Prospects for Trade and Economic Cooperation between Russia and Mongolia

|Russia & Mongolia

In 2005, trade with Russia accounted for 19.3% of total trade turnover in Mongolia, representing a decrease of 3.9% from the 2000 level of 23.2%. Mongolia imported 127 types of product in 2005, at a value of $400 million. Oil products accounted for 75% of imports, machinery for 9.9%, food products for 7.2%, chemicals for 2.5%, electricity for 1.6%, and construction materials, shoes, clothes and other industrial products accounted for the remaining 3%.

In 2005, Mongolian imports from Russia increased by 16.9% on the previous year and by 93.9% compared with 2000. In 2005, Mongolia exported 34 types of product to Russia, at a total value of $26.4 million. 77.4% of these exports was accounted for by mining products, with meat accounting for 18.7% and raw materials of animal origin for 3.9%.

According to statistics for the last five years, Mongolia has had a trade deficit with Russia. The gap in the trade balance grew to $374 million in 2005, 2.3 times higher than in 2000; this was caused by a fall in the quantity of exports and an increase in the price of imports from Russia on the world market.

Russia invested $33.7 million in 18 Mongolian sectors between 1991 and 2005. 27.2% was invested in geological research, 15.5% in construction, 12.3% in the financial sector, 9.7% in the food industrial sector, 6.5% in transport, and 6.3% in the industrial and public food sectors. Of the 376 Russian-invested companies in Mongolia, 86 are active in the trade and public food sectors, 52 in the processing sector, 46 in the geology sector, 33 in the food industrial sector, and 20 in the transport sector.

Some of the tariff and non-tariff barriers existing in trade between the two countries are as follows:

  • High tariffs imposed on Mongolian exports and transit goods on Russia’s railways.
  • Lack of a mechanism for regulating the rights of Mongolia as a landlocked country.
  • Discord concerning licenses and quotas imposed by Russia on Mongolian meat exports.

Both sides place great importance on tariff negotiations concerning Russia’s accession to the WTO, an agreement on which was signed in October 2005, and consider that this would be effective in promoting trade and economic relations between the two countries on a new level. It is in the interests of both sides that this is achieved and we are making an effort to implement a medium-term program for developing cooperation between the two countries in the area of trade and the economy. The objective of this medium-term program is to increase Mongolian trade with Russia to $1 billion by 2010; accordingly, the two sides are discussing the following measures to realize this goal:

  • Improving the recent turnover mechanism and creating a pleasant atmosphere for cooperation between the businesspeople of the two countries.
  • Including companies from the two countries in the presentation of investment projects, promoting the exchange of investment information, and creating infrastructure, in order to assist businessmen in making the best choice of investment project in the field of machinery industry, as well as research and collaboration relating to mineral resources, processing and agricultural industry.
  • Stabilizing the mutual exchange of information on the investment environment and the implementation of and changes in related laws.
  • Preparing specific programs and projects in the roads, transportation, construction, energy, geology and mining sectors and, within this framework, establishing a factory for the processing of mineral resources from the Gobi area.
  • Improving the outcome of cooperation in the agricultural sector, preventing high-risk animal diseases, conducting continence actions according to international standards, and cooperating in the realization of bilateral and multilateral agreements.
  • Making progress in the risk rankings, linking Mongolia with international export and investment insurance communities, and establishing direct relations and mechanisms that will enable financial transactions to be conducted directly between the national banks of Mongolia and Russia.
  • Expanding cooperation in the field of tourism and setting up cross-border tourist zones.
  • Promoting the activities of ports at the frontier to international status and developing direct trade and economic cooperation among regional institutions in the border area.
  • Within the framework for implementing the bilateral agreement concerning Russia’s accession to the WTO, there is a need to continue the negotiations on export tariffs, measures concerning animals and continence, and issues which might influence trade between the two sides, including transport tariffs and transit issues concerning oil products, in order to continue mutual trade liberalization and remove barriers.
  • Continuing negotiations on eliminating technical barriers to trade between the two countries.
  • Finalizing trilateral negotiations between Mongolia, Russia and China concerning transit transportation.
  • Reducing the tariff on oil imports from Russia and concluding an agreement on the co-accreditation of oil (quality) guarantees.
  • Seeking possibilities for the mutual recognition of transport insurance.

The two sides will work on achieving these measures step by step and aim to settle the medium-term program for developing trade and economic cooperation between Mongolia and Russia by the end of 2006.

[Translated by ERINA]