Mongolia: Transport transformation
May 23 (Oxford Business Group) New rail links with Russia and China and a planned overhaul of the road network underline progress in Mongolia's plans to use the recent surge in resource growth to improve infrastructure and transport. However, there are concerns that political wrangling could delay the implementation of ambitious projects.
In early April, state-owned Mongolian Railways received five new locomotives and 245 freight wagons from China as part of a soft-loan deal. Delivered with decorations commemorating the 805th anniversary of the Mongol Empire's founding, the rolling stock symbolises eagerness to improve transport links with China as the scale of Mongolia's mineral wealth becomes clearer.
Ulaanbaatar plans to build a new 270-km link from its Tavan Tolgoi coking coal mine – located in the South Gobi desert – to the Chinese border by 2013. While exports to China rose 37% year-on-year (y-o-y) to 17.5m tonnes between January and November 2011, international media reported in February that the current rail link between South Gobi and China, used to export millions of tonnes of coal each year, is "overwhelmed", adding that "foreign investors say their future could depend on easing the bottleneck".
With an eye on easing congestion on the route, in March, Mongolia Mining raised $600m in a bond offering for the construction of a 240-km rail link between its Ukhaa Khudag mine and the Mongolia-China border at Gashuun Sukhait. The link is expected to be complete by 2014.
Despite the new links, Ulaanbaatar is wary of overdependence on Chinese demand, with Mongolian Railways also planning to construct a 1000-km rail link from its Tavan Tolgoi coal mine to a port in Russia's Far East. In February, officials revealed that the link will take two to three years to build and will cost $2bn-2.5bn.
The Russian link is part of $5bn plans approved in 2011 to quadruple the domestic rail network to boost commodity exports. The existing Trans-Mongolian Railway connects the Trans-Siberian Railway from Ulan Ude in Russia to Erenhot and Beijing in China through Ulaanbaatar, with the Mongolian section spanning 1110 km.
Despite the importance of the new links, railway officials have complained over a political stalemate stalling implementation. According to Purevbaatar Luvsandavag, the vice-chairman of theMongolia Railway Authority, the government has not raised the $50m required to fund a series of feasibility studies and projects designs drawn up in 2011.
"We still do not have permission from the government to announce an open tender to build the railways, and in general, there is still a deadlock when it comes to funding and building infrastructure," Purevbaatar told Reuters on the sidelines of the Coal Mongolia conference in Ulaanbaatar.
Purevbaatar further added that the government had sought funding for the projects through overseas equity markets, instead of the railway authority's preferred option involving public-private partnerships with investors from Japan and South Korea.
In March, the cabinet introduced an implementation plan for state policy on the railways, with the government planning to create a state-run dominant shareholding company that will control 51% of basic railway structure and the rest to be offered as shares on domestic and foreign stock exchanges.
Although railways are vital in linking the 1.5m-sq-km country, revenues from coal and other minerals are also expected to fund far-reaching upgrades in road and air infrastructure. In April, the cabinet identified a list of "urgent" roads and bridges to construct as part of its new building programme, with a total of 5572 km of roads and 900 km of highways connecting the capital to the country's aimags, or provinces.
In the same month, city officials revealed $280m in plans to build bus lanes on existing roads to ease congestion, while adding that a metro service was being mulled as part of efforts for the current public transport system in the capital to be "greatly enhanced".
On April 23, construction began on a new international airport in Tuv province to satisfy the rising international passenger and freight transport volume. Prime Minister Sükhbaatar Batbold said at that the groundbreaking that a $358m soft loan from Japan would fund the new facility. The airport, located 60 km outside of Ulaanbaatar, will ease pressure on the existing Chinggis Khaan International Airport.
Expected to be complete by 2015, the new airport will be able to service all larger modern aircraft and afford better protection from wind shear than Chinggis Khaan. The airport is expected to have a capacity of transporting 1.65m passengers and 11,900 tonnes of freight annually.
The government's wide-reaching plans to facilitate commodity-based travel will help ensure longer-term and broad-based growth. Improving passenger services and minimising political wrangling will also go a long way in this regard.
In early April, state-owned Mongolian Railways received five new locomotives and 245 freight wagons from China as part of a soft-loan deal. Delivered with decorations commemorating the 805th anniversary of the Mongol Empire's founding, the rolling stock symbolises eagerness to improve transport links with China as the scale of Mongolia's mineral wealth becomes clearer.
Ulaanbaatar plans to build a new 270-km link from its Tavan Tolgoi coking coal mine – located in the South Gobi desert – to the Chinese border by 2013. While exports to China rose 37% year-on-year (y-o-y) to 17.5m tonnes between January and November 2011, international media reported in February that the current rail link between South Gobi and China, used to export millions of tonnes of coal each year, is "overwhelmed", adding that "foreign investors say their future could depend on easing the bottleneck".
With an eye on easing congestion on the route, in March, Mongolia Mining raised $600m in a bond offering for the construction of a 240-km rail link between its Ukhaa Khudag mine and the Mongolia-China border at Gashuun Sukhait. The link is expected to be complete by 2014.
Despite the new links, Ulaanbaatar is wary of overdependence on Chinese demand, with Mongolian Railways also planning to construct a 1000-km rail link from its Tavan Tolgoi coal mine to a port in Russia's Far East. In February, officials revealed that the link will take two to three years to build and will cost $2bn-2.5bn.
The Russian link is part of $5bn plans approved in 2011 to quadruple the domestic rail network to boost commodity exports. The existing Trans-Mongolian Railway connects the Trans-Siberian Railway from Ulan Ude in Russia to Erenhot and Beijing in China through Ulaanbaatar, with the Mongolian section spanning 1110 km.
Despite the importance of the new links, railway officials have complained over a political stalemate stalling implementation. According to Purevbaatar Luvsandavag, the vice-chairman of theMongolia Railway Authority, the government has not raised the $50m required to fund a series of feasibility studies and projects designs drawn up in 2011.
"We still do not have permission from the government to announce an open tender to build the railways, and in general, there is still a deadlock when it comes to funding and building infrastructure," Purevbaatar told Reuters on the sidelines of the Coal Mongolia conference in Ulaanbaatar.
Purevbaatar further added that the government had sought funding for the projects through overseas equity markets, instead of the railway authority's preferred option involving public-private partnerships with investors from Japan and South Korea.
In March, the cabinet introduced an implementation plan for state policy on the railways, with the government planning to create a state-run dominant shareholding company that will control 51% of basic railway structure and the rest to be offered as shares on domestic and foreign stock exchanges.
Although railways are vital in linking the 1.5m-sq-km country, revenues from coal and other minerals are also expected to fund far-reaching upgrades in road and air infrastructure. In April, the cabinet identified a list of "urgent" roads and bridges to construct as part of its new building programme, with a total of 5572 km of roads and 900 km of highways connecting the capital to the country's aimags, or provinces.
In the same month, city officials revealed $280m in plans to build bus lanes on existing roads to ease congestion, while adding that a metro service was being mulled as part of efforts for the current public transport system in the capital to be "greatly enhanced".
On April 23, construction began on a new international airport in Tuv province to satisfy the rising international passenger and freight transport volume. Prime Minister Sükhbaatar Batbold said at that the groundbreaking that a $358m soft loan from Japan would fund the new facility. The airport, located 60 km outside of Ulaanbaatar, will ease pressure on the existing Chinggis Khaan International Airport.
Expected to be complete by 2015, the new airport will be able to service all larger modern aircraft and afford better protection from wind shear than Chinggis Khaan. The airport is expected to have a capacity of transporting 1.65m passengers and 11,900 tonnes of freight annually.
The government's wide-reaching plans to facilitate commodity-based travel will help ensure longer-term and broad-based growth. Improving passenger services and minimising political wrangling will also go a long way in this regard.
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