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http://zgm.mn/post/2300/

Mongolian Foreign Policy: The story of seeking the third neighbor

The initial third neighbor policy was misrepresented as a betrayal to Japan

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http://zgm.mn/post/2300/


Mongols are the nationality that introduced Europeans to Asia and Asia to Europeans. When I say Asia, I mean both Central and East Asia. The Mongols conquered the vast Eurasian territories in the XIII-XIV century and played a major role in culture, humanity, civilization, and information.

The Chinese Silk Road was developing during the Great Mongolian Empire. Mongolians maintained its safety, order and trading culture along the way. In the history of Iran, the Ilkhanate of Mongolia gave the hand of salvation to Iran's Persian culture and it preserved without fading. Mongolia's Golden Horde had a tremendous role in Russian culture, which has a unique Eurasian culture and heritage. In particular, Mongolia helped Russia to merge into a single state. In China's history, Mongolia led Chinese kingdoms to unify and make Beijing the capital of the Yuan Dynasty as the capital of Ming, Qing, Dynasty, and China. In this way, the Mongols and their ancestors started the great migrations of Eurasian transcendental nations and tribes.

The geographical location of Mongolia is rather unique as it stretches from west to east. The horizontal position of Mongolia is the link to Central Asia and Northeast Asia and in the broad sense, it is a bridge for the West-East connection. The location of the north and south are considered unique and spectacular within Russia and China. From this perspective, this unique location urges Mongolian politicians to search for third neighbors.

Historically, Mongolia was regarded as a buffer zone in the first half of the 20th century by Russia-Japan, then Soviet Union-Japan, Russia-China, Soviet Union-China, and Soviet-Chinese buffer zone in the second half. In that sense, Mongolia's external environment was created in the twentieth century, with the revolution in Mongolia. Mongolia has had a great history, including the struggle, the outcome of the Khalkhyn Gol war, the status of Mongolia's acceptance of the status quo, the socialist construction, the 30-year conflict of Soviet-China, and the 20-year conflict of Mongolia-China during the war, and the eastern side of the communist bloc headed by the Soviet Union.

The aspiration to have third neighbors became one of the most important things among the leaders of the Mongolian society in the midst of the revolutionary national liberation of 1911. The new objective of Bogd Khan was the priority of Mongolia's diplomatic service, which was to persuade the two neighbors into accepting the independence, as well as other larger states, to unite Inner Mongolia in Khalkh.

Mongolian Ministry of Foreign Affairs made an official note to nine countries including France, England, Germany, the United States, Belgium, Japan, Denmark, Holland, and Austria on November 18, 1912. The exchange of diplomatic missions between the governments mentioned in the note indicated that the agreement between Russia and Mongolia stated: "The friendship of the two countries should be extended and to start trading by signing the contract".

After the separation from Manchus and receiving the approval of other countries (excluding Tibet), our patriarchs have entered St. Petersburg and went into the locked doors of foreign countries' embassies.

It was the first step of Mongolia's third neighbor policy and the proof of the ability to be a legal subject in international relations. Limiting the diplomatic efforts of a third neighbor was basically restricted under the three treaty agreements of Khyagt, which was the first major evidence that both sides did not support the third neighbor policy.

After the victory of the People's Revolution, Tseveen Jamsran (who had been invited by the Foreign Ministry to be a Cultural Affairs Officer from Buryatia at the beginning of 1912), called for the establishment of a neutral state as the country was waiting for some government support. "Mongolia is a country that has been approved by both the Soviet Union and China and has to be a neutral state approved by many other countries. It is like Switzerland, " he said in 1926.

At the time, the people of MPRP opposed Tseveen Jamsran as a Western ideologist and believed in maintaining neutrality between the socialist (CCCP) and capitalist (China) conditions in the capitalist  environment, which would cause Mongolia to become prey for imperialists and threaten its liberation  and independence. It was another proof that both neighbors did not support the two neighbors' policy.

The views and attempts to secure independence by getting approved by third neighbors in Central Asia, as well as becoming a neutral state like Switzerland, were misrepresented into taking side with Japan and betraying to the Japanese imperialists during the 1937 repression. There is evidence that Prime Minister Genden Peljid reported this to Stalin.

Genden. I would like to ask you for explanations on the Independence of the People's Republic of Mongolia.

Stalin. In regard to Independence, your country is, in fact, an independent state. As I know, only the Soviet Union has accepted your sovereignty. Is that so? Your country inofficially separated from China, and did not declare it. Really?

Genden. Yes, That’s true. No one except the Soviet Union accepted us, nor did we officially separated from China.

Stalin. Is there any official representative of your country in China? Would you like other countries to accept the independence of your country? Do you want to have a formal relationship with them? Have you ever talked to other subjects on this topic somewhere?

Genden. Chinese delegation does not exist. Not to be accepted by foreigners. I have not discussed this subject with any foreign delegates.

Stalin. Do not. Do you want to be recognized by foreigners? Did you not discuss this subject with other foreign delegates?

Genden. Yes. I did not negotiate with anyone. You know that we have punished the people who requested Japan’s approval. You would know better how would be recognized by foreigners. The issue of acceptance of the People's Republic of Mongolia is not a domestic matter, it is an international issue.

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Experts warn of pre-election year impact on improving economy

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Public investment expenses almost tripled compared to the previous years to MNT 1.2 trillion. As a reminder, the economic growth slowed down during the three previous parliamentary elections and the MNT rate declined sharply. Thereby, analysts are being cautious towards the election that could potentially change the economic and business environment and the fiscal discipline that is currently improving.

Since 2012, the volume of the economy has expanded and the budget revenue outreached the trillion mark. As a result of mega projects in the mining industry, such as Oyu Tolgoi, Mongolia's economy has developed its basic structure. Also, public expenditures, revenues, and investments have improved from the 1990s. The amount of capital that is being allocated from the budget to rural administrations is reaching billions of MNT. As a result, companies' investment in the public sector such as schools, kindergartens, hospitals, and road bidding are becoming more competitive.

However, some of the taxpayers' money is being wasted in the name of financial investment. In particular, the construction costs have exceeded budget allocation over the years. Many of the buildings, roads, and bridges that have not been completed after the election still remain as carcasses. Construction costs have been increased 2-5 times.

According to a survey conducted by the Open Society Forum, the Government budgeted MNT 2.5 trillion to finance 887 projects, activities, and constructions in 2019.

In general, major maintenances burden the budget. A total of MNT 84.9 billion has been planned for 75 major maintenance works this year. The maintenance budget is mainly expected to contribute to the transport sector.

Mongolia is expected to purchase 42 new equipment worth MNT 102.4 billion this year. If the MNT rate falls, this figure will rise. Analysts believe that budget management is deriving and that it is time to estimate the socio-economic efficiency of the budget.

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Mineral exports increases in the first quarter

100 percent of copper output exported to China in Q1

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Mining exports, the key driver for Mongolia's economic growth, slightly picked up in the first quarter of this year. Mongolia's economy is dependent based on a few mining commodities. The exports of these minerals, such as coal and copper, constitute the main inputs of the nation’s revenue. The coal supply, which accounts for about 25 percent of Mongolia's total export revenue, jumped 15 percent to 7.8 million tons in the first three months of this year. The country earned USD 644 million from coal exports, which is USD 130 million increase from the same period of the previous year.

The export at the Gashuunsukhait-Gantsmod port, the main gateway for mining goods, was temporarily delayed in January and coal output dropped sharply as a result. Regardless, the coal supply was stable in the first quarter of this year.

Although coal exports increased in the first quarter of the year, a slow down in supply has been observed due to China's recent slowdown in exports, as well as the tightened customs control over the last few months. The same thing happened in 2018 and coal exports fell drastically for a short period. Specifically, coal export was temporarily suspended in November and almost put to a full stop in December. Mongolia intends to generate one-tenth of its budget revenue from coal. Although coal export is expanding, it remains uncertain whether if coal sales could reach MNT 1 trillion this year.

The export of copper concentrate, which is equally profitable as coal, increased by 7 percent to 361,400 tons in the first quarter. Mongolia exported 100 percent of its copper concentrate output to its southern neighbor China in the last quarter.

Another significant development was the growth in other commodities that make up lesser revenue compared to the previous two items have grown significantly. For example, iron ore export revenues increased by 66 percent to USD 106.5 million according to the National Statistical Office. Fluorspar export revenues increased by 62 percent to USD 40.5 million. Last year, Mongolia exported 110,600 tons of fluorspar and 69 percent of it exported to China and 30 percent to Russia. Only one percent of fluorspar was supplied to the Republic of Korea.

The Government is planning to launch the 2019-2024 action program to support the production of fluorspar production and export. The geological exploration study is about to exclude fluorspar resources in this sector. Accordingly, the industry experts are highlighting the need for revising the resource tax.



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Third Neighbor Trade Act may see approval this year

Trade Act to allow US investors to engage in wool and cashmere industry of Mongolia

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Mongolia accounts for almost half of the world's raw cashmere production but supplies less than 20 percent of final products in the market. The American Chamber of Commerce in Mongolia (AmCham  Mongolia) praised the action taken by the United States Congress to advance the Mongolia Third Neighbor Trade Act, a U.S trade initiative that will grant Mongolian cashmere duty-free access to the United States. Officials note that there is a high probability of the bill getting approved in 2019.

Adiya Oyungerel, the Executive Director for the AmCham Mongolia said, “The bill was submitted in July 2018. At the time, some U.S politicians were skeptical about ratifying a law for a single country and how it will comply with the United States. At the end of the 1990s, the U.S provided Mongolia with such advantages; however, these were not utilized very often. Chinese manufacturers established a factory in Mongolia to have the exploit this opportunity and exported its products to the U.S under discounted terms. There was a possibility to repeat this case, and it might take heed to the U.S.”

“The two U.S chambers are currently holding the first discussion on the bill. Last Wednesday, the act was submitted to the House of Representatives, and to the Senate on Thursday. Of course, it will take time to ratify the law. The time of approval is uncertain, but it is within prediction to be finalized within this year,” he added.

The act provides a clear definition of export conditions for cashmere. For example, the product must be produced in Mongolia and must contain over 51 percent cashmere. The U.S Congress has 500 heads of Senate. Therefore, we need to introduce the significance of the draft law to the members of  the chamber.

The Third Neighbor Trade Act was written by members of the US-Mongolian caucus in Congress. Cashmere is one of Mongolia's few value-added and internationally competitive products. The draft law could potentially diversify the mining-dependent economy. With the bill, Mongolia will deliver its products to the U.S market and allow US investors to engage in the wool and cashmere industry.

Mongolia produced almost 50 percent of the world’s cashmere in 2017, with 9,400 tons of raw cashmere created, of which only 1,100 tons were processed domestically, while the remaining 8,300 tons were exported to China.

The elimination of U.S import tariffs will create a strong demand for Mongolian cashmere in the United States. To meet this increased demand, Mongolian cashmere will be processed in Mongolia rather than in China, creating thousands of new jobs for Mongolian workers.

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ETT may raise coal price and double dividends

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Coking coal prices expected to hike this year compared to previous years. Mongolia has the opportunity to earn over USD 1.3 trillion from coal exports. If we use it, Erdenes Tavan Tolgoi JSC (ETT) will double its 2018 profits with about MNT 1.5 trillion. For example, the company could increase its coal price by USD 20 per, which could then double dividends by at least USD 90 per share.

Mongolia plans to export 42 million tons of coal for MNT 1.3 trillion return in 2019. With this amount of money being generated from coal revenue, this year's budget will be much higher. The country could spend the budget on social projects such as schools, kindergartens, and hospitals in the capital city and rural areas. We have been resetting the historical record of coal exports for the last three consecutive years and might renew it this year.

Mongolia has a chance to expand its market in the southern neighbors, and to have a strategic relationship with China in the coal trade. The S&P Global Platts survey shows that the coking coal prices have risen by over USD 20 per ton since the beginning of this year. Coal prices will remain steady throughout the year. The price of coking coal is expected to reach USD 250 per ton, exceeding the previous year's price, according to the Vice-President of Fenwei Energy Information Services Co., Ltd. Sarah Liu.
Coal prices will remain steady throughout the year

The Chinese side emphasized that China's coal reserves will increase beyond 36 million tons in the south at China's "Coking Coal Resources and Market" world conference. Furthermore, the demand for high-quality coking coal remains high. Within the framework of the Blue Sky plan implemented by China, the region's major industrial zones began to shift from the sea to the north. Chinese market will come closer to Mongolia as a result. The seaborne coking coal price is starting to become expensive in the northern part of the country, where the industry is developing and steel production is in process.

According to the Ministry of Finance, Mongolia's coal export increased by 15 percent to 7.8 million tons over the same period of the previous year. In the second quarter, we can expect more growth in coal exports, says a correspondent of the ministry.