Mongolia’s relations with North East
Asian countries and
possibility of involvement in regional
integration
TS. DAVAADORJ
Director of Information & Analysis Service,
National Security Council of Mongolia
October 3rd, 2013
Contents:
I. Northeast Asia cooperation
-
Political difficulties
-
Northeast Asian economy
-
Greater Tumen Initiative
-
Energy security in NEA
II. Mongolia and NEA countries relations
-
China-Mongolia
-
Russia-Mongolia
-
Japan-Mongolia
-
South Korea-Mongolia
-
North Korea Mongolia
III. Mongolia-Russia cooperation opportunity in the region
-
Main Necessities of Russia-Mongolia Cooperation
-
New “Silk Road”
-
Opportunity of Russia-Mongolian cooperation /railway/
Abstract

The most important subregion in Asia, Northeast Asia - comprising the
China, Japan, South Korea, North Korea, Mongolia, and the Russian Far
East - is key to Asia’s success in contributing to global prosperity and
stability.

These countries occupy sensitive geo-political positions in both the Cold
war and contemporary eras. The region’s major political challenge is to
maintain peace and security in the Korean peninsula and manage the
territorial disputes among some countries, while pursuing economic
cooperation to promote growth and development, trade and investment
integration, physical connectivity, energy security, and environmental
sustainability.

In recent years, Mongolia has shown signs of economic growth.
Mongolia’s mining wealth is attracting attention beyond its Russian and
Chinese neighbours. Mongolian active participation and role is important
in Northeast Asia.
I. Northeast Asia Cooperation
Northeast Asia
Japan, South Korea, North Korea
 Mainland China, Hong Kong, Taiwan
 Russia, Mongolia

Political Difficulties:

Legacies of World War II
- Japanese atrocities in Pacific Asia

Legacies of Cold War
- Partition of Korea

Territorial dispute
- Japan – China
- Japan - Russia
- Japan – Korea etc
Northeast Asian economy

China, Japan and South Korea are the world’s second, third and 11th
biggest economies in the world. These three NEA countries hold
significant global economic power in the 21st century. Japan followed
outward foreign investment, Korea adopted export-driven growth, and
China launched a going out strategy.

Russia’s plans for developing its Far East are based on the region’s
potential. Russia’s Far East is certainly rich in resources, including metals
and minerals. It is also well placed to be a transit and logistics hub for
shipping Russian oil and gas onward to Asia and Asian-made goods
deeper into Russia.

Mongolia’s copper, gold, coal, molybdenum and others mining deposits
have attracted foreign direct investment. Mongolia’s medium-term
economic prospects are favorable. The mining sector is expected to
continue to be the main engine of growth in 2013 and 2014, with
commercial production at the Oyu Tolgoi copper and gold mine starting in
mid-2013. Growth in GDP: 12.3% in 2012. 17.5% in 2011.
Asia-Pacific Economic
Cooperation
(APEC)
Established in 1989 by the initiative of
Australia
 Its members are 21 Pacific Rim countries
or formally “Member Economies”
 Main factors led to establishment

◦ Growing interdependence of Asia-Pacific economies and the advent of
regional trade blocs in other parts of the world;
◦ Fears that highly industrialized Japan would come to dominate economic
activity in the Asia-Pacific region;
◦ Establish new markets for agricultural products and raw materials beyond
Europe
“Bogor Goals”
(was adopted in 1994 Bogor, Indonesia)
“Creating free and open trade and investment in the Asia-Pacific
by 2010 for industrialized economies and by 2020 for developing
economies”

APEC's Three Pillars
To meet the Bogor Goals, APEC carries out work in three main areas:
1. Trade and Investment Liberalization
2. Business Facilitation
3. Economic and Technical Cooperation


Last summit - Vladivostok, Russia (September 9-10, 2012)
Bali – Indonesia (October 5-7, 2013)
Membership and Enlargement
Current members
Announced interest in membership
China-Japan-South Korea FTA

In December 2011, the three countries held a final joint study meeting on the feasibility
of an FTA among them.

In January 2012, the South Korean and Chinese presidents announced that they
would move towards negotiating a bilateral agreement between the two countries.

In March 2012, the three countries concluded an investment agreement among
themselves which is viewed as a step towards a more comprehensive FTA. In May
2012, China and Korea held their first round of negotiations towards an FTA in
Beijing.

Three sides discussed key issues such as ways to lower tariffs and the scope of future
negotiations based on terms of reference adopted at the first round of talks.

The second round of negotiations for a Free Trade Agreement (FTA) among Japan,
China and the Republic of Korea (ROK) was held in Shanghai, China from July 30 to
August 2. In this round of negotiations, areas such as Trade in Goods, Trade in
Services, Customs Procedures, Competition Policies, amongst others, were
discussed.

The third round of negotiations will be held in Japan in November or December ,
2013.
Economic indicators of Northeast
Asian countries, 2011
Economic integration in NEA
“Greater Tumen Initiative”

Northeast Asian economies have undertaken an infrastructure cooperation
initiative, called the Greater Tumen Initiative (GTI). Established in 1995 under
an earlier name, the GTI is an intergovernmental cooperation mechanism in
Northeast Asia, supported by UNDP, with the current membership of four
countries: the PRC, the Republic of Korea, Mongolia, and the Russian
Federation. The GTI has an institutional framework consisting of two
intergovernmental bodies (the Consultative Commission and the Coordination
Committee), the Tumen Secretariat, and the Council of Eminent Persons for
the Tumen Programme.

The origin of the GTI is in the Tumen River Area Development Programme
(TRADP), a subregional program by UNDP commenced in 1991. Its member
countries included the PRC, the DPRK, the Republic of Korea, Mongolia, and
the Russian Federation, with Japan, Finland, Canada, the World Bank, and
ADB holding observer status. It started as a planned 20-year-long program,
which envisioned a grand design to transform about 3,000 square kilometers
(km) of the Tumen River Economic Zone into an economic center in Northeast
Asia, like Hong Kong and Singapore. The financial needs for the project were
estimated at about $30 billion. However, due to financing difficulties, the
project was adjusted to focus on five sectors: trade and investment, transport
and communications, environment, tourism, and energy.
Since its commencement, the TRADP had experienced
three phases.
 Phase I (1991–1996) attempted to create a joint special
economic zone to be built on land leased from the PRC,
the DPRK, and the Russian Federation.It was
envisaged that significant infrastructure investment
would be required for this internationally managed
cross-border zone.
 Phase II (1997–2000) aimed to operationalize the
agreements signed in Phase I and advance
development within the subregion with a focus on trade,
investment, and environmental management.
 Phase III (2001–2005) had a dual objective of
strengthening the institutional framework of the initiative
and continuing to contribute to the economic
development of the subregion through concrete actions
in the five sectors mentioned above (trade and
investment,
transport
and
communications,
environment, tourism, and energy)


Despite its large potential, however, the GTI has not been able to make
substantial progress in terms of subregional economic and infrastructure
development as well as cooperation. The main obstacle has been political.

First, political commitment to subregional development cooperation has not
been as strong as in Asia’s other subregional groups, as evidenced by a lack
of leaders’ or even ministers’ processes.Sufficient financial resources have
not been put by member countries.

Second, Japan has never been a member of the TRADP or GTI, and the
DPRK withdrew its membership. Japan has not joined the program and/or
initiative because of the unfavorable political relationship with the DPRK.

Third, without tangible economic reforms and opening on the part of the
DPRK—not to mention its GTI membership withdrawal—support for
infrastructure development may not bear sufficient fruit. A significant
improvement of political stance, external relations, and economic regime in
the DPRK would be needed for the GTI to become truly effective.
Approved Greater Tumen Initiative Projects
Energy security in NEA


Energy security has emerged as one of the hottest
agenda in Northeast Asia. There are three major
consuming countries (China, Japan, Korea), and
two major producing countries (Russia, Mongolia).
It has been assumed that cooperation between
NEA countries would be necessary since all have
faced a major challenge to secure their energy
supply. However, in spite of shared sense of
necessity, regional energy cooperation was largely
unsuccessful.
NEA energy security threatening factors

Rapid Growth of Energy Demand
◦ EIA (Energy Information Administration of USA) forecast of annual
growth rate for 1999~2020:
China 4.7%, South Korea 2.8%, World Average 2.2%

Growing Dependency on Oil
◦ Oil becoming the leading primary energy in NE Asia
◦ China (2nd largest consumer), Japan (3rd), South Korea (10th)

Increasing Import from Outside the Region
◦ 76% of NE Asia oil imports from the Middle East in 2011: Japan
(87%), S.Korea (72%), China (46%)

Vulnerability to Environmental Issues
◦ High dependency on coal (64% in China) and oil (S. Korea 51%,
Japan 50%, China 30%)
Main Necessities of NEA Energy
Cooperation


Diversification of energy supply sources from
Middle east Asia
Expand scale of energy industry
- Effective development of resources throughout technology
transfer
- Create and specialize business activity in energy projects

To establish new energy market
- Secure a stable energy demand
- Exploit and export energy resources from East Siberia and the
Far East
- Spill-over effects and expanded energy markets

To build up energy infrastructure
- Set-up energy distribution and infrastructure system in Siberia
Far East and Mongolia
Potential Energy Cooperation
Projects
■ Resource and transportation route development
projects
– Construction of expanded crude oil pipeline in East Siberia
– Development of natural gas.
 Construction of cross-border pipeline networks: <
Russia – Mongolia - China
- Korea > < Russia - China - Korea > and < Russia - DPR Korea - Korea >
– Cross-border power interconnection grids Mainland China-Korea-Russia
– Security of Coal transit rail corridor over China and Russia
– Development of
■ Down-stream cooperation projects
– Joint strategic oil stockpiling
– Sharing refinery/upgrading facilities
Comparison of Mongolian coal deposits
Comparison of Mongolian coal
deposits
Ro,%
2
0.86-2.83
1,8
1.55
1,6
1,4
0.6-2.5
0.6-2
1-1.5
0.6-2.0
0.6-1.7
1,2
0.85-1.26
0.84-1.23
1
0,8
0,6
0.23-0.59
0,4
USA
Canada
Australia
Kutsnets
Pechoryn
Donets
East Mongol
Tavan tolgoi
Mongol-Altai
0
South yakut
0,2
II. Mongolia and Northeast Asian
countries relations
North East Asia
China - Mongolia
Mongolia and China established diplomatic relations in 1949. Over
the last 10 years in particular, their relations have developed rapidly
and made remarkable achievements.
 In 1994, bots sides signed again Treaty on Friendship and
Cooperation between China and Mongolia, laying the political and
legal foundation for the healthy and steady development of their
relations.
 Two countries established Strategic partnership in 2011. In recent
years, Mongolia has been following a friendly relationship and a
policy to develop sustainable mutually beneficial cooperation with
the China. China involves actively in Mongolia’s infrastructure
progress, besides to advocate Mongolia on mining, transit traffic,
agriculture and energy industry sectors. Mongolia is willing to
cooperate with China in mining and infrastructure sectors on long
term. The transit freight rates via Tianjin municipality have not been
resolved yet, which means Mongolia as a landlocked country, this
issue is an utmost important one to be solved in the near future.

Japan-Mongolia

Diplomatic relations between Japan and Mongolia were established
in 1972.

Substantial expansion of the bilateral relationship has taken place
since Mongolia's democratization and transition to market
economies in 1990. Japan has been providing to Mongolia top donor
since Mongolia’s democratization. Mongolia states that Japan is
important developing relations of “Strategic Partnership” from
traditional good friendly third neighbors of Mongolia.

Mongolia and Japan established “Comprehensive partnership” in
1997, the two countries proposed a new objective to step up the
relations of the two countries to level of strategic partnership. This
will further strengthen mutually beneficial relations substituting each
other’s disadvantages, and it will be an important step to cooperate
within the framework of politics, economy, and environment those
are challenging the region of Asia and international communities.
Also, parties confirmed to immediately establish Economic
partnership agreement /EPA/.

Prime minister of Mongolia N.Altankhuyag and Prime minister of
Japan Shinzo Abe held official talks in Tokyo on september 13, 2013
and signed the medium term program for Strategic partnership. This
document determines the activities for the next five years of the
Mongolia, Japan partnership.
South Korea - Mongolia

South Korea is the first nation to establish diplomatic relations with
Mongolia after 1990 Democratization in March, 1990.

Agreement on “Foreign trade, investment, economic, scientific,
technological, cultural cooperation” signed in March, 1991.

High level visits are frequent since establishment of diplomatic
relations.

Agreement on “Energy, natural resources development” based on
mutual benefit and cooperation signed in 1999.

Economic relations growing since 2000.

Agreement on “Good neighborly cooperation partnership” signed
during President Roh Moo-Hyeon’s visit to Mongolia in 2006.

Agreement on “Comprehensive partnership” signed during President
Lee Myung-Bak’s visit to Mongolia in 2011.
North Korea-Mongolia

Mongolia and North Korea established diplomatic relations in 1948.
Mongolia became the second country to recognize North Korea after
the Soviet Union.

North Korea and Mongolia are strengthening economic cooperation as
national interests of the two states overlap in many areas. As Mongolia
is a landlocked country, Ulaanbaatar wants to take advantage of North
Korea’s Rajin Port as a conduit to export Mongolia’s natural resources
to foreign countries since access to the East Sea via use of the port
can significantly reduce transportation costs.

North Korea sends a large number of workers to Mongolia to work at
construction sites. Radio Free Asia (RFA) reported on July 3 that there
were 1,749 North Korean workers dispatched to Mongolia as of April —
the second largest group of foreign laborers in Mongolia (second only
to the Chinese at 5,976 workers), which has a total of 12,064 workers
from 103 countries.

Six-party talks have continued, on and off, for years between South
Korea, North Korea, China, the U.S., Russia and Japan. Mongolia has
maintained good relations with North Korea for decades. So Mongolia
seeks to play peacemaker as North Korea.

The official bilateral talks between the Governments of DPRK and
Japan hold in Ulaanbaatar under the auspices of the President of
Mongolia Ts.Elbegdorj on November, 2012. Mongolia negotiated with
both parties to conduct the meeting in Ulaanbaatar, and deems by
hosting this Foreign Ministerial-level talks between North Korea and
Japan in its own territory would contribute Mongolia’s role to normalize
the sustainable situation in the Northeast Asian region, moreover bring
the relationship between the two countries into the new level of mutual
understanding.

Mongolia plays a unique role in the Korean Peninsula by
continuing close relations with its North Korean neighbor.
Mongolia is perceived by Pyongyang as Northeast Asia’s only nonthreatening nation. Mongolia is also one of the few if not the only
country in the world which has a visa free regime with North Korea.
Initiative on “Ulaanbaatar Talks on
Security of Northeast Asia”
President of Mongolia Ts.Elbegdorj held
a meeting with Secretary General of the
United Nations Mr. Ban Ki-moon during
the 68th General Assembly meeting and
informed him about Mongolia’s initiative
on holding “Ulaanbaatar Talks on
Security in Northeast Asia”. SecretaryGeneral expressed thanks and said UN
will back all activities initiated by
Mongolia for contributing peace and
security in the region.
ROK Northeast Asia peace initiative
“Seoul Process”
South Korean President Park Geun-hye unveiled
her vision to promote peace in Northeast Asia,
inviting North Korea to join in the trust-building
process.
 The “Seoul Process” calls for participating states
to enhance cooperation, first on non-political
issues such as climate change, terrorism
prevention and atomic power
 The initiative is expanded version of Park’s
“Korean Peninsula trust process” that calls for
greater exchanges and cooperation between the
two Koreas.

Russia - Mongolia

Diplomatic relation has been established between two countries in 1921.

Mongolia shares its 3,500-kilometer border with Russia.

In the concepts of Mongolian Foreign policy and National Security
reflected that forging neighborly, close bilateral relations with Russia and
China is priority of Mongolia and should develop multilateral cooperation
with them.

Mongolia-Russia relations can be fitted on following timeline:
◦ 1921-1991 Socialist era relations
◦ 1991-1995 Slow down of relations between two countries
◦ 1995-1999 Stabilization of relation
◦ Since 2000 New beginning for Mongolia-Russia relations
Economic cooperation between Russia
and Mongolia

Cooperation in the field of economic relation between Russian and
Mongolia can be defined through following factors:
◦ Joint ventures (“Erdenet Mining Corporation”, “Mongolrostsvetmet LLC”
, “Ulaanbaatar Railway Joint Venture Company”)
◦ Import of oil products from Russia (Mongolia imports almost all needs of
its oil products from Russia)
◦ Russian participation in Mongolian mining sector (especially in uranium
mining sector and recently in projects such Tavan-Tolgoi etc.)

As of September 2011, trade turnover between two countries was $1.2
million. (trade deficit between two countries reached $ 1 million)

Russian direct investment into Mongolian economy has been increased by
61% in 2011. Trade turnover between two countries is increasing year by
year too. However the trade deficit is still high for Mongolia.

Trade between two countries consists of relatively few amount of products
generally based on mining sector.

In the face of decreasing Russia’s role in Mongolian trade and increased
Chinas role, there arises need to develop trade between our countries in
order to protect our interests .
Russian direct investment in Mongolia
FDI in Mongolia
By countries
Japan, 2%
Australia,
2%
Europe, 2%
USA, 3%
Russia, 6%
UK, 1%
South
Korea, 1%
China, 7%
Canada,
12%

Hong
Kong,
63%
FDI shares in Mongolian economy (total 3.9 billion): mining sector /85%/,
construction /5%/, banking and finance sector /3%/, communication /1%/
Russian export to Mongolia compared to other countries:

Mongolian import amount has been increased by 115% as of September 2011. Import
from Russia increased too, but when its compared to last year, its share in total import
has decreased from 34.3% to 23.7%.
Share in import, 2011
Share in import, 2012
(total import amount 6.6 billion $)
(total import amount 6.74 billion $)
France,
0.94%
France, 1.50%
Australia,
1.20%
Canada,
1.5%
Germany,
4.10%
Others,
Australia,10.70%
1.40%
Canada, 2%
Germany,
3.60%
Others,
12.36%
USA, 8%
Singapore, 1%
Malaysia, 1.00%
Singapore,
1%
Malaysia,
1.00%
Russia, 24.60%
Japan, 7.40%
USA, 8%
Japan, 7.40%
Ukraine, 2.30%
China, 30.60%
South Korea,
5.40%
China,
27.60%
Russia,
27.40%
Ukraine,
1.00%
South Korea,
7.00%
Mongolian export to Russia compared to other countries:

As of September 2011, Mongolian export has grown up by 73% compared to
September 2010. The export amount to Russia has increased, but its share in total
export has decreased from 2.7% to 2.0%.
Share in export, 2011
Share in export, 2012
(total export amount 4.8 billion $)
(total export amount 4.4 billion $)
Others,
3.90%
Others,
3.00%
Russia,
2.00%
Canada,
2.00%
Russia,
1.80%
Canada,
2.70%
China,
92.10%
China,
92.50%
III. Mongolia-Russia cooperation
opportunity in the region
New “Silk Road”

China unveiled China’s new Central Asian policy as a “new Silk
Road” of free trade and exchange. China suggested a free
trade zone that includes China and Eurasian countries, which
have combined population of 3 billion.

Beijing considers relations with Central Asian countries a
foreign-policy priority.

Proposing a new Silk Road is a strategic necessity for China.
As a great power, China has to protect its vital economic
interests and political influence in the region. The new Silk
Road proposal does that.
China and CIS Countries Economic Cooperation

The world’s newest Free Trade Area (FTA) will cover 5 CIS
countries.

Trade between China and 5 CIS countries ballooned from $460
million in 1992 to $46 billion in 2012.
China’s Provincial GDP Growth Rates in
2012

China’s central provinces GDP grew by over 12% in 2012

Going forward, most of China’s economic and industrial growth is expected to be
generated from four cities in Central China: Xining, Yingchuan, Lanzhou, Chengdu
How do you reach the growth markets in
Central China ?
1)
New Western Mongolian Rail line to Jiayuguan
2)
New Northern Rail line connecting to Trans -Mongolian
Rail line to Yinchuan
№1. New Western Mongolian Rail line to Central China
 The shortest rail route from Kyzyl to Central China:
 Reach new industrial cities in Central China:
1107~1475km
Grodekovo
5390 km
Kyzyl
Tsagaan Tolgoi
204km
Zabaikalsk Manzhouli
2774 km
Laoemai, China
1107km
Shiveekhuren-Sekhe
1475km
Jiayuguan, China
1935km
№1. Cut transportation distance
 Cut transportation distance and time by up to 1.4x ~ 2.8x
Rail Distance (km)
6000
2.8x
5000
5390
4000
3000
2000
1935
1.4x
2774
1000
0
Kyzyl - Shiveekhuren Kyzyl Jiayuguan
Zabaikalsk/Manzhouli
Kyzyl Grodekovo/Suifenhe
№2. Northern Rail line Connecting to Trans-Mongolian Rail line
 The shortest rail route from Kyzyl to Yinchuan: 3060 km
Kyzyl
Ovoot
240km
Erdenet
835km
Erenhot
1935km
Yinchuan
3060 km
№3. Trans-Mongolian Highway: 990 KM PAVED ROAD
Altanbulag
Zamyn Vvd
990 km
Route:
Altanbulag – Zamyn Vvd
Speed:
100 km/h
Lanes:
4 Lanes
Classification: Class 1 Asian Highway Network
Central
China
Thank You