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Mongolia: Trade Facilitation and Logistics Development Strategy Report The Asian Development Bank has been supporting efforts to reduce poverty and improve livelihoods in the Central Asia Regional Economic Cooperation (CAREC) countries. A major focus of these efforts is improving the transport and trade sectors to spur economic growth and promote social and political cohesion within the region. Improving the efficiency of the CAREC transport corridors will allow these landlocked countries to take full advantage of being transit countries between the surging and dynamic economies of the East and the West. This report, one of a series of nine reports, highlights the substantial challenges that Mongolia needs to overcome and recommends measures to make its transport and trade Mongolia sectors more efficient and cost-competitive. Trade Facilitation and Logistics Development About the Asian Development Bank Strategy Report ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries substantially reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to two-thirds of the world’s poor: 1.8 billion people who live on less than $2 a day, with 903 million struggling on less than $1.25 a day. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines www.adb.org ISBN 978-971-561-811-3 Publication Stock No. RPT090343 Printed in the Philippines TF_Mongolia_Sept3_changecolor_FA.indd 1 9/28/2009 7:30:43 PM MONGOLIA: Trade Facilitation and Logistics Development Strategy Report Max Ee Khong Kie Paige Lee Hwee Chen Teo Puay Kim Damdinjav Amarsaikhan Dambiiyam Ochirbat © 2009 Asian Development Bank All rights reserved. Published 2009. Printed in the Philippines. ISBN 978-971-561-811-3 Publication Stock No. RPT090343 Cataloging-In-Publication Data Asian Development Bank. Mongolia: trade facilitation and logistics development strategy report. Mandaluyong City, Philippines: Asian Development Bank, 2009. 1. Trade facilitation. 2. Logistics development. 3. Mongolia. I. Asian Development Bank. The views expressed in this report are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, contact: Department of External Relations Fax +63 2 636 2648 [email protected] Contents Abbreviations v Foreword vi Executive Summary viii Introduction and Background 1 Country Profile 4 Assessment of the Transport and Logistics Sectors 17 Major Transport Routes in the Region 17 Road Transport 19 Rail Transport 21 Air Transport 25 Water Transport 25 Logistics Sector 25 Customs and Transport Agreements 27 Key Conclusions 28 Recommendations 30 Mongolia’s Strategic Positioning 30 Demand-Side Proposals 30 Promote Trade and Manufacturing 30 Strengthen Industries 32 Improve Current Transport Services and Introduce New Ones 34 Prioritize the Development of Free Trade and Special Economic Zones 36 Supply-Side Proposals 42 Rail Transport 42 Road Transport 43 Logistics Facilities 44 Policy Measures 45 Other Measures 45 Implementation Plan 46 Stakeholders 46 Public–Private Partnerships 47 Review and Reporting Mechanism 47 Project Financing 48 Conclusion 52 Appendix: Organizations Visited and Officials Interviewed 54 iii List of Tables 1 Summary of Programs and Projects Proposed by the Study to Improve Mongolia’s Transport and Logistics Sectors xi 2 SWOT Analysis Results for Mongolia 5 3 Costs of Sending a TEU over Two Modes of Transport for Mongolian Cashmere Exports 9 4 Cross-Comparison of the Three Free Trade and Special Economic Zones in Mongolia 15 5 Bilateral Trade between Mongolia and the European Union (EU), 1999–2005 (€ millions) 32 6 Proposed Infrastructure Programs and Projects 49 7 Proposed Measures to Improve Trade and Industries 50 List of Figures 1 Proposed Trade Logistics Strategy for Mongolia 3 2 Assessment of Mongolia’s Three Free Trade and Special Economic Zones 16 3 Trans-Asian Railways 17 4 Share to Total of Different Roads in Mongolia 19 5 Freight Carried by Rail in Mongolia, 2005 (million tons) 22 6 Yearly Freight Throughput Carried by Rail in Mongolia (million ton-km) 22 7 Monthly Freight Throughput Carried by Rail in Mongolia, 2006 (million ton-km) 23 8 The Mongolian Vector 24 9 Imports of Timber Products by Mongolia, 2001–2003 33 10 Exports of Timber Products by Mongolia, 2001–2003 33 List of Boxes 1 Ivanhoe Mines Mongolia Inc.’s Activities in the Omnogovi Province 27 2 Proposed Strategic Architecture for Mongolia’s Transport and Logistics Sectors 31 iv Abbreviations ADB Asian Development Bank AH Asian Highway BCP border-crossing point BOT build–operate–transfer (scheme) CAREC Central Asia Regional Economic Cooperation FTZ free trade zone GAMAS Mongolian Customs Automated Data Processing System GDP gross domestic product GSP General System of Preferences HACCP Hazards Analysis and Critical Control Points ICT information and communication technology ICTA InfoComm Technology Agency IFFC International Freight Forwarding Centre IMAR Inner Mongolia Autonomous Region (PRC) IMMI Ivanhoe Mining Mongolia, Inc. KPI key performance indicator MCGA Mongolian Customs General Administration MFFA Mongolian Freight Forwarding Association MFN most favored nation MIAT Mongolian Airlines MIT Ministry of Industry and Trade MMA Mongolian Meat Association MNCCI Mongolian National Chamber of Commerce and Industry MNT Mongolian togrog MRTA Mongolia Road Transport Association MRTT Ministry of Road, Transport, and Tourism MTZ Mongolian Railways PRC People’s Republic of China SEZ special economic zone SSIA State Specialized Inspection Agency SWOT strengths, weaknesses, opportunities, threats (analysis) TIR Transports Internationaux Routiers Note In this report, “$” refers to US dollars. v Foreword The Asian Development Bank (ADB) is pleased to provide this report on the state of the transportation and logistics sectors in Mongolia. It covers key measures needed to make these sectors more efficient and cost-competitive. This volume will be useful for government policy makers, providers and users of transport and logistics services, and other stakeholders. Efficient and cost-competitive transportation and logistics sectors will enable Mongolia not only to spur economic activity and engender social and political cohesion within its borders, but also to take full advantage of its geographical position and serve as a transit corridor between the dynamic and growing economies in the East and West. This report is part of a series of nine that cover the countries in the Central Asia Regional Economic Cooperation (CAREC) area: Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, the People’s Republic of China (specifically its Inner Mongolia and Xinjiang Uyghur autonomous regions), Tajikistan, and Uzbekistan. This series is part ADB’s continuing support of CAREC and the region in an effort to further poverty alleviation and secure a better future for people. Support, provided under the ADB CAREC Program, has been focused on promoting more efficient and effective economic cooperation among CAREC countries in the areas of transport, trade policy, trade facilitation, and energy. The reports highlight the substantial challenges CAREC countries need to overcome. Aside from being landlocked with varied terrain, these countries are challenged by inadequate infrastructure, unsupportive systems and policy environment, and lack of skills and management know- how. From the numerous measures recommended in these reports, a common theme has emerged: the compelling need for the members of CAREC to achieve unity in purpose and action. Across borders, customs procedures need to be harmonized, tariffs rationalized, and a common framework for achieving seamless movement of cargo agreed upon, Clearly, a general atmosphere of cooperation needs to be achieved if the whole region is to reap the full benefits of efficient and competitive transportation and logistics services. ADB hopes that the publication of this report, as well as the eight others in the series, would inspire such spirit of cooperation and unity in the region. The conduct of these trade logistics studies embodies ADB’s new strategy under its Strategy 2020 and its five core areas of operation, two of which are infrastructure and regional cooperation
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