Trade and Economic Cooperation Between Mongolia and Russia

|Russia & Mongolia

There is a long tradition of cooperation between Mongolia and Russia, which has successfully been developed in a variety of fields, including politics, trade, the economy, and sociocultural fields. In particular, trade and economic cooperation play an important role in the socioeconomic development of Mongolia.

The main legal document regulating bilateral trade and economic cooperation is the intergovernmental agreement on the development of economic, scientific, technical, cultural and trade-related cooperation between Mongolia and Russia, which was adopted in 1991. Within this framework, an intergovernmental committee regulates trade and economic cooperation, while subcommittees established under its auspices develop regional and border area cooperation and expand educational, cultural and scientific development with the purpose of improving the effectiveness of the committee. Working groups involving both sides were established for the purposes of coordinating the activities of the subcommittees and providing support for discussion of the issues within the framework of bilateral cooperation, as well as making the necessary decisions.

Currently, the 2005 figure for Mongolian trade with Russia stands at $426.6 million. Russia has invested $33.7 million in 18 Mongolian sectors since 1990, accounting for 27.2% of total investment in the geology sector, 15.5% in construction and construction material production, 12.3% in banking, 9.7% in food production, 6.5% in transportation and 6.3% in the trade and services sector.

One recent major achievement in the arena of bilateral cooperation was the conclusion of a tariff agreement between Mongolia and the Russian Federation in connection with Russia’s accession to the WTO; the Protocol for this agreement was signed in Moscow in October 2005.

The current directions of bilateral trade and economic cooperation are as follows:

  • The formulation and implementation of the “Program for the Development of Trade and Economic Cooperation Between Mongolia and Russia Until 2010”;
  • The commencement of talks and negotiations concerning the establishment of a free trade zone between the two countries after Russia joins the WTO;
  • The joint establishment of a tourist zone around the Baikal and Khuvsgul lakes;
  • Securing support from Russia in sustaining the price stability of Russian oil products supplied to Mongolia and ensuring their continuous delivery;
  • Collaboration in the conclusion of an MOU or Protocol concerning cooperation between public institutions and the improvement of linkages between them;
  • Ensuring significant attention is paid by both sides to supporting SMEs by various means and increasing their capacity;
  • Increasing investment from Russia in such sectors as natural gas, mining, construction, construction material production, light industry, tourism and education sectors;
  • The organization of exhibitions, fairs, meetings and seminars in connection with the goals of increasing investment and exchanging information on legislation;
  • Actively work among public institutions at all levels, aimed at developing regional and border area cooperation within the agreements of the WTO;
  • Accelerating the establishment of a free trade and economic zone in the border area within the framework of regional development policy;
  • Determining the export and import capacities of business entities and implementing a policy focused on the effective utilization of the Siberian market;
  • Implementing measures aimed at increasing investment in free trade and economic zones by Russian investors.

Regional cooperation plays an important part in trade and economic cooperation between Mongolia and Russia. 70% of trade with Russia is accounted for by the Irkhutsk, Buryatia, Chita, Khemerova and Tuva regions of the Russian Federation. Regional cooperation activities take a diverse range of forms, such as arranging business forums, establishing trade representations and trade centers, holding exhibitions and fairs to advertise the products of enterprises, and organizing round table discussions to create linkages. The stabilization of these activities has been of great benefit in expanding cooperation between businessmen from these two countries.

The weakness in Mongolian and Russian trade and economic cooperation is the enormous trade deficit between the two countries, due to the effects on trade of transportation issues, as well as tariff and non-tariff barriers. In 2005, Mongolia imported from Russia 127 worth $400 million and exported to Russia 34 types of commodity worth $26.4 million. More than 80% of imports from Russia are accounted for by oil and oil products, while 50% of exports to Russia consist of mining products, with the other 50% accounted for by meat and raw materials of animal origin. The main reason for the trade deficit is the reduction in the value of Mongolian exports to Russia and the fact that the prices of commodities exported from Russia to Mongolia are increasing in world markets.

Having decided to work on entering a new stage of bilateral cooperation, eradicating the deficit in the balance of trade and modifying the present structure of trade, both sides are working on creating an environment in which resources and the opportunities resulting from long-term cooperation are comprehensively utilized, with efforts being made to maintain the relevant conditions for trade in products and services and to stabilize their supply, as well as jointly implementing cooperation projects that are of mutual interest and establishing a legal environment conducive to strengthening cooperation in the fields of economics, science, technology and investment, in order to increase bilateral trade turnover to $1.0 billion by 2010.

Furthermore, we will adhere to a policy of intensive development in the arena of bilateral cooperation through increasing investment from Russia, creating processing capacity for raw materials of animal origin, increasing the value of Mongolian exports to Russia, eradicating tariff and non-tariff barriers to trade, revitalizing regional cooperation, and strengthening linkages among businesspeople.

[Translated by ERINA]