorj said that relations were good with China following Chinese Premier Wen Jiabao's official visit earlier in the month. The primary purpose of Mr Wen's visit was to discuss increased economic and trade ties. However, other recent developments suggest that the Mongolian government is taking pains to diversify its economic partners. For example, on 28 June 2010, Mongolian Prime Minister Sukhbaatar Batbold and the speaker of India's lower house of parliament, Meira Kumar, agreed to enhance parliamentary and economic cooperation. Mongolia is particularly interested in engaging with India on information technology, mining exploration and nuclear energy.
The Mongolian government's approach to economic policy demonstrates its uneasiness over how to make the best use of its wealth of natural resources. It is evident that it does not want to over-commit itself to any one market, particularly China or Russia. However, hesitancy in managing its resources may serve to increase uncertainty amongst current or potential investors to the detriment of the country's development.
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