On the development of regional cooperation between and Mongolia

Potaev V.S. ‐ Doctor of Economic Sciences, Professor of Buryat State University

1 The relevance of scientific research • In the current conditions of globalization and growing dynamism, the problems of the development of regions, in particular the border areas, come to the fore. The changes taking place in the functional component of the state borders necessitate the development of a new vision, a rethinking of a number of fundamental concepts, the development of conceptual bases for border development as an element of the national economy system. • For the Republic of , this circumstance determines the urgency of analyzing the social and economic situation in the Russian‐Mongolian border regions at the present stage, identifying problems and inconsistencies in their development, and developing proposals for their solution. Territorial‐spatial studies of the economies of Mongolia and Russia show a deterioration in the structure of the economies of countries and the irrational concentration of productive forces in the regions, particularly in the border areas.

2 Purpose and objectives of research • The goal: to develop a set of measures and a mechanism to improve the development of social and economic relations between the border areas of Russia and Mongolia, which will allow to form an effective regional policy in the field of social and economic development of border regions capable of bringing international cooperation between the border regions of Russia and Mongolia to a new stage of development. • Tasks: • 1. Analysis of modern theories and concepts containing the scientific substantiation of conditions, factors and trends in the development of the country's border area; • 2. Study of interstate integration in the border area as a factor of increasing competitiveness and efficiency of the economy of the Russian Federation and Mongolia; • 3. Assessment of the current socio‐economic development of Russia and Mongolia at the regional level; • 4. Definition of the basic social and economic directions on problems of a border area of two countries; • 5. Development of a set of measures and a mechanism to improve the development of social and economic relations of the border territories of Russia and Mongolia.

3 Degree of scientific elaboration of the problem • The theoretical basis of our research is the scientific theory of the classics of economic thought, such as I. Tünen, V. Launhardt, A. Weber, A. Lesh, A. Smith, D. Ricardo, E. Heckscher and B. Olin, • As is known, foreign and Russian authors engaged in scientific research in the development of the regional economy: Alampiev P., Aleksandrov I., Anokhin A., Balshakov S., Valentey S., Granberg A., Gutman G., Zakharova E., Kolossovsky N. ., Lapaeva M., Nekrasov N., Novoselov A., Smirjagin L., Khasaev G., Shtulberg B., Jacobson L. et al. • The study of trade and economic ties between Mongolia and Russia, in conjunction with the problems of market transition and socio‐economic development of the two countries, are reflected in the writings of Russian scientists. Among them we can distinguish such names: Atanov NI, Mangataeva DD, Osodoev PV Namzhilova B.E. Kilgydai A.C., Damdin OS, Dabiev DF, Lebedev V.I. Sharaldaev B.B. A.A. Gerbov, A.V. Golikh, V.R. Nazirov, G.S. Yaskina, L.A. Anosov, M.E. Tregubenko, S.K. Roshin, Yu.V. Kuzmin, as well as modern Mongolian scientists G. Purevbaatar, T. Dorzh, D. Boldbaatar, C. Davadaorg, A. Davaasuren, P. Luvsandorj, D. Sergelen, N. Otgonsaihan, and others.

4 Methodological approach and methodic of research • In the methodological approach and methodic of research, according to the classification of A.G. Granberg, we proposed to distinguish three levels of borderland, on the basis of which it is expedient to distinguish the following characteristics: • Micro‐level ‐ settlements directly entering the state border and included in the border zone. • Meso level is administrative areas in the larger regions, part of whose external borders coincide with the state border, as well as enterprises and organizations operating within these regions. • The macro level is the border region as a whole. • The information base of the research is made up of legislative, normative and analytical documents of the state and municipal government of the region, data from the periodical press, Internet sources, and expert analysis results.

5 Regulatory documents governing the cooperation of Russia and Mongolia • "The Treaty on Friendly Relations and Cooperation between the Russian Federation and Mongolia" (1993), • "Agreement on border points and simplified communication through the Russian‐Mongolian state border" (1994), • "Agreement between the Government of the Russian Federation and the Government of Mongolia on cultural and scientific cooperation" (1995), • "Agreement between the Government of the Russian Federation and the Government of Mongolia on trade and economic and cultural cooperation of the Republic of Buryatia and aimag of Mongolia" (1998), • "Agreement on cooperation between border aimaks of Mongolia and the republics, regions, territories of the Russian Federation" (2000) • The Ulaanbaatar Declaration (2000), the Moscow Declaration (2006), • Declaration on the development of strategic partnership between Russia and Mongolia (2009), • "Agreement between the Government of the Russian Federation and the Government of Mongolia on the training of underage citizens of Mongolia in Russian educational institutions with additional educational programs aimed at conducting military training for underage citizens" (2010), • "An agreement between the Government of the Russian Federation and the Government of Mongolia on temporary labor activity of citizens of one state in the territory of another state (2012), • Medium‐term program for the development of strategic partnership between the Russian Federation and Mongolia (2016)

6 Table 1. ‐ Foreign trade turnover of Russia and Mongolia for 2012‐2016. ($ million)

Foreign trade turnover Including:

Export Import Year USD million rate of USD million rate of USD million rate of growth of growth of growth of chain (%) chain (%) chain (%)

2012 1927,0 +11,97 79,6 ‐17,34 1847,4 +13,71

2013 1623,6 ‐15,74 61,8 ‐22,36 1561,9 ‐15,45

2014 1610,9 ‐0,78 61,6 ‐0,32 1549,3 ‐0,81

2015 1097,9 ‐31,85 76,9 +24,84 1021,0 ‐34,10

2016 936,2 ‐14,73 55,8 ‐27,44 880,4 ‐ 13,77

7 Table 2. ‐ Structure of Russia's exports to Mongolia in 2015‐2016 (%)

№ Product group 2015 2016 Deviation

1. Mineral products 74,11 60,34 ‐ 13,77

2. Food and agricultural products 11,11 18,29 + 7,18

3. Machinery, equipment and 4,68 8,32 + 3,64 vehicles 4. Chemical products 5,04 7,17 + 2,13

5. Metals and metal products 2,52 2,42 ‐ 0,1

6. Other product groups 2,54 3,46 + 0,92

8 Table 3. ‐ Structure of imports of Russia from Mongolia in 2015‐2016 (%)

№ Product group 2015 2016 Deviation

1. Mineral products 81,34 75,08 ‐ 6,26

2. Food and agricultural products 14,70 18,83 + 4,13

3. Textiles and footwear 2,29 5,89 + 3,60

4. Machinery, equipment and 1,36 0,04 ‐ 1,32 vehicles

5. Other product groups 0,31 0,16 ‐ 0,15 ов

9 The border territories of Russia and Mongolia • The border regions on the Russian side are the Altai, Tyva, Buryatia, Zabaikalsky Krai, the Mongolian side ‐ the aimaks Bayan‐Ulgiy, Uvs, Zavkhan, Khuvsugul, Orkhon, Selenge, Bulgan, Hantiy, Dornod. • The Republic of Buryatia is bordered by aimaks Selenge, Bulgan and Khovsugul. In Buryatia the bordering regions with Mongolia are , Dzhidinskiy, Okinsky and Zakamensky.

10 Table 4. ‐ Socio‐economic indicators of Mongolia and the border regions of the Russian Federation (as of 01.01.2016)

Territory, Population, Unemployment Density of thousand thousand rate, % population, square meters people. people / thousand. sq. m. km Mongolia 1564,9 3057,8 7,9 1,9 The Republic of 351,3 982,3 10,4 2,8 Buryatia Altai Republic 92,6 215,3 11,5 2,3

Tyva Republic 168,6 313,7 20,8 1,9

Transbaikal region 431,5 1082,6 10,3 2,5

Total for the 1044 2593,9 13,3 2,4 border regions of Russia

11 Normative‐legal acts of the Republic of Buryatia

• Law of the Republic of Buryatia "On the implementation of certain provisions of the federal law" On the Basics of Cross‐Border Cooperation "on the territory of the Republic of Buryatia. Ulan‐Ude 08‐Nov‐2011 • Agreement between the Government of the Republic of Buryatia (RF) and the City of Ulan Bator (Mongolia) on trade, economic, scientific, technical and cultural cooperation December 22, 2003 • Agreement between the Government of the Republic of Buryatia (Russian Federation) and the Government of the ARVM (PRC) of 22.12.2003. February 25, 1999 • Agreement between the Government of the Russian Federation and the Government of Mongolia on cooperation between RB and Mongolia • Ordinance of the Government of the Republic of Belarus 07 November. Order of the Government of the Republic of Buryatia No. 729‐r of November 7, 2016 "On the provision of favorable conditions for the performance of export activities by foreign economic activity participants" • Ordinance of the Government of the Republic of Belarus on 23 June 2016 No. 356‐g .Order of the Government of the Republic of Buryatia No. 356‐r of June 23, 2016 "On approval of the Action Plan for the Roadmap for Promoting Goods Produced in the Republic of Buryatia to the Mongolian and Chinese Markets for 2016‐2017" 12 Table 5. ‐ Foreign trade turnover of the Republic of Buryatia (million US dollars)

2016 2012 2013 2014 2015 2016 as% of 2012 Total 1202,1 1463,1 1425,0 1680,2 1019,1 84,8

including: with far abroad 1056,1 1316,1 1331,5 1540,3 973,2 92,2 countries

With Mongolia 45,2 42,2 33,5 32,2 34,6 76,5

with CIS 146,0 147,0 93,5 139,9 45,9 31,4 countries

13 Table 6. ‐ Exports of goods of the Republic of Buryatia (million US dollars)

2016 as% of 2012 2013 2014 2015 2016 2012

Total 949,1 1299,7 1278, 9 1567,5 960,0 101,1

including: with far abroad 896,6 1246,2 1272,1 1490,3 920,5 102,7 countries

With Mongolia 42,4 36,6 27,7 26,1 28,9 68.2 with CIS 52,5 53,5 6,8 77,2 39,5 75,6 countries

14 Table 7. ‐ Imports of goods from the Republic of Buryatia (million US dollars)

2016 2012 2013 2014 2015 2016 as% of 2012

Total 253,0 163,4 146,1 112,7 59,1 23,4

including: with far abroad 159,5 69,9 59,4 50,0 52,7 33,0 countries

With Mongolia 2,8 5,6 5,8 6,1 5,7 в 2 раза

with CIS 70,4 93,5 86,7 62,7 6,4 9,1 countries

15 Table 8. ‐ Basic socio‐demographic indicators of the border regions of the Republic of Buryatia

2016 as% of 2014 2015 2016 2014

Density of population, people / 2,8 3 2,8 100,0 thousand square kilometers The coefficient of migration loss, per 1000 people of population 42,1 42,7 46,3 110,0

The proportion of the population at working age in the total 67,1 54,3 66,4 99,0 population Average nominal accrued wages of employees, rubles. 28713,8 30945,3 32034,2 111,6

16 Table 9. ‐ Indicators of agricultural production of the Republic of Buryatia and border areas (as of 01.01.2016)

Number of Number of Harvesting of Harvesting Harvesting of sheep and cattle, thousand cereals, potatoes, vegetables, goats, heads thousand tons thousand tons thousand tons thousand heads The Republic of 287 377,2 21,4 133,2 53,6 Buryatia in t.ch. Kyakhta 25,3 26,6 1,8 7,7 2,4 district Zakamensky 6,7 34,7 0,9 2,4 0,3 district Dzhidinsky district 46,9 41,1 4,0 4,9 3,3

Tunkinsky district 4,4 27,6 0,7 5,1 1,4

Okinsky district 1,8 17,2 ‐ 0,017 0,005

Total for the 85,1 147,2 7,4 20,1 7,4 border regions of the Republic of Belarus 17 Table 10. ‐ Strengths and weaknesses for cooperation

Strengths Weaknesses ‐ Geographical proximity, the length of the common ‐ Low population density. border is 1275 km. ‐ High customs duties on imports of ‐ Historically established trade, economic and socio‐ traditional Mongolian goods. cultural ties. ‐ Low investment attractiveness of ‐ High demand for traditional Mongolian goods in border areas. Russia (live cattle, meat, woolen, cashmere, leather, ‐ Low level of incomes of the population. sheepskin and fur products, etc.). ‐ Underdevelopment and inconsistency ‐ Growth of requirements in the Russian transport with the world standards of transport services (repair of aircraft, railway transport, etc.). and border infrastructure (customs ‐ The presence of the transport corridor "Ulan‐Ude ‐ points and some elements of the border ‐ Ulan‐Bator ‐ Beijing". infrastructure, transport services, etc.). ‐ Similarity of culture, language, customs, culture, mutual attraction of kindred peoples.

18 Table 11. ‐ Opportunities and threats to cooperation

Capabilities Threats

. High potential for joint ventures and . Loss of highly skilled human resources. international projects. . An inadequate demographic situation. . Creation of new jobs for citizens of Buryatia . Technological backwardness. and Mongolia in both territories. . Imperfection of the regulatory framework . Arrangement of border infrastructure for the development of cross‐border (roads, road construction, etc.). cooperation. . The transformation of the republic into a . Competition in the Mongolian trade link between the subjects of the Siberian market and foreign investment market. Federal District and Mongolia. . Criminogenic situation in the border areas. . Mutual interest of administrative structures . The similarity of potential advantages. and population in the cooperation of . Conjuncture decline in demand for Buryatia and Mongolia. products.

19 Problems of development of cooperation • There is a sharp imbalance in the trade and economic sphere between Russia and Mongolia, in favor of China. The predominant share in the trade turnover of Mongolia and Russia is occupied by China's third neighbor partner; • there are significant differences in the customs statistics, which clearly goes beyond the limits of statistical error and does not give an accurate description of the real situation, but on the whole it does not change the notion of general trends; • there are restraining veterinary and sanitary restrictions on the part of Russia in relation to imported meat products from Mongolia; • regional and cross‐border communications require the intensification of work on the part of administrations and the Government of the two countries; • there is no systematic work to study the consumer markets of countries in order to identify the demand for goods of consumer groups, cross‐border trade is chaotic; • there is not enough popular Russian and Mongolian brand goods, import and export of which need to reduce duties in order to revive trade; • there is a problem of developing border territorial business units both from Russia and Mongolia, as a whole due to the lack of sources of financing and / or their lack.

20 Main directions of development of regional cooperation • 1) Increasing the level of socio‐economic development, the greater the similarity in terms of economic activity, the better the climate for cross‐ border interactions. • 2) Improvement of relevant interstate agreements and mutual preferences granted within their framework, which create more favorable conditions for cooperation. • 3) Development of institutions for promoting cross‐border and interregional cooperation, including interregional and inter‐municipal agreements, improving budgetary and other financial instruments to improve the effectiveness of countries' investment policies, and coordinating fiscal activities. • 4) Improvement of the regulatory and legal framework for interregional and cross‐border cooperation of the Russian Federation, including the adoption of the Federal Law "On Cross‐Border and Interregional Cooperation in the Russian Federation". • 5) Support by public authorities and local self‐government bodies, projects and activities for the development of the border area and checkpoints to address the development of cross‐border cooperation. • 6) Improvement of migration, tax, customs and criminal legislation.

21 Thank you for attention!

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