Road Logistics

New Trade Policies Unlock Foreign Investment in Mongolia

A look at recent diplomatic and legislative initiatives, including the Mongolia-US strategic partnership, the China-Mongolia-Russia Economic Corridor and the Canada-Mongolia Investment Agreement.

Mongolia is quickly becoming a hub of international trade and investment. According to the 2020 World Investment Report published by the United Nations Conference on Trade and Development, foreign direct investment flows to Mongolia totaled US$2.4 billion in 2019, an increase from US$2.2 billion in 2018, owing largely to a continuation of large mining projects, including the country’s world-class Oyu Tolgoi copper-gold mine. 

Recently, a number of diplomatic and legislative initiatives were made to protect and promote partnerships between Mongolia and its neighbors Russia and China, as well as overseas investors.

The China-Mongolia-Russia Economic Corridor

The start of 2019 marked seven decades of diplomatic relations between Mongolia and China. China’s Mongolian component of its Belt and Road Initiative (BRI) — the China-Mongolia-Russia Economic Corridor (CMREC) — is designed to facilitate trade between Mongolia and its neighbors while at the same time opening Mongolia to overland routes to the European Union as well as sea ports in Asia.

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The CMREC is one of six major corridors envisioned by China’s BRI. The project aims to promote infrastructure connectivity and regional economic integration while developing trade and investment. The corridor intends to position Mongolia as the critical link in newly-developed trade networks between the East and West and, once completed, is expected to reduce freight times, create new export routes and cut down bureaucratic barriers. The Mongolian government itself has invested in national infrastructure through railway expansion and the construction of more than 6,000 km of roads.

The CMREC will begin in the Chinese port of Tianjin, trending northwest toward the cities of Zhangjiakou and Erenhot before crossing the China-Mongolia border. Mongolian stops along the corridor include Choyr, Ulan-Bator and Darkhan. The corridor then crosses the Mongolia-Russia border toward the Russian towns of Kyakhta and Ulan-Ude. For northeast China’s provincial powerhouses, the CMREC represents the shortest path to Europe, positioning Mongolia as a key logistics hub.

Mining success

Roughly 80 percent of Mongolia’s current export volume is directed toward China. While the CMREC will open Mongolia to additional international investment partners, the country has already begun the process of expanding its horizons. In particular, the Mongolian government only has 34 percent equity stake in the high-profile South Gobi Oyu Tolgoi mine, often referred to as the backbone of the Mongolian mining industry, as a symbol of Mongolia opening its doors to international majority-holding partnerships like Canada-based companies Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) and Turquoise Hill Resources (TSX:TRQ,NYSE:TRQ).

Oyu Tolgoi is one of the largest known copper-gold deposits in the world. The mine has seen immense success since open pit mining began in 2011. In 2013, the mine’s copper concentrator, the largest industrial complex ever built in Mongolia, began processing mined ore into copper concentrate. Production is expected to continue for decades to come.

As Mongolian legislation continues to pave the way for large-scale resource development, Mongolia remains one of the world’s most significant prospective sources of lithium. With confirmed reserves of at least 200,000 tonnes of lithium, the country has…

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