Balanced overlap

The Concept of Mongolia’s Foreign Policy states, “Maintaining friendly relations with the Russian Federation and the People’s Republic of China shall be priority directions of Mongolia’s foreign policy activity… The second direction of Mongolia’s foreign policy activity shall be developing friendly relations with highly developed countries of the West and the East such as the United States of America, Japan, the European Union, India, the Republic of Korea, and Turkey.” Also, it is stated that the objective of our economic foreign policy is to achieve sustainable development of the national economy, ensure economic security, and improve the livelihood of the people.
It has almost been 20 years since the Concept of Mongolia’s Foreign Policy was first developed. Some observations can be made today about how this policy can be implemented and developed in the future. Mongolia has had many high-level visits from many countries and our dignitaries have paid numerous official visits to other countries. There have been many formal documents signed. Furthermore, the heads of state from our two neighboring nations are visiting Mongolia soon. President Elbegdorj has also proposed holding a summit with the leaders of the two countries. A very timely question in front of us today is whether Mongolia’s foreign policy has established a balanced overlap between the circles of interests of our two neighbors and the “third neighbor” countries in certain economic sectors. Another related question is whether we have formulated an approach to be used in implementing policy for finding a balance between these overlapping interests.


A total of 17 international companies are currently conducting petroleum exploration activities in Mongolia. Petro China Dachin Tamsag, which operates in the largest area, is extracting and exporting petroleum from a deposit with estimated reserves of 180 million tons and proven reserves of 20 million tons. Due to several sudden changes made to the foreign investment law and changing mineral policy, the majority of companies from the third neighbor countries have left Mongolia.
Peabody Energy from the United States and Shenhua Group of China are interested in taking part in coal extraction at the TavanTolgoi deposit. A year ago, the Government of Mongolia and Sinopec Group signed a memorandum of understanding to implement a multi-billion dollar project to build a gas plant, produce, and export fuel gas. It is still unclear whether German technology will be used in this project. There has been recent talk about the cheapest and shortest route to transport oil and gas from Russia’s Siberia not being the Altai Mountains, but the Mongolian steppe. There are also prospective projects to build power plants in proximity to brown coal deposits.
In this industry, China’s circle of interest keeps expanding while that of our third neighbor nations is shrinking. There is almost no sign of Russia having its own circle of interest here.


It has mostly been thought that the key to unlocking the infrastructure industry is largely dependent on which railway track gauge to use. Track gauge is significant in Mongolia’s access to the sea. As President Elbegdorj pointed out, we are interested in reaching the markets of our third neighbor nations by acquiring access to the sea by using both the track gauges employed by our neighboring countries. Mongolia is currently waiting for China to issue a permit that will allow cargo from Mongolia to be transported across its territory with the same rates that apply to Chinese companies.
Mongolia should build a dual-gauge railway horizontally, trade with Russia and China using their own track gauges, and establish a railway hub where the different track gauges meet and transshipment services are provided. When finding investment and implementing these projects, it is important to balance the overlap between the interests of our two neighboring countries as well as the third neighbor countries. This way, Mongolia can become a true transport hub that links Europe and Asia. It will also allow Russia to send its natural resources to Southeast Asia and India. In this industry, we should find an overlap where the interests of our two neighboring nations are equal.


We can develop our industrial sector by proposing that investors make investments providing that they will be repaid with our products, while meeting domestic demands to a certain extent of the value chain, including extraction, processing, and production.
China has come up with an initiative and proposed training our workforce. We need to incorporate the interests of our third neighbors in every part of the value chain in our industrial sector and introduce the most advanced technology.
In this industry, we should pursue a policy to overlap the interests of our two neighbors and the third neighbor countries equally.


Mongolbank and the People’s Bank of China (the central bank of China) have recently renewed the currency swap agreement for another three years. This agreement allows Mongolia to acquire a CNY loan worth 3.3 billion USD (up to 20 billion CNY) when required. It proves that Mongolia’s foreign trade now uses Chinese yuan.
The Bank of China has applied to open a branch in Mongolia. However, our government has not yet reached a decision with respect to their request. Although this bank is only supposed to fund large projects, some clarifications need to be made around land to be used as loan collateral and the issuance of special permits.
There is an increasing trend that China’s circle of interest in these industries is likely to keep expanding. It has divided Mongolia’s society in two. One half thinks that Mongolia might become too dependent on China and is wary of an increased influx of Chinese people if the railway is built using their gauges. They are also cautious of China sending their military into Mongolia if a conflict arises between Mongolian citizens and Chinese citizens. The other half views China as Mongolia’s biggest partner in foreign trade and investment, as well as the sole client who buys our natural resources and other products. They believe that Mongolia should regard China as its client and point out that European leaders have been pursuing a more pragmatic policy towards China while being reluctant to raise the issues of human rights or receive the Dalai Lama.
In order to deescalate this division, we need to work closely together with our two neighbors on large, economically significant projects, while ensuring that the interests of our third neighbor countries exist equally. As companies from our two neighbors are dominated by state-owned enterprises, we need to make it clear from the beginning when the shares of new companies being jointly established will be publicly sold on international stock exchanges. Such arrangements will allow us to attract investment from third neighbor countries and increase their involvement.
When Mongolia’s foreign policy finds an equally balanced overlap between the circles of interest of our two neighbors, as well as third neighbor countries, Mongolians will be more united, as there will be less polarization and differences of opinion.

Trans. by B.AMAR

Short URL: http://ubpost.mongolnews.mn/?p=10690

Posted by on Jul 20 2014. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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