Presented by the MOEF, Republic of Korea

2018/19 KSP Policy Consultation Report Mongolia Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia Government Publications Registration Number 11-1051000-000961-01

2018/19 KSP Policy Consultation Report Mongolia Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 2018/19 KSP Policy Consultation Report

Project Title Development of Smart Aero-City adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia Prepared for The Government of Mongolia In Cooperation with Ministry of Construction and Urban Development (MCUD)

Supported by Ministry of Economy and Finance (MOEF), Republic of Korea Korea Development Institute, KDI Prepared by Dohwa Engineering Co., LTD Young Jin Advisory Group Project Directors Sanghoon Ahn, Executive Director, Center for International Development (CID), KDI ‌Youngsun Koh, Executive Director, ‌Global Knowledge Exchange & Development Center, Former Executive Director, CID, KDI Project Managers Chang Jae Lee, Visiting Senior Fellow, CID, KDI Project Officers Jun Hee Kim, Senior Research Associate, Division of Policy Consultation, CID, KDI Eun Jung Lee, Dohwa Engineeing Joo Hyun Kim, Dohwa Engineering Senior Advisor Seok Dong Kim, Former Chairman of Financial Services Commission Principal Investigator Sung Rae Kang, Dohwa Engineering Authors Chapter 1. Sung Rae Kang, Dohwa Engineering Mun Gyu Lee, Young&Jin Accounting Byeong jin Choi, Young&Jin Accounting Dr. Otgonbaatar, Mongolian Urban Development Research Institute Chapter 2. Kwang Box Park, Dohwa Engineering Ho Kyoung Song, Dohwa Engineering Kwang Young Choi, Dohwa Engineering Chapter 3. Jung Wook Kim, Young&Jin Accounting Ji Yong Jung, Young&Jin Accounting Emile Frémont, M.A.D Urban English Editor Korea Institute of Culture and Arts Translation (KICAT)

Government Publications Registration Number 11-1051000-000961-01 ISBN 979-11-5932-474-1 979-11-5932-438-3 (set) Copyright ⓒ 2019 by Ministry of Economy and Finance, Republic of Korea 2018/19 KSP Policy Consultation Report Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia Preface

Since its launch in 2004, the Knowledge Sharing Program (KSP) has provided a platform for knowledge sharing and mutual learning between Korea and 76 partner countries. It has facilitated the expansion of economic and political cooperation between Korea and the partner countries, contributing to an active policy dialogue for both parties to disseminate their own development experience and gain benefit from the mutual learning. KSP focuses on customized solutions for each partner country’s economic, social, and administrative settings, fostering and strengthening its policymaking capacity and global networks for development cooperation.

The 2018/19 KSP with Mongolia II was conducted by the Korea Development Institute (KDI), Dohwa Engineering and Young Jin Advisory Group to establish a policy research institute in the urban development sector of Paraguay. The project began with the request of the Ministry of Construction and Urban Development (MCUD), Mongolia. The Mongolian government is currently planning to build a new city with multiple functions, including logistics, distribution, industry, entertainment, and housing, in Khushig Valley, an area near the now-completed New Ulaanbaatar International Airport. Through the development of NUBIA Aero-City, we intend to promote different industries, trading, and investments in Mongolia by connecting the airport with surrounding cities.

Based on Korea’s experience, the KSP project in Mongolia (2018/19 KSP with Mongolia II) has analyzed the development conditions of the new airport in Ulaanbaatar, Mongolia, and proposed a plan to promote the NUBIA Aero-City project. The cooperation between experts of Korea’s urban planning and real estate development and officials of Mongolia’s Ministry of Construction and Urban Development has been well accomplished, and it can be assessed that the search for deeper research and policy alternatives has been faithfully carried out. In particular, local government officials, including the MCUD, the Municipality of Ulaanbaatar (MUB), and the Ulaanbaatar Urban Development Corporation (UBDC), have continued to show their active interests and opinions on the KSP project, which allowed specific policy proposals to be drawn. Through the KSP project, a cooperative relationship with the Mongolian government is expected to expand significantly for the future, which can be seen as an achievement that is consistent with the purpose of the KSP project. Through this KSP project, the implementation, management, and development procedures of the Incheon Free Economic Zone were identified and derived possible implications and timing for Mongolia while the major anchor functions needed for the development of NUBIA Aero-City were presented. Policy suggestions were also made on specific methods for the promotion of the project for reviewing areas where public-private joint investment is possible, predicting the real estate demands, and financing plans at each stage. The analysis of Mongolia’s urban development project and institutional conditions has been written in collaboration with Mongolian experts, and it can be assessed that the process of seeking future tasks presented a practical way to help through continuous discussions with Korean researchers.

I extend my profound gratitude to Mr. Kang, Sungrae, the principal investigator, and his research team for their hard work and dedication to the successful completion of the 2018/19 KSP with Mongolia II. We also sincerely appreciate the continuous support and contribution from Mr. Gunbold Baatar, director general of the MCUD, Mongolia. Lastly, we send out special thanks to the Government of Mongolia, including MUB, and all the advisers and consultants for their continued interest and support for the establishment of the policy recommendation for developing NUBIA Aero-city. In return for their dedication to the research, we promise our extended support and cooperation in the future.

Chang-Min You Vice President Dohwa Engineering Co., LTD. Contents

2018/19 KSP with Mongolia·······································································································014 Executive Summary·····················································································································020

Chapter 1 Anaylysis on Development Conditions

Summary·····································································································································025 1. Introduction·····························································································································027 2. Analysis on Development Conditions·····················································································028 2.1. Physical Conditions of the Project Site···········································································028 2.2. Socio-Economic Conditions of Mongolia········································································033 2.3. Institutional Framework of Urban Development in Mongolia······································036 2.4. Urban Development Projects of Mongolia·····································································043 2.5. Comprehensive Analysis··································································································047 3. Korean Experience of Urban Development: IFEZ··································································038 3.1. Outline of IFEZ··················································································································038 3.2. Development Plan············································································································051 4. Policy Recommendations········································································································057 4.1. Legislative Arrangement to Integrate Development and Management······················057 4.2. Dedicated Administrative Body·······················································································058 4.3. Collaborative Institutional Framework···········································································059 References···································································································································061 Appendix······································································································································062

Chapter 2 Review of The Existing Master Plan

Summary·····································································································································073 1. Introduction·····························································································································075 2. Review of The Existing Master Plan························································································077 2.1. Analysis of Geographic Location·····················································································077 2.2. Review of Related Plans···································································································078 2.3. Review of Master Plan Concept·······················································································081 2.4. Review of Land Use Plan··································································································085 2.5. Swot Analysis····················································································································087 3. Analysis on Airport City···········································································································089 3.1. Latest Trend on Airport Area···························································································089 3.2. Definition of Airport City··································································································090 3.3. Case Study of Airport Cities·····························································································091 3.4. Lessons From Case Studies·····························································································094 4. Korea’s Development Experience···························································································095 4.1. Incheon Free Economic Zone (Ifez), Korea·····································································095 4.2. Functions of Three International Cities··········································································096 4.3. Development Features····································································································100 5. Policy Recommendations········································································································104 5.1. Functions of Airport City··································································································105 5.2. Recommendation for Functions of Nubia Aero-City······················································106 5.3. Economic Activity and Living Environment····································································108 5.4. Focus on Synergy Between the Airport And The Existing City······································110 References···································································································································112

Chapter 3 Review of Implementation Method

Summary···································································································································· 115 1. Market Analysis·······················································································································117 1.1. Overview···························································································································117 1.2. Land Market Analysis·······································································································117 1.3. Residential Market Analysis·····························································································118 1.4. Retail Market Analysis······································································································121 1.5. Office Market Analysis·····································································································123 1.6. Site Analysis······················································································································125 2. Legal Environment··················································································································126 2.1. Property Relations···········································································································126 2.2. Legal Structure of Immovable Property Ownership······················································130 3. Case Studies·····························································································································131 3.1. New Yarmag·····················································································································131 3.2. Midann City - Korea·········································································································134 3.3. Songdo International Business District- Korea······························································135 Contents

4. Major Player in Real Estate Market in Mongolia···································································146 4.1. Local Developers··············································································································146 4.2. Local Commercial Bank····································································································138 5. Implementation Plan··············································································································139 5.1. Overview···························································································································139 5.2. Infrastructure Period·······································································································140 5.3. Construction Period·········································································································145 6. Policy Recommendations········································································································149 6.1. Public Project Ownership for Infrastructure Periods·····················································149 6.2. Anchor Projects for Construction Periods······································································149 References···································································································································150 Contents l List of Tables

Chapter 1

Comparative Socio-economic Analysis·····························································033 Main Economic Analysis of Mongolia·······························································034 International Competitiveness··········································································034 Foreign Trade Status – Exports & Imports························································034 Construction Market Analysis of 2016-2019·····················································035 Infrastructure Analysis of Mongolia··································································035 Existing and New International Airport Information·······································036 Review of Relevant Laws····················································································037 Rights and Responsibilities of Government·····················································039 Mongolia’s Free Economic Zones······································································046 Comprehensive Analysis ···················································································047 Development Outline & Plans for Yeongjong···················································049 Implementing Agencies for Each Project·························································054 Analysis of Relevant Laws··················································································055 Comparison of Free Economic Zone Laws························································057 Free Economic Zone Authorities in Korea·························································058

Chapter 2

Review of UB Master Plan 2030 on Free Economic Zone·································079 Land Use Program of NUBIA·············································································086 Analysis of Strengths··························································································087 Analysis of Weaknesses·····················································································087 Analysis of Opportunities··················································································088 Analysis of Threats·····························································································088 Basic Layout of NUBIA·······················································································090 Analysis of Aerotropolis within Incheon Free Economic Zone·························096 Outline of Anchor Facilities in Sondo and Yeongjong ·····································101 Outline of Integrated Resort at Yeongjong Airport City··································102 Songdo’s High-Quality Services·········································································104 Contents l List of Tables

Chapter 3

SWOT Analysis····································································································125 Total Cost – Phase 1, New Yamag Project·························································133 Possible Project Owners for Urban Development············································139 Advantage and Disadvantages for PPP in Infrastructure Stage······················140 Financing Methods in Infrastructure Stage······················································142 Cumulative Lending, Grant, and Technical Assistance Commitments············143 Cumulative Commitments in Mongolia Projects··············································144 Possible Project Owners in Construction Period··············································146 Advantage and Disadvantage of Land Lease···················································146 Schedule for Korean Casino Operator Selection··············································147 Integrated Resorts Developers in Korea···························································148 Contents l List of Figures

Chapter 1 [Figure 1‑1] Location of NUBIA ·····························································································028 [Figure 1‑2] Transport Conditions ·························································································029 [Figure 1‑3] Topographic Condition ·····················································································030 [Figure 1‑4] Features of NUBIA Project Site··········································································031 [Figure 1‑5] Safety Zone·········································································································032 [Figure 1‑6] Land Use of Surrounding Areas········································································032 [Figure 1‑7] Framework of Urban Planning and Development···········································038 [Figure 1‑8] Organizations Under MCUD··············································································040 [Figure 1‑9] Location of KFEZs·······························································································048 [Figure 1‑10] Location Map of IFEZ··························································································049 [Figure 1‑11] Development Plans by Steps·············································································051 [Figure 1‑12] Schedule for each Development Process··························································052 [Figure 1‑13] Main Projects and Implementers of Yeongjong ··············································053 [Figure 1‑14] Organization of IFEZ···························································································056 [Figure 1‑15] Suggestion of FEZ authority organization························································059 [Figure 1-16] Collaborative Governance·················································································059

Chapter 2 Figure 2‑1] Key Considerations for the Review of Master Plan··········································076 [Figure 2-2] Location of NUBIA in relation to the surrounding area···································077 [Figure 2-3] UB Master Plan 2020 on Mongolian Economic Corridor·································081 [Figure 2-4] 5 Functions of the Concept················································································082 [Figure 2-5] Basic Layout of NUBIA Aero-City·······································································084 [Figure 2-6] Existing Land Use Plan·······················································································085 [Figure 2-7] Analysis of the Trend··························································································089 [Figure 2-8] Development Direction······················································································090 [Figure 2-9] Development Outline of 3 Airport Cities···························································091 [Figure 2-10] Main Functions of 3 Chek Lap Kok Airport City················································092 [Figure 2-11] Main Functions of Schiphol Airport City···························································092 [Figure 2-12] Main Functions Brandenburg Airport City························································093 [Figure 2-13] Development Direction of NUBIA Aero-City·····················································094 [Figure 2-14] Main Features of IFEZ························································································095 Contents l List of Figures

[Figure 2-15] Land Use Plan of Sondo International City·······················································096 [Figure 2-16] Land Use Plan of Cheongna International City················································097 [Figure 2-17] Land Use Plan of Yeongjong International City················································097 [Figure 2-18] Land Use of Airport City at YeongJong······························································098 [Figure 2-19] Bird’s-eye view of Paradise City·········································································099 [Figure 2-20] IBC-II Stage 2······································································································099 [Figure 2-21] Expansion of the Songdo Bio Hub····································································100 [Figure 2-22] Outline of Anchor Facilities in Songdo and Yeongjong····································101 [Figure 2-23] Outline of Integrated Resort at Yeongjong Airport City··································103 [Figure 2-24] Songdo’s High-Quality Services·········································································104 [Figure 2-26] Functions of Existing NUBIA Aero-City······························································106 [Figure 2-25] Main Functions of Airport City···········································································106 [Figure 2-27] Proposed Functions for NUBIA Aero-City·························································107 [Figure 2-28] Development Direction of NUBIA Aero-City·····················································109 [Figure 2-29] Concept of Aerotropolis·····················································································110 [Figure 2-30] Development Directions for Aerotropolis·························································111 [Figure 2-31] Scheme of Aerotropolis Surrounding NUBIA Aero-City ··································111

Chapter 3 [Figure 3-1] Sq.M of Residential Supply in Ulaanbaatar Capita of City Population············118 [Figure 3-2] Number of Households in Ulaanbaatar ···························································119 [Figure 3-3] Number of Households by Housing Type 2013-2019······································119 [Figure 3-4] Good‌ Grade Retail Space per 1,000 Capita in Ulaanbaatar and Total Good Grade Retail Space·····························································································121 [Figure 3-5] Historical Supply of Good Grade Office in Ulaanbaatar (Cumulative)············124

2018/19 KSP with Mongolia II

Kwang Box Park (Dohwa Engineering) 2018/19 KSP with Mongolia II

Kwang Box Park (Dohwa Engineering)

The 2018/19 KSP with Mongolia II was successfully completed with a friendly partnership and good cooperation between the two countries. The project offered comprehensive policy consultations tailored to the needs of partner countries encompassing in-depth analysis, policy consultation, and training opportunities.

The 2018/19 KSP with Mongolia II was executed from May to October 2019 and was able 015

to present a direction for practical policies in both developing the NUBIA Aero-City and 2018/19 KSP with Mongolia II promoting project plans through briefings by phases, advisory meetings, and high-level meetings. The Mongolian government agreed that institutional conditions, such as relevant laws and agencies, are required first for the development of new cities in large-scale and free economic zones through attracting private sectors and foreign investment.

The following topics were carefully selected by the Ministry of Construction and Urban Development(MCUD) after consultation with partner institutions.

Sub-topics Researchers Advisory Committee

S u n g R a e K a n g ( D o h w a E n g i n e e r i n g ) Analysis on development Prof. Shin Lee Mun Gyu Lee (Young&Jin Accounting) conditions (University of Seoul) Byeong Jin Choi (Young&Jin Accounting)

Kwang Box Park (Dohwa Engineering) Review of the Existing Master Dr. Jin Kyu Chung Ho Kyoung Song (Dohwa Engineering) Plan (KRIHS) Kwang-young Choi (Dohwa Engineering)

Review of Implementation Jung Wook Kim (Young&Jin Accounting) Won Ho Choi (Lee&Ko) Method Ji Yong Jung (Young&Jin Accounting)

• Senior Advisor: Seok Dong Kim (Former Chairman of the Financial Services Commission) • Project Manager: Dr. Chang Jae Lee (KDI) • Principal Investigator: Sung Rae Kang (Dohwa Engineering) Venue Seoul, Korea Seoul, Korea Seoul, Korea Ulaanbaatar, Mongolia Ulaanbaatar, Mongolia Ulaanbaatar, Mongolia Ulaanbaatar, Mongolia Date June 17, 2019 May. 28, 2019 May. August 1, 2019 August June 24~29, 2019 May. 26 ~ 30, 2019 May. Sept. 16 ~ 19, 2019 August. 5 ~ 9, 2019 August. Workshop Introduction Program Cycle Program Senior Policy Dialogue Interim Evaluation Meeting Final Reporting Workshop and Final Reporting Workshop Evaluation Meeting for Project Plans Evaluation Meeting for Project KSP Policy Seminar and In-depth Study KSP Policy Seminar and Interim Reporting & Policy Practitioners' Interim Reporting & Policy Practitioners' Launching Seminar and High-Level Meeting Launching Seminar and In order to conduct discussions on the establishment and identification of research of research In order to conduct discussions on the establishment and identification The Construction Ministry in Mongolia held a launching seminar on May 28, 2019 to For For further details of the progress, please refer to the following progress by phase until The 2018/19 KSP with Mongolia II was conducted over various stages, which are 2 1 5 3 4 6 7 No. directions and detailed tasks by subject for the project, KSP Policy and In-depth Study were introduce a direction and research outline by subject of the “2018/19 KSP Policy Advisory Project in Mongolia II” and attain the opinions of local officials. The agenda of the launching seminar included the KSP projects of Korea, various KSP projects that have been carried out in Mongolia, and the introduction to “2018/19 KSP Policy Advisory Project in Mongolia who are participating in the project made pledges II.” During this seminar, the researchers to successfully carry out the project, after the consortium and its various experiences were introduced. In addition, the Mongolian officialsand Korean researchersshared their opinions and discussed how to carry out various tasks for the project, including the analysis of development conditions, review of the master plans, estimation of demands, and analysis of stakeholders. the completion of the project. summarized in the following table. in the following summarized 2. Launching Seminar and High-Level Meeting 2. Launching Seminar and High-Level 1. Introduction 016 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia conducted in Ulaanbaatar, Mongolia. Through the launch briefing, the participating team introduced the direction of research and Korea’s exemplary cases to the local authorities in cooperation with the project in Mongolia and discussed the direction of the project. The participating team met with representatives from the local partners of the KSP project, including the Ministry of Construction and Urban Development (MCUD), Municipality of Ulaanbaatar (MUB) and Ulaanbaatar Development Corporation (UBDC), to identify their needs and opinions as local residents and asked for cooperation in carrying out the tasks for the project, including the supply of necessary data. The team also discussed the schedule of local market research companies. At the request of the Ministry of Construction and Urban Development, the team visited Moodun Khan, a private company in the industry, and visited the construction site with the cooperation of officials from the Construction Ministry and the Airport Authority to inspect the progress of the new airport and the outline of the project.

The agenda of the final wrap-up meeting included discussions on future schedules, MOM’s consultation for the confirmation of the task scope, and the method of delivery of requested data and designation of local experts for local support. 017 3. Evaluation Meeting for Project Plans 2018/19 KSP with Mongolia II

On June 17, 2019, an assessment meeting for the project plan was held to collect external experts’ opinions and evaluation on the project plan that had been prepared through the prelaunch briefing sessions and project evaluation. In order to enhance the quality of the research, experts from each area were selected to form Mongolia’s KSP Advisory Evaluation Committee, deliberating on three topics: (1) review of the development conditions, (2) re- evaluation of master plans, and (3) delivery of expert opinions on the methods of the project implementation. The meeting also conducted discussions with the researchers on how to improve the effectiveness of the advisory results. The final direction of this study was thus established, including the phased implementation of the established development plan, measures for efficient project promotion, and improvement of the project promotion system.

4. KSP Policy Seminar and In-depth Study

In order to share the progress of the research and conduct further inspection of the project, local seminar and detailed in-depth study were conducted in Ulaanbaatar, Mongolia, from June 24, 2019 to June 29 of 2019.

Through the local seminar, the researcher team shared the direction and progress of the actitioners’ ‌ Interim Reporting and Policy Pr Workshop With Gunbold Baatar, the Director of Mongolian Construction Bureau, Mongolian policy Prior to an interim evaluation meeting and workshop for policy staff, the evaluation In a wrap-up meeting with the Mongolian Construction Bureau, the final research executives and seven officials from related organizations were invited to Korea for an report was supplemented at an interim evaluation meeting, which was held to gather feedbacks from experts through an advisory committee. On the first topic, the analysis on development conditions, the leading opinion of the interim evaluation meeting was that it was necessary to analyze the legal and instrumental framework in more detail based on Korea’s IFEZ case as requested by Mongolia. On the second topic of the review of existing idea and direction of the topic—the importance of master plan—despite the appropriate the anchor function evaluation of Master Plan, functional division between nearby cities in and introduction of anchor function through national territory and metropolitan planning, the case studies were emphasized in order to enhance the main plan and to improve its legitimacy and concreteness. on Lastly, the third topic, which is delivery of expert opinions on the methods of the project implementation, the need to review the importance of industrial and logistics complexes in consideration of the market demand aside from residential development was suggested. In addition, there was a request for the project plan and the priority presentation of the introduction facilities under the development plan to be implemented from a long-term perspective while deriving final resultsby analyzing the topics. results of the preceding linked 6. 5. Interim Evaluation Meeting 5. Interim Evaluation roduction for the development for the development airports, introduction of the trend in new through the analysis research of a multipurpose explanation city, of differences between airport cities and aerotropolis, and gathering of the feedback from the officials who attended. Furthermore, visits to relevant institutions for cooperation were made to investigate the detailed status of the project in addition to consultations with experts and officials to further investigate the local related information. situation and collect direction and policy suggestions were discussed while the schedule for the invitational workshop, list of participants for the workshop, and relevant Korean institutions to visit decided. were also shared and 018 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia interim meeting and a workshop for policy executives between Monday, August 5, 2019 to Saturday, August 9, 2019.

In the interim reporting session, Mongolian officials and Korean researchers shared the interim results of their research and discussed the details of future projects, including suggestions of practical policies considering Mongolia’s urban development conditions. As for the main contents of the workshop, the development case study of Incheon Free Economic Zone, development plans for a smart-airport city. The Mongolian delegation also experienced examples of urban development, management, and operation through field trips to smart cities such as Songdo International City of Incheon Free Economic Zone, Pangyo, and Suwon, and discussed possible implications for development projects in the surrounding areas of Ulaanbaatar New Airport.

7. ‌Final Reporting Workshop and Senior Policy Dialogue

Between September 16, 2019 and September 19, 2019, the final reporting sessions and 019 high-level policy discussion were held in Ulaanbaatar, Mongolia to share the final results 2018/19 KSP with Mongolia II of the Mongolian KSP research with Mongolian high-ranking policymakers and related 

 agencies. The final briefing session was held on September 17, 2019 for around 30 senior policymakers and policy executives from relevant Mongolian agencies related to the project. In addition, a Korean expert was invited, as a panelist for discussions on practical policy, to gather opinions from cooperating countries on the project and on the possibility of introducing policy proposals. In addition, both local experts and officials expressed satisfaction with the project in general and said that the project would greatly contribute to economic and trade exchanges between the two countries in the future.

The high-level policy discussion was held on September 17, 2019 and was conducted with Minister of Ministry of Construction and Urban Development Munkhbaatar Begzjav, Director Gunbold Baatar, and four other officials. In the final briefing session and high- level policy discussion, the Mongolian government’s continued interest in and support for the KSP were confirmed. Moreover, it was a great opportunity to confirm the Mongolian government’s interest and willingness to implement the policy proposals on the two topics that have been implemented this year. In addition, during the high-level policy discussion, the Mongolian government requested the Korean government to share the successful cases of policy implementation among the economic development examples in and also requested for a continued cooperation between the two countries through the KSP in order for Mongolia learn from Korea’s experience in policymaking. Executive Summary

Sung Rae Kang (Dohwa Engineering) Executive Summary

Sung Rae Kang (Dohwa Engineering)

The government of Mongolia (GOM) began the construction of the New Ulaanbaatar International Airport (NUBIA) in 2013 to maximize its potential as a geopolitical hub connected to China and Russia and to meet the increasing air passengers demand as well. In addition to the construction of the new airport, NUBIA Aero-City, a new city with complex functions, such as logistics, manufacturing, tourism, commerce, and business, is expected to be built next to the airport, and it will play an important role as an international 021

Free Economic Zone (FEZ), attracting foreign investments. Therefore, the GOM has Executive Summary already established the development plan for NUBIA Aero City and is looking for feasible implementation methods to accelerate the development; in this sense, the GOM has requested policy recommendations for urban development and management to the Korean government in order to utilize rich experiences of urban developments in Korea.

The 2018/19 Knowledge Sharing Program-II (KSP-II) with Mongolia is to review the existing NUBIA Aero-City Master Plan, which is established by the GOM, and enhance its urban development and management capabilities. As a result, the main objective lies in suggesting implementation directions for the construction of a new city around NUBIA that will be sustainable and competitive. To efficiently achieve the purpose of this KSP project, the research was conducted by setting the three subtopics within the main topic:

1. Analysis of the development conditions;

2. Review of the existing Master Plan; and

3. Review of implementation methods.

Firstly, in Chapter 1, the overall development conditions of NUBIA Aero-City, such as the location of the project site, socioeconomic conditions of Mongolia, the institutional In particular, the GOM agreed that the development of large-scale FEZs by attracting regarding Firstly, to applicable laws related to FEZs, it is recommended to integrate a In Chapter 2, the existing NUBIA Aero City master plan, which includes the development frameworks frameworks of urban development, and current urban development status were analyzed. The analysis showed that the project site had favorable conditions for urban development in terms of regional accessibility and However, topography. in terms of the institutional conditions for urban development, the application of various urban development methods is not activated, and it is mainly limited to the redevelopment of ger areas or small-scale developments for affordable housings for lower-income groups. As for the large-scale lacks of experience. the city Aero-City, projects such as NUBIA private sectors and foreign investments requires the improvement of institutional frameworks such as relevant laws and institutions. In this regard, the following policy analyzing the institutional conditions in the comparing and proposals were suggested by development of Korea’s FEZs and the development cases of Incheon Free Economic Zone (IFEZ). dualized legal system of urban development and FEZ management into a FEZ law including foreign and sectors private various provide will turn, in This, management. and development investors with the consistent and prompt administration of FEZs development. it Secondly, seems necessary to establish a dedicated administrative body for a FEZ because FEZs apply special measures such as tax exemptions for attracting foreign investors and can be located in several administrative districts. The role of the organization would consist of three functions: planning & development, operation & management and investment promotion. that are in advisable to establish clear roles between related government agencies it is Lastly, charge of planning & major policy, infrastructures such as airports, highways and railways, and implementation and management of individual FEZs. Furthermore, the establishment of cooperative governance between the related government agencies is proposed by setting up a FEZ committee whose role is coordinating various interests from the agencies. concept and land use plan, was reviewed followed by the review of the concept of Airport City and the development direction as an airport complex city that can directly connect and a synergic effect from the new airport, domestic with the airport. In order to draw overseas development cases were analyzed. through Finally, the review of development cases of IFEZ in Korea, we introduced possible functions to promote foreign investment and suitable development conditions to create an environment suited for foreign settlements, which is necessary for developing NUBIA Aero City as a FEZ near an international airport. In addition, the linkage between the airport city and the existing city was also reviewed. The 022 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia policy proposals presented in this chapter are as follows.

Firstly, it is necessary to reorganize the various functions presented in the Master Plan, focusing on the development concept as an airport city and anchor functions in line with its locational advantage; and the suggested functions are MICE and aviation industries including air logistics and MRO facilities, exhibition and convention. The tourism and leisure industry, that includes businesses, hotels and shopping facilities, is proposed as the main function as well. Secondly, in order to promote urban development, anchor facilities and population-inflow facilities such as complex resorts should be attracted first by means of incentives, and this will induce ripple effects in related industries and subsequent projects. In addition, to attract foreign investment, it is necessary to create a “competitive,” “attractive,” and “habitable” urban environment by providing educational and smart services for foreign companies and workers. Lastly, while developing NUBIA Aero City as an airport city, it is advisable to develop the nearby cities located within a 20 to 30 km radius as an industrial cluster or housing complex in order to form an aerotropolis. Realizing the concept of an aerotropolis would be an opportunity to reorganize the overall spatial structure of the city whose center is overcrowded. 023 Executive Summary

In Chapter 3, NUBIA Aero-City’s implementation methods were reviewed through the analysis of demand on major facilities, relevant legal analysis, and case studies of urban development projects in Korea and Mongolia. Firstly, in the case of infrastructure, public-led projects are common due to the long period of development and non-profitability, but Public- Private Partnership (PPP) method can be used for some facilities, such as roads, railways, sewage treatment plants, and schools. Financing at the infrastructure level can be divided into the government budget, bond issuance, and official development assistance (ODA). In the case of ODA, it will be efficient to utilize funds in the sectors such as environment and energy in which related organizations have been currently emphasizing.

In the construction phase, the project is mainly promoted by private sectors, but the government is encouraged to lease the lands in order to effectively respond to the private sector’s attraction of major anchor facilities and in preparation for future expansion. Lastly, based on the analysis of stakeholders, such as development agencies and financial institutions in Mongolia, it seems that linking the project with the green development sector, which has developed along with the recent economic recovery, will be preferred. 01 Chapter

Analysis on Development Conditions

Sung Rae Kang (Dohwa Engineering) Mun Gyu Lee (Young&Jin Accounting) Byeong Jin Choi (Young&Jin Accounting)

Keywords New Ulaanbaatar International Airport (Nubia), New Town, Free Economic Zone(Fez), Public-Private Partnership, Cooperative Governance Analysis on Development Conditions

Sung Rae Kang (Dohwa Engineering) Mun Gyu Lee (Young&Jin Accounting) Byeong Jin Choi (Young&Jin Accounting) Dr. Otgonbaatar (Mongolian Urban Development Research Institute)

Summary

This chapter analyzes the development conditions for NUBIA Aero City to develop the baseline data that will be used to suggest effective and practical implementation methods. Socioeconomic status of Mongolia shows a growth rate of 17.3% in 2011, which collapsed to 1.2% in 2016 and returned to 6.2% in 2018, which implies an economic recovery. Foreign 025 trades in Mongolia has had a trade surplus since 2014, and due to its geographical influence, Chapter it tends to be highly dependent on neighboring countries such as China and Russia. Mongolia 01

intends to strengthen its national competitiveness by improving its functions as a key node Analysis on Development Conditions for inland transportation by utilizing its geographical location; in fact, there is a large-scale infrastructure project such as the construction of an expressway that connects to Russia and China through the New Ulaanbaatar International Airport (NUBIA). In particular, Mongolia’s only international airport, Chinggis Khaan International Airport is unable to meet the current demands due to its geographical limitations that result in the same direction for the aircrafts’ landing and take-off. In order to address this issue, NUBIA is under construction in Khushig Valley area, which is about 53 km away from Ulaanbaatar City, to accommodate an increasing number of air passengers.

Along with the construction of the new airport, the government of Mongolia (GOM) is planning to develop NUBIA Aero City that would facilitate logistics, industry, tourism, and commercial land-uses to increase the ripple effect of the new airport construction and attract foreign investments. In this regard, the overall development conditions of NUBIA Aero City such as the location of the project site, socioeconomic conditions, the institutional frameworks of urban development, and current urban development status were analyzed. The results show that the project site has favorable conditions for urban development in terms of regional accessibility and topography. However, in terms of the institutional conditions of urban development, the application of various urban development methods Firstly, Korea’s Firstly, Free Economic Zone Act is a special law that covers designation, since Lastly, FEZ involves participation of diverse ministries and local autonomy is not yet activated, and it is mainly limited to the redevelopment of Ger areas or small- scale developments for affordable housing for lower-income groups. As for the large-scale projects such as NUBIA Aero there City, is definitely a lack ofexperience. In particular, the GOM agreed that the development of large-scale FEZs by attracting private sectors and foreign investments requires the improvement of institutional frameworks such as passing relevant laws and institutions. In this regard, the following policy proposals were suggested FEZs Korea’s of development for the conditions institutional the analyzing and comparing by cases of Incheon Free Economic Zone. and the development development, and management of FEZs appointing the Ministry of Trade, Industry and Energy as a mandated On authority. the other hand, Mongolia currently has a legal system that is dualized by the Free Economic Zone Act for designation and management of FEZs and the Urban Development Act for urban planning and implementation. Therefore, it is recommended to integrate a dualized legal system of urban development and FEZ management into a FEZ law that includes development and management and that will provide various private sectors and foreign investors with a consistent and prompt administration of FEZs development. it Secondly, is suggested to establish a separate bodies. In the roles among the existing administrative than share rather body administrative Korea, five of the seven economic zones are located across multiple administrative districts, and there is an administrative agency dedicated to the development, management and investment attraction of each FEZ. This dedicated Free agency, Economic Zone Authority, is in operation under the metropolitan council. Although it is still under debate whether to designate the FEZ Authority as a special self-government that is independent of the upper- level metropolitan government, it is essential to establish a dedicated administrative agency for the development, management, and investment attractions. The sectors that should be included in the dedicated administrative body for NUBIA Aero-City are: Planning & Coordination Division, Investment & Assistance Division, and Development & Management Division. bodies, it is necessary to establish a government agency that oversees the development and management of FEZs and coordinates the opinions of each This agency. organization shall act as a coordinator of policies and systems on FEZs, administrative service support and governments as well as regional governments. As seen in the administrative relevant central experience of Korea, the institutional basis for establishing cooperative governance of each relevant organization is considered as one of the most important factors for successful FEZs developments. 026 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 1. Introduction

The government of Mongolia (GOM) has been promoting the construction of New Ulaanbaatar International Airport (NUBIA) since 2013 and is expecting to begin its operation at the start of 2020. To support this development, infrastructure facilities required for the operation of the NUBIA, such as highway connecting the NUBIA with the center of Ulaanbaatar City, is currently being developed. Along with the construction of the new airport, the GOM is planning to develop NUBIA Aero City around the new airport that would accommodate logistics, industry, tourism and commercial land-uses to increase the ripple effect of new airport construction. The development plan for NUBIA Aero City has been already included in the Ulaanbaatar City Master Plan, and the new city is supposed to be designated as Free Economic Zone (FEZ) to attract foreign investments.

In this regard, the GOM has been looking for effective ways to promote the development, and as Korea has had a vast scope of experience in this field, the GOM has requested for policy recommendations for its planned development. Through this Knowledge Sharing Program (KSP), the development conditions and the existing master plan will be reviewed, 027 Chapter and implementation methods will be suggested to review the practicability of the new airport city and to strengthen the capacity of urban development and management of 01 related authorities including the Ministry of Construction and Urban Development (MCUD). Analysis on Development Conditions

This chapter will analyze the overall development conditions of NUBIA Aero City, such as the location of the project site, socioeconomic conditions of Mongolia, the institutional frameworks of urban development and current urban development status. In particular, the GOM agreed that the development of large-scale FEZs by attracting private sectors and foreign investments requires the improvement of institutional frameworks such as passing relevant laws and organizing institutions. In this regard, this chapter will also analyze the institutional conditions and the development cases of FEZs in Korea to draw policy recommendations for improving the development conditions. Apart from the above, the environmental impact analysis on topography, soil, and ecology resulting from the development is suggested to proceed as a follow-on task at the stage of feasibility study. TUUL RIVER Planning area Soum center Satellite cities Satellite towns TERELJ VALLEY LEGEND: valley Nalaikh Khonkhor Gachuurt valley SOUM SERGELEN SERGELEN Maidar Sergelen BOGDKHAN MOUNTAIN Zuunmod NUBIA ULZIIT VALLEY velopment conditions velopment BIOKOMBINAT Jargalant valley Rashaant valley EMEELT AMGALAN SOUM ALTANBULAG ALTANBULAG ARGALANT ARGALANT SOUM ALTANBULAG Analysis on de Analysis NUBIA Aero City is located in the territory of Sergelen soum, which is neighboring The project site, NUBIA Aero is City, to be developed in connection with two satellite 2.1. Physical Conditions of the Project Site of the Project Conditions 2.1. Physical (1) Location

with with Altanbulag and Erdene soum of Tuv province. This location is 53 km away from the Airport. Khan International and 32.2 km south of existing Chinggis Ulaanbaatar City center and and Maidar are located 10 km Zuunmod and Maidar. Zuunmod cities in close proximity: 22 km away from the NUBIA Aero These respectively. City, cities will become satellite cities to decentralize the population of Ulaanbaatar City while further developing tourism and of the new airport. economic sectors through the development Master Plan of New City –NUBIA, Municipality of Ulaanbaatar (2018). Master Plan of New Source: [Figure 1‑1] Location of NUBIA [Figure 2. 028 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia (2) Transport Accessibility

The current status of transport accessibility can be explained in two ways: road and railway. For the road network, there is only one road (Zuunmod-Mandalgovi Road) that connects Ulaanbaatar to the project site. Railway does not provide any access to the site but goes farther out to Bagakhangai (in the east-western direction).

However, this connection will be improved through the construction of the new AH3 Highway and the extension of the current railway network. Within Mongolia, AH3 Highway is comprised of three parts that make up for 1,000 km road, and NUBIA will act as the center in the Russia-Mongolia-China connection: the 310-km road to Ulaanbaatar, 375-km road to Khushig Valley, and 690-km road to Zmiin Uud from Altanbulag, the southern part of Mongolia, closer to China.

[Figure 1‑2] Transport Conditions

029 Chapter 01 Analysis on Development Conditions

LEGEND

Boundary Exsiting road connecting cities (9.6km) Ulaannbaatar-NUBIA Road

Rivers and streams Exisiting earth road (36.4km) Railway (Existing)

Bood khan railway /planned/ AH-3 State road Railway (Planned)

Source: Master Plan of New City–NUBIA, Municipality of Ulaanbaatar (2018). Elevation Slope The site visit was made in May 2019 during the Launching Seminar and Pilot to Study, (4) Site Visit and Analysis (3) Topographic and Geographic Conditions and Geographic (3) Topographic Khushig Valley is located at the valley of hills belonging to the southwest of Khentii Overall, the project site has a slope of 5.8 degrees or lower, which shows that it is in the In In addition, the existing railway that runs through Ulaanbaatar will be extended with examine the conditions and operation status. Its wide, open land is suitable for setting up for setting up land is suitable Its wide, open status. operation conditions and examine the logistics and industrial complex, and the new airport construction is almost completed. A mountainous area. The highest mountain is Takhilt Mountain at the elevation of 1,744 m above the sea level followed by Ikh baraat Mountain (1,702 m), Bukhug Hill (1,419 m)— which coexist with the Takhilt Mountain—Bayasgalant Mountain (1,466 m), Tarvaga Mountain (1,529 m), Ikh Oortsog Mountain (1,588 m), and Baga Oortsog Mountain (1,635 m) sides. are elevated on the southwest and southern most suitable condition for new developments to take place while taking a full advantage of conditions. its natural double-tracks double-tracks from Bagakhangai Station to Mandal Station with an increased capacity that freights and and national for both international and reliable transportation allow faster passengers. This extended network railway will pass near the satellite cities through NUBIA, and result in a transportation enhance the efficiency of freight which will undoubtedly on the Mongolian logistics industry. positive influence Master Plan of New City –NUBIA, Municipality of Ulaanbaatar (2018). Master Plan of New Source: [Figure 1‑3] Topographic Condition 1‑3] Topographic [Figure 030 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia new connecting highway is soon to be in operation while the New Ulaanbaatar International Airport itself is expected to operate in 2020 at the earliest.

The main physical characteristic of the site is that it is a vacant land with flat topography, and there are no obstacles that hinder the development process. Also, the easily accessible and elevated plain as well as the absence of mountains in the take-off and landing area implies that it can address the same direction of take-off and landing issue that the existing Chinggis Khan Airport has. Furthermore, the extensively wide land gives sufficient space for setting up logistics and industrial complex under FEZ.

When the construction is completed, it is expected to hold 3,000,000 passengers per year, which is 3 times more than the existing airport, and will be comprised of a 3.6-km runway with six gates.

[Figure 1‑4] Features of NUBIA Project Site

Control Center Construction of NUBIA

031 Chapter 01 Analysis on Development Conditions

East-southern side of Project Site Northern side of Project Site

Source: Author’s own.

Area for Urban Planning: Planning Limiting Area: ban Planning Prohibiting Area: Strictly Strictly Area: Prohibiting Planning ban The site is located along the Safety along the Safety The site is located prohibited due to the requirements prohibited due to the requirements for aerodrome (for the safe flight of aircrafts). Urban Planning activities will be of organized in line with the zoning Master Plan; and the ratio of building coverage and floor will be strictly complied. Reserved for new development and land allocation until 2038.  ‌Ur ‌Urban ‌Supporting Zones A and B as well as the Obstacle Limitation Zone. For the regulation under the Safety Zones A and B, the is buildings residential of construction not allowed in the special protection zone or within the 3-km radius of the zone. Also, there is an altitude limitation within within limitation altitude an is there Also, m, excluding 45 zone, limitation obstacle the civil aviation facilities. 1. 1.  2. 3.

29.5 6,470 3,204 14.5 12,31921,993 56 100 w City–NUBIA, Municipality of Ulaanbaatar w City–NUBIA, Municipality of Ulaanbaatar limiting zone Name of zone Land (ha) Ratio (%) Urban planning Urban planning Urban planning supporting zone prohibiting zone ‑5] Safety Zone Safety zone – A near Aerodrome Safety zone – B near Aerodrome Obstacle limitation Zone Boundary of the state specially designated area 1 (2018). (2018). ‌ ‌ Master Plan of Ne Master Plan of Ne TOTAL (Urban planning zone) TOTAL (5) Analysis on Development Regulation on Development (5) Analysis those project site are highlighted in the identified and that were Main regulations 1 2 3 No. Legend regarding Safety Zone and Land Use of Surrounding Areas. Use of Surrounding Safety Zone and Land regarding Source: Source: [Figure [Figure [Figure 1‑6] Land Use of Surrounding Areas 1‑6] Land Use of Surrounding [Figure 032 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 2.2. Socio-economic conditions of Mongolia

In order to review the development conditions, the current general conditions as well as the market conditions must be analyzed through the identification of main indicators that would help to analyze and compare the trends of Mongolia and Korea.

Comparative Socio-economic Analysis

Category Mongolia Republic of Korea

Area: 1,567,000 km2 Area: 100,363 km2 - majority‌ of the land (80%) is used for - About‌ 65% of the land is covered by Geography & farming, followed by mountains (10%), mountains, followed by arable land Population arable land (1%), and others (9%). (19%), farmland (2%), and others (14%). Population: 3,170,000 Population: 51,420,000 Urbanization Rate: 68.4% Urbanization Rate: 81.5%

Dry microthermal climate Mid-latitude temperature climate; four Climate Average temperature: 20°C from distinct seasons November to March

Capital city: Ulaanbaatar Capital city: Seoul 21 Aimags (Democratic) 1 Metropolitan City, 6 Megalopolis, 8 Provinces, 033 2 Special Province/City Chapter Administrative District 01 Analysis on Development Conditions

GDP $11.1 Billion (2017) $165.6 Billion (2018)

GDP Per capita $3,489 (2017) $32,046 (2018)

Growth Rate 5.1% (2017) 2.66% (2018)

Unemployment Rate 7.3% (2017) 3.8% (2018)

Source: National Statistics Office of Mongolia, Ministry of Foreign Affairs, National Credit Evaluation Report, K-EXIM Bank (2018).

Mongolia’s economic growth rate reached 17.3% in 2011 but fell to 1.2% in 2016 due to the economic downturn. The economy grew 5.1% and 6.2% in 2017 and 2018 respectively, with the recovery of its economy underway.

The Asian Development Bank (ADB) expects the Mongolian economy to grow by 6.7% in 2019 and 6.3% in 2020 due to the increase in exports and the strengthening of the country’s financial capacity and the IMF system. Mongolia’s GDP has been steadily declining for four years from 2013 to 2017, but it has been growing since 2017, reaching about $ 11.1 billion in 2017. 7.3 1.41 2016 3,489 27.41 10.53 ~2017 Japan : 8.4% Russia : 28% Korea : 4.6% Korea USA : 4.8% USA 10 2015 11.1 11.1 8.27 ~2016 -4.17 3,572 24.62 2,148 2,440 Imports by Country Imports by 98 104 102 2014 2.4 1.2 5.1 ~2015 11.7 China : 32.6% 22.71 1,971 107 2013 Russia : 1.1% ~2014 7.9 Germany : 0.2% Germany UK : 10.6% 2012 ~2013 7.9 7.9 7.5 Exports by Country Exports by China : 84.9% 2011 ~2012 8.2 4.2 2.01 0.23 0.08 19 12.3 11.6 4,282 4,288 4,081 3,839 62 43 99 96 93 15.5 2010 ~2011 49.1 33.5 17.3 10.2 14 11.9 11 1.9 1.1 6.4 10.4 12.2 12.5 12.2 2.45 4.12 2.25 1.65 1.32 1.29 3.01 8.7 9.84 13.65 15.05 16.42 4.47 2011 2012 2013 2014 2015 2016 2017 1,265 1,359 1,526 1,818 11.41 11.12 10.62 11.01 8.46 46.7 117 37.9 2009 5.3 ~2010 57.7 52.3 -20.8 42.7 Export Balance of trade 63.5 -23.5 43.8 67.3 Category Import Foreign Trade within 7 years Trade Foreign FDI (Bill. $) GDP (Bill. $) -17.80 Ranking Growth Rate(%) 48.1 Inflation Rate (%) Inflation Rate GDP per capita ($) 3,702 2011 2012 2013 2014 2015 2016 2017 International 65.9 Scale of Trade (Bill. $) Scale of Trade (2) Foreign Trade Status Trade (2) Foreign total exports state’s the and since 2014, surplus recorded a trade trade foreign Mongolia’s Looking at international Mongolia’s competitiveness, it ranked 93rd out of 144 countries (1) Competitiveness Competitiveness Unemployment Rate (%)Unemployment 7.7 Exchange Rate (MNT / $) 0 Foreign Exchange (Bill. $) Exchange Foreign 80 70 60 50 40 30 20 10 Gross Foreign Debts (Bill. $) Debts Gross Foreign in 2017 reached a record high. Main countries that trade with Mongolia are China and high dependency on neighboring countries. Russia, which shows Mongolia’s in 2012, which shows that its competitiveness has improved by 21 ranks compared to just 3 in the recent years. change years ago. However, there was no dramatic World Bank (2018), IMF (2018), National Statistics Office of Mongolia. World Source:

Foreign Trade Status – Exports & Imports Trade Foreign 1‑4> International Competitiveness Main Economic Analysis of Mongolia Analysis 1‑2> Main Economic

The Mongolia construction market, which recorded a negative growth rate for the period between 2015 and 2017, is expected to grow at an annual rate of 6% until 2027.

Construction Market Analysis of 2016-2019

Category 2016 2017 2018 2019 Remarks

Market Size (Bill. $) 4 4 5 5 -

Share of GDP 3.9 3.4 3.5 3.5 -

Growth Rate -6.3 % -0.7 % 7.8 % 8.7 % -

Source: Business Monitor International Report, Fitch Solutions Group (1Q, 2018).

(4) Infrastructure

Only about 40% of Ulaanbaatar population lives in buildings with proper infrastructure while 60% of the population l in non-infrastructure Gers. 035 Chapter

Infrastructure Analysis of Mongolia

Category Status 01

The city center is supplied with the district heating through three power plants, but Analysis on Development Conditions Heating heating is only accessible by installing individual boiler or small plant in the outskirts area.

The roads in Ulaanbaatar are 629.9 km in total, with 132.3 km of main roads, 139.8 km Road of auxiliary roads, and 357.8 km of local roads. The average speed of traffic on the road is 20 to 30 km/h, and the average commute time is about 30 minutes.

About 50% of the city's population is supplied with water through the central water pipeline network, and other areas are supplied with water through kiosks and mobile Water water vehicles. Only 38.6% of the restrooms are connected to the sewage treatment line while the rest are collected or discharged.

Thermal Power Plant 2, 3, and 4, and 14,110 kw substations supply the electricity, and Electricity there is a plan to build Thermal Power Plant 5 in the near future. & Communication Currently, telecommunication is provided by 32 Automatic Telephone Stations.

About 27.7% of all Mongolian schools and 31.4% of kindergartens are located in Ulaanbaatar City while 70% of them are concentrated in Sukhbaatar, Bayangol, and Schools Bayanzurkh. Also, 69.8% of pre-school children reside in Ulaanbaatar, and the demand for educational facilities, which is concentrated in urban area, exceeds the supply.

Source: Author’s own. - NUBIA 3,000,000 (expected) 2012 (under construction), Operation Date to be confirmed Date to be Operation 3,600 m (1st stage) - to be expanded 1957 13,178 (2014) 3,100 m x 60 m, 1,019,102 (2014) 2,000 m x 40 m (2) Chinggis Khaan Intl. Airport 15 km from the center of Ulaanbaatar15 km from the center of 53 km from the center of Ulaanbaatar Location Category departure Passengers Annual arrival & Lengths of airstrip Year Established in Established Year Mongolia’s main Mongolia’s legislation on urban development is law on Urban Development, and it 2.3. Institutional Framework of Urban Development in Mongolia of Urban Development 2.3. Institutional Framework Planning and Development to Urban 2.3.1. Laws related (5) Airport requiresinternational airport in Mongolia, Airport , the only International Chinggis Khan was enacted to ensure the consistency with urban planning system in urban development and to define the relationship and roles between government and private operators. Other legislations and laws include laws on land and development by sector such as water the table below. resources, energy and housing. The main contents of each law are shown in all landing and take-off in one direction due to its geographical constraints. As a result, the number of flight is so limited that it is difficult respondto theto rapidly increasingnumber of air passengers. A new airport is being constructed in the Khushig Valley area, located 53 km from downtown Ulaanbaatar, and through this airport, it is expected that around three will visit per year through six gates. million passengers Master Plan of New City –NUBIA, Municipality of Ulaanbaatar (2018). City –NUBIA, Municipality Master Plan of New Source:

Existing and New International Airport Information International Airport 1‑7> Existing and New Review of Relevant Laws

Relevant laws of urban № Main Contents development

• ‌To regulate relations between the state, an economic entity, an organization and a citizen in order to create an appropriate structure for population development, resettlement, and a rela- 1 Law on Urban Development tively independent zone of regional development, as well as for the construction of cities and villages in accordance with urban planning

• ‌To regulate land use as private property and use for other pur- 2 Law on Land poses by citizens, business entities and organizations and other related issues

Law on Allocation of Land to • ‌To regulate relations regarding the provision of land to citizens 3 Mongolian Citizens of Mongolia for ownership and related issues

• ‌To regulate relations between the Government, citizens, business entities and other organizations in order to ensure the right to live in a healthy and safe environment Law on Environmental 4 • ‌To harmonize socio - economic development with the ecological Protection balance, protect the environment, use its resources correctly, and restore natural resources in interests of present and future generations

• ‌To regulate relations regarding the protection, proper use, and 037 5 Law on Water restoration of water resources and their basins Chapter

• ‌To determine status, functions and systems of the Law on the legal Status of Urban 6 administrative-territorial units as well as of coordination 01 Area between urban and rural authorities, entities, and residents Analysis on Development Conditions

• ‌To regulate relations in order to provide clean water for settle- Law on urban water supply and ments with relevant regulatory requirements and the owner- 7 sewerage utilization ship status of engineering facilities as a private property and for other purposes

• ‌To regulate relations on energy production, transmission, sup- 8 Law on Energy ply, usage, as well as construction of energy facilities

• ‌T o determine the power and legal status of public authorities in 9 Law on Housing the field of construction, financing to development of the hous- ing project, and the construction work of residential buildings

• T‌ o regulate relations associated with conducting construction work, producing building materials, completing construction 10 Law on Construction and installation works, performing technical supervision, and getting into operation

• ‌Implementation and monitoring of geodetic and cartographic 11 Law on Geodetic Cartography works and their coordination

Law on Cadastral Mapping and • All‌ types of cadastral mapping and regulation of relations 12 Land Cadastre relating to the land cadastre

Source: Local Expert’s research (Mongolian Urban Development Research Institute). Civil Law Law on Land the Capital City Local Orcinance Law on Housing Constitution of Mongolia Construction norms and rules Law on Regional Development of Law on Regional Development Law on Planning Law on Urban development & Land Utilization & Law on Urban Planning State Policy Regional Policy MPACC of MUB MPACC is responsible for (a) formulating policies on urban development, Ministry of Construction and Urban Development is responsible for (a) preparing on Land Utilization on Land Utilization City Land Utilication Plan and General Plan Plan and General PADI PADI is an agency under the MPACC and is responsible for formulating the city’s master plan, associated detailed plans, and building and infrastructure design design master plan, associated detailed plans, and building and infrastructure according to the economic and social objectives of the city. ‌U  land land administration, and infrastructure; (b) preparing master plans and detailed development plans; (c) developing the urban planning database; and (d) monitoring development and construction activities. The agency has a division that manages the information system (GIS) and urban database. geographic The ‌ the legal framework for urban planning, including laws on urban development, land management, and construction; and (b) reviewing and approving the urban plans of Ulaanbaatar City before submission to the Parliament. The ‌ (iii) (iii) (ii) 2.3.2. Government Bodies & Organization Related to Urban Planning Related to & Organization Bodies 2.3.2. Government in urban planning are: The main government bodies involved (i) Mongolia’s Mongolia’s urban planning framework at the national level involves a state policy and land utilization. The regional policy on land utilization and city land utilization plan and plan and land utilization utilization and city policy on land The regional land utilization. general plan at the regional scale are on the regional government level. The relationship below. the related laws is shown in the figure of each plan and between the hierarchy Local Expert’s research (Mongolian Urban Development Research Institute). Research Urban Development (Mongolian research Local Expert’s Source: [Figure 1‑ 7] Framework of Urban Planning and Development of Urban Planning and 1‑ 7] Framework [Figure 038 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia (iv) ‌Several other municipal agencies such as Agency for Economic Development are also involved in the planning process and implementation. Sector agencies are responsible for developing their own sector master plans, such as water and wastewater master plan, transport master plan, and energy master plan.

Currently, the implementation and enforcement of urban master and local plans seem to be ineffective due to (i) segmentation of urban planning functions in MUB; (ii) lack of integrated protocols, approval mechanisms, and information sharing among the main players directly involved in urban plan formulation and implementation; and (iii) weak links among urban planning, land management processes, and legal framework.

2.3.3. Rights and Responsibilities for Each Government Agency

The organizations involved in urban development and their roles in accordance with the Law on Urban Development are as shown in the table below.

039

Rights and Responsibilities of Government Chapter

№ Government Agencies Rights and responsibilities

- to determine the state policy in the field of urban construction 01

- to decide on the establishment, dismantling, and relocation of a new city Analysis on Development Conditions 1 Parliament - to approve and amend the border menu of the free econimic zone - to approve the City Development Master Plan

- to approve the regional development project - to organize the implementation of the State policy in the field of urban planning - to approve the development plan of the city-development centers 2 Government - ‌to approve the general plan of construction, tourism, infrastructure development, and special regulated objects - to approve and amend the General Development Plan of free economic zone

- to‌ approve and enact a model rule for the province and city’s administration of urban planning - to approve urban construction norms and regulations State Central - ‌to allow the development of urban planning documents for business entities Administrative Agency and organizations 3 in charge of Urban - to develop legislation and policy documents on urban development sector Development - ‌to set regulations for urban construction activities on an exclusively controlled object and its territory - ‌to approve urban development projects and technical documentation developed by organizations with foreign investments for new districts and microdistricts licies and aster plan for d by urban and d by ation and in the or urban and Urban Authority of Authority Construction development the Capital City Land Relations, Cartography Agency for Land, Geodesy and Agency and Urban the Aimags Authority of Authority Construction development Land Relations, ams, and plans at the master plan stage for the ams, and plans at the master Rights and responsibilities Rights and development ‌ to approve projects, progr research work in rural areas research work in rural development and other legal acts organize their implementation document on urban development projects approved master plans and construction rural archival fund for urban development the development of the city and villages the development of the city ‌ ‌ to organize land allocation and implement land projects approve to organize land allocation development and amendment of the m to initiate and organize the ‌ standards f to submit proposals for the development of industry ‌ development po to submit proposals for the development of urban ‌ of design, explor to organize and coordinate the implementation and towns and creating an to maintatin an urban planning cadastre in cities ‌ and plans contained the implementation of projects to supervise ‌ - - - - to approve master plans for the development of cities and villages - to approve master plans - - llages plan of cities and vi and approve a partial master - to develop - - of urban development and land use and its protection - to control the activities - to decide on the new development of districts, housing estates, Ger areas, and the to decide on the new development old part of the city Ministry of Construction and Urban Development Construction Development Center Capital city Capital city • Research for the development of the settlement as a whole • Review and evaluation of development projects • Proposals for the development of state policy city general architect city general Aimag, capital city and Khural of Province and Khural Governor of Aimag and Citizens Representatives Citizens Representatives Government Agencies Government Under the Ministry of Construction and Urban Development (MCUC), there is a 2.3.4. Mission and Functions of Organizations 6 5 4 № Construction Development Center and Agency for Land, Geodesy and While Cartography. the Construction Development Center focuses on suggesting policies and regulations, Agency for Land, have Geodesy two and sub-organizations Cartography to effectively implement the scale. urban development projects at a different Local Expert’s research (Mongolian Urban Development Research Institute). Research (Mongolian Urban Development research Local Expert’s Source: [Figure 1‑8] Organizations Under MCUD Under 1‑8] Organizations [Figure Local Expert’s research (Mongolian Urban Development Research Institute). Research Urban Development (Mongolian research Local Expert’s Source:

Continued

MCUD’s mission is to create favorable conditions for a healthy, safe and comfortable living environment by increasing the efficiency of urban development, land relations, geodesy, cartography, construction, and public policies.

To accomplish this mission, the main functions involve:

• Organization and coordination of legislation, policies, programs, and projects in the field of urban development; • Organize and coordinate legislation, policies, programs, and projects in the field of land management; and • Organize and coordinate the implementation of laws, policies, and programs of surveying and cartography.

(2) Construction Development Center

041 Construction Development Center is part of MCUD and shares the same mission except it Chapter considers the history of Mongolia and civilization to suggest regional development policies and strategies to achieve balance of social development and optimal population base. 01 Analysis on Development Conditions

Their main roles are:

• To conduct research and develop proposals for the development of state policy for urban development and the creation of databases in research work; • To conduct the research necessary for the development of the settlement as a whole, and develop a document in accordance with socio-economic, spatial and environmentally sustainable principles, as well as conduct an in-depth analysis of data from earlier studies concerning the settlement of Mongolia; and • To provide reviews and evaluations to support and monitor the implementation of regional development projects, urban development plans, free development zones, tourism, infrastructure development projects, regional development projects, and major national and special projects.

(3) Agency for Land, Geodesy and Cartography

Another sector within MCUD is the Agency for Land, Geodesy and Cartography, which is implements policies in the filed of geodesy, cartography, baseline conditions, land al legal documents at the national level; al legal documents land surveying, geodesic, cartographic and urban planning activities on , the report on the work of Architect the should General be submitted to the state accordance with the decrees and resolutions of the Parliament and Government ulfilling ulfilling the tasks entrusted to the Parliament, the Cabinet of Ministers and the roviding roviding timely and accurate information on planned and completed agency work mproving mproving the coordination of the work of the beneficiaries withinthe mandate of central administrative authority in administrative charge of central urban planning, in accordance with the Law on Urban Planning and the rules of city and city architects. general He will be responsible for organizing urban development issues, providing city agencies with information on urban development and coordinating joint activities with them; and Annually In of Mongolia, the decrees of the civilian representative khurals of the capital, the of programs action of the governor of the the capital orders and the of mayor the city, of the governor of the capital, as state well principles as of the socio-economic general development, this organization must provide half-year quarterly, and one-year reports; on the Agency website. on the Agency F state central administrative agency for land relations, follow directions and provide information; and accurate P Organizing I other organizations; the potential of professional and the agency and increase Monitoring the implementation of sector Monitoring the implementation the basis of existing legal documents that provide users with information, profession and methodology;

• • • • • • • (5) Authority of the Capital City Land Relations, Construction and Urban Development develop the city according to the Master Plan. ThisAs the organizer, its main mission is to (4) Land Relations, Construction and Urban Development Authority of the Aimags Urban Development (4) Land Relations, Construction and This Government agency ensures an effective implementation of legislation on geodesy, In order to achieve their mission, they are involved in: they are involved achieve their mission, In order to requires the roles: cartography, land management, land cadastre, construction, and urban planning in the land cadastre, construction, and urban planning in the land management, cartography, territory of Mongolia. monitoring, land management, and urban development sectors. and urban development land management, monitoring, 042 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 2.4. Urban Development Projects of Mongolia

2.4.1. New Town Development Projects

The Mongolian Parliament has approved the Ulaanbaatar City Development Master Plan 2030 in February 2013. One of the master plan’s key aspects is that the redevelopment of the highly polluted peri-urban Ger areas, which have a negative impact on the environmental pollution and detrimental effect on citizens health, is formally and fully incorporated in the city’s overall development and urban infrastructure programming by restructuring sub- centers including Ger areas.

The extension of urban services through a network of sub-centers will unlock the economic development potential and improve the livelihood of people in these poor urban areas. Therefore, the government of Mongolia and the municipality of Ulaanbaatar set up a legal environment to build Ger districts. In addition, ADB, World Bank, European Bank of Rehabilitation, and the JICA are implementing specific projects.

043

In connection with the maintenance of the Ger area, another major issue in urban Chapter development of Ulaanbaatar is to supply sufficient housings. In order to resolve the housing shortage in Mongolia, the GOM has established a plan to supply 100,000 housing units in 01 Analysis on Development Conditions 2012 and a plan to supply 20,000 public rental housings in 2015. As the housing market of the private sector is stagnant, the necessity of supplement of housing in the public sector is increasing, therefore, the State Housing Corporation is focused on the construction of affordable housing for low- and middle-income families.

As mentioned above, the maintenance of Ger area and supply of affordable housing are currently being carried out according to the master plan as main urban development projects. However, the master plan is still in its preliminary stage and provides only general directions for the development. Further refinement and adjustment are expected to take place soon in detailed local plans based on the approved master plan. It is critical that each development partner’s assistance plan aligns with the master plan and government programs. However, such reforms are incomplete, and the city administration’s efforts are constrained by existing national laws and regulations and conflicting perceptions about land as a designated public entitlement for residential use. Redevelopment Project - Selbe Redevelopment Project – Bayan Hoshuu Redevelopment Project – Bayan 1> Case Study 1: Redevelopment of Ger Areas 1: Redevelopment 1> Case Study - According to the statistical According data from 2018, about 380.6 thousand households live in Ulaanbaatar, According to the master plan of Ulaanbaatar until 2020, in the documents of development trend The project Rebuilding and Construction of Ger Area is being implemented with a soft loan and 164.6 thousand households (43% of the total households) live in ordinary residential such as apartment buildings and private houses, and 216.0 thousand households (57 %) live in Ger areas. It “rebuildingwithout proper solution the future development of the city seems impossible to imagine the Ger area.” until 2030 indicates that the development of the central zone of Ger area are associated with the engineering structure and high-rise apartments. The goal of the Ger area redevelopment project is to implement the principle of maximum participation of citizens, and public private partnership (PPP). Within the legal environment, it will be coordinated with political documents, such as the Plan “General for the Development of Ulaanbaatar until 2020 and Development Trends until 2030,” Parliament of Mongolia in 2013. the which was approved by from ADB and the European Investment Bank in accordance with the “Ger area Development and Investment Support Program.” According to Decree No. 19/23 of 2014, 24 locations for planning sites were approved. At the present, the project design and drawings for infrastructure were developed on 14 locations for planning sites, and the installation work for a total area of 1,506 and 9 % of the population as already been done. hectares covering 14 % of the total Ger area Author’s own. Source: Case Study 2: Affordable Housing Program

Bayant-Ukhaa 1

Since 2013, the State Housing Corporation has started construction work of 28 residential buildings for 1,764 households in Buyant-Ukhaa 1 microdistrict in the 9th khoroo of Khan-Uul district. According to the Government’s Resolution No. 263 in 2013, 85.0 billion MNT of the loan from the Development Bank was financed by the Chinggis Bond Fund.

Bayant-Ukhaa 2

The Government of Mongolia approved a program to provide affordable housings (2012-2016) for low-income households by the order of the State Housing Corporation and approved the “Buyant- Ukha 2” project for 28 hectares in Khan-Uul district’s 2nd khoroo. Social infrastructure, such as 6,500 family apartments, 4 kindergartens for 240 children, 2 schools for 1,200 children, gyms, cinemas, shopping centers and 7-story parking lots are planned for construction.

The housing projects have a number of discount mechanisms for the citizens, such as low-cost housing and affordable apartments, which will provide people with limited income sources. For example, the price of an apartment is 1.28 mill. MNT per 1m2 in Buyant-Ukhaa and this price is 30% lower than the market price. This makes purchasing apartments easier for citizens with low income. This is one of the advantages of new urban development projects. 045 Chapter Housing Project - Buyant-Ukhaa 1 Housing Project - Buyant-Ukhaa 2 01 Analysis on Development Conditions

Source: Author’s own.

2.4.2. Free Economic Zones Development Projects

Mongolia has started transition to democracy and market economy in early 1990s. Previously, Mongolia was unable to develop new cities and had unsuccessfully implemented more than one urban development projects. As a result, large scale urban development projects were not implemented. The GOM adopted the “Concept of a Free Economic Zone” in 1995 and the Law on a Free Economic Zone in 2002 to create a favorable investment climate and liberalize the state’s economy. On February 12, 2015, the new version of the Law was passed by the Parliament, and a legal environment for a free trade zone was created in Mongolia. During this period, a master plan for Altanbulag, Zamiin Uud, and Tsagaannuur free economic zones were developed and approved. (Hotels) services services Target Sector Target Foreign Trade, Trade, Foreign and warehouse manufacturing, and Kazakhstan, Asia and Europe; International trade International trade International trade International trade between Russia and China; link between between Russia, China heavy & light industries; tourism, resorts, casinos Details tourism, Corridor; Objectives opportunities industrial and Development of China-Mongolia- country markets Russia Transport Russia Transport and employment and employment local investments economic welfare through foreign & Western Mongolia Western free access to third Major commercial, Uud City Location 25 km from China border; Russia border South of Zmiin Sukhbaatar City; 68km from Aimag center Bayan-Ulgii closer to Mongolia- Closer to Mongolia- Zmiin Uud FEZ Altanbulag FEZ Tsagaannuur FEZ Tsagaannuur Free Economic Zones Free Economic According According to the master plans, the territories of the Altanbulag FEZ, located in Selenge In the past years, the government of Mongolia has made great efforts to improve the aimag, and Zamiin-Uud FEZ, located in Dornogovi, and Tsagaannuur FEZ in Bayan-Ulgii are hectares in area, respectively. 500 hectares, 900 hectares, and 708.4 legal environment for the Altanbulag, Zamiin Uud, and Tsagaannuur FEZs, and to create an effective structurefor the management of FEZs, as well as attract investments and create example, since the creation of FEZs, 35 billion MNT have been invested in For infrastructure. the state budget. Of these, 77% were spent on infrastructure development in the Altanbulag FEZ. The development Zamiin-Uud project infrastructure was a funded soft by loan from the Chinese government in 2010 water, and sewage, was roads, intended and to build electricity, communications in the Zamiin-Uud free economic zone. About $58.8 million was spent on the construction of this particular infrastructure. Author’s own. Source:

Mongolia’s Free Economic Zones Free 1‑10> Mongolia’s

Although all these projects can be referred to as the main urban planning projects in Mongolia, the construction work has not been completed for many years.

2.5. Comprehensive Analysis

Comprehensive Analysis

Factors Key Considerations

- Located within a 30-km radius to the South of Ulaanbaatar - A‌ djacent to planned new cities such as Zuunmod and Maidar and easy access to the regional highway - ‌Good development conditions, as the project site has a flat topography and regulates the Locational Conditions altitude restrictions due to the new airport - Development of new cities nearby including Free Economic Zones 047 ⇒ ‌High development potential as a free economic zone due to transport accessibility; easy Chapter development conditions and linkage with neighboring cities

- Accelerated economic recovery since 2017 01

- Dependent on the trade with China and Russia Analysis on Development Conditions Socio-economic - Capacity to hold 3 times more passengers than the existing international airport Conditions ⇒ ‌Contribution to economic revitalization by attracting foreign direct investment from NUBIA Aero-City

- ‌Establishment of Institutional framework for planning and development system at national, regional and urban level Institutional - Centralized city planning and development system led by the government Framework - Need to increase the participation of various implementers in urban development ⇒ ‌Need to revitalize urban development projects through private investment or Public- Private Partnership

- Large-scale urban development is mostly led by the government - Urban‌ developments are mainly focused on affordable housing andGer area redevelopment project Urban Development - Development of three free economic zones has been standstill for a long time Project - Only‌ a few cases of private sector development and the lack of institutional basis to promote private investment ⇒ ‌Institutional framework needs to be upgraded to activate private sector and foreign investment

Source: Author’s own. ee . . Incheon Free Economic Zone ㎢ Economic Zone ‌ Outline of Incheon Fr The project period for IFEZ is 20 years, 20 is IFEZ for period project The from 2003 to 2022, and the area takes up 122.4 consists of three districts—Yeongjong, Songdo and Cheongna International City—and, all together, it has been planned to accommodate housing for a total of 537,000 people. Major functions for these cities are divided: Yeongjong focuses on logistics and tourism; Songdo and business international on focuses 3.1.1. Kor 3.1. Outline of IFEZ 3.1. Outline scope of the KSP program, seminar for determining the detailed During the launching NUBIA Aero City is a multi-complex that has diverse functions around the new airport, The Korean Free Economic Zones (KFEZs) are specially designated areas created to improve

the GOM has requested analyzing Korea’s urban development cases and institutional frameworks in order to compare with the Mongolian development conditions and establish effective implementation methods for NUBIAAero In Korea, City. between 1950s and 1960s, new modernized cities had been developed in accordance with industrialization and solving efforts have been put into policies. After the 1980s, numerous economic development the housing issues in the metropolitan areas, and the outcome of it was the creation of 17 in the urban development sector. very much experienced new cities, which made Korea and it will be designated as FEZ to promote a private sector and foreign investment. FEZ, especially Incheon Free Economic Therefore, Zone Korea’s is selected for a comparative analysis. This research aims to share the development experience of Korea and draw cities around a new airport. implications for the development of new the business and living environment for foreign investors in Korea. Since the 2003 inauguration of a FEZ in Incheon, the number of FEZs in operation has grown to seven areas: Incheon, Busan- Sea, East Coast, and Chungbuk. Yellow Area, Daegu-Gyeongbuk, Jinhae, Gwangyang Bay www.fez.go.kr. Source: [Figure 1‑9] Location of KFEZs [Figure 3. IFEZ Development: ofUrban Experience ean 048 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia high-tech cluster such as IT and BT; and, lastly, finance and leisure activities are facilitated in Cheongna.

The purpose of this research is to review the development cases of Yeongjong International City near Incheon International Airport, as it has the most similar development environment as NUBIA Aero City. The outline of Yeongjong District and its major development plans are shown below.

Development Outline & Plans for Yeongjong

Development Outline Development Plans

• Location : Yeongjong-do·Yongyu-do, Jung-gu • Complex Tourism : family resorts, maritime leisure facilities • Size : 52.30km2 • Flight and Distribution : to make a hub for international cargo • period : 2003 to 2020 • ‌Aviation Industry : educational institutions, manufacturing and • population : 183,762 people laboratory facilities

Source: Author’s own.

[Figure 1‑10] Location Map of IFEZ

049 Chapter 01 Analysis on Development Conditions

Source: White Book of IFEZ, IFEZ (2007). Deliberation Deliberation FEZ Committee FEZ Committee notify notify request request Governor Consulting Designation Determination Mayor/Province Minister of Trade, Minister of Trade, request notify Industry and Energy Industry and Energy notify notify request request Proposal Proposal Governor Implementer Mayor/Province 3> Introduction of Free Economic Zone in Korea Economic of Free 3> Introduction - Administrative Body: Free Economic Zone Authority Administrative The Governor shall establish the Free Economic Zone Authority to handle the affairs prescribed The revenue and expenditure of the Free Economic Zone Authority shall be managed separately Procedure of Implementation Plan Purpose Free Economic Zone is a designated area with the purpose of facilitating foreign investment, Relevant Laws Economic Zones on Designation and Management of Free Special Act Procedure of Designation in the Act on the Designation and Operation of Free Economic Zones. The head of the Free Economic Zone Authority shall appoint a Governor but shall consult with the Minister of Trade, Industry and Energy beforehand. by independent accounts in the Special Accounting or City/ Province Accounting under the Local Finance Act. strengthening national competitiveness, and seeking balanced development among regions by improving the business environment for foreign-invested enterprises and living conditions for foreigners. Author’s own. Source:

3.2.1. Phased Development Plan

Yeongjong International City, one of the IFEZs, was planned as a tourism and leisure city based on Incheon International Airport’s global transportation infrastructure and its beautiful marine environment. The project period is planned to be from 2003 to 2020. Its major projects include Yeongjong Sky City, Yeongjong Complex Resort, Midan City, Yong- Yu and Muuido Development Project, Incheon International Airport Construction Project (including expansion), and Yeongjong Aviation Cluster.

One of the main characteristics of Incheon Free Economic Zone is its plan for the long- term development project with a period of 20 years. In carrying out the project, the project was divided into three phases: planning and foundation; investment; and completion and management.

Firstly, in the planning and foundation stage, development plans were established, and 051

major infrastructure such as highways and railways were built with the central areas and Chapter anchor facilities placed in each business district. Next, in the investment stage, the main focus was put on promoting investments for development and attracting companies 01 Analysis on Development Conditions

[Figure 1‑11] Development Plans by Steps

1st STEP 2nd STEP 3rd STEP Action Plans Investment Completion Groundwork Promotion Stability

• Development and Action • Investment and business • Completion of development Plans promotion plans

• Infrastructure expansion for • Residential environment • City management system increased development for foreigners considering efficiency - Stability of foreign investment business condition changes - Incheon Bridge, business environment and Seoul-Incheon highway, living conditions Extension of subway line • Vision achievement • Acceleration of - Vitalization of Incheon area economic activity and development project and • Promotion of central strengthened national regions and ripple effect from competitive facilities anchor facilities guidance projects

Source: Author’s own. 1st Step (2003-2009) 2nd Step (2010-2014) (2015-2020) 3rd Step Project Yeongjong Distribution Complex Yeongjong Airport 2nd Step Construction Yongyu-Muui Tourism Complex Tourism Yongyu-Muui International Business Area North-South Retarding Basin Golf Course Development Yedanpo-Airport Highway Yedanpo-Airport Yedanpo-Jungsindo Road Yedanpo-Jungsindo Yeongjong Sky City Yeongjong Free Area Zone Midan City Medi City Yedanpo-Unbuk Environment Yedanpo-Unbuk Business Road www.ifez.go.kr. Urban Airport Incheon 3.2.2. Implementing Agencies Incheon Free Economic Zone consists of a long development period and a number of ess attraction, a corporate a corporate and business attraction, foreign investment in order to promote In particular, At the present time when the project has been partially completed, the vision of the of the project, are completed at the beginning expressways such as Major infrastructures International Development Infrastructure business districts, and it has been developed by various implementing agencies for each business district. Yeongjong Sky City is also under construction in the long term, and each project, such as aviation cluster, Sky and City, Midan is City, being implemented by diverse agencies such as Korean public corporations, foreign corporations, local governments, and management management environment for foreign investments and convenient residential spaces for were established. foreigners development is fulfilled through the urban management plan that addresses the changes to corporate environment and adding facilities that strengthen local economy as well as national competitiveness. and various urban development projects are being promoted over a long period of time. Incheon International Airport has been continuously expanding its business to meet the in 2001. The table below shows the project schedule by increasing demand since its opening types. Source: [Figure 1‑12] Schedule for each Development Process 1‑12] Schedule for each Development [Figure 052 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia foreign investors.

Various implementation methods have been used not only for private investors but also for the expansion of infrastructure facilities. For example, although Incheon International Airport had been created by public corporations, private capital had been utilized for airport railway and highway in the form of BOT and BTO. This was mutually beneficial situation for both public and private corporations; the government was able to secure infrastructure system without a financial burden while the private sector had provided a full funding and investment costs were recovered through the operation of the airport.

[Figure 1‑13] Main Projects and Implementers of Yeongjong

053 Chapter 01 Analysis on Development Conditions

Source: www.ifez.go.kr. Features ation and transfer to the to ation and transfer , Tourism, Cultural Facilities, etc. Facilities, Cultural , Tourism, acting domestic and foreign investors acting domestic and foreign orea’s first private railroad project first private orea’s viation Operation Training Center, Aviation Center, Aviation Training viation Operation TO (Build-Transfer-Operate) – Transfer to the – Transfer (Build-Transfer-Operate) TO to the – Transfer (Build-Transfer-Operate) TO acilities, etc. oreigners’ participation with social overhead convention, spa, arena, K-studio, etc. convention, concert hall, theme Park, entertainment, etc. Government after 30 years of operation Government as contributed acceptance Government after 30 years of operation Korea capital for the first time in for each project & Implementing project by project by for each project & Implementing client and tenants attracting MRO Industry, Aerospace, Satellite & Defense- Aerospace, Industry, MRO related Industry convention, Shopping facilities, etc. Industry F Hotel (814 rooms), foreigner casino, Hotel (1,350 rooms), foreigner casino, ‌ B ‌ 30 years of oper B ‌ F ‌ ‌ ‌ ‌ ‌ Hotel (720 rooms), foreigner casino, ‌ A Attr ‌ ‌ Complex city with the function of Residence, with the function of Residence, Complex city Business, Public Residential, Commercial, • • K • Road • Toll • • • • • • • • • y y Co., Ltd.(Samsung C&T y Co., Ltd.(Samsung C&T ay suited Resort (United suited Resort (United ay A), UTC(USA), Korean Air(Korea) Korean A), UTC(USA), orea Land & Housing Corporation orea Land & Project Period/ Implementing Agencies Project Period/ Corporation Consortium) Corporation States) Metropolitan City Development Compan Metropolitan City Development Airport Railroad Co., Ltd. ‌ ‌ New Airport Highwa Inspire Integrity gr ‌ Boeing(US ‌ Co., Ltd., Incheon Midan City Development ‌ ‌ K • 2016 to 2022(Step 1) • • 2001 to 2009 • • 1993 to 2000 • • 2004 to 2009 • Incheon Bridge Co., Ltd. (Hyundai Engineering & Construction Consortium) • 2014 to 2022 Ltd. (Japan) Segasami Co., • Paradise • 2014 to 2022 Co., Ltd Korea • RFCG • 2006 to 2020 • • 2008 to 2020 • • 2003 to 2020 • Incheon Development & Tourism Corporation Tourism Incheon Development & • 2008 to 2020 • Incheon Metropolitan City 13> Implementing Agencies for Each Project Agencies 13> Implementing - IR City Town adise City Bridge Cluster Project Incheon Incheon Incheon Aviation Aviation Railroad Highway Inspire IR Midan City Intl. Airport Intl. Airport Airport New Par Caesars Korea Caesars Korea Yeongjong Sky Yeongjong Author’s own. Source:

(1) Related Laws

The Institutional Framework for the development of Incheon Free Economic Zone can be classified into three types. The main law is the special law on Free Economic Zone. The Local Autonomy Law also provides that the Free Economic Zone can be managed as an independent administrative zone. There are three main characteristics of Korea’s Free Economic Zone.

Firstly, the law on Free Economic Zone prevails over other laws and allows for the mitigation of regulatory matters. By covering matters on the designation, development, and management of FEZs, it is possible to conduct a project faster and manage more efficiently than dual system of development, management, and operation.

Secondly, there is a separate regulation to install infrastructure facilities through Public-Private Partnership. As discussed earlier in the sector of implementing agencies, 055

private sectors’ participation in social overhead capital (SOC) projects helped to ease the Chapter government’s financial burden and promote economic projects that utilize private sectors’ creativity. 01 Analysis on Development Conditions

The last characteristic is focused on allowing flexible use of development methods under individual laws and regulations concerning housing, industrial park, logistics, and so on.

Analysis of Relevant Laws

Category Relevant Laws & Main Contents

• Special act on Designation and Management of Free Economic Zones - Designation, development, management Free Economic Zone - ‌Tax reduction, duty reduction, rent reduction, etc. • Local Autonomy Act - Establishment of special local governments to achieve specific purposes

Public-Private • Act on Public-Private Partnerships in infrastructure Partnership - ‌Types of infrastructures, concession, unsolicited project proposal, etc. (Infrastructure)

• Urban Development Act, Law on Housing Urban Development • Industrial Sites and Development Act • Act on the development and management of logistics

Source: Author’s own. Division Division Yongyu-Muui Yongyu-Muui Yeongjong-Cheongna Yeongjong-Cheongna YeongjongCheongna Development Division Development Division Cheongna Management Yeongjong Management Yeongjong Business Headquarters Department Urban Design Division Division Division Headquarters Forestry Division Forestry Environment and Songdo Business Urban Management Songdo Infrastructure Development Planning Commissioner Division Headquarters Planning Division Emerging Industries Strategic Investment Strategic Service Industry Division Investment Opportunity Division Headquarters Support Division Administration & Administration Smart City Division Planning and Policy Public Relations Division Planning & Coordination (2) Management Organization (2) Management There are seven Free Economic Zones in Korea, and the Free Economic Zone is The Free Economic Zone Authority was established as an administrative body that Until now, the Free Economic Zone Authority independently carries out the tasks of established established and which managed is the by from separated Free the Economic Zone Authority, local governments. manages each free economic zone. It is composed of planning, investment, urban development, and management field. It also maintains its status as a subsidiary of a metropolitan city or province, and, in the case of two or more administrative districts, it local governments. as a combination of operates developing, managing, and attracting investment in FEZs. Therefore, there is a claim that the Free Economic Zone Authority should be recognized as a special self-governing body to but this matter is still more grant controversial autonomy, due to disagreements with higher and distribution of development profits. agencies, such as the tax collection administrative www.ifez.go.kr. Source: [Figure 1‑14] Organization of IFEZ 1‑14] Organization [Figure 056 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 4. Policy Recommendations

4.1. Legislative‌ Arrangement to Integrate Development and Management

The Government of Mongolia intends to exploit the potential of the NUBIA Aero City for mixed-use and designate it as a Free Economic Zone to activate developments by attracting private sector and foreign investments. As seen in the case of Korea’s FEZs development aimed at attracting foreign investment, the development of large scaled FEZs requires the involvement of various project implementers over a long period of time. Therefore, an institutional foundation is required to respond efficiently and promptly to the diverse needs and changing environmental conditions of investors.

Korea’s Free Economic Zone Act is a special law that covers designation, development, and management of FEZs appointing the Ministry of Trade, Industry and Energy as a mandated authority. On the other hand, Mongolia currently has a legal system that is dualized by the Free Economic Zone Act for designation and management of FEZs 057 and the Urban Development Act for urban planning and implementation. Therefore, Chapter it is recommended to integrate a dualized legal system of urban development and FEZ 01

management into a FEZ law that includes development and management, and that will Analysis on Development Conditions provide various private sectors and foreign investors with the consistent and prompt administration of FEZs development.

Comparison of Free Economic Zone Laws

Mongolia Korea Type (Law on Free Economic Zone) (Special Law on Free Economic Zone)

Establishment, change, liquidation Comprehensive planning, designation Security management Project implementation Contents Security free issue Incentives for foreign activity Foreign working activity Improvement for living conditions of foreigners Integrated communication Committee and administrative body of FEZ

Source: Author’s own.

Basic Local Government Cheongju City (1) Yeosu City, Sooncheon City, Gwangyang City, Gwangyang City, Sooncheon City, City, Yeosu Hadong City (4) Pyeongtaek City(1) City, Yeongcheon Gyeongsan City, Pohang City (3) Donghae City (2) Gangneung City, Yeonsu-gu,·Jung-gu· Seo-gu (3) Gangseo-gu, Changwon City (2) Metropolitan Government Jeollanam-do, Gyeongsangnam-do (2) Daegu Metropolitan, Gyeongsangbuk-do (2) Gangwon-do (1) Incheon Metropolitan (1) FEZ Area Daegu· Incheon Bay Area Bay East Coast Chungbuk Chungcheongbuk-do (2) Yellow SeaYellow Gyeonggi-do (1) Geyongbuk Gwangyang Busan·Jinhae Busan Metropolitan, Gyeongsangnam-do (2) 4.2. Dedicated Administrative Body Administrative 4.2. Dedicated NUBIA Aero-City is located on the administrative and boundary, its jurisdiction is In Korea, as shown in the table below, five of the seven economic zones are located currently currently in discussion regarding whether to include it within the administrative district of Ulaanbaatar. In addition, if NUBIA Aero City is designated as a FEZ, it will be subject to fee reductions zones such as tax and land-use administrative from general special exceptions as well as foreign employment. As mentioned above, if there are multiple administrative districts and special cases that differ from the general administrative districts operate, it is suggested to establish a separate administrative body rather than share the roles of the bodies. existing administrative across multiple administrative districts, and there are administrative agencies dedicated to the development, management, and investment attraction of each FEZ. Free Economic Zone Authorities are in operation under the metropolitan councils. Although it is still under debate whether to designate the FEZ Authority as a special self-government that is independent of the upper-level metropolitan government, it is essential to establish a dedicated administrative agency in terms of development, management, and investment attraction.

Free Economic Zone Authorities in Korea 1‑16> Free

[Figure 1‑15] Suggestion of FEZ authority organization

Planning & Coordination Division

COMMISSIONER Investment & Assistance Division

Development & Management Division

Source: Author’s own. 059 4.3. Collaborative Institutional Framework Chapter 01 Looking at the case study of Korea’s [Figure 1-16] Collaborative Governance Analysis on Development Conditions Incheon Free Economic Zone, the Policy development conditions for airport Planning Coordination cities and free economic zones can be (FEZ Committee) broadly categorized into institutional Ministry of framework, sufficient demands of Trade, Industry passengers and logistics, and business- and Energy friendly environment. Above all, institutional arrangements, such as role Cooperative sharing between government agencies Institutional System In Korea and institutional systems, should be Ministry of Free Land, Economic prioritized. Infrastructure Zone and Transport Authorities

In Korea, the Ministry of Commerce, Airport Implementation Infrastructure Management Industry and Energy establishes Urban Development Promotion cooperative governance centering on the policies and plans of the FEZ. The Ministry of Land, Infrastructure and Transport is in charge of major infrastructures such as airports, ports, railways, and urban development projects. Free Economic Zone Authority, As seen in the exemplary cases in Korea, the institutional basis for establishing which which is considered as a special local government, is responsible for implementing and above, since for each FEZ. As stated investments and attracting individual projects managing the FEZ involves the participation of diverse ministries and local autonomy bodies, the Free Economic Zone Committee is established under the Ministry of Trade, Industry and Energy and is in charge of coordinating various issues. The Committee should act as a coordinator of policies and systems on FEZs, administrative service support, and relevant central governments. and regional administrative cooperative governance of each relevant organization is considered as one of the most successful urban developments. important factors for 060 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia References

Asian Development Bank (2008), Evaluation Study Mongolia; Urban Development Sector.

Busan Jinhae Free Economic Zone, www.bjfez.co.kr.

Fitch Solutions Group (2018), Business Monitor International Report.

Incheon Free Economic Zone, www.ifez.go.kr.

Incheon Free Economic Zone Authority (2007), The White Book of Incheon Economic Zone.

JICA (2017), Outline of Urban Redevelopment Law & Mechanism of Urban Redevelopment Projects.

Korea Free Economic Zone Planning Office, www.fez.go.kr.

Korea Legislation Research Institute, elaw.klri.re.kr. 061 Chapter

Korea Ministry of Government Legislation, www.law.go.kr. 01

MAD Investment Solution (2015), Mongolian Urban Development Law Analysis Statistics Analysis on Development Conditions Office of Mongolia, www.en.nso.mn.

Municipality of Ulaanbaatar (2014), Master Plan of New City – NUBIAMunicipality of Ulaanbaatar (2014), Ulaanbaatar 2020 Master Plan and Development Approaches for 2030.

The Export-Import Bank of Korea (2018), National Credit Evaluation Report.

The State Great Khural of Mongolia (2016), Mongolia Sustainable Development Vision 2030.

The State Great Khural of Mongolia (2016), Action Program of the government of Mongolia for 2016-2020.

UNHABITAT (2016), Mongolia Habitat-III National Report. Special Act on Designation and Management of Free Economic Zones on Designation and Special Act Article 1 (Purpose) The purpose of this Act is to facilitate foreign investment, strengthen national Article 2 (Definitions) shall be defined as follows: The terms used in this Act 1. The term “free economic zone” means a zone developed to improve the business No. 10529, Apr. 4, 2011> Act 2. Deleted;

Article 4 (Designation, etc. of the Free Economic Zones)

(1) ‌A Mayor/Do Governor may request the Minister of Trade, Industry and Energy to designate a free economic zone: Provided, That if any proposed zone extends over at least two of the Special Metropolitan City, Metropolitan Cities, Metropolitan Autonomous Cities, Dos, or Special Self-Governing Provinces (hereinafter referred to as “Cities/Dos”), the relevant Mayors/DoGovernors shall jointly file a request for designation of a free economic zone.

(2) ‌Where a Mayor/Do Governor intends to request for the designation of a free economic zone in accordance with paragraph (1), he/she shall prepare and submit a development plan for such free economic zone including the matters set forth in each subparagraph of Article 6 (1) (hereinafter referred to as “development plan for a free economic zone”). In such cases, he/she shall hear the opinions of residents in advance, 063

as prescribed by Presidential Decree. Chapter

(3) ‌Where a Mayor/Do Governor intends to request for the designation of a free 01 Analysis on Development Conditions economic zone in accordance with paragraph (1), he/she shall prepare and submit a development plan for such free economic zone including the matters set forth in each subparagraph of Article 6 (1) (hereinafter referred to as “development plan for a free economic zone”). In such cases, he/she shall hear the opinions of residents in advance, as prescribed by Presidential Decree.

(4) Where‌ a development plan for a free economic zone contains the matters concerning industrial complexes under subparagraph 8 (a) through (c) of Article 2 of the Industrial Sites and Development Act, the Mayor/Do Governor shall consult with the Minister of Land, Infrastructure and Transport before making the request for the designation of a free economic zone pursuant to paragraph (1). In such cases, the Minister of Land, Infrastructure and Transport shall undergo deliberation by the Industrial Location Deliberation Committee under Article 3 of the Industrial Sites and Development Act.

(5) ‌Upon receiving a request for the designation of a free economic zone pursuant to paragraph (1), the Minister of Trade, Industry and Energy shall finalize the development plan for a free economic zone and designate a free economic zone after the Minister of Trade, Industry and Energy deems it necessary to develop a receiving a notice referred to in paragraph (8), the Mayor/Do Governor shall Minister of Trade, Industry and Energy may have the development of a free Mayor/Do Governor shall designate a development project operator for a free hen hen designating a free economic zone, the Minister of Trade, Industry and Energy ere ere the Minister of Trade, Industry and Energy designates any free economic zone make the details of such notice available for public perusal for at least 14 days. the details of such make ‌Upon  economic zone or the relevant unit district for a development project (limited to development implemented through division pursuant to Article 4 (6)), from among the following persons: economic zone implemented in phases where the requirements prescribed by where the requirements prescribed by economic zone implemented in phases Presidential Decree have been fulfilled, such as securing of land required for the development of such free economic zone. in accordance with paragraph (4) or (5), he/she shall announce the details of such designation in the Official Gazette and give a notice thereof to the competentMayor/ Presidential Decree. In such cases, Article as prescribed by Do Governor without delay, 8 of the Framework Act on the Regulation of Land Use shall apply with respect to map. public announcement of a topographic free economic zone, he/she may devise a development plan for such free economic after obtaining consent from such zone as a free economic zone zone and designate the competent Mayor/Do Governor and undergoing and deliberation resolution of the Committee. Free Economic Zone where may, allow necessary, the development to be implemented by dividing such for development projects. free economic zone into at least two districts consultation consultation with the heads of relevant administrative agencies and deliberation and resolution of the Free Economic Zone Committee. In such cases, he/she shall hear the opinion of the Mayor/Do Governor who has requested the designation of such free (1). with paragraph economic zone in accordance  ‌The   ‌h  ‌The  ‌W ‌Where 1. The State or a local government; Article 8-3 (Designation of Development Project Operators) (1) (9) (9) (10) (7) (7) (8) (6) (6) 064 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 2. An administrative body under Article 27-2 (1) (limited to cases where such body is established as a local government association under Article 159 of the Local Autonomy Act; 3. An institution prescribed by Presidential Decree as a public institution under the Act on the Management of Public Institutions; 4. A local government-invested public corporation established in accordance with the Local Public Enterprises Act; 5. A person meeting qualification requirements prescribed by Presidential Decree, such as capital, etc., who is not related to a public sector; 6. A corporation established through investment from at least two persons falling under any of subparagraphs 1 through 5 exceeding 70/100 of its capital stock for the purposes of implementing a development project

(2) ‌N otwithstanding the provisions of paragraph (1), the Mayor/Do Governor shall designate a development project operator for an area excluded from a development- restriction zone under Article 38 of the National Land Planning and Utilization Act, from among the following persons: 065 Chapter

1. A person falling under any of paragraph (1) 1 through 4; 01 2. A person falling under paragraph (1) 6 (limited to cases where the ratio of Analysis on Development Conditions investment by a person falling under paragraph (1) 5 is less than 50/100).

(3) ‌Where the Mayor/Do Governor intends to designate the State or a public institution as a development project operator pursuant to paragraphs (1) and (2), he/she shall consult in advance with the Minister of Trade, Industry and Energy or the heads of relevant ministries.

(4) ‌T he Mayor/Do Governor shall consider the following matters when designating a development project operator:

1. Capability to attract foreign investment; 2. Financial soundness and capability to raise the required funds; 3. Experience in implementing similar development projects; 4. Matters deemed necessary for the smooth execution of a development project and publicly announced by the Minister of Trade, Industry and Energy. 5. Where the Mayor/Do Governor designates a development project operator pursuant to paragraphs (1) and (2), he/she shall publish the details thereof in the Official Gazette. rdance with Article rdance with Article gh 36, 36-2, and 37 through it is necessary for implementing a development project, any development Land Tribunal having jurisdiction over the adjudication on the expropriation of e Act on Acquisition of and Compensation for Land, etc. for Public Works development project operator may perform a land substitution for land owners, may if it development project operator 49 of the Urban Development Act shall apply mutatis mutandis to the land substitution 49 of the Urban Development Act shall referred to in paragraph (1): Provided, That if the development project operator has obtained an approval of the implementation plan, including the land substitution is necessary to implement the development project. land, etc. referred to in paragraph (1) shall be the Central Land Tribunal. (1) shall be the Central land, etc. referred to in paragraph Projects shall apply mutatis mutandis to the expropriation of land, etc. referred to in Act. for in this (1) except as otherwise specifically provided paragraph project operator may expropriate (including use; hereinafter the same shall apply) land, goods, or rights (hereinafter referred to as “land, etc.”) under Article 3 of the Act on Acquisition of and Compensation for Land, etc. for Public Works Jan. 27, 2016> No. 13837, Act by Projects.

Article 25 (Establishment and Operation)

(1) ‌The Free Economic Zone Committee shall be established in the Ministry of Trade, Industry and Energy to perform the affairs regarding the free economic zones.

(2) ‌T he Free Economic Zone Committee shall deliberate and pass resolutions on the following matters:

1. Matters concerning the main policy and system with regard to free economic zones 2. Matters concerning formulation of master plans for free economic zones; 3. Matters concerning designation, revocation of designation, and the alteration of designation, of a free economic zone; 4. Matters concerning development plans for free economic zones under Article 6; 5. Matters concerning the provision of administrative services necessary for foreign- 067

invested enterprises to conduct their business in free economic zones; Chapter 6. Matters concerning the development of free economic zones;

7. Matters concerning the coordination of opinions with the heads of central 01 Analysis on Development Conditions administrative agencies and Mayors/Do Governors in connection with free economic zones; 8. Matters concerning exclusion from application of special cases concerning the handling of administrative affairs of local governments, etc. under Article 27 (2); 9. Other matters prescribed by Presidential Decree and necessary for the designation and management of free economic zones.

Article 27 (Special Cases concerning Handling of Administrative Affairs of Local Governments, etc.)

(1) ‌A Mayor/Do Governor shall directly perform the following administrative affairs among administrative affairs that the head of a Si/Gun/Gu is mandated to perform within a free economic zone: Provided, That the same shall not apply to affairs prescribed by ordinance of a City/Do as affairs under subparagraphs 5, 7, 9, 12, and 18:

Article 27-2 (Administrative Bodies of Free Economic Zones) governments shall be classified into the following two categories: . No. 10739, May Act paragraph paragraph (1) (hereinafter referred to as “free economic zone authority”) after consultation with the Minister of Trade, Industry and Energy in advance. In such cases, if any free economic zone extends over at least two Cities/Dos, the relevant Mayors/Do Governors shall jointly appoint the head of the administrative body through mutual consultation. administrative administrative affairs referred to in Articles 27 and 30. In such cases, if any free the relevant Mayors/Do Governors at least two Cities/Dos, zone extends over economic body through mutual consultation. administrative shall establish a joint In ‌  ‌A ‌ Local ‌A  ‌A Special Self-Governing Province’ ‌ 2. Si, Gun and Gu. 1. (3) (2) (2) Local Autonomy Act Local Autonomy Article 1 (Purpose) The purpose of this Act is to promote democracy and efficiency of local autonomous Article 2 (Categories of Local Governments) (1) (2) (2) (1) (1)  Mayor/Do Governor shall establish an administrative body in charge of the administration administration and to ensure balanced development of local areas and democratic concerning types, organization prescribing matters by development of the Republic of Korea, and operation of local governments, and basic relations between the State and local governments. 068 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia (4) ‌Matters necessary for the establishment and operation of special local governments shall be prescribed by Presidential Decree

Article 159 (Establishment of Local Government Association)

(1) ‌If necessary for joint performance of one or more affairs by two or more local governments, they may establish a local government association, after formulating rules and going through resolutions of the local councils concerned, with the approval from the Minister of the Interior and Safety in the case of Cities/ Dos, or with the approval from the competent Mayor/ Do Governor in the case of Sis/ Guns/ autonomous Gus: Provided, That if the Sis/ Guns/ autonomous Gus that are the members of the local government association extend over two or more Cities/ Dos, approval from the Minister of the Interior and Safety shall be obtained.

(2) ‌The local government association shall be a juristic person.

Article 160 (Organization of Local Government Association) 069 Chapter (1) ‌A local government association shall have a board of the local government association,

president of the local government association, and other clerical personnel. 01 Analysis on Development Conditions

(2) ‌The members of the board of the local government association, the president of the local government association, and other clerical personnel shall be selected and appointed under the rules of the local government association.

(3) ‌Notwithstanding the provisions of Articles 35 (1) and 96 (1), members of the local councils of the competent local governments and the heads of such local governments may hold concurrently the office of members of the board of the local government association or the president of the local government association.

Article 163 (Direction and Supervision of Local Government Association)

(1) ‌A local government association in which Cities/ Dos are the members shall be directed and supervised by the Minister of the Interior and Safety, and a local government association in which Sis/ Guns/ autonomous Gus are the members shall be directed and supervised primarily by the competent Mayor/ Do Governor, and secondarily by the Minister of the Interior and Safety: Provided, That if the Sis/Guns/ autonomous Gus that are the members of the local government association extend necessary necessary for the public interest, the Minister of the Interior and Safety may order ion, or the modification dissolution of a local government associat the establishment or of the rules thereof. over over two or more Cities/Dos, the local government association shall be directed and and Safety. of the Interior the Minister by supervised ‌ If (2) 070 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia

er

pt

Cha Keywords Anchor Function, Main Function, Facility for Gathering Airport City, NUBIA Aero-city,

Kwang Box Park (Dohwa Engineering) Kwang Box Ho Kyoung Song (Dohwa Engineering) Choi (Dohwa Engineering) Kwang Young

Review of the Existing Master Plan of the Existing Review 02 072 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia Review of the Existing Master Plan

Kwang Box Park (Dohwa Engineering) Ho Kyoung Song (Dohwa Engineering) Kwang Young Choi (Dohwa Engineering)

Summary

This chapter analyzes the existing master plan of New Ulaanbaatar International Airport (NUBIA) to define the development direction of NUBIA Aero-city. The main objective is to provide policy recommendations for developing NUBIA Aero-city based on case studies of an airport city and Korea’s development experiences. 073 Chapter

Firstly, the geographic and topographic characteristics are identified to analyze 02 the development conditions of the NUBIA Aero-city for more effective development of Review of the Existing Master Plan Ulaanbaatar and Mongolia. Its location in the center of Mongolia provides easier and quicker daily commute from the center of Ulaanbaatar City or relocation of people in ger areas. Also, the majority of tourist attractions are located in the southern part, where NUBIA Aero-city can act as a focal hub that provide easy accessibility for tourists to visit tourist attractions. This strategic location is not only applicable to Mongolia but also to surrounding countries for trading; the close proximity to the freeways and railways links the cities within Mongolia and provides a good connectivity to Russia and China, facilitating local economic development.

To support the vision of achieving Aero-city development that meets the criteria of international cities and in consideration of the conditional analysis and project vision, there are five key functions to focus on: nomadic city, logistic hub, high-tech cluster, free economic zone, and smart city.

With this in mind, the projects of existing land use had been well planned according to the appropriate scale and location. Tourism takes up half of the land use with recreation and sports facilities infrastructure zones and industrial zones that are responsible for industrial and logistic development. About 427 hectares of land is allocated for airport and relevant

all development cases in Korea, Incheon Free Economic Zone (IFEZ), which Among Therefore, NUBIA Aero-City should identify the main anchor functions in order to Through the analysis of latest trend on airport development, the recent focus of airport Candidates of suitable functions for the airport city are finalized based on case studies

includes Songdo, Yeongjong, and Cheongna International cities, presents the best example. smart Songdo’s city focuses on high-tech industry such as IT and BT industries. Cheongna is regarded as an international financial and leisure city for both tourism and international business. provides Yeongjong a hinterland for residence through Sky City and a high value- International Airport is also pursuing the developmentadded aviation logistics hub. Incheon of Airport City at Yeongjong with an aim to become a representative tourism and business hub in northeast Asia. Yeonjong airport city provides not only hotels, resorts, and casino services but also aircraft maintenance services, aviation logistics and FBO (fixed base operator) services. This development concept and directions of Yeonjong airport city are very similar to that of NUBIA Aero-city. increase the competitiveness of a new airport and minimize number of functions rather than introducing a number of functions As indiscreetly. NUBIA Aero-City has adopted functions that can create synergy with an airport are the concept of an airport city, recommended. NUBIA Correspondingly, Aero-City shall be developed as a multifunctional projects to support the effective operation of the airport. However, livingenvironment at NUBIA aero-city is not as pleasant as it is for the airport since residents living around NUBIA will be greatly affectedby aircraftnoise. For this reason, it is recommended that housing large-scale residential site. as this area is not suitable for supply shall be minimize development is well equipped with various functions and services that facilitates the economic development. Such type of development can be categorized into three types: of airport, function, airport corridor. In terms of connection aerotropolis, and airport city, scale, and influencerange, NUBIA Aero-city is classified as the airport city that is directly and new roads. connected to the airport that show the different types are HongKong’s For compared and the contrasted. airport city, Chek Lap Kok Airport Amsterdam’s City, Schiphol Airport and City, Berlin Brandenburg Airport City are reviewed, the common functions among the three airport cities airport- related industrial development, aviation logistics and business park, which further support the idea of becoming a gateway for international trade and business. To be more specific, Hong Kong has a passenger terminal called “Sky City” supported by MICE, convention and on logistics-based “Schiphol Schiphol airport city is based hotel functions while Amsterdam’s industry. aviation and hotel & shopping attracted has airport Brandenburg and World,” Cargo

074 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia airport city that offers anchor functions such as aviation logistics, MRO facilities, and MICE. To avoid an airport city becoming deserted after business hours, it is recommended for tourism & leisure functions such as integrated resort (hotel, casino, shopping malls) that attracts large scale investment in multiple economic activities be included in the project.

Furthermore, NUBIA Aero-City should create new economic activities and attract potential investment demands so that the implementation of the master plan will provide incentives to domestic and foreign companies to attract anchor facilities initially and to increase tourist visits by inviting “attractive” facilities such as integrated resorts including shopping malls, hotels, and casinos. Therefore, it will be necessary to build NUBIA Aero-City that are “competitive,” “attractive,” and “habitable” by providing commercial and leisure facilities, international schools, and smart services, which provides convenient and pleasant living environment to foreign residents.

Lastly, reorganization of the overall spatial structure of the Ulaanbaatar by applying the concept of aerotropolis that is approximately 20 to 30 km away from the airport is recommended. This aerotropolis can serve as an industrial cluster and an airport hinterland 075 for residential purpose. For identifying development priorities of aerotropolis that will be Chapter developed along the NUBIA aero-city, it is necessary to consider interconnection and cross 02 impacts of Zuunmod, Sergelen, Ulziit, Tuul shuvuu, Maidar, and Free Economic Zones (FEZs), Review of the Existing Master Plan which are located within a 25-km radius from the airport.

1. Introduction

The main objectives of this chapter are to review the existing master plan based on successful case studies of airport cities to facilitate for a comprehensive NUBIA aero city development. The review of the master plan involves the analysis of the various impacts such as land use plans, development concept, and other relevant plans.

In order to successfully implement the NUBIA Aero-City with fully occupied enterprises, NUBIA Aero-City should consider what “key functions” are in line with the concept of an airport city. It means that NUBIA Aero-City should find anchor facilities and minimize number of functions rather than introducing a number of functions indiscreetly. To this end, recommendations for policies are suggested in terms of the suggested function of NUBIA Aero-City, economic activity & living environment, and expansion airport city to aerotropolis. Leisure Tourism / Tourism Airport Industries Provide Policy MICE / Business Recommendations the airport and the existing city NUBIA aero-city environment for foreigners • Economic activity and living on synergy between • Focus • Suggest suitable functions of - Songdo Intl. city Intl. cities - Yeongjong - Cheongna Intl. cities Airport City - Yeongjong Define “Development Suggest development Direction of based on airport NUBIA Aero-city experience city concept and Korea's Direction” of NUBIA Aero City Direction” of NUBIA Aero Airport City Experience Korea's (Netherlands) (Hong Kong) - Schiphol - Chek Lap Kok • Latest Trend on Airport area Development • Define "What is Airport City" Airport Logistics / Industrial Hub Mixed-Use Zones Master Plan Review of Existing Land Use Status NBUBIA aero-city To To effectively review the existing master plan for NUBIA some Aero-City, of the key Plan of Existing Master (1) Review the Firstly, development concept, land use plan, and its proposed functions that are City (2) Concept of Airport for creating a synergic effect with the airport The airport city is an important area (3) Provide Policy Recommendations Concerning the review of Master Plan, case studies of airport cities, and potentials of • Review of Development Concept • Review of Existing Land Use Plan of considerations identified are as follows: identified considerations stated in the existing NUBIA Master Plan Report are reviewed to define the direction of how to develop NUBIA Also, Aero-City. relevant plans (UB Master Plan) such as Economic Corridor and Free Economic Zone are reviewed to confirm the government-suggested roles Aero-City. and functions for NUBIA and is the most favorable area for expanding airport functions. Considering the recent trend of developing an airport with more than having just airport functions, it is vital to finalize which functions are applicable development to featuresFinally, NUBIA of Aero-City. airport city concepts are identified through relevant case studies andby analyzing Korea’s experiences in the development. NUBIA the Aero-City, policy recommendations for NUBIA Aero-City are as follows: suitable functions of economic NUBIA activity Aero-City, and living environment for foreigners, and, effect between the airport city and surrounding satellite cities. a synergic lastly, Author’s own. Source: [Figure 2‑1] Key Considerations for the Review of Master Plan for the Review Considerations 2‑1] Key [Figure 076 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 2. Review of the existing Master Plan

2.1. Analysis of Geographic location

NUBIA is located at the territory of Sergelen soum, which is neighboring with Altanbulag and Erdene soums of Tuv Province. It is approximately 52 km to the south from the center of Ulaanbaatar City and 35 km away from the existing Chinggis Khaan International Airport. Currently, the only way to access the site is through the existing highway, which is about 51 km to the south; however, with the opening of new AH3 highway, soon to be operating in 2019, the accessibility will be enhanced and it will take shorter for people to get to given that the surface of newly constructed highway would be smoother. Additionally, there are two cities in proximity that are to be developed along with NUBIA; these are Zuunmod City and Maidar City. NUBIA is 10 km and 22 km away from these two developments, respectively.

[Figure 2-2] Location of NUBIA in relation to the surrounding area

077 Chapter 02 Review of the Existing Master Plan

Legend Central Ger Mid-tier Ger Fringe Ger Urban areas Green Space

Source: Edit from MUB’s PT internal material (2019).

NUBIA’s strategic location is vital in facilitating a more effective development of Ulaanbaatar and, further, Mongolia. Firstly, it can reduce urban sprawl and growth of urban population as NUBIA can act as a new city that provides both job opportunities and Free Economic Zones (FEZs) have long been regarded as a tool to promote export Under the Ulaanbaatar Free Economic four Zone areas policy, have been designated as a 2.2. Review of Related Plans of 2.2. Review Zone (FEZ) Economic 2.2.1. UB Free Another factor to note is that the land is a vacant land with flat topography and no development and employment generation by bringing foreign direct investments and natural Mongolia, which depends solely on country. promoting manufacturing to the host resources, is in dire need of such benefits created by Free Economic Zones. Mongolia has been attempting to develop three Special Economic Zones since 2002 without much success. Despite the various opportunities regarding regional economic cooperation such as “Economic Corridor,” Free Economic Zones are struggling to attract investments and of the zones. operation business activities necessary for effective Free Economic Zone. All four zones are within 30 km radius from the center of Ulaanbaatar City: 1) Tourism, Business & Financial, 2&3) Industrial & Innovation Zone, and 4) NUBIA Each Aero-city. zone has its own distinctive characteristics and have different functions to support it. NUBIA Aero-city is under consideration to designated Free Economic Zone with & logistics. various function of tourism, business & financial, industrial and transport housing. The majority of housing is currently concentrated around Ulaanbaatar, especially to the northern side. NUBIA Aero-city is within a relatively close proximity from the center of Ulaanbaatar which makes it easier for people to commute as well as visit to NUBIA. In part of Mongolia are located in the southern of tourist attractions addition, the majority where NUBIA can provide a quicker and smoother connection. This central location is not such as Russia for trading, surrounding countries to to Mongolia but also only applicable and China. obstacles that provides optimal conditions for new town development. Considering the potentially effective operation of the airport, an easily accessible and elevated plain with no mountains in the immediate take-off and landing is quite advantageous. Its wide and open land can also facilitate aviation industries while having the easy accessibility to that railway an industrial cluster that can contribute largely to the promotes the potential of setting up local economy. 078 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia

Review of UB Master Plan 2030 on Free Economic Zone

• Eco-Tourism 1. Tourism, Business & Financial • Business & Finance • Aero Tech Industrial Park

• Light Industrial Park • Agro Park 2 & 3 Industrial & Innovation Zone • High-Tech Park • Construction materials and Heavy Industry

• Tourism, Business & Financial 4. NUBIA Aero-city • Industrial, Innovation • Transport & Logistics Area

079 Chapter 02 Review of the Existing Master Plan

Source: Edit from MUB’s PT internal material (2019).

2.2.2. UB Master Plan 2020 – Mongolian Economic Corridor

The program for establishing “an Economic corridor” between Mongolia, China, and Russia was agreed by the Presidents of each country during the trilateral meeting. As stated in this project, 32 projects will be implemented jointly in following seven cooperative activities:

1. Support development of correlated transportation infrastructure; 2. Develop border crossing points and improve customs and quarantine controls; 3. Strengthen cooperation of industrial and investment sectors; 4. Broaden commercial and economic cooperation; 5. Expand cooperation on humanitarian exchange; 6. Strengthen cooperation on environment protection and ecological sector; and 7. Develop regional and border cooperation. It aims to make contribution on peace, stability and economic growth in the Northeast As for Mongolia, it has high potentials to increase volume of foreign investment by As shown in the figure below (Figure 2-2), NUBIA Aero-City is not only the center of In fact, Mongolia defined a new initiative to construct roads between the borders with Asia through cooperation of four countries, Mongolia, China, Russia, and South Korea, on road transportation, tourism, energy, environment and trade facilitation. By fulfilling such objectives, it embraces higher significances to connect Mongolia, a landlocked and country, northeast province of China with the ports of the Pacific Ocean, and to link the ports of Russian far north and the eastern shores of South and North Korea with the transportation of the Northeast Asia. network in the territories oil and gas infrastructure, projects related to road transportation implementing bigger pipelines, telecommunication, and power networks. Furthermore, Mongolia continues to pursue policies to become a bridge between the two powerful neighboring countries, China and Russia, whose commercial and economic cooperation have been steadily expanding— connects the Siberian zone, which has rich natural for instance, an economic bridge that resources, with industrial zones of China; and to become an integrated logistics hub of Northeast Asia. This can be achieved through creating new economic zones and new supply in Mongolia. resources of environment friendly power economic zones in Mongolia, but it is also located in the center of Mongolian Economic Corridor, giving significance to the project site. Being strategically located in the center, which puts NUBIA in an important part of Belt China’s and Road Initiative, it has a potential between in China increasing and Russia. trade Furthermore, this Economic Corridor, has the in China and Russia its economic hubs and markets most direct route between Mongolia and as well as Europe. China in the south and Russia in the north that will include 1,100 km of electrifiedrail lines and an oil and gas pipeline across Mongolia. Through this Corridor, cooperation of three governments in transportation infrastructure port connectivity, construction, industrial will be strengthened. and economy investment, trade capacity, 080 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia [Figure 2-3] UB Master Plan 2020 on Mongolian Economic Corridor

From Ocean to Land

Russia

Seeking the most effective forms of Altanbulag Free Zone Cooperation with neighbors Khushig Valley Land Port Chinese-Mongolian Russian-Mongolian trade turnover trade turnover NUBIA Aero-City $20 billion in 2020 $10 billion in 2020 Zmin-Ude Cross Bordering Free Zone $1 billion discounted Mongolian exports Loan agreement increase

China 1 billion tons of coking Meat and agricultural coal supply Contract products

From Land to Ocean

Source: Edit from Internal Materials at MUB (2019).

The results of reviewing related plans regarding NUBIA Aero-city, Ulaanbaatar City (MUB) is considering the designation of the Free Economic Zones on NUBIA Aero-city where it will not only be a brand new city but also a free economic zone around the airport with 081 Chapter convenient transportation and logistics functions. In addition, the Ulaanbaatar 2020 Master

Plan describes the Economic Corridor as a hub of business and finance connecting China 02 and Russia. NUBIA Aero-city is located in the center of the Economic Corridor, and it is Review of the Existing Master Plan expected to serve as a center of trade hub for the Economic Corridor.

2.3. Review of Master Plan Concept

2.3.1. Review of Development Concept

The concept of the Master Plan was determined in accordance with the city’s future development philosophy, characteristics, and priorities.

• Vision: Develop as an aerotropolis that meets development criteria of international cities • Mission: To become an open city where the inhabitants live and work in a healthy and safe environment supported by smart transportation network • Strategies: ‌1. A strategy of the state policy to develop the city 2. A main strategy to develop an independent new city 3. A‌ strategy that pursues distinctive goals of the development

ech Cluster : Logistic Hub for North Asian passenger and : Logistic Hub for North freight transport : New airport-based Special Zone Free Economic Zone ‌ Logistic Hub ‌ : Nomadic City of Pride & Diversity : Nomadic City of Pride & ‌ Nomadic City :Urban renewable energy, smart :Urban renewable energy, transportation Smart City ‌ : Develops IT products, Biotechnology and Nano-Technology High-T ‌ b. d. a. c. e. City Smart Free Zone Economic city City Aero Nomadic Cluster High-tech 4] 5 Functions of the Concept 4] 5 Functions of the - Hubt Logistic • Nomadic City one of the priorities for the development of the new city plan, describes The nomadic city, • Logistic Hub The establishment of a logistics hub is significant for increasing foreign trade turnover, A large focus is put on NUBIA being the transport hub for air and rail as well as a the concept of “a nomadic city” in the architecture of spatial planning, as well as the concept the concept of “a nomadic city” in the of This “a is nomadic vital city in with securing pride Mongolian and heritage diversity.” and national solidarity. which directly stimulates economic growth, and developing airport-related business and opportunities. This will also increase amounts of passengers and transportation assist NUBIA in becoming a logistic hub for North Asian passenger and freight transport. The newly built AH-3 highway that provides an easy connection to Russia and China and will also support the correlated industries within logistic hub. railroads smart city that will act as the focal point of the tourism and free economic zones. Through economic zones. tourism and free focal point of the that will act as the smart city reviewing the overarching plan, conditional analysis and project vision, the following key functions are identified: Logistic Nomadic Hub, City, Cluster, High-Tech Free Economic Zone and Smart City. Author’s own. Source: [Figure 2 [Figure 082 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia • High-Tech Cluster

The significance of High-Tech Cluster lies within the development a knowledge-based industry for high technology and specializations. Some of the industries to focus on are IT products, Biotechnology (BT), Nano technology (NT) production, and the world-class export products. A Technological Park in charge of manufacturing the necessary equipment to support such cluster would be required.

• Free Economic Zone

Free Economic Zone greatly assists in inducing local economic development through creation of jobs, promotion and diversification of exports, and increase in technology transfer and investment flows. Through the establishment of Free Economic Zone, an increase in domestic and international investment and tourists are expected.

• Smart City

083 In accordance with the recent trend of development, smart city elements such as the Chapter use of automation, urban renewable energy, and smart transportation networks will be encouraged. More efficient uses of resources and improvement of infrastructure will result 02 Review of the Existing Master Plan in better quality of life and increased economic competitiveness.

As a new type of modern city being introduced in Mongolia, NUBIA Aero-city should be developed in connection with the peripheral satellite cities to maximize the economic influence. After reviewing the current conditions as well as relevant plans, each concept would play in developing NUBIA Aero-City, and focusing on three anchor functions seem more feasible, which are airport industry, tourism & leisure, and Free Economic Zone. This is due to the locational advantage of the city, infrastructural support (such as road & airport), as well as having the potential in increasing airport competitiveness to secure economic development.

2.3.2. Planning of Population and Housing Supply

As for the review of the land use plan, projects are planned according to the appropriate scale and location. The figure below (Figure 2-4) is the basic concept of the layout for NUBIA Aero-city.

34,119 9,478 23,270 387 people/ ha ‌ Expected Population ‌ Household ‌ Economically active population Population Density ‌ • • • • City - 5] Basic Layout of NUBIA Aero 5] Basic Layout - Target population for new cities is based on a number of baseline studies, such as as such studies, of baseline a number on based is cities new for population Target The population may affect the total capacity of utilities, water & sewerage consumption, As such, target population is decided how many people can use the underground water. (1) Planning of Population: estimation of drinking water demand, planning demographic the policy, requirements for in jobs for demand the and built, be will housing where areas in requirements aerodrome new cities. By reviewing the current and potential data for such factors, the results support economically active where can reside in the new city., that 34,119 people in 9,478 households density is 387 people/hectare. population is 23,270 and the population that the calculation of population is quite mode, and housing unit plan. It implies traffic the general, In population. target the on depend demands utility many as accurate as the number of occupied area can therefore be calculated geographic population of any housing unit times the average number of persons per household (PPH). However, a major estimation method for target population is based underground water demand. be will resident of number actual the as demand infrastructure the miscalculate may It differentfrom estimation of population that depends on underground water demand. The residents will live in the houses supplied according to housing plan. Edit form Aero-City Master Plan (Gobi Trillei LLC, 2017). LLC, Master Plan (Gobi Trillei Edit form Aero-City Source: [Figure 2 [Figure 084 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia (2) Planning of Housing supply:

The new housing provision is planned to accommodate urban and rural planning, construction norms and rules (BNDD.01.04.04), and requirements for aerodromes, low- income housing districts and middle-class housing zones. Accomodation of aviation and aviation service is initially introduced to startthe establishment of a new urban settlement and the plan for the decentralization of population. In the planning phase, first-stage apartments were commissioned to provide 3,436 apartment and new airport infrastructure for the engineering infrastructure.

However, the living environment in NUBIA aero-city may not be as pleasant it sounds due to aircraft noise that the residents will constantly experience. For this reason, it is recommended that the supply of housing be minimized as this area is not suitable for large- scale residential site. The residential buildings shall be constructed for the aviation workers instead.

2.4. Review of Land Use Plan 085 Chapter With this concept in mind, the land use activities are planned according to the appropriate scale and location for each project. It is mainly composed of five zonings. 02 Review of the Existing Master Plan

[Figure 2-6] Existing Land Use Plan

Special purpose zone Apartment and (427ha) public zone (438ha) • Airport • Public management • Air cargo • Office. Hotel • Office • Bank, financial and • Economical free zone business center • Specific storage • Apartment • Reserve area • Public entertainment center Infrastructure and • School, Kindergarten road zone (902ha) • Hospital • Heating plant • Commercial service • Waste water treatment center plant • Sports and recreational • Renewable energy center • Drinking water source • Road Industrial zone (491 ha) • Pipelines • Biotechnological industry Green, Recreation & • Nano technological Tourism zone (2,099ha) industry • Recreation • IT industry • Sports court • Research industry • Golf • Air freight logistics • Park • Railway freight logistics • Protection area • Road freight logistics • Green facilities center

Source: Edit form Aero-City Master Plan (Gobi Trillei LLC, 2017). 491.5 902.0 438.46 427.04 2099.3 Areas /ha/ Utilization types Utilization 1. Public management 2. Hotel center 3. Bank, financial and business 4. Office 5. Apartment center 6. Public entertainment 7. School 8. Kindergarten 9. Hospital 10. Commercial service center center 11. Sports and recreational 1. Biotechnological industry 2. Nano technological industry 3. Information technology industry 4. Research industry 5. Airfreight logistics freight logistics 6. Railway 7. Road freight logistics 1. Airport 2. Air cargo 3. Office 4. Free Economic Zone 5. Specific storage 6. Reserve area 1. Heating plant water treatment plant 2. Waste 3. Renewable energy 4. Drinking water source 5. Road 6. Pipelines for engineering 7. Preparatory 1. Recreation 2. Sports court 3. Golf 4. Park 5. Protection area 6. Green facilities Zoning 2> Land Use Program of NUBIA Program 2> Land Use - Apartment and public zone Industrial zone Specific objective zone and Engineering infrastructure road zone Green facilities and recreation and tourism zone As an airport in the center of the development, mixed-use zone comprised of residential 1 2 3 4 5 No and commercial projects is placed to the north of the airport. Logistics and the industrial industrial the and Logistics airport. the of north the to placed is projects commercial and infrastructure hub zone are located to the south of the site to maximize the use of peripheral such as AH-3 highway and regional Although highway. zoning is well-distributed at this will functions final the that so forecast demand on based finalized be should it moment, functions for be in line with airport city concept. The consultant will recommend optimal discussion with Mongolian stakeholders. NUBIA aero-city and will be decided by Author’s own. Source:

After review of geographic location, master plan concept, related plans and development conditions of NUBIA Aero-city, the SWOT analysis is conducted as shown in the following tables (Tables 2-3, 2-4, and 2-5).

(1) Strengths

Analysis of Strengths

Item Details

• ‌According to the UB Master Plan 2030, the NUBIA aero-city is envisioned as Free Economic Zone (FEZ), corresponding with the overarching regional and national level plans. Related Plans • ‌According to MUB’s Free Economic Zone (FEZ) plan, the NUBIA Aero-city will be designated as Transport & Logistics hub, Air Transportation Zone, and Continental port. • NUBIA Aero-city will be a trade hub of Economic Corridor

• ‌NUBIA Aero-city is located 53 km away from the city center, and satellite cities such as Zuunmod, Maidar, and Sergelen are closely located NUBIA Aero-city. Location • ‌Newly built highway from the Chinggis Khan Intl. Airport to NUBIA will provide good accessibility to the NUBIA Aero-city. • AH3 highway and Bogdkhan railroad will be built 8 km away from the NUBIA Aero-city. 087 Chapter • The overall terrain of the project site is gently sloped. Development • ‌It is feasible to establish the NUBIA Aero-city as there is no water streams or any other Condition

obstacles that would impede the development of the area. 02 Review of the Existing Master Plan Source: Author’s own.

(2) Weaknesses

Analysis of Weaknesses

Item Details

Location • Low‌ current attractiveness and recognition nearby NUBIA Aero-city

• Residential‌ area is too close to NUBIA. The living environment in NUBIA aero-city will not be pleasant due to the aircraft noise and air pollution that the residents of the city will Land Use Plan be constantly experiencing. Too many functions in Land Use Plan that are not designated based on actual demand and concept of Airport City.

• Due‌ to the low capacity of infrastructures inside the NUBIA aero-city, new infrastructures Infrastructure need to be constructed.

Source: Author’s own. for Mixed-use zones the development of w attractions n its attractiveness due to due n its attractiveness y satellite cities located nearby. act investors and corporate clients act investors and corporate Details Details ative & financial support to meet large-scale urban developments ative & financial support to meet large-scale urban y to NUBIA will provide good accessibility. y to NUBIA will provide y (AH3) and Bogdkhan railroad will be constructed near NUBIA will be constructed y (AH3) and Bogdkhan railroad affic to access the NUBIA is only one local road (no bus route and public affic to access the NUBIA is only one local road astructural utilities will be newly built. utilities will astructural ero-City Master Plan is established with various concepts such as Airport logistic/ ero-City Master Plan is established industrial hub, High-tech Cluster within Free Economic Zone. industrial hub, High-tech large-sale new towns. and Logistic hub. is insufficient. recent re-development plan as this area will be transforming to a new town area. recent re-development plan as this area will be transforming system). transportation ‌ The 35-km new highwa ‌ National highwa Not only strengthen airport support capacity but also create ne Not only strengthen airport will be readily provided b A sufficient labor force NUBIA A with economic opportunities Suitable design of new developments Zones and New policies emphasise designating the Free Economic Creation of a new economic hub that will attr Creation of a new economic ‌ ‌ ‌ ‌ ‌ ‌ ‌ Internal infr ‌ ‌ Not pleasant living environment for residents ‌ Some of functions are too utopian and overreaching. ‌ Anchor functions are not clear as an airport city development. ‌ still maintai The Chinggis Khan Airport (old airport) area will Skilled labour, administr ‌ The mode of tr • • • • • • • • • • • • • • • 6> Analysis of Threats 5> Analysis of Opportunities 5> Analysis - - Item Item Land Use Condition Condition Development Development Related Plans Land Use Plan Infrastructure Infrastructure (4) Threats (3) Opportunities Author’s own. Source:

3.1. Latest Trend on Airport Area

Recently, airports are becoming new dynamic centers of economic activity and are closely related to the development of the entire city. Airports and its surrounding areas are recognized as optimal places to create various synergies in connection with the airport facilities. As a result, the airport areas now serve as important places to introduce various activities. They have incorporated several commercial services and businesses, both inside passenger terminals and on their landside areas.

[Figure 2-7] Analysis of the Trend

Past Airport Current & Future Airport Excellent Infrastructure Simple function with Airport area is a city where airplane landing & Takeoff Airport, Highway, various economic & industrial Railway, Subway activities are taking place 089 Chapter ▶ Change to Airport City Hub airport High ratio Hub Airport ▶ Actively of transit passengers MICE, Business, Leisure, Finance responding to customer's needs 02

(Airport always has floating population) Review of the Existing Master Plan

Logistics & Service Airport Development ▶ Airport City where is well Only construction of Economic Hub equipped with various Airport facilities functions and facilities (High-value services, High-tech industries)

Source: Author’s own.

Airports are also becoming the economic catalysts of a metropolitan area by attracting tourists and serving commercial needs of millions of air passengers and airport-area visitors annually. Based on this, airports can create new major urban economic entities such as airport cities, the aerotropolis and greater airport corridors.

The airport area has excellent infrastructure and is the closest link to the world. Therefore, it is important to consider introducing functions that can create synergy with airports, such as airline industry, aviation logistics, MICE and so on. eholders polis 20~30km) Aerotro Aerotro (Airport radius y airport authorities Planning and Developing and private and public managed b regional in cooperation: airport authorities; airport in cooperation: private developers; and local and regional public institutions Mix of developers: private, public, Privately and public developed and Privately and public developed ‌ Unplanned for national; planned for ‌ ‌ ‌ ‌ Public-privately planned Intervention of various stak • • • • • y highways y highways Airport Corridor (Between Airport & City) Concept’s features Concept’s astructure planning apolation of the Airport City to the apolation of the Airport eatures similar to Airport Corridor surroundings of its perimeters commerce; public services; leisure and business commerce; public services; spaces residential, thematic and logistical spaces (express or tollgate) and railway (express/high (express or tollgate) and railway speed or tollgate) the host city the infr ‌ ‌ ‌ ‌ Limited to the airport perimeter ‌ services: aviation logistic, Large supply of various Extr Replication of Airport City services, industrial, F ‌ ‌ Connected to host city and region b ‌ Developed on a corridor between the airport and Developed on a corridor between the airport and on Greater and more varied involvement of public • • • • • • • • Airport

City 8] Development Direction 8] Development 7> Basic Layout of NUBIA - (Airport- - Airport City oriented city) Airport Airport Corridor Category Aerotropolis Airport Airport City is the closest to or directly connected to the airport and serves as a center 3.2. Definition of Airport City of Airport 3.2. Definition Depending on the function, scale, influencerange, and location, the airport area can be of business-trade district for handling passenger-related demand and logistics around the the around logistics and demand passenger-related handling for district business-trade of internal an or connected by to the airport connected also directly It is terminal. airport circulation road network. divided into three concepts: Airport Aerotropolis city, and Airport corridor. This chapter such concept. has adopted Airport City as NUBIA Aero-city discusses more about [Figure 2 [Figure Kim, Baek-Su(2013), “A Study on Activation Methods of Airport City Development of Incheon Airport”. on Activation Methods of Airport City Development Study Kim, Baek-Su(2013), “A Source:

3.3. Case Study of Airport Cities

The Chek Lap Kok airport in Hong Kong and Schiphol Airport in Netherlands and Brandenburg Airport in Germany are good examples of Airport City. The various commercial & business functions are locating on and around major airport sites—transforming them from “city airports” and “airport cities”.

[Figure 2-9] Development Outline of 3 Airport Cities

Category Chek Lap Kok Schiphol Brandenburg

Region Hong Kong Amsterdam, Netherlands Berlin, Germany 091

Chek Lap Kok, 30km northwest 17km Southwest of 18km Southeast of Chapter Location of Hong Kong Island Amsterdam CBD Berlin CBD 02 Area(ha) 1,255 2,200 2,000 Review of the Existing Master Plan

Runways & 2 runway(3,800mx60m), 6 runway, 2 runway, Terminal 2 passenger terminals 3 passenger terminals 3 passenger terminals

Amsterdam City, Schiphol Berlin Brandenburg Flughafen Developer Airport Authority Hong Kong Airport Development Agency, Holding GmbH Royal Schiphol Group

Airport City ‌Sky City Business City - Shopping‌ & Hotel Main - MICE Convention - Logistic Center (Regional Specialty Store) Functions - Shopping & Entertainment - Aviation Logistic Hub - Business Park - Hotels - Cargo and general aviation

Location Map

Source: Author’s own. al

11] Main Functions of Schiphol Airport City 10] Main Functions of 3 Chek Lap Kok Airport City 10] Main Functions - - 3.3.2. Schiphol Airport City, Amsterdam 3.3.2. Schiphol Airport City, to hub that offers multi-modal forms of transport Schiphol airport is an international 3.3.1. Chek Lap Kok Airport City, Hong Kong Hong City, Lap Kok Airport 3.3.1. Chek Chek Lap Kok Airport has been growing with a new development adjacent to the such as logistics, commercial, cargo, and industry of place with consideration - expansion will take surrounding nature and airport-related industries Business District including MICE, shopping, Business District including entertainment and Finance ‌ ‌ ‌ International Business City with diverse functions Five-phased plan to expand out to periphery ‌ Developing a business hub that caters for Centr Developing a business hub Good connectivity via air and sea • • • • both people and goods with numerous facilities. Based on the airport city concept, Schiphol is a key gateway for international trade and business engine for various forms of economic activity. passenger passenger terminal called Sky This City. consists of Sky Plaza which is an office, retail and business & MICE complex integrated with the passenger terminal. Sky City has the Asia- World Expo Exhibition Centre, Marriot Hotel, a nine-hole golf course, and a permanent park, more hotels, and well consist of a business terminal. Phase 2 may cross-boundary ferry entertainment facilities. further leisure and Amsterdam’s Schiphol Airport website (http://www.amsterdamairport.info/). Amsterdam’s Source: [Figure 2 [Figure Chek Lap Kok Airport website (https://www.hongkongairport.com/). Source: [Figure 2 [Figure 092 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 3.3.3. Berlin Brandenburg Airport City, Germany

Berlin Brandenburg Airport is an international airport under construction near the capital of Germany (expected to be in operation in 2020). This airport is located 18 km south of the city center, and it has adopted a single airport concept to ensure the economic viability, implying that the new airport would become the sole commercial airport for Berlin and Brandenburg.

This new airport is directly connected to the railway underground station that makes easy connections to the city center of Berlin by utilizing the domestic railway line, the regional railway network, and the international air network. In addition, the Inter City Express (ICE) will be connected in the future and to the continental high-speed railway as well. In order to connect with the express highway, a dedicated access road is connected to the existing express highway, which is smoothly joined with the high-speed traffic modes.

Brandenburg Airport has a 16-hectare “Airport City” within walking distance of the airport’s passengers. This airport city has attracted more than 150 world-class brands 093 and local specialty stores in its center. It also has established shopping & hotel, cafes & Chapter restaurants, offices and conference facilities. Northern part of the airport area will be an aviation industry that operates cargo facilities, aviation terminal, and aircraft maintenance. 02 Review of the Existing Master Plan A 109-hectare business park will also be established for industrial and commercial use as well as congress centers.

[Figure 2-12] Main Functions Brandenburg Airport City

• Airport‌ City (16ha): shopping mall, hotel, office, restaurant & cafe Business Park (109ha): Congress center (Industrial & Commercial Use) • ‌Aviation Industry : - Cargo facilities (60,000 ton) - General Aviation Terminal - Aircraft maintenance

Source: Wikipedia (https://en.wikipedia.org/wiki/Berlin_Brandenburg_Airport). NUBIA Aero City NUBIA Aero • Airport City is good for aviation logistics and it aerospace industries as connected to the is directly airport. • NUBIA Aero-city is applied • NUBIA Aero-city to Airport City Concept (Airport-oriented City) City - Case Study of Airport City Airport Logistics facilities • Chek Lap Kok Airport : • Chek Lap Kok MICE in connection with • Schiphol Airport : Aviation Cargo, Logistics, Commercial, Industrial Cluster Airport : • Brandenburg Shopping & Hotel, Aviation Business Park industry, 13] Development Direction of NUBIA Aero Direction 13] Development - Airport Development 3.4. Lessons from Case Studies from 3.4. Lessons An airport is much more than aviation infrastructures. It has become multi-functional airport simple a from transforming now is city airport the that shows study case The As such, airport cities will need to be equipped with aeronautical services such as • Airports are becoming new dynamic centers of economic activity • Airports are developing as is well Airport City where equipped with various functions & Services & Industries area that generates considerable economic development. According to above case studies, airport areas are developed as an “Airport Hinterland” that also attracts non-airport linked business. This multi-functional development is referred to as an A “Airport City.” city in general is multi-functional, but the crucial differenceis that the airport city focuses than residential houses. functions rather primarily on economic function to a center of new economic In activity. particular, Chek Lap Kok Airport has attracted MICE and international business, Schiphol Airport City has attracted aviation & hotel, and aviation industry. shopping Airport has attracted logistics, and Brandenburg aviation logistics & cargo, commerce and urban services to support aviation-related industries. NUBIA as Aero-city, it is directly connected to the airport, is suggested to invite the aviation logistics or aviation industry which will serve optimal functions for the development of an Airport City. Author’s own. Source: [Figure 2 [Figure 094 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 4. Korea’s Development Experiences

4.1. Incheon Free Economic Zone (IFEZ), Korea

Incheon Free Economic Zone (IFEZ) is a specially designated aerotropolis where the government supports international businesses to maximize their economic potentials. IFEZ, comprised of Songdo, Yeongjong and Cheongna international cities, is being developed into the golden triangle of the west coast of Korea.

The goal of the IFEZ is to transform these three cities into hubs for logistics, international business, leisure, and tourism for the Northeast Asian region. It is also planned to be a self- contained living and business district featuring air and sea transportation.

IFEZ has three development stages until 2020. The first stage is for building infrastructures, and the second stage is for “expanding the infrastructure for education, health, and leisure, and attracting domestic and international businesses.” The final stage is 1 to realize the goal of the project of building a top-three economic zone in the world. 095 Chapter

[Figure 2-14] Main Features of IFEZ 02 Review of the Existing Master Plan

• Aims‌ to transform the cities into hubs for Aviation logistics, international business, leisure and tourism

• Established‌ to be one of the top economic zones

• IFEZ‌ is designated with area size of 122.4km2 over Songdo, Yeongjong, and Cheongna Intl. cities including the Incheon Intl. Airport.

Source: Author’s own.

1 https://en.wikipedia.org/wiki/Incheon_Free_Economic_Zone. 90 32.4 17.8 Seo-gu, Cheongna Corporation Gyeongseo-dong Metropolitan City, Metropolitan City, Corporation, Incheon Corporation, Korea Rural Community Community Rural Korea Korea Land and Housing Korea 169 12.2 52.3 Yeongjong & Yongyu-dong Jung-gu, Yeongjong Development Agency Korea Land and Housing Korea 2003 ~ 2022 (1st Phase 2009) 2003 ~ 2022 (1st Phase 2009) Incheon Metropolitan City, Incheon Metropolitan City, Corporation, Incheon Urban Corporation, Incheon Intl. Airport Agency, Incheon Intl. Airport Agency, 8.3 6.1 5.5 5.9 8.0 33.1 13.9 253 City 47.4 53.4 Ratio (%) Songdo Yeonsu-gu, Yeonsu-gu, Songdo-dong ) Incheon Metropolitan

City, Songdo Techno Park, Songdo Techno City, ㎡ New Songdo International New Songdo International 530 1.0 954 1.8 821 120 1.5 0.2 4,437 3,245 7,936 14.7 7,343 Area 53,362 100 (1,000 ) ㎢ ) ㎢ 15] Land Use Plan of Sondo International City 15] Land Use Plan of Sondo International Period 8> Analysis of Aerotropolis within Incheon Free Economic Zone Economic Incheon Free within of Aerotropolis 8> Analysis - Location - Area ( Category Developer Total units Road (Thousands) Planned Pop. Others Tourism Logistics 4,282 Business Research 3,151 Industrial 2,930 Category Mixed-use Residential Density (Person/ Commercial Park & Green 17,690 4.2. Functions of Three International Cities 4.2. Functions of Three 4.2.1. Songdo International City Songdo boasts the world’s best IT infrastructure that is linked to the global the gateway, Neighborhood Incheon International Airport, with the natural landscape of Korean peninsula. Songdo, Northeast Asia’s No. 1 Business the City, center of information Biotechnology Technology, and Research & Development industries. High value-added Aviation Logistics Hub, Medical Leisure, and Free Economic Zone. Mixed city, Edit from “White Book of Incheon Free Economic Zone” (IFEZ, 2007). “White Economic Zone” Edit from Book of Incheon Free Source: [Figure 2 [Figure Edit from “White Book of Incheon Free Economic Zone” (IFEZ, 2007). Zone” “White Economic Edit from Book of Incheon Free Source:

Cheongna presents a serene waterfront environment that utilizes the water resources. By introducing nearby logistics and transportation infrastructure, Cheongna International City also proves to be a mighty business and global finance district, and sports and leisure complex.

[Figure 2-16] Land Use Plan of Cheongna International City

Category Area (1,000㎡) Ratio (%) Residential 2,331 13.1 Neighborhood 14 0.1 Commercial 655 3.7 Business 496 2.8 Mixed-use 230 1.3 Industrial 861 4.8 Research 506 2.8 Investment 1,397 7.8 Tourism 2,005 11.3 Road 2,953 16.6 Park & Green 3,343 18.8 Others 2,799 15.7 097

Total 17,807 100 Chapter

Source: Edit from “White Book of Incheon Free Economic Zone (IFEZ, 2007)”. 02 Review of the Existing Master Plan 4.2.3. Yeongjong International City

Yeongjong provides leading infrastructures in logistics, commerce, tourism, and distribution, which are well represented by Incheon International Airport, and is able to renew itself as the essential city that focuses on logistics, aviation services, leisure, and tourism.

[Figure 2-17] Land Use Plan of Yeongjong International City

Category Area (1,000㎡) Ratio (%) Residential 6,710 12.1 Commercial 1,490 2.7 Business 847 1.5 Mixed-use 41 0.1 Industrial 5,227 9.4 Tourism 3,207 5.8 Road 4,796 8.6 Park & Green 8,891 16 Airport 7,709 13.9 Reservoir 2,968 5.4 Others (Public) 2,799 15.7 Reserved Area 7,615 8.8 Total 52,300 100

Source: Edit from ;White Book of Incheon Free Economic Zone (IFEZ, 2007). (FBO) (197ha) Golf Course Aviation Logistics Aviation Area(IBC-11 (16ha) • Hotel • Office • Commercial Service • Airport Terminal • Airport Terminal Shelter • Aircraft • Warehouse Fixed Based Operator • Airport Logistics Complex International Business 18] Land Use of Airport City at YeongJong - Area(IBC-1) (50ha) IBC- Stage 1 (Paradise DHotels, City, Golf Club) is the first of its kind in Northeast Asia as 4.2.4. AIRPORT City at Yeongjong 4.2.4. AIRPORT Incheon International Airport also is pursuing the development of Airport City with Through the development of the surrounding areas in connection with airport, it is not Area(IBC-II) (437 ha) • Resort • Hotel • Entertainment • Shopping • Office • Hotel • CASINO • Club & Spa • Convention • MRO Facilities • MRO shelter • Aircraft Cargo • Aircraft and Operation (MRO) and Operation Maintenance, Repair International Business International Business a resort complex with hotel, casino, convention, shopping, art spa, gallery, club, carnival, been successfully performances, and other hospitality and entertainment facilities. It has operating from 2018 and is attracting many tourists and visitors into a resort complex. As a way to promote the foreign investments for free economic zones, the Korean government has currently been giving prior permission through preliminary examination for the foreign investments of USD 500 million or more regarding the foreigner-only casino business license that was scheduled to be approved after the development project is completed. This is to ensure the place. uncertainty in investment is eliminated and active foreign investments can take the goal of being a representative tourism and business hub in Northeast Asia. For the development of an Airport it City, is operating properties that include International Business Area(IBC-I) stage-1, Runway-5 area (golf course). It is currently pursuing additional investments for International Business Area (IBC-I) stage-2 and International Business area. Area(IBC-II) and BC-III creating new demands that will its airport support capacity but also only strengthening to the national and local development. further contribute Edit from Incheon Airport Authority webpage (https://www.airport.kr/). Edit from Source: [Figure 2 [Figure 098 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia [Figure 2-19] Bird’s-eye view of Paradise City

Source: Incheon Airport Authority Website (https://www.airport.kr/co_cnt/ko/majbus/airport/airove/airove.do)

The Land Use Plan of IBC-II Stage 2 [Figure 2-20] IBC-II Stage 2 area includes the following location and surface area: airport northwest area 4,775,000㎡(including 1,501,000㎡ of reservoir). 099 Chapter

The International Business Area within Yeongjong Airport City provides 02 Review of the Existing Master Plan not only hotel, resort, and casino services but also aircraft maintenance services, aviation logistics, and FBO (fixed base operator) services. • Development‌ theme: shopping, tourist attraction, and business to accommodate foreign tourists More specifically, the Yeongjong • ‌Function: Hotel, entertainment, shopping, business airport city retains huge space for facility, etc.

MRO (Maintenance, Repair, Operation) Source: Incheon‌ Airport Authority Website (https://www.airport.kr/ co_cnt/ko/majbus/airport/airove/airove.do). facilities due to a lack of aircraft maintenance services at Incheon Airport, which has led to heavy reliance on foreign outsourcing of aircraft maintenance. It is expected to attract local and foreign companies related to aviation maintenance and flight training while contributing to the growth of the regional economy.

2 560,000ℓ 440,000ℓ 270,000ℓ 230,000ℓ Songdo Singapore Dublin · Coke San Francisco 4.3. Development Features 4.3. Development Facilities Effect of Anchor 4.3.1. Ripple land. the sale of is required for great cost a city, enter the airport initially In order to Songdo International City has attracted Samsung BioLogics by providing 274,000m Also, Yeongjong Aviation Cluster is in development to build a special industry base for • Location: Sector 4, 5(910,000㎡) Industry: Bio Medicine, Medical Devices, R& D Ins. • Target DM Bio • Major Investors: Celltrion, Samsung Biologics, Production Capacity(Single city basis) In Songdo International the City, long-term free lease method was used rather than sales to save the initial entry costs. In other words, through the endless reforms, domestic and foreign companies are provided with reliable investment conditions by creating a business- friendly environment. Edit from internal education material of IFEZ(2019). Edit from Source: [Figure 2-21] Expansion of the Songdo Bio Hub [Figure of land with an exceptional incentive such as free lease of land for 50 years, in order to strategically facilitate the bio As industry. a result, Songdo has emerged as the world’s No. 1 biopharmaceutical production city by attracting large companies such as Celltrion and Samsung BioLogics. space and including aircraft, an air center training and Industry MRO based on firm IT skills of America, Asia. The global engine manufacturer, UTC and ICN, the hub airport of Northeast and KAL collaborated to build an aircraft engine maintenance center and world’s largest aircraft manufacturer Boeing (USA) is constructing the largest operations training center in Asia. 100 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia

Outline of Anchor Facilities in Sondo and Yeongjong

Category Sondo International city Yeongjong Aviation Cluster

Anchor Facilities Sondo Bio Hub Yeongjong Aviation Cluster

Area(ha) 28 363

Value Chain Samsung Biologics, Celltrion, DM Bio Aeronautical MRO, Components, R&D Centers

Turnover $1.26 billion $1.1 billion

Source: Edit from internal education material of IFEZ(2019).

[Figure 2-22] Outline of Anchor Facilities in Songdo and Yeongjong

[Sondo Bio Hub] [Yeongjong Aviation Cluster]

Expansion

Existing bio-hub

101 Chapter 02 Review of the Existing Master Plan

Source: Edit from internal education material of IFEZ(2019).

In this sense, attracting anchor facilities or anchor companies are vital in successful development of an airport city. Rather than introducing various functions indiscriminately, it is important to select distinctive targets and attract anchor functions centered on high value- added job-oriented service industries or aeronautical logistics and aerospace industries that can be directly linked to NUBIA.

4.3.2. Casino and Integrated Resorts

There used to be a negative connotation for the casino industry until recently, but it is now attracting attention, generating foreign currency revenue. The profitability for key functions of resorts such as accommodation, MICE convention, shopping center and theme parks are very low; however, casino facilities are synonymous with these facilities and can be said to be the most important source of revenue. For instance, the business structure of complex casino resorts in Macau and Singapore are reported generating 80 to 90% of profits from casino facilities, hotels, convention and commercial. In other words, if such complex resorts were not based on casinos, the development itself could have been uncertain. 106 IBC-3 Lease Under USD 2.5bn Inspire IR Construction Arena, Convention etc. Mohegan Entertainment CASINO for Foreigner, Theme Park, Hotel, Theme Park, Hotel, CASINO for Foreigner, 33 IBC-1 Lease Operating USD 1.8bn Paradise City Paradise Paradise Group Paradise Hotel, Shopping Mall, etc. CASINO for Foreigner, Convention, CASINO for Foreigner, Land Main Status 10> Outline of Integrated Resort at Yeongjong Airport City Resort at Yeongjong 10> Outline of Integrated Location Facilities - Total Budget Total Total Area(ha) Total Project Owner Classification A casino also accounts for the highest proportion of foreign tourists. In Korea, where the Incheon International Airport Corporation, located in Yeongjong Airport has City, Yeongjong Airport including City, the Incheon International Airport’s infrastructure

[Paradise City] [Yeongjong Airport City] [Inspire IR]

IBC - III

IBC - I

Source: Edit from Incheon Airport Authority website (https://www.airport.kr/co_cnt/ko/majbus/airport/airove/airove.do).

4.3.3. Living Infrastructure

Songdo was chosen as the most ideal airport-based city among the seven major airport cities in the world by “Aerotropolis – The way we’ll live next.” Although the criteria for the 103 selection was based on several factors, its connection with the airport was played a major Chapter role. The rest of the factors are focused on having the functions that a city should have 02 in order to become a compact city such as residential, office, education, and culture and Review of the Existing Master Plan shopping activities; these factors are essential to create a good living infrastructure for a company to move in and have the infrastructural support to operate well.

In the case of Yeongjong International City, airport facilities are directly connected to the airport, and the city is being developed to the eastern direction of the airport to provide high-quality residential areas and attract anchor companies to enhance the city’s self- sufficiency. In other words, anchor companies can only be attracted if the daily services that people need, such as lifestyle, education, and culture need to be enhanced and a pleasant living infrastructure also need to be created so that the workers as well as their families can move into a good living environment.

The market for international schools continues to expand around the world and is vibrant and growing along with economic development. Songdo International City has international schools, hospitals, and create various residential environments as well as facilities for tourism and leisure. To make a successful NUBIA Aero-city, it will offer an optimal living environment by creating an infrastructure that is perfectly suited to the international standards of overseas investors.

‌ Integrated Control Center Integrated , SUNY Korea, UTAH.) UTAH.) , SUNY Korea, Contents adise City, Jack Nicklaus CC (Golf Club) CC Jack Nicklaus adise City, onsei, Incheon National Univ.) onsei, Incheon , Disaster prevention, Environment, Public information• , Disaster prevention, Environment, Songdo Global Campus Hyundai Premium Outlet Golf Course Jack Nicklaus 4 global universities (George Mason, GENT (George Mason, 4 global universities (Y 2 domestic universities ‌ Security Par Premium Outlet, Costco, ‌ ‌ ‌ • • • Prestigious Services Infrastructure Smart City Service • ourism and Leisure T Educational Institutes Educational Chadwick Intl. School Bus Information System Policy Recommendations 2 3 1 The prospects of an airport’s growth and economic impact are determined by the the economic impact are determined by and growth The prospects of an airport’s Concerning physical conditions, case studies of airport cities and potentials of NUBIA

Item development and size of its hinterland, anchor functions, the regional and economy, the of impact spatial and economic and potential The connections. international of number a small airport, such as NUBIA airport, differ from that of a large airport such as Incheon International Airport in Korea. the Aero-city, factors of success for NUBIA Aero-city are focused on functions, economic activities, and synergy with existing cities. 5. Edit from internal PT material of IFEZ(2019). Edit from Source: Edit from internal PT material of IFEZ(2019). internal Edit from Source: High-Quality Services 2-24] Songdo’s [Figure

Songdo’s High-Quality Services High-Quality 2-11> Songdo’s

The airport is not just a space where aircrafts land and take off but is instead transforming into a high-value business in distribution, culture, tourism, and commercial areas, which is why countries all around the world are strategically developing airport cities.

As a result of case study for airport cities, Chek Lap Kok Airport in Hong Kong has been a major transit center for passengers and cargo through Hong Kong, and it is a gateway to several countries in East and Southeast Asia and mainland China. Chek Lap Kok Airport is using passengers terminal called as Sky City based on the MICE, Convention, and Hotel. Sky City has been developed to meet the needs of an airport hub base and is enhanced through business, commerce, and tourism.

Amsterdam Schiphol Airport is a logistics-based airport city based on “Schiphol Cargo World.” It attracted aviation logistics centers such as that of multinational companies through the aggressive investment policies of the Dutch government.

105

As for the Yeongjong Airport City, commercial areas such as hotels, casino, resorts are Chapter provided by creating an International Business Hub, and there are maintenance and storage for airplanes as well as logistics near the runway. This implies that the focus should be on 02 Review of the Existing Master Plan providing commercial, leisure, and airport logistics.

The new airport cities are being developed with an emphasis on the airport hub function such as MICE, convention, hotel, and aviation logistics. In other words, they are focusing on one or two anchor functions rather than incorporating many functions.

The review of the case studies in Korea, Songdo International City is a smart city that is focusing on the high-tech industry including IT and BT industries. Yeongjong International City provides a hinterland for residence through the Sky City and high value-added aviation logistics hub. Finally, Cheongna International City can be regarded as an international financial and leisure city. As such, instead of concentrating on one or two anchors, the three aerotropolis offer a variety of city functions that can be found in new cities.

In conclusion, NUBIA Aero-city should identify the main anchor functions that can increase the competitiveness of new airport. As NUBIA Aero-city is similar to the airport city concept, it is recommended to concern the functions that can create synergy with airport such as airline industry, aviation logistics, MICE, trade, and so on. Aircraft Aircraft Center Hotel & Terminal, Shopping Congress Restaruant Maintenance Airport Cargo & Airport Cargo Brandenburg Business Park, High-Tech Cheongna Canal way, Robot Land Intl. Schools Intl. Finance, Cluster, R&D Intl. Business, Shopping mall Robot Industry Flower Complex Office Resort & Terminal Convention, Airport City Airport City MRO Facility, MRO at Yeongjong Airport Cargo Hotel, CASINO, According According to the existing Master implement successfully to order In Plan Plan of NUBIA Aero-city includes many research, as industrial, such functions logistics, tourism, commercial, business, park & green space, and various industries. NUBIA Aero-city with fully occupied 5.2. Recommendation for Functions of NUBIA Aero-city Logistic Medical Sky City Tourism Complex Complex Leisure & Complex, residence) Yeongjong Intl. Business (Hinterland for Aviation Cluster Aviation Cluster

Schiphol Cargo World, Airport Cargo Intl. Business, R&D Industrial Air Transportation Continental port Air cargo Warehouse Tourism information Tourism Center, Leisure & relax Logistics Tourism cluster Songdo Medical R&D tech Industrial Aero Complex Stadium Complex High-Tech Art Center Apartment Residential, Intl. Schools, Rock Musical MICE Sports Water Leisure, Water Hotels, Airport IT, Bio-Complex, IT, Logistics Shopping, convention, Business Hub Chek Lap Kok Business Research City - Commercial & Business, Finance Commercial Centre & Aero ‌ Functions of Existing NUBIA 26] 25] Main Functions of Airport City of Airport 25] Main Functions - - Industry use Park & Green MICE MICE park Airport Airport Tourism & Mixed Industry Tourism Industry & Leisure Airport & Leisure & Business & Business Residential Airport City industry, industry, Aerotropolis High-tech Agro park, Agro Eco park, Green area Recreational facilities Edit form Aero-City Master Plan (Gobi Trillei LLC, 2017). LLC, Master Plan (Gobi Trillei : Edit form Aero-City Source Author’s own. Source: 2 [Figure [Figure 2 [Figure 106 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia domestic and global enterprises, NUBIA Aero-city should consider what are the “key functions” in line with the concept of the airport city. It means that NUBIA Aero-city should find anchor functions rather than introducing many functions indiscreetly.

As mentioned before, the functions to be invited in NUBIA Aero-city are very diverse as shown in the left side of the figure below (Figure 5-3). These functions were firstly re- classified into four themes: Airport-related industries, case studies of airport cities, Korea’s experience, and living facilities function. The KSP team has made many consultations and discussions with the Mongolian government officials, conducted high-level meetings and received comments from advisors.

Based on these results, the anchor functions of NUBIA Aero-city are finalized. Firstly, the aviation industry including aviation logistics, airport cargo, and MRO facilities; secondly, the MICE and business industry including R&D centers; thirdly, tourism & leisure including hotels, shopping malls and integrated complexes; and finally, the supporting facility that includes international schools and smart service are suggested.

107

[Figure 2-27] Proposed Functions for NUBIA Aero-City Chapter

Current Functions in NUBIA aero-city Airport-related Industries Proposed Functions 02 • Airport Logistics

Air Cargo Review of the Existing Master Plan Special • Cargo World Economical free zone Purpose • MRO facility Airport Industry Specific storage Zone • Airport Terminal Reserve area • Aviation Cluster • FBO (Fixed Based Operator) Aviation Logistics Financial & Business Center Airport Cargo Airport city Case Study Apartment MRO Facility • MICE Public entertainment center • Convention School • Business Hub Residential • R&D Center Kindergarten & • Hotel & CASINO Hospital & bank Public Zone • Integrated Resort MICE & Business Commercial service center • Shopping Center • Intl. Business Center Convention Sports and recreational center Exhibition Korea's Experience R&D Center Office Hotel • Bio Cluster • Medical Complex Biotechnological industry • Aviation Industrial Cluster Nano technological industry • High-tech Cluster • Leisure & Tourism Complex Tourism & Leisure IT industry & Research industry Industrial • Sky City Zone Air freight logistics • Residential area Hotel, Shopping Mall • Intl. Finance & Business Railway freight logistics • Shopping Mall(Premium Outlet) Integrated Resort Road freight logistics center Living Environment Sports court • International University Recreation Recreation • Smart City Services & Supporting Facilities Golf Course • Hospital & School Tourism • Premium Outlet (University, Hospital) Park & Green • Golf Club

Source: Author’s own. ‌ ating new economic activities and introducing commercial activities; ating new economic activities and introducing xpanding xpanding the economic activities and related aviation logistics and creating conomy; and and even national economy; multiplier effects that enhance the regional differentiation of industrial and commercial cluster. differentiation of industrial and commercial gener e

• • • o avoid an airport city becoming deserted after business hours, it is recommended to or airports, the airport city concept has provided an opportunity to diversify from away According According to experience Korea’s in the development of airport cities, the IFEZ attributed Yeongjong Aviation Cluster is in development to build a special industry base for space F T As mentioned earlier, airports are increasingly being viewed as catalysts for local 5.3. Economic Activity and Living Environment 5.3. Economic As NUBIA Aero-city has adopted airport city concept, it is recommended the functions aviation activities and to generate non-aeronautical revenue. Apart from airport-related activities (e.g. transport and logistic firms, and airport services), other types of companies and institutions, such as bio cluster, aviation cluster, international school, and integrated also be interested in locating near an airport. resort including hotels and casinos, will to proximity district’s the to Songdo in interest companies’ biopharmaceutical global the Incheon International Airport and large-scale R&D facilities built by Samsung BioLogics, Celltrion, and DM Bio. and aircraft including industry, an air training center and MRO based industry, on its firm IT skills and ICN, the hub airport of Northeast Asia. The airport city in Yeongjong, attracts foreign casino facilities in IBC-I (Paradise City) and “Inspire Integrated Resort,” a Korean- allow for tourism and leisure functions such as integrated resorts (hotel, casino, shopping investments in multiple economic activities. large-scale malls) that attract economic development. Their ability to jobs generate and new attract business is being used in many locations as a justification for public investments in new airport construction and expansion. Also, rapid commercial developments at and around airports makes them the leading urban Airport growth regions generators. are becoming a place to work, shop, trade, development will achieve positive effects, such as: and do businesses. Properly planned that can create synergy with airport be implemented. Therefore, NUBIA Airport should be developed as a multifunctional airport city that offers anchor functions such as aviation MICE.• facilities, and logistics, MRO 108 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia style leisure complex located at 4.37 million sq.m of IBC-III area at Incheon International Airport. Construction of new tourism clusters centered around Inspire Resorts and new casinos result in creating 10,000 high-quality jobs, attracting more than 3 million new foreign tourists and more than 600,000 transit passengers annually. The airport city can thus attract a wide range of companies and employees, which increases the value and appeal of the airport and its wider environment, creating a strong network of anchor companies and facilities that reinforce each other.

Currently, the airport city provides high-quality education services to the foreign residents is provided. As the place where talented people will grow up and play an important part in leading the global era in the future, top notch educational curriculums are also provided. Through its efforts, Songdo’s International City has been constantly upgrading the quality of its educational services. The global university campuses (e. g. Chadwick International School Songdo, Yonsei International Campus, and Incheon National University) are being been built by integrating various degree programs of leading schools from foreign countries. 109

The area around the airport is now a great place to work, shop, and have fun. Successful Chapter construction of the NUBIA Aero-City will create new economic activities and attract potential 02 investment demands. In summary, the implications of implementing the Master Plan should Review of the Existing Master Plan be to provide incentives to domestic and foreign companies to attract anchor facilities initially and to increase tourist visits by inviting “attractive” facilities such as integrated resorts including shopping malls, hotels, and casinos. Therefore, it will be necessary to build NUBIA Aero-City that are “competitive,” “attractive,” and “habitable” by providing commercial and leisure facilities, international schools, and smart services, which will provide convenient and pleasant living environment to foreign residents.

[Figure 2-28] Development Direction of NUBIA Aero-City

Competitive Attractive Habitable NUBIA Aero-City

Economic Growth

Anchor Habitable Attractions Facilities Environment

Provide good incentives Provide an integrated resort with Provide pleasant living condition to to invite anchor industries the function of hotel & casino foreigner by offering global education, and shopping mall smart service and tourism & leisure

Source: Author’s own. Airport ↔ road and city city & Airport Comprehensive Airport Corridor New town that connects development with railway, development with railway, Aerotropolis Hinterland area Separate real estate Separate Industrial Cluster & development near airport real estate Airport City Comprehensive Commercial, Exhibition Airport surrounding area Within 30Km from Airport City Centre Airport Logistics, Business, development of airport with Item Purpose Location Direction Development 29] Concept of Aerotropolis - An airport and aerotropolis cities are growing together in terms of their geological 5.4. Focus on Synergy Between the Airport and the Existing City and the Existing the Airport Between on Synergy 5.4. Focus The airport city concept is often considered on a small scale. However, the most Aerotropolis is a compound word of an airport and metropolis. The aerotropolis is location. A well-balanced combination will expand the international competitiveness of the region. These two economic poles are complementary and interlinking each other, and it brings mutual synergy for regional growth. Furthermore, it will be possible to reorganize the overall spatial structure of Ulaanbaatar applying the concept of Aerotropolis, which is about 20 to 30 km from away the airport. This aerotropolis can serve as an industrial cluster and an airport hinterland for residential purpose. important important factor for a sound master plan is to create a synergic effectbetween the existing city nearby and the airport. Developing NUBIA Aero-city with economic functions will concept. as Aerotropolis of the Maidar, Zuunmod cities strengthen the establishment equipped with most of the city functions mainly residential functions. Aerotropolis is of aviation- corridors and clusters apart from Airport, and it is outlying located a 20 to 30 km linked businesses and associated residential development that feed off each other and their airport. accessibility to the Edit from Airport City & Urban Planning (ADPi, 2012). Edit from Source: [Figure 2 [Figure 110 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia [Figure 2-30] Development Directions for Aerotropolis

NUBIA Aero City Aerotropolis

• Airport City is directly connected to • A new city that is expanding into the the airport for airport logistics, surrounding area (20~30km) through Cargo, MICE & Business hub. the airport connected traffic network

• NUBIA Aero-city is applied to Airport • Aerotropolis creates synergy with City Concept (Airport-oriented City) ▶ airport-industry • Functions : Airport Industries, MICE, • Functions : Industrial cluster International Business hub, Hotel & associated with aviation industry, Resort, International Schools, etc Hinterland for residential purpose

Source: Author’s own.

NUBIA Aero-city as a transport hub, an important center of economic activities, is linking the satellite cities and Free Economic Zones together. For identifying development priorities of Aerotropolis that will be developed along NUBIA Aero-city, it is necessary to consider 111 interconnection and cross impacts of Zuunmod, Sergelen, Ulziit, Tuul shuvuu, Maidar, and Chapter Free Economic Zones(FEZs), which are located within 25 km radius from the airport. 02

[Figure 2-31] Scheme of Aerotropolis Surrounding NUBIA Aero-City Review of the Existing Master Plan

Legend

Boundary Existing Railway Boundary of of UB City Aerotropolis Satellite Cities Existing Road (within 25km)

Source: Author’s own. Airport. City”. ADPi (2012), “Airport City & Urban Planning”. ADPi (2012), “Airport Schiphol Airport website (www.amsterdamairport.info). Amsterdam’s (www.hongkongairport.com). Airport website Chek Lap Kok City Master Plan Report”. Aero- LLC. (2017), “NUBIA Gobi Travel (www.airport.kr). website Incheon Airport Authority “The White Book of Incheon Economic Zone”. (2007), Incheon Free Economic Zone Authority www.ifez.go.kr). Incheon Free Economic Zone website( Kim, Baek-Su(2013), A Study on Activation Methods of Airport City Development of Incheon PT internal MUB’s material (2018), “Study on Establishing Free Economic Zone in the Capital Master Plan and Development Approaches for 2030”. Ulaanbaatar (2014), “Ulaanbaatar 2020 References 112 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia

03 Chapter

Review of Implementation Method

Jung Wook Kim (Young&Jin Accounting) Ji Yong Jung (Young&Jin Accounting

Keywords Implementation Method, Demand Forecast, Legal Environment, Financing, Anchor Project Review of Implementation Method

Jung Wook Kim (Young&Jin Accounting) Ji Yong Jung (Young&Jin Accounting) Emile Frémont (M.A.D Urban)

Summary

The purpose of the Review of Project Implementation is to review the Master Plan through the Market Analysis and Stakeholder Analysis. Through the results and implications of the review, the Project Phasing Plan and Project Implement Plan is proposed. 115

Firstly, in demand point of view, around 46% of Mongolia’s total population is Chapter concentrated in Ulaanbaatar. Significant latent demand for housing is apparent for the 03 fact that only 40% of Ulaanbaatar’s population lives in housing with access to permanent Review of Implementation Method infrastructure whilst the rest, 60%, if the population lives in peri-urban areas in traditional Mongolian gers (felt-tents) or housing without a permanent infrastructure. Due to the latent demand, the Mongolian government has proceeded several housing projects like “New Yarmag,” mainly developed by the State Housing Corporation (TOSK).

The new city airport, New Ulaanbaatar International Airport, is located 35 km away from the center of Ulaanbaatar, south of Bogd Khan Mountain Protected area. The location of this new airport is directly accessible through a newly constructed road (expected completion in summer 2019) that links the new airport to the exiting Chinggis Khaan International Airport and then to the city center through Yarmag road. Despite the advantages upon completing new roads such as improved accessibility low air pollution problems, and closer proximity to natural areas that can play as positive factors, there still exist weaknesses, such as a long distance from the city and no existing infrastructure, in the area. We believe that creation of a new free-economic zone near the airport and dedicated bus routes linking the site to the city airport that would reduce travelling distance, and innovative designs of new developments with niche opportunities for new residential and commercial concepts will help the area prosper. We We also studied two PPP (Pubic-Private-Partnership) projects, which are urbanization We have also looked at local developers and banks and examined their guidelines and The purpose of the Review of Project Implementation is to review the Master Plan in Firstly, demand point of view, around 46% of Mongolia’s total population is from International Airport, is located 35 km away The new city airport, New Ulaanbaatar We also studied two PPP (Pubic-Private-Partnership) projects, which are urbanization developments, developments, in Midan City and Songdo International Business District in Korea. The two projects have successfully reduce the governmental budget and introduce creative designs through private development, but the downsides were the delay in the completing project public facilities. and insufficient major projects. In Summary through Analysis Analysis. the and Through Market Stakeholder the results and implications Plan is proposed. Phasing Plan and Project Implement the Project of the review, concentrated in Ulaanbaatar. Significant latent demand for housing is apparent for the fact that only 40% of Ulaanbaatar’s population lives in housing with access to permanent infrastructure whilst the rest, 60%, if the population lives in peri-urban areas in traditional Mongolian gers (felt-tents) or housing without a permanent infrastructure. Due to the latent demand, the Mongolian government has proceeded several housing projects like “New (TOSK). the State Housing Corporation mainly developed by Yarmag,” the center of Ulaanbaatar, south of Bogd Khan Mountain Protected area. The location of this new airport is directly accessible through a newly constructed road (expected completion in summer 2019) that links the new airport to the exiting Chinggis Khaan International Airport and then to the city center through Yarmag road. Despite the advantages upon completing new roads such as improved accessibility low air pollution problems, and closer proximity to natural areas that can play as positive factors, there still exist weaknesses, such as a long distance from the city and no existing infrastructure, in the area. We believe that creation of a new free-economic zone near the airport and dedicated bus routes linking the site to the city airport that would reduce travelling distance, and innovative designs of new developments with niche opportunities for new residential and commercial concepts will help the area prosper. developments, in Midan City and Songdo International Business District in Korea. The two projects have successfully reduce the governmental budget and introduce creative designs through private development, but the downsides were the delay in the completing project 116 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia and insufficient public facilities.

We have also looked at local developers and banks and examined their guidelines and major projects. In the local development market, there are still factors to improve such as the barter system, but it is expected to improve in the future. The observed interest rates of the local banks were quite high around 20%, requiring developers to invest in capital and provide evidence of pre-sale. Three of the largest banks in Mongolia—Golomt Bank, Trade and Development Bank of Mongolia (TDB), and XAC Bank—expressed their interest in setting up green housings and urban development schemes that will provide financial mechanisms to developers under the Asian Development Bank Affordable Housing and Urban Renewal Project (ADB AHURP).

Through the previous analysis results, we divided the project into two stages: infrastructure and construction. In the infrastructure stage, it is reasonable to carry out business with the governmental budget, and infrastructures such as roads and railways may adopt PPP. In addition, another viable solution may be to establish separate public institutions that can coordinate the various stakeholders within the government. In the 117 construction stage, various projects can be promoted by land parcels. Anchor facilities such Chapter as casino, logistics complex, and more are also proposed. 03 Review of Implementation Method

1. Market Analysis

1.1. Overview

Since it is common to buy or sell land in urban development projects, we first focused on studying the land sale market. As the land sale market is inevitably affected by residential, commercial, and industrial markets, we have also researched on these markets.

1.2. Land Market Analysis

Ulaanbaatar extends over 4,704 square kilometers of the Mongolian steppe with a residential core of around 224 square kilometers. Over 123 square kilometers of this space is given over to apartment buildings whilst ger districts have grown to surround the city to the north, east and, to a lesser extent, the west, extending out into the foothills of mountains surrounding the city. The last data available in 2013 indicated that urban areas accounted for just 7.7% of the total space encompassed within Ulaanbaatar’s administrative boundaries. Within the six inner-districts of the city, urban space accounted for 7.2% of total

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‌ Sq.M of Residential Supply in Ulaanbaatar Capita of City Population Sq.M of Residential Supply in Ulaanbaatar

1] 1971

- 1969 : National Statistical Office of Mongolia (NSOM). Approximately 4,397 hectares or 20.7% of the land in Ulaanbaatar has been used up by Around 46% of Mongolia’s total population lives in Ulaanbaatar. Significant latent 1.3. Residential Market Analysis Market 1.3. Residential 6.000 4.000 2.000 0.000 8.000 residential apartments. Another 4,642 hectares is occupied by ger areas. Economic growth and new construction are strongly skewed towards the capital of Mongolia. During 2012, about 59% of new businesses were established in Ulaanbaatar, with the city contributing to 52% of In Mongolia’s GDP. nominal terms, Ulaanbaatar’s GDP at the time was 8.96 billion MNT (USD 4,480,000), representing a 3.7% increase over 2011. Ulaanbaatar’s population has grown at an incredible pace since the transition from socialism to democracy began in 1990. By 2017, there were 1.462 million people residing in Ulaanbaatar. A rapid urbanization is taking place in Ulaanbaatar, but strategic urban infrastructure and planning are still inadequate and are falling behind the pace of the city’s urbanization. For this reason, Master Plan 2030 has been updated 2013. times in which the last version was adopted in February several demand for housing is evident by the fact that only 40% of Ulaanbaatar’s population lives in housing with access to permanent infrastructure whilst 60% of the population lives in peri urban areas in traditional Mongolian gers (felt-tents) or housing without a permanent infrastructure. The current average population density of Ulaanbaatar is 310 persons per Kazakhstan. is around a quarter of that in Astana, square kilometer, which Source Source [Figure 3 [Figure allocated territory. allocated The territory. category of land use that takes up the largest area is agricultural, Ulaanbaatar. within the districts of land area registered for 57.6% of total accounting 118 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia [Figure 3-2] Number of Households in Ulaanbaatar (Unit: Growth Rate (%))

400,000 9%

300,000 7%

200,000 5%

100,000 2%

0 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Number of Households (Left) Growth Rate (%) (Right)

Source: UBSTAT(Ulaanbaatar City Stats.

[Figure 3-3] Number of Households by Housing Type 2013-2019

220,000 119 Chapter 165,000 03

110,000 Review of Implementation Method

55,000

0 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1

Apartments Ger&others

Source: UBSTAT.

The above graph shows that the number of ger-area household increased between 2013 and 2015 up to 218,000 households with a slight decrease from 2016 to 2019. Overall, the CAGR of the households living in ger areas over the period between 2013 and 2019 is 1.64% with a CAGR of -0.77% between 2016 and 2019. The number of households in apartments has been increasing over the last 5 years at a CAGR of 4.67 % between 2013 and 2019. The variation in these two indicators reflects the efforts made by the municipality to develop and encourage new housing solutions in the ger districts over the past years.

Prior to the massive development projects and rapidly growing migration movement into Ulaannbaatar, or UB, the city had housed organized, complex residential districts such There are major factors regarding future supply as below. There are major factors regarding future 1. GADIP- Ger Area Development and Infrastructure Project have launched in 2013, and 2. AHURP - The project, which has been co-financedby ADB and GCF and implemented 3. Capital City’s Rental Housing Project – This project is proposed to support for those as 40k, 50k, 120k, 220k, Sansar, and 1, 3 & 4 micro-districts, which were built in the frame of Soviet Urban planning. The core of Sukhbaatar and significant areasof Chingeltei districts had served the function of central business and retail center of the UB. For this reason, the 40k, 50k, and 220k are referred as high grade, or old residential buildings. As the city continues to the grow, residential sector has been developed in two directions: (1) high-end apartments with modern services and amenities which occupy the Stadium and Zaisan area and (2) low-end residential projects which are implemented at the outskirts, such as Yarmag and Songinokhairkhan districts that are supported by the international organizations and government programs. A highly constrained supply of apartments in Ulaanbaatar implies that existing apartments are 19% vacant across the The city. uptake of new apartments is also very high with pre-sales still accounting for a majority of primary market sales (up to 70% across most developments). Despite the growth in the construction sector, it is clear that demand and supply are far from converging in Ulaanbaatar’s residential markets, the developments. toward mid to high-end residential supply being strongly skewed its capacity covers 24 locations and 75 partial areas which constitutes 15% of the total ger area and 10% of the ger area inhabitants. In the framework of the project, a total of 5,200 households’ residential apartments were commissioned. However, the project has been on hold due to the lack of financial sources for developers, which has led them to struggle with several issues, such as difficulties in sales, insufficient support from the government side, and project implementors. by the MCUD, aims to develop green affordable housing units (10,000 in total) over a 10- year period in selected ger areas, mostly relying on GADIP pre-selected zones as the access to trunk infrastructure is one of the main selection criteria. The launch of this project is scheduled for this year and will start by developing housing units in Bayankhoshuu and Selbe ger areas as pilot areas. who did not meet the requirements of the loan program yet. The project aims to develop residential complexes with school and kindergarten for 1,020 households. It will be carried out with two schemes: “common rental” and “rent to own.” 120 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 4. State Rental Housing Project - State Rental Housing Project was approved by the Government of Mongolia in 2015. Since its implementation, only 1,512 households moved into the housings provided by the rental housing project. By May 2018, the apartments of 350 households in Buyant -Ukhaa 2 Project have been transferred to the State Rental Housing Project. Citizens who requested to enroll in the rental apartment program were selected by an electronic lottery system. In February 2017, the regulation on reducing the rental price was confirmed, and the rental price per sq.m was reduced to MNT 4,500.

1.4. Retail Market Analysis

The 2015 A.T. Kearney Global Retail Development Index (GRDI), which placed Mongolia in the 5th place internationally for its potential in the retail market, is indicative of the growth opportunities that exist within the Ulaanbaatar retail markets at present. The population is young with over 65% being under the age of 35 and upwardly mobile. However, the small size of the market restricts most big retailers to enter the market. (Note that the A.T Kearney has stopped including Mongolia in ranking its potential since 2015 due to the small size of the market.) Whilst the Mongolian retail market remains small in overall 121 scale in comparison to other top 10 markets, it has scored high due to extremely low market Chapter saturation as well as the extremely small window of opportunity that large international 03 retailers now have to engage in with the increasingly affluent population. Review of Implementation Method

[Figure 3-4] Good‌ Grade Retail Space per 1,000 Capita in Ulaanbaatar and Total Good Grade Retail Space (Unit: Good Grade Retail per 1,000 capita, Total Good Grade Retail Space (Sq.m))

200 300,000

150 225,000

100 150,000

50 75,000

0 0 1990 2005 2012 2017 2018

Sq.M Per 1,000 Capita Overall volume of Good Grade Retail in Market

Source: Market Research. Mongolia’s Mongolia’s limited market scale—small population and even smaller proportion of the With new large-scale mall facilities being planned by several developers, Mongolia will The biggest development in the Zaisan area is by far the Zaisan Hill Complex which population population with access to suitable disposable incomes—means that new market entrants are likely to be extremely cautious. Nevertheless, this market will open up significant developing consumer consciousness movers. Mongolian consumers are opportunities to early that is no less advanced or experienced in global trends than that of consumers in China or Korea. In order to take full advantage of growth opportunities in the Mongolian retail new facility types with increased market, differentiation must be introduced into the market Department store-type concepts trends in consumer preferences. to reflect the changing and markets are expected to play a less prominent role whilst shopping centers and mall- style facilities are projected to increase in popularity and provide a combined 68% of all future While supply. markets will remain significant contributors to overall sq.m supply in the mid-term period at the lower end of the market, new entrants who are targeting the mid-upper and upper-end will most likely focus on retail facilities that offer unique shopper entertainment. retail spaces, and integrated experiences, curated also become increasingly appealing to major retail management companies and investors into the retail space. As such, alongside new retail concepts, new investment concepts will also be increasingly emerging in the retail markets. Investments in the typical structures of build-to sell, build-to-lease, or into smaller scale (floor-by-floor) facilities will likely be overtaken by investments from large private equity firms in the mid-term period. These will either lease and manage entire properties (depending on suitability) on a long-term basis or co-invest at the construction stage. As more international brands enter the market, to sign long-termed pre-leases with anchor tenants.developers will also gain the opportunity This again provides value to investors and facilitates the process of locating sufficient capital investment. encompasses the Zaisan Square, Zaisan Memorial, and Zaisan area residences. The construction of the Zaisan Square has been completed and in-use (by stores such as Good Price and Caffe Benne along with some retail shops such as Oppen, Dior, and Yves Rocher). The Zaisan Hill Complex was completed in January 2018. (However, at the writing of this report, the Zaisan Hill Complex is yet to be fully occupied with some unfinished interior work left over.) The Zaisan Hill Complex is envisioned as a cultural center housing the Mongolian National Art Museum and a wedding palace but is likely to have a huge commercial and retail presence, potentially bringing over 40,000 sq.m into the market. 122 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 1.5. Office Market Analysis

The office market in Ulaanbaatar has mostly been developed in the last six years, driven by the mining boom and the accompanying influx of international companies. The market remains somewhat nascent in terms of both supply differentiation and management with significant opportunities in the market for well-managed, well-designed upper-grade office space. As of 2015, Ulaanbaatar’s good grade market is estimated to comprise of just 69,432 square meters of local Grade A office space. The majority of the market, whose total is estimated at 516,997 square meters, consists of B- and C-Grade properties that are relatively low quality in terms of both building specifications and management. Private companies are now responsible for over 80% of the national GDP of Mongolia. The number of registered business entities in financial services and other business sectors has shown almost uninterrupted year-on-year growth since the transition to a free market began, despite the slowdown in GDP growth in recent years. Ulaanbaatar’s GDP has displayed continued growth even in 2009, when the Mongolian economy contracted by -1.3%. As the capital city of a nation that is undergoing dramatic economic growth on the back of its mining industry, Ulaanbaatar has continued to see 20%+ year-on-year growth in 2012 and had a GDP per 123 capita higher than the average middle-income country in 2011 (and higher than that of Chapter China in 2012). Such advanced growth in the mining industry also brought growth to other 03

sectors, particularly in Finance, Insurance and Real Estate (FIRE) sectors, which take up a Review of Implementation Method significant proportion of good grade office space within any economy.

The core of the Sukhbaatar District presently performs the function of central business district (CBD) for Ulaanbaatar, having traditionally housed the centralized Government of Mongolia. It now hosts not only government ministries, such as the Parliament building and established cultural institutions, but also the offices of top 10 Mongolian companies and key international firms in the mining and financial industries. Many local companies and multinational companies (MNCs) prefer to have office addresses in Sukhbaatar District. As the CBD of a national capital that has experienced sustained double-digit regional GDP growth, this area has been the focus of commercial development in recent years. However, due to the rapid commercial development, a lack of vacant land for expansion and a moratorium that the City Government has passed in 2012 on new builds in green-field land in certain parts of the city center, any development in green-field in the city center was halted in 2013. Pipeline projects remain under construction although developers are increasingly expanding the good grade office markets into new areas of the city.

Over the past 20 years new offices have been gradually operative in Ulaanbaatar to house the activities of the burgeoning private sector, which has pushed the overall GDP e Meters) (Unit: Squar 2015 2016 2017 2018 A Grade B Grade 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 200220012000 0 During the early years of economic liberalization in Mongolia, the commercial sector sector in Mongolia, the commercial of economic liberalization During the early years 800,000 600,000 400,000 200,000 Market Research. Source: [Figure 3-5] Historical Supply of Good Grade Office in Ulaanbaatar (Cumulative) 3-5] Historical Supply of Good Grade [Figure of the capital city above that of the entire nation. The tallest office building that has been completed in the city center presently peaks at just 25 floors, indicative of a CBD that is Over the relatively past low fivedensity. years the CBD has, nevertheless, been transforming into a bustling hub of commercial activity for the growing financial services and mining supply sectors that are on developing the rapidly back of large along mining with operations upper-end office markets. into the new foreign entrants struggled due to high inflation and low revenues and resulted in a low supply of new good grade office spaces. An average of just 1,237 sq.m of new office space entered the market per annum during the period from 1990-1999. From 2000-2009 this figure leapt toa mean of 23,139 sq.m per annum as the economy recovered from the tectonic shocks of rapid reform and the removal of the safety net provided by trades and aids from the former Soviet Union. By the turn of the millennium, Mongolia had begun to exploit its vast reserves of mineral wealth and succeeded to attract foreign direct investment into world-class of the growth rapid gold and copper mine. This resulted in a projects such as the Oyu Tolgoi mining sector and of related operations where domestic firms begun to grow and diversify their operations, boosting the demand for office space. Increased loans from banks for the late 2000s and a bullish outlook on the futurecommercial real estate development during commercial of 55,009 sq.m of good-grade led to an annual mean of the Mongolian economy space to become available in Ulaanbaatar between 2010 and 2012. The office sector became dominated at this time large, by upper-end, mixed-use projects. The Ulaanbaatar good grade office market ispresently clustered around the Central Business District whichis power a well as as Avenue & Seoul Street that extends west along Peace center for office development areas. south into the Embassy and Marshall 124 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 1.6. Site Analysis

The new city airport, New Ulaanbaatar International Airport, is located 35 km away from the center of Ulaanbaatar, south of Bogd Khan Mountain Protected area. The location of this new airport is directly accessible through a newly constructed road (expected completion in Summer 2019) that links the new airport to the exiting Chinggis Khaan International Airport and then to the city center through Yarmag road.

As part of the Master Plan 2020 and development approaches for 2030, the city, TOSK, and NOSK have initiated feasibility studies for new real estate developments in secondary cities outside of Ulaanbaatar’s main urban core, so as to create new economic hubs.

As any new city development that has been created from scratch, such initiative presents certain risks and opportunities as presented in the SWOT analysis below:

SWOT Analysis

Strength Weaknesses 125 • Located‌ 35 km away from the city center and main Chapter • ‌Connection to existing infrastructure network amenities; available for new developments; • Existing‌ oversupply of retail and residential in the city

• New road upon its completion with good accessibility; center that needs to be absorbed; 03

• Away from air pollution problems; and • The‌ airport is an end destination for tourists, not a Review of Implementation Method • Vicinity to natural areas that can play a positive role stop-over, which leads to reduced possibility to develop hotels

Opportunities Threats

• Creation of a new free-economic zone near the airport; • ‌The old airport area keeps its attractiveness due • ‌Attractive tax systems as incentive for new to recent development and installation of new city developments; administrative buildings, main sport facilities financed • ‌Creation of dedicated bus routes linking the site to the by the IOC; city airport, reducing travel distance; • ‌Redevelopment of ger areas settles the population in • ‌Innovative design of new developments with niche the current residential zones; opportunities for new residential and commercial • ‌The city already has a plan to develop affordable concepts; housings in Moringiin Davaa, limiting the possibility • ‌Creation of a new economic hub that will attract to develop further affordable housing scheme near the investors and corporate clients airport

Source: Author’s own. -century city, -century providing city, new infrastructure st onment Legal Envir Legal The Constitution of Mongolia, adopted in 1992, was the first document to ensure the rightsThe Constitution of Mongolia, adopted 2.1. Property Relations 2.1. Property A functioning real estate market is a critical ingredient of a free-market The economy.

and supplying housing and facilities for a large population, whilst maintaining a for a large population, whilst maintaining a and supplying housing and facilities commitment to the sanctity of private property which has underpinned the growth of the free-market over the last two decades. This section addresses the legal developments which have been the foundations of the development of Mongolia’s real estate sector. Possible are also discussed. directions for the future development over private The property. Constitution provided the basic conditions for the ownership of private lands and immovable properties. However, the national supply of properties and statute explicit of series further a without population the to distributed be not could lands was the Land Law laws, which were passed and followed later. The earliest of these statutes between relationship the regulates statute 1994, and this in force into that came Mongolia of of land citizens, organizations, and companies concerning rights and responsibilities possession. It definesdifferent entitlements toland for differentpersons. This law defines two separate forms of land tenure: land possession and land ownership. Possession allows a legitimate control of land in accordance with a defined purpose of use and under terms and conditions specified in a lease provided from the Government of Mongolia. Ownership, is This land.” that of dispose to the right “with of land legitimate control entitles contrast, in freedom to transact immovable property and land is necessary for both growth of private industry and a healthy labor market. In any transition as economy, economic growth drives job creation across the housing country, stocks must be made available to deal with migration for economic reasons. If these stocks are insufficient, a developing country may end up with the proliferation of informal housing developments and makeshift accommodations. Such informal community has been growing around Ulaanbaatar since the city was formed and even the strict controls of a socialist system could not prevent levels of migration outrunning the government’s projections. these Initially, informal developments coalesced around manufacturing and light industry that have been developed in Ulaanbaatar since the 1960s. However, with the end of socialism in Mongolia and a general relaxation on movement restrictions from rural to urban areas, in-migration to the capital accelerated swelling rapidly, the population of Ulaanbaatar from 588,400 in 1989 to just 29 years. City planners and legislators now face the its current population of 1,463,000 in dual task of transforming Ulaanbaatar into a 21 2. 126 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia an important distinction as possession does not allow land transfer without a consent of the District Government, with whom all possession contracts are made. Only Mongolian citizens may legally own land who are then restricted in the size of land plot they can lay claim to. Agricultural lands legally remain under the state ownership, but a person or family who already possesses land for agricultural purposes would be entitled, according to the Land Law, to a preferential right to buy this land for agricultural purposes. Where no possession right was already established, agricultural land may only be made available for possession via a government auction. The Land Law, coupled with the Constitution of Mongolia, entitles landowners to robust rights over land and disposal thereof but explicitly forbade them from transferring it to foreign citizens and stateless persons.

Establishment of land fees was the next legislative movement and became enshrined in law as a result of the 1997 Law on Land Fees. This puts systems for defining the high and low-price points for land fees for each year in place and also defined baseline values for land to be given for possession by a government auction.

Essentially, land fees must be paid for land that has been given over for ownership whilst 127 fees for possession rights, purchased at auction, are based upon base land values. Land fees Chapter are higher in the city than they are in rural areas and were initially established at rates of 03 44 to 440 MNT per sq.m in city centers. Outside of the land fees that has been defined city Review of Implementation Method center were initially defined as between 40 and 80 MNT per sq.m. Provincial land costs vary depending upon use and are defined according to population density, varying between 4 MNT and 50 MNT per sq.m. In large Sums, fees were initially set at 0.8 MNT per sp.mand 0.5 MNT per sq.m for small Sums.

Herders are exempted from paying fees for pastureland and fodder-producing fields and Mongolian citizens are exempted from paying 90% of their land fees for possession of an area of up to 0.07 (in urban areas) hectares for exclusive use for residential purposes. All kindergartens, children camps, secondary schools, orphanages, and nursing homes are exempted from land fees. In 1997, the first year in which land values were determined, the Government set the value for land compensation per square meter between 13,200 and 44,000 MNT. Agricultural land was valued higher between 1,738,000 and 3,858,000 MNT per hectare. These values relate to land sold via government auctions. The price of developed land— which implies that land is attached to infrastructure or near roadways—is, in practice, more expensive than the base rate. In 2010, the price of 0.07 hectares of land in outlying districts of the city was valued at approximately US$8,000. In the heart of Ulaanbaatar’s CBD, land that was considered suitable for high-rise constructions have transacted at up to US$ 2,400 per sq.m in 2012. All owners of land are liable for land tax, presently defined to be between 0.6 and 1% between preliminary the boundary finds itself straddling In summation, Mongolia Immovable property (pertaining to the built environment) distribution and ownership of the total cost of the land. This is defined pursuant to the Immovable PropertyTax Law of Mongolia. An amendment to this law has passed in 2004, and it entitles citizens to an exemption at a rate between 95%-98% depending upon location from immovable property tax on the land that they possess for residential purposes, providing it does not exceed 0.07 hectares in size. Land in the city is entitled to the lower 95% exemption, whilst Sum-level a 98% discounted rate. land is eligible for and developed stages of land market creation, wherein secure tenures have been legally structured and private ownership are established. However, state-controlled systems of land distribution are already proving to be a barrier to proper market functioning. This status in future. will be portioned out and henceforth traded creates uncertainty around how land In terms of restrictions on land ownership, the Law on State Special Protected Areas, passed in 1995, defined protected areas of land and set legal classifications of national conservation parks, natural complex areas, natural reserves, and national monument areas. In these or stateless citizens, foreign organizations, international entities, legal foreign no areas persons may use land. Limited amounts of land are available in conservation areas, natural parks, nature reserves and monument areas for Mongolian citizens, business entities, and these areas was set at three times the baseline amount organizations to utilize. Land fees for Land Fees. as determined according to the law on was governed by the Law of Mongolia on Registration of Immovable This Property. law states that ownership of immovable and property, the rights and responsibilities accruing thereto, arise only on registration of the property at an Immovable Property Registration Office (which are located in Aimag centers and in the capital, Ulaanbaatar). All transfers and collateralization of immovable property must, by law be registered at an Immovable Property Office. Taxes payable on Immovable Property are Governed by the Immovable Property Tax law, which initially applied a blanket tax of 0.6% of the registered value income, or being used for build property generating of the property per annum on any to a sliding commercial purposes. However, as of January 2013, this tax has been transferred scale of between 0.6% and 1%, depending upon the location, characteristics, and value of to rental the property in question. Properties used for residential purposes, not including properties, are exempted from this property tax. Income tax is payable for immovable property sales, which is set at a low rate of 2%. There is a high level of confusion over whether the base income tax of 10% is also on gains related to although property, the 2% tax is the only one technically payable on property owned by an individual. Companies and 128 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia organizations are more liable to pay income tax on gains from property.

In summation, the legal environment of Mongolia, pertaining to property ownership, is very robust but can be considered a work in progress. Immovable property allocation occurred rapidly—between 1997 and 2004, most of Mongolia’s housing stock was privatized, along with many commercial properties—and gave over a large existing apartment stock to around 22% of the population. As households choose to liquidate or collateralize this stock in years to come, the increasing stores of wealth this housing stock represents should stimulate spending and boost the consumer economy. Land allocation for private use is now beginning to take place. In 2011, 104.7 hectares of land was allocated to be privatized to Mongolian citizens. However, despite reported high levels of privatization within urban centers, only 9.19% of the total Mongolian population have opted to enact their right to privatize a plot of land, which lead to a call to extend the privatization period past 2013 when the initial round of land privatization is due to expire. The extended privatization ended in 2018. In contrast, land auctioned for commercial use is receiving an uneven interest. As noted in the section on the Ulaanbaatar 2020 Master Plan, land is allocated for auction based upon yearly land use strategies defined by the Mongolian government. While prime plots for commercial 129 development receive significant attention, some spaces defined for manufacturing or Chapter industrial purposes are receiving very little, if any, interest, as these sectors are not yet 03

sufficiently developed nor are they competitive. Whilst restrictions on land use are useful Review of Implementation Method for purposes of rationalizing the spread of Ulaanbaatar, they may, as this case illustrates, not be suitable for development of competitive and market-driven profiles of land use, where the most successful companies can pay the most for the best plots and thereby are likely to make the most productive use of them.

It is expected that as land ownership becomes the norm in Mongolia, a number of legal land disputes will rise. In 2009 alone, the legal firm Anderson and Anderson LLP reported that there were 2,652 land dispute cases brought to the attention of the Administration of Land Affairs, Geodesy and Cartography. A majority of these were related to land possession (56%) while land ownership disputes accounted for only 17% of cases. The most frequent reason for dispute concerns the purchase of real estate without the consent of the land owner or of the State. Another reason for legal dispute is disregarding or misunderstanding of a clause in possession contracts which states that the possession of any land that has not been in use for two years or more may be forfeited and reverted to the state.

Violation of land possession contracts and non-payment of land fees are also the cause of a good deal of legal cases. Such disputes arise from the lack of understanding of the legal codes governing land possession and ownership on the part of citizens. At present, there is shall have an economy based on different forms of property consistent to State recognizes all forms of public and private property and shall protect the y property situated in the territory of Mongolia, being property with certain An methods, such as land and buildings, actual and abstract by boundaries measurable which would lose their purpose and economic value if separated from land...except The law. rights of the owner by Mongolia universal trends of world economic development and own country’s specifics. and own country’s universal trends of world economic development

• • • Immovable property was originally defined by law within the bounds of the Law of of Immovable Property states that: Article 2.3 of the Law of Mongolia on Registration 2.2. Legal Structure of Immovable Property Ownership Property of Immovable 2.2. Legal Structure The robustness of property rights in Mongolia provides a sense of security for investors As noted above, the basic guarantee of Immovable Property ownership is written into Mongolia on Registration of Immovable This Property. document outlines the legal status of registered immovable property and regulates matters relating to the protection of rights of ownership over immovable property. concerning expropriation of foreign investments. which states that: the Constitution of Mongolia, Article 5, very little information available on land and immovable property law and the government should work to improve this before the land market can grow without trouble. There have been a few reported cases of legal expropriation in Mongolia, that have arisen due to the breach of terms of possession or violation of environmental laws concerning proper use of undertook Agency When the State Specialized Inspection the citizens and companies. land by to inspect land plots as part of their “Protect Environment and Civil Responsibility” program in 2010, they found over 300 violations of Land Law across the capital and surrounding areas. As a result of these violations being brought before a court of some law, citizens had cases of expropriation are It should be noted that these cancelled. their land lease contracts directly to linked misuse of land or breach of There contract. have been no reported cases of arbitrary expropriation of land even or in property, cases where state projects are involved. (Although, as noted in the section on Mining Policy Environment, actions of expropriation these are covered the government concerning mining licenses. However, by have been taken a somewhat different legal framework.) by 130 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia land which contains buildings owned by the state and local property for public use, shall be registered at the Registration Office in accordance with the paragraph 3 of Article 77 of the Civil law.

In accordance with this, a property must be registered with the Immovable Property Office before it becomes subject to the legal protections afforded by the laws of Mongolia. Any immovable property may be registered, although without an immovable property certificate being issued ownership is neither conferred by law, neither are protections in place concerning the trade or use of the property in question. The Immovable Property Office, which functions under the Minister of Justice, is responsible for the registration of all Immovable Property in Mongolia, as well as record keeping concerning immovable properties and receipt of stamp duties. All Aimag centers contain an office of this kind. Ulaanbaatar’s Immovable Property Office is located to the rear of the USA Embassy Office.

3. Case Studies 131

Regarding the case study selection, cases similar to large-scale urban development in Chapter Mongolia and development cases of airport city in Korea are selected. 03 Review of Implementation Method 3.1. New Yarmag

3.1.1. Introduction

The “New Yarmag” residential complex project has a total of 368,262 sq.m building plot on total of 21,6 hectares land. It is aimed at mid income groups that are expected to relocate in this area. It is located south of Yarmag area in front of the Chinggis Khan international airport. Yarmag is an old established ger settlement and, contrarily to the northern ger district, suffers moderately from air pollution during winter time. This area has been the focus of development for many residential and commercial projects in the past decade (Hunnuh mall, Viva City, Shine Urguu, Buyant Ukhaa), from both public and private sector. The government plans to relocate its administrative activities in this area, explains in part why many developers and public authorities (TOSK, the city housing corporation), have decided to develop many real estate projects in this area. What is worthy of this report is the upcoming development of an international sport facility in the direct vicinity of the site, which is partially funded by the International Olympic Committee and will be hosting an IOC compliant swimming pool as well as other sport facilities. 3.1.2. Project Developer 3.1.2. Project The government of Mongolia decided to establish “The National Housing Center” The government of Mongolia decided to establish the Mongolian Housing Finance Since the start of the implementation of the “4,000 Housing Units” program for civil TOSK financed the construction of the 1,764 housing units in the Section A of the according to the Government’s Resolution No.37, and it indeed was established by the Decree by it indeed was established No.37, and Resolution to the Government’s according No.32 of the Minister of Construction and Urban Development on March 17, 2006 in order to implement the government’s program “40.000 Housing Units” within the framework of affordable housing. medium and low income citizens with policy on providing Corporation according to the Resolution No. 200 dated on October 17, 2006, and it was established by the joint Orders No.196/372/567 of the Ministry of Construction and Urban Development, Ministry of Finance and Mayor’s Administration of Ulaanbaatar. The “40.000 of project housing the implemented (MHFC) Corporation Finance Housing Mongolian Housing Units” that was approved by the Resolution No. 69 from 2006 of the Parliament of Mongolia and Decree No. 191 from 2006 of the Government of Mongolia between 2007 and 2009 in order to build housing districts and provide middle and low-income citizens who are in need of affordable housing, to improve their living conditions, and to increase job positions in the construction sector. Within the framework of the program, the project has successfully built a total of 1,531 housing units so far in 21 provincial centers and sold to the citizen with mortgage loans. servants, in the beginning of 2010 the company has successfully granted 4,300 civil servants more than 130 construction incorporated mortgage loans. The project has low-interest rate companies, which have significantly benefited financially thanks to the sale of the housing units built by themselves within the framework of the program, further overcoming industry in a short amount of time. The the economic crisis faced in the construction Housing Finance Corporation has been restructured under the name of the State Housing under the Resolution No. 253 of the Government of Mongolia dated July 6, (TOSK) Corporation 2013 for the purpose of intensifying the activities to provide housing to citizens of Mongolia in place. the State with expansion of its operations by Buyant Ukhaa-I District within the framework of the New Development mid-term program implemented by the Government for Changes. Also, TOSK launched the construction of 1,000 housing units in each and every province of Mongolia within the framework of the Action Plan of 2012-2016 of the Government for Changes and the opening ceremony of the construction of the first housing block was organized in Orkhon province in July 2013. 132 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 3.1.3. Facilities and Services

The “New Yarmag” residential complex development consists of a three-phase construction plan. Upon completion of the whole development, the project is expected to host 2,910 new households in addition to 1,100 indoor parking spaces, providing indoor parking for each 2.6 households. The first stage of the project, currently under development, aims at building 1,500 household units, 610 car parking spaces, green parks with recreation facilities, and commercial facilities. The second stage of the project will see the construction of 1,410 household units, 500 car parking spaces, recreation area, a water fountain, and green area with sports facilities. Finally, the third stage will focus on the provision of education facilities with the construction of a school with a capacity of 2,000 children and a kindergarten with a capacity of 300 students, firefighting centers, a vocational training center, and an international medical diagnostic center as well as other commercial facilities.

3.1.4. Total Costs – Phase 1

Total Cost – Phase 1, New Yamag Project 133

Contents Details Unit New Yarmag Chapter

Number of blocks Unit 20 03 Apartment units Unit 1,500 Review of Implementation Method

TOTAL PROJECT Residential area Sqm 131,874

Retail area Sqm 11,229

Garage Sqm 47,299

Number of blocks Unit 4

Residential area Sqm 37,091 COMPLETED Retail area Sqm 822

Garage Sqm 24,602

Number of blocks Unit 16

Residential area Sqm 94,783 UNCOMPLETED Retail area Sqm 10,407

Garage Sqm 22,697

Total construction cost MNT 227,263,009,330 BUDGET Remaining construction cost MNT 78,972,641,697

Source: Author’s own. SPC, Infrastructure, Eco-park) SPC, Infrastructure, 2 ower ated Resort Hotel : Hotel, Foreigner Casino, Shopping mall, Spa etc. ated Resort Hotel : Hotel, Foreigner orean American Village Landmark T K Project Cost : Estimated total 935 billion won (Development of Period : 2006 ~ 2020 (Anchor project will be completed in 2014) International Healthcare Center International School City-in-City Integr Size : 2,711,070.8m

• • • • • • • • • 3.2.3. Facilities 3.2.2. Developer Koam, and U.S. trader, Chinese investors such as Lippo Limited, Hong Kong-based Foreign Midan City, Midan located City, in the Yedanpo region of northeastern Yeongjong area, is a project 3.2. MIDANN CITY - Korea - Korea CITY 3.2. MIDANN 3.2.1. Introduction The project was in part funded by the Development Bank of Mongolia, and the units The foundation works have been completed, as well works as of the each main structural 3.1.5. Financing Scheme and domestic organizations, construction and financial companies have been participating together. in and developing the new city project being promoted through international competition for the first time among Korea’s free free among Korea’s time first the for competition international through promoted being economic zones. Midan City is a self-sufficient global free city where residence, commerce, and leisure are combined all together, being business, education, culture, tourism Kong’. constructed with the aim of ‘Beyond Hong are currently pledged as collateral as they have been used to obtain the financing. No information is currently available regarding the terms of the loan (interest rate, maturity, MNT. 2,600,000 MNT to 3,500,000 of the residential units varies from etc.). The selling price block. At the time of drafting this report, only four low-rise residential buildings have been floor. facilities on the ground with commercial completed 134 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 3.2.4. Financing Scheme

The developer of the Midan City plans to recover the funds by selling the land after the completion of land development. This project was not completed because it is still in progress. However, due to sluggish land sales, developers are reportedly having many difficulties.

3.2.5. Implication

The Midan City project was a project to attract foreign investment and develop the city through PPP. However, the small amount of foreign investment and project delay showed the disadvantage of PPP.

3.3. Songdo International Business District- Korea

3.3.1. Introduction

135 Building a premium international city with foreigner-friendly business environment and Chapter settlement condition for development of Northeastern Asia International Business Hub City. 03

3.3.2. Developer Review of Implementation Method

The majority stake of 61% is held by Gale International, 30% by Posco Construction Company, and the remaining 9% by Morgan Stanley Real Estate. Infrastructure development, labor, and funding are also being provided by the city of Incheon.

3.3.3. Facilities

• NEATT(The Northeast Asia Trade Tower) • Songdo ConvensiA : Convention Center • CHADWICK Songdo International School • Jack Nicklaus Golf Club • Songdo Central Park • Arts Center Incheon • Songdo Lottemall • Posco Office Building • Canal Walk : Retail • Hotel(Sheraton) Major Player in Real Estate Market in Mongolia Major Player in Real Estate Considering the current oversupply in a majority of the residential and commercial 4.1. Local Developers Conditions 4.1.1. General 3.3.5. Implication Songdo International Business District was originally a project aimed to invite foreign 3.3.4. Financing Scheme 3.3.4. Financing The developer plans to recover the funds by selling the land after the completion of land

sector over the past two years, a considerable interest has arisen in more affordable residential project as many developers see this as their salvation to retain their staff and return to the profitable pre-crisis activities. picks up and they can capacity until the economy This implies that, in today’s market, any project can benefit from a relatively low-cost profile (thanks also to a depressed—and largely informal—labor market), and developers must thus take advantage of the situation. Developers generally agree that it would be 3 to 5 years at the minimum before the real estate “boom” could resume. Some developers also believe that they realize that the previous modes of urban redevelopment (high rise single use buildings) do not conform to the Mongolian nomadic cultural norms and that there was a better way of doing the redevelopment of the ger districts. Some publicly supported projects have forced developers to question the methods of urban planning and their vision of community spaces. There is now a real dialogue on community-focused, demand based, and mixed use developments from the perspective of the community users who can achieve real community empowerment. This change in mind-set is essential and will enable the government to achieve real improvement on the ground, and it also implies that some developers see construction in the ger districts not as a profit-making activity but as a CSR or activity. CSV investment. However, the actual financing was done through domestic banks.In addition, residential projects with andprofitability the were projects promoted such preferentially, as relatively delayed. which were indeed needed, were schools and hospitals, is still in progress. However, because it is still in progress. not yet been completed The project has development. difficulties. many sales, developers are reportedly having due to stagnant land 4. 136 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia 4.1.2. Guideline for Participation

From our study with Mongolian Real Estate developers, a majority have favored high- end developments offering high notional margins for the past decade, capitalizing for a time on the construction boom, but they have struggling to meet their objectives since 2016 as the economy plummeted. The failure to understand basic real estate life cycle, and the lack of appropriate market research have rendered real estate endeavors risky and not in line with the market demands. There is now a trend of developers carrying out more in-depth pre-investment research to ensure that their project will actually sell off and be successful. However, there are still a number of private developers starting the construction of their projects and initiating a belated proper market research in the form so as to ensure to get additional financing from foreign financial institutions.

Overall, the following assumptions can be considered as an average for the participation of real estate developers in any project according to interviews with the developers:

• Development Margin ≥ 20% 137

• IRR ≥ 20% Chapter • Developer’s Equity: 20 to 30% 03 Review of Implementation Method A majority of developers, to reduce capital expenditure (capex), have now started to use barter system, mostly on concrete and rebar, in exchange of apartments or retail units in their project that are sold off at a discounted market price. Those barter agreements are mainly entered on concrete material and rebar, going up to 50% discount on the concrete, and 30% on the rebar. Depending on the capabilities of each developer to leverage such scheme, it is also not uncommon to see other construction material to be offered by contractors with a 30% discount (aluminum panels for instance).

The use of pre-sale agreement is also widely used to finance the construction of real estate developments. Such agreement includes clauses such as 20% down payment before the start of the project, followed by regular 10 to 15% down payment spread over the construction of the project with the final payment due on completion of the building so that buyers can move directly into their residential apartments. While this mechanism can prove to be successful if demand exists, this has led many developments that are uncompleted across town as some developers have relied exclusively on the pre-sale method to finance the construction, and the deterioration of the market led to very few units actually being sold and a lack of financing, stalling constructions for years. Three of the largest banks in Mongolia—Golomt Bank, Trade and Development Bank Golomt Bank collaborated with various international financing institutions to secure TDB has boosted its reputation in the international market with the redemption of its 4.2.2. Participating Banks in Housing Finance for Donor-Funded Project 4.2.2. Participating Banks in Housing 4.2. Local Commercial Bank Commercial 4.2. Local Loan Conditions 4.2.1. Business The interest rates in Mongolia are substantial, which has led many developers to seek of Mongolia (TDB), and XAC Bank— expressed their interest to set up a green housing and urban development scheme which will provide financial mechanisms to developers under the ADB They AHURP. are actively engaged in the real estate development market and the (8+/-1%) home mortgages program of the Government of Mongolia. These three banks have a coordinated successfully in current economic challenges weathered through Mongolia’s approach with the Bank of Mongolia. debt financing for an on-lending facility of USD 55 million to its clients in 2015. It is recognized as the lead bank in sustainable financing policy by the relevant banking and finance institutions in Mongolia. med-term bonds $300 million bond in 2015. Thereafter, it successfully issued a $500-million bearing the guarantee of the government of Mongolia. The issue has been fully subscribed solid reputation in the global investment market. and proved TDB’s financing abroad in foreignFor currency. instance, the Exim Bank of China has been used to finance many real estate developments, both public and private, at favorably low interest rates, around 4.5%. However, such loans are emitted in RMB, adding currency risks to the project as the sale of the unit, and the revenues are generated in Mongolian Tugriks. Despite this, the option of seeking financing aids abroad is used by developers more and more to avoid paying substantial loan repayments that hamper the overall margin of local developers. One must note that the below business loan conditions are the ones officially presented by the banks. For instance, although Bogd Bank claims not to provide any such loans, the companies have been recently involved in a large-scale residential development project partly financedby Bogd Bank, with two MNT loans at 19.5% withapplication fees of 3.5%. However, the loans were only granted upon delivery of the first three floors of the project, with pre-sale evidences covering at least 25% of the total number of units and the total project costs. equity injection of minimum 15% of developer’s 138 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia XacBank is the sole provider of a credit facility aimed at financing projects of green and environmentally sustainable infrastructure development and other socioeconomic development. With funds being sourced from the Clean Air Fund, Millennium Challenge Account, and the World Bank, XacBank has assisted clients who are engaged in renewable energy projects: stoves, solar energized panels for hot water, and others. Of the three banks, it has been first to secure accreditation from the Global Climate Partnership Fund. It has also participated in the sale of 1.2 million carbon credits in the international market as a by- product of its eco-banking operations.

5. Implementation Plan

5.1. Overview

Urban development is a project that involves many laws and stakeholders. Since there are numerous steps to be taken, it is appropriate to separate these steps as well. We first analyze the infrastructure level, which is generally divided into three business models 139 according to the project owner: Public, Private, and Public-Private Partnership. An overview Chapter of the three models is shown below. 03 Review of Implementation Method

Possible Project Owners for Urban Development

Classification Notes

Development led by the Government (central government, local government, public institution) Public-driven Development land purchases and business implementation by the Government

Private company buys land and conducts business for Private-driven Development profitability

Joint-venture between the Government and private Public-Private-Partnership company Pursues profitability and public interest at the same time

Source: Author’s own.

We will then break down the urban development into infrastructure and architecture. Therefore, we will review project owners, financing methods, and the development of major facilities at each stage. acilities Disadvantage heavily lean-on local funding (Apartment) ‌ ‌ Initially expected foreign funding (FDI) but actually Priority Development of Profitable F • • • Little foreign investment Advantage easibility able legal Environment 4> Advantage and Disadvantages for PPP in Infrastructure Stage PPP in Infrastructure 4> Advantage and Disadvantages for - Uncertain F Unfavor Political Risk Long Developing period Non-Profit facilities

• • • • • n n most countries, urban development is understood as a public good. Therefore, it is a I We We believe it is appropriate to act as the project owner in government at the In most countries, the project owner of urban development is the central or local 5.2.1. Project Owner 5.2.1. Project 5.2. Infrastructure Period 5.2. Infrastructure Urban development is a project that involves many laws and stakeholders. Since there • Government Budget Reduction • Creative design and Plan big political burden for private capital to promote urban development and to profit from it. Sometimes in some developed countries where the capital markets are mature, private capital is also driving urban development. Midan City and Songdo International Business District in are Korea good examples. The urban development PPP project promoted in Korea 4. shown in Table has advantages and disadvantages as infrastructure infrastructure level for better results. In this project, it is necessary to cooperate strongly with central and local governments. A possible solution would be to establish a special government for the following reasons: government for the are numerous steps to be taken, it is appropriate to separate these steps as well. We first analyze the infrastructure level, which is generally divided into three business models according to the project owner: Public, Private, and Public-Private Partnership. An overview is shown below. of the three models Author’s own. Source:

5.2.2. Possible PPP Project

Of course, even if the government owns an infrastructure project owner, some facilities can also introduce private investments.

(1) highway and railroad

There are many PPP projects for rail and road around the world. This is because profitability can be secured by fee income. In Korea, the PPP project was successfully introduced in airport railways and bridges. In the case of airports, it is easy to carry out PPP projects because of roads and railways with limited access.

(2) Power Plant, Sewage Treatment Plant and School Facilities

141 There are also cases where power plants and sewage treatment plants are promoted Chapter as PPP projects. Of course, sufficient demand will have to be ensured. Sewage treatment

plants are often promoted as BTL in Korea. This is because, in the case of sewage treatment 03 plants, profits are lowered by fees alone, so the government must pay the fees additionally. Review of Implementation Method Although BTL is PPP, it is closer to borrowing. School facilities may also be promoted by BTL.

5.2.3. Financing

As described above, the urban development project is mostly driven by the government, so the government is also responsible for the financing. For the purpose of an urban development, the government may pursue it through its own budget, or it also may issue bonds. Urban development bonds, like taxes, are also mandatory for citizens to purchase in various transactions. In Korea, city development bonds are mandatory for purchase of real estate. Public institutions may also raise money through borrowing. Unlike the government, if urban development is promoted by public institutions, there should be a minimal profitability. Only then they can repay their loans through income (land sales). O O △ Notes Comments government. purchase in various transactions. purchase in various transactions. their borrowings through income (land sales). their borrowings through Separate independent income and expenses management independent income and expenses Separate Unlike the government, if urban development is promoted by public development is promoted by the government, if urban Unlike Urban development bonds, like taxes, are also mandatory for citizens to like Urban development bonds, institutions, there should be a minimal profitability. Only then they can repay repay Only then they can be a minimal profitability. institutions, there should ODA can be a method of financing. We have summarized some ODA next topic. We have summarized some ODA can be a method of financing. ODA It may be a way to carry out the business by spending the general budget of the budget the general spending business by to carry out the a way be It may 5> Financing Methods in Infrastructure Stage Methods in Infrastructure 5> Financing - ODA Bond Issue (Borrowing) Classification (1) Asian Development Bank (ADB) (1) Asian Development ADB in partnership with member governments, independent specialists and other ADB provides loans, grants, and technical assistance to its developing member countries, ADB has been Mongolia’s largest multilateral development partner since 1991, playing 5.2.4. Official Development Assistance (ODA) Development Assistance 5.2.4. Official Official Development Assistance (ODA) can be a method of financing. We have Government Budget Government financial institutions is focused on delivering projects in developing membercountries that create economic and development impact. to the private sector and through public-private partnerships to support the building and transport, is in businesses of water, energy, The majority maintenance of infrastructure. urban development, and information and ADB communications is technology. scaling up its USD 20 billion in 2020, with 70% 50% from USD 14 billion in 2014 to more than by operations of this amount going toward infrastructure. a central role in the country’s transformation to a middle-income, market-based economy. ADB has approved sovereign loans totaling USD 2.3 billion, non-sovereign loans totaling USD 105.1 million, grants of USD 313.9 million, and technical assistance projects worth USD 161.1 million for Mongolia. In 2018, ADB committed USD 430 million in 8 projects and USD 11.18 million in technical assistance for 20 projects. Cumulative loan and grant disbursements to the Mongolia amount to $1.76 billion. These were financedby regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds. summarized some ODAs here. summarized some ODAs Author’s own. Source:

Cumulative Lending, Grant, and Technical Assistance Commitments

Total Amount Sector No. % ($ million)

Agriculture, Natural Resources and Rural Development 42 167.45 5.84

Education 31 181.28 6.32

Energy 33 179.63 6.26

Finance 53 387.29 13.50

Health 41 252.03 8.79

Industry and Trade 14 112.80 3.93

Information and Communication Technology 1 2.00 0.07

Multisector 7 21.90 0.76

Public Sector Management 58 562.00 19.59

Transport 51 629.26 21.94

Water and Other Urban Infrastructure and Services 36 372.83 13.00

Total 367 2,868.47 100.00

Source: ADB.

143 (2) World Bank Chapter

The World Bank provides low-interest loans, zero to low-interest credits, and grants to 03 developing countries. These support a wide array of investments in areas such as education, Review of Implementation Method health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. Some of projects are co- financed with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors.

Since 1947, the World Bank has funded over 12,000 development projects, via traditional loans, interest-free credits, and grants.

• IBRD provides financial development and policy financing • IDA provides zero-to low-interest loans and grants • IFC mobilizes private sector investment and provides advice • MIGA provides political risk insurance (guarantees) • ICSID settles investment disputes 4.15 5.21 2.40 2.04 6.96 2.89 5.18 % 20.27 10.26 40.64 100.00 44.14 55.40 25.46 21.64 74.00 30.66 55.00 215.32 109.06 431.79 1,062.47 ($ million) Total Amount Total 8 8 5 4 3 3 4 3 14 29 81 No. Total Other Theme Education for all Macroeconomic management Other public sector governance Rural services and infrastructure Rural Regulation and competition policy Regulation and Administrative and civil service reform and Administrative Environmental policies and institutions Environmental policies and 7> Cumulative Commitments in Mongolia Projects Commitments 7> Cumulative - Infrastructure services for private sector development Infrastructure Public expenditure, financial management and procurement Public expenditure, financial • Korea International Cooperation Agency (KOICA) Agency International Cooperation • Korea KOICA is an organization responsible for 26% of the entire ODA in Korea based on the the Traditionally, Asian continent has the ultimate priority for Korea’s grant assistance, KOICA has concentrated on supporting 5 major areas (education, health, public (3) Korea Official Development Assistance (ODA) Official (3) Korea 2018 business plan, and leading is agency Korea’s that is responsible for approximately 60% of grant aid. The scale of aid from KOICA increased significantly from 17.4 billion KRW in 1991 to 800 billion in KRW 2018. This followed the admission to the Development Assistance Committee (DAC), along with the ODA contribution diplomacy policies of the Korean government that aims to make contributions to the international Compared community. to the Gross National Income (GNI), the Korean government is increasing the scale of ODA to the average level of OECD DAC member countries, and, therefore, the aid scale of KOICA is expected to increase continuously. finances in 2018. consisting 40.8% of the country program and agriculture, forestry and fisheries) environment and energy, technology, administration, selected by reflectingKorea’s comparative advantage, corresponding to the UN’s SDGs and support for the priority for the development of developing nations at the same time. KOICA’s : World Bank. : World Source

• Economic Development Cooperation Fund (EDCF)

The government of Korea established the EDCF on June 1, 1987 with the purpose of promoting economic cooperation between Korea and developing countries.

EDCF has steadily continued to increase its ODA and successfully carried out major tasks to enhance development effectiveness. By doing so, it aims at meeting the rapidly growing development demands of the developing countries in alignment with the recent international discussions on development that stress the importance of eradicating poverty through economic growth.

According to its objective of promoting the economic development of partner countries and building mutual cooperation, EDCF is dedicated to providing support for developing countries to build necessary infrastructures to achieve sustainable growth. 145 Chapter To be more effective in its efforts, EDCF has been diversifying development resources and support programs. In particular, it has developed support plans by region/country 03 Review of Implementation Method to enhance aid efficiency and implement tailor-made support programs. It also seeks to enhance development effectiveness based on coordinated efforts with other Korean and international aid institutions while increasingly taking a leading role in international development cooperation.

5.3. Construction Period

Unlike the infrastructure phase, the construction phase is divided into several projects. These projects are determined per land parcel. These parcels are divided into residential, retail, office, industrial, and tourism depending on their use. Therefore, the construction phase is smaller in scale and often developed privately if profitable. Public Private Private Disadvantage Project Owner (PPP is also possible) the land price is lower than other facilities) the land price is lower than (Due to low profitability and attraction for investment, for investment, and attraction (Due to low profitability • Low return regarding the land sale • Harder to find the investors Industrial Advantage Classification Profitable facilities Non-Profitable Facilities Non-Profitable (Residential, Office, Retail etc.) (Residential, Office, Retail (Public building, school, parks) (Public building, school, 9> Advantage and Disadvantage of Land Lease 9> Advantage and Disadvantage of Land 8> Possible Project Owners in Construction Period Owners in Construction Project 8> Possible - - An aero-city is a good place to build complex resorts, including casinos. Casinos in 5.3.3. Possible Anchor Project (1) Casinos 5.3.2. Land Lease What is unique about Korea’s aero-city development is that it leased land without As previously analyzed, the land price does not yet reflect the market price due to the 5.3.1. Project Owner 5.3.1. Project • Rental Income • Control on the project near the airport • Land Rights secured Northeast Asia are very profitable projects. However, casinos should be very carefully domestic serious side effects. Casinos can be divided into introduced because there are many casinos and foreign casinos. Countries with foreign casinos include Korea, China, and selling it. Through this, IIAC (Incheon International Airport Corporation) wanted to control the impact of the development project near the airport and introduced the facilities they of land leases are as below. wanted. The advantages and disadvantages uncertainty of the Mongolian building market. If development profits are expected to be bring more benefits as may involvement in the construction business high, the government’s well as interested parties. Author’s own. Source:

Korea benchmarked Singapore in 2015 to conduct two international bids, RFC (Request for concept) and RFP (Request for Proposal). In addition, a pre-licensure system was introduced to ensure the stability of the casino business. The pre-licensure system allows casino operators to obtain a casino license in advance through an approved business plan before construction.

Schedule for Korean Casino Operator Selection

Date Event

2014 Singapore benchmark 147 Chapter 2015.6 RFC(Request for concept)

2015.12 RFP(Request for Proposal) 03 Review of Implementation Method Source: Author’s own.

During the RFC competition, the Ministry of Culture, Sports and Tourism selected six operators, and then one operator was selected during the RFP process.

Currently, there is one casino resort in operation and two casino resorts under construction in Yeongjong Island.

(2) Paradise City

Paradise City Casino Resort, a casino-integrated resort completed in 2017, was promoted by Paradise Group, which operates several foreign casinos in Korea. Paradise City Casino Resort did not go through the aforementioned RFC and RFC procedures, and was promoted by transferring the casino business rights of Paradise City to Incheon.

(3) RFCZ

The RFCZ project is a casino project currently being promoted in Midan City. The project was initially pursued by the joint venture between LIFO Group, a Midian City developer, and Lease Inspire Construction Theme Park etc. Mohegan Entertainment Casino, Hotel, Convention, etc. RFCZ Purchasing Construction Entertainment RF Group + Caesar’s RF Group + Caesar’s Casino, Hotel, Convention etc. Lease Operating Paradise City Paradise Paradise Group Paradise Casino, Hotel, Pool, Museum 11> Integrated Resorts Developers in Korea Resorts Developers 11> Integrated Land - Status facilities Project Owner Classification The logistics market has been greatly developed along with the growth in the global (5) Logistics Complex Due to the two casino resorts mentioned above, the Ministry of Culture, Sports and are summarized as below. resorts The three casino integrated (4) Inspire logistics industry. logistics The industry. development of the Internet and apps has greatly increased the size of offline shopping, and offline shoppingin Korea, China, and Japan beenhas greatly developed. Logistics markets require large warehouses, which require good access and low land prices. It is advantageous for logistics to move to the airport area and will very advantageous for the logistics complex as the land price is low. Tourism decided that Tourism it would be advantageous to build several casino resorts in Yeongjong- do. Because domestic casinos cannot be built in Korea, they are more disadvantageous than casino resorts in Singapore or Macau. Therefore, through the RFC and RFP process, the US selected as the final casino operator. inspire resort was Mohegan group’s casino operator Author’s own. Source:

6.1. Public Project Ownership for Infrastructure Periods

In most countries, urban development is driven by public sector due to long development periods, low profitability, uncertainty, and regulations. This is due to the public interest in urban development, and development by private enterprises may be insufficient for such purposes due to profitable development.

In the case of development around Ulaanbaatar New Airport, the infrastructure development stage is considered to be appropriate for the public-driven development method. Consideration may be given to the establishment of a special agency for coordination and cooperation between Ulaanbaatar cities and central government.

While promoting infrastructure development through public, roads/railroads and power plants/water treatment facilities for access to new airports can be carried out through PPP (BTO or BTL). 149 Chapter

6.2. Anchor Projects for Construction Periods 03 Review of Implementation Method In the construction stage, profitable facilities such as residential, retail and office are developed by the private sector while non-profitable facilities, such as public facilities, are generally developed by the public. However, the introduction of anchor projects is important in developing unique characteristics of a new airport city. Examples of such anchor facilities are integrated resorts including casinos and logistics complexes.

The location of the new airport city is quite good place for the development of integrated resorts in Northeast Asia, such as China, Korea, and Japan. However, it is necessary to consider the social side effects of operating the casino business.

In the case of Korea, integrated resorts, including foreigner-only casinos, have been developed near the Incheon International Airport. For attracting developers, Korea introduced a pre-licensure system, and it would be beneficial to introduce such a system in Mongolia as well.

The logistics market has been greatly developed due to the increase of the global logistics industry. Logistics markets require large warehouses, which require good access and low land prices. It is advantageous for logistics to move into the airport area and will very advantageous for the logistics complex as the land price is low. EDCF annual report 2013, Economic Development Cooperation Fund. 2013, Economic Development Cooperation EDCF annual report Zone. Incheon Free Economic Office of Mongolia, https://www.en.nso.mn. National Statistical SMEs in Mongolia, https://www.ifc.org. SMEs and Women-owned Asia, Shim, Su-min. policy towards Central ODA of Korea’s strategies Study on the future The Constitution of Mongolia. Global Retail Development Index, A.T.Kearney. Kearney The 2015 A.T. Ulaanbaatar City Stats, https://www.ubstat.mn. References 150 Development of Smart Aero-city adjacent to the New Ulaanbaatar International Airport (NUBIA) in Mongolia Ministry of Economy and Finance (MOEF) Sejong Government Complex, 477, Galmae-ro, Sejong-si 30109, Republic of Korea Tel. 82-44-215-7741 www.moef.go.kr

Korea Development Institute (KDI) Namsejong-ro, 263, Sejong-si 30149, Republic of Korea Tel. 82-44-550-4114 www.kdi.re.kr

Dohwa Engineering Co., LTD. 438 Samseong-ro, Gangnam-gu, Seoul, Republic of Korea Tel. 82-2-6323-3869 www.dohwa.co.kr

Young & Jin Accounting Corp. 4th Fl., Hanil Bldg, 652, Nonhyeon-ro, Gangnam-gu, Seoul, Republic of Korea Tel. 82-2-6959-6509 www.ynjac.co.kr

Knowledge Sharing Program (KSP) www.ksp.go.kr

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9 791159 324741 ISBN 979-11-5932-474-1 ISBN 979-11-5932-438-3(set)