START Mongolia merges with StartupJohor to form a united brand START www.e27.co

The new entity aims to build a global acceleration hub for startups in Johor region of Malaysia, while at the same time becoming the gateway to global expansion for Mongolian startups

START Mongolia and StartupJohor, the ecosystem developers in their respective regions, have merged together to form a unified brand​.

Called START, the new entity aims to build a global acceleration hub for startups in Johor region of Malaysia, while at the same time becoming the gateway to global expansion for Mongolian startups.

The merger further expands the existing market reach for both parties. StartupJohor is based in Iskandar Malaysia, the southern economic development region of the Johor province of Malaysia. The city is strategically located beside Singapore and Indonesia that allows companies based within to have an easy access to the market opportunities in Malaysia, Singapore, Indonesia and southeast asian countries.

This strategic location, along with a relatively cost-effective environment compared to Singapore with a ready-built world-class infrastructure in Medini, Iskandar Puteri, will be a gateway for Mongolian startups to expand their operations to overseas market.

Furthermore, Mongolian distinct geographical location, and East European and Asian cultural mixture will be a gateway for Malaysian startups into central Asia. So, Mongolia’s location in between Russia and China will be a gateway to markets beyond Mongolia, eastern region of Russia and Stan countries.

In the future, START will showcase Mongolian and Malaysian startups to investors, synchronise their operations, best practices of ecosystem building and ​database platform comprises of the two ecosystem​. On the innovation front, START will open tech-driven hubs and expand into corporate innovation programs.

The idea of merger became inevitable to each party when the hubs were promoting their startups overseas. So, given the potential for further ecosystem development and market reach, the new START brand will bring mutual benefits to startups in Mongolia and Malaysia in the area of market reach, product testing, operational synergy, investor and partnership diversification.

StartupJohor, established in 2014 and has dedicated in building startup and entrepreneurial ecosystem in southern region of Malaysia, has multiple signature programmes under its umbrella and incubates its startup companies in its five co-working offices in the southern region of Malaysia, Johor Bahru and Iskandar Puteri.

Similarly, ​START Mongolia, since its establishment in 2011 as Startup Mongolia NGO and WorkCentral Mongolia, is an ecosystem developer with community building programmes in startup community and track record in the corporate world. START Mongolia incubates companies with a global aim in its three co-working offices in Ulaanbaatar, and it has launched first co-working and incubator in Darkhan, the center for the northern region of Mongolia.

“In general, the markets in central asian region have had a limited exposure to the global startup ecosystem. However in Mongolia, the home-grown startups, given the high internet and smartphone usage and culture to adopt new technology, are altering the landscape intensively in this region. Tech and startup arena in Mongolia already have gave birth to home-grown fintech, martech, insurtech and blockchain startups. On the local stock exchange, number of microfinancing fintechs and blockchain tech companies have successfully raised funding through IPO,” said Zolboo Bayarsaikhan, CEO of START Mongolia.

“Many great companies are coming up from Johor Bahru. These companies have been acquired, raised substantial funding and on the path to IPO in the local stock exchange, and we are seeing a clear trend and movement that many best startup may not necessary coming out from first-tier cities such as Kuala Lumpur or Singapore. There is a rising amount of great companies from tier-two cities or even countries as well,” said Feng Lim, CEO of StartupJohor (now START Malaysia).

“Following to this changing landscape, the traditional business are keen to digitise their business operations, but in most industries, the tech solutions, and the corporate culture and structure to deal with the outcome are not readily available. This is where START Mongolia has the team, expertise and community to help them. Now through this merger, START is setting up the channel for the rest of Asia to enter into rapidly changing startup ecosystem and market of Mongolia and Central Asia,” added Bayarsaikhan.

Chinese Ambassador to Mongolia Xing Haiming hails 70 years of China-Mongolia relations www.globaltimes.cn

Editor's Note: China and Mongolia share the longest borderline of 4,710 kilometers. The two countries are good neighbors, good friends and good partners linked by mountains and rivers. This year marks the 70th anniversary of the establishment of the diplomatic relations between China and Mongolia. Chinese Vice President Wang Qishan will pay a friendly visit to Mongolia on Wednesday. In an exclusive interview the Global Times' reporter Zhang Dan (GT) in Ulan Bator, Chinese Ambassador to Mongolia Xing Haiming (Xing) tackled topics of the bilateral relations and Mongolia's attitude toward Belt and Road initiative (BRI).

GT: What have the diplomatic ties over the past 70 years have achieved and what is the future course they are likely to take?

Xing: Mongolia has established diplomatic relations with China since the founding of the People's Republic of China in October 1949 as one of the first 10 countries that established ties with China at that time. Even though the two countries have experienced some setbacks since then, good-neighborliness and friendliness have marked ties.

In 1994, the two countries revised the Treaty on Friendly Relations and Cooperation between China and Mongolia, which laid the political and legal foundation for the healthy and stable development of the bilateral relations.

Chinese President Xi Jinping paid a historic visit to Mongolia in 2014. The two countries upgraded bilateral relations to comprehensive strategic partnership, marking a new historical chapter in the bilateral relations.

At present, the "three carriages" - mutual political trust, economic and trade cooperation, people-to-people and cultural exchanges are driving bilateral relations fast forward.

High-level exchanges are frequent, meanwhile, mutual political trust has deepened. In 2018, the heads of the two countries met twice, reaching a consensus on a series of important issues and giving a boost to bilateral cooperation.

In April, Mongolian President Khaltmaa Battulga paid a state visit to China and attended the second Belt and Road Forum for International Cooperation. The meeting between the two top leaders was a significant one in the year of the 70th anniversary of the establishment of the diplomatic relations between China and Mongolia.

In terms of trade cooperation, Mongolia has been supporting and participating in the China-proposed BRI. The two sides are speeding up the alignment of the BRI and Mongolia's Development Road Program.

China has been the biggest trading partner, the most important source of investment and aid to Mongolia for years. Last year, Mongolia's trade volume with China reached $8.53 billion, accounting for 66.2 percent of Mongolia's total foreign trade volume, 26.9 percent higher than that of 2017. The two sides are working together to achieve the goal of bilateral trade volume of $10 billion by 2020.

China and Mongolia are accelerating joint research on FTA. The two countries have signed an inter-governmental agreement on a joint economic zone, which comprises land in Erenhot, North China's Inner Mongolia Autonomous Region and Zamyn-Uud, Mongolia.

On July 10, Chinese Vice President Wang Qishan will pay a visit to Mongolia, which will take bilateral relations into a new phase in the new era.

GT: Amid anti-globalization, unilateralism and trade protectionism, what is the significance of the joint research by the two countries on free trade zone (FTZ) and its implementation?

Xing: Currently, the main challenge for the global economy is the rising anti-globalization, unilateralism and trade protectionism. The US-led trade friction with China has aroused global attention.

I recently published an article with some facts about the trade friction and laid out China's stance in Mongolian media, which triggered a strong reaction in Mongolia.

I talked with people from all fields in Mongolia, and most of them understand and support China's position. They hope that China and the US can properly resolve trade disputes through dialogue and consultation.

China has been dedicating to protecting the free trade system and carrying out economic and trade cooperation with other countries based on equality, mutual benefit and mutual respect.

The FTZ cooperation between China and Mongolia demonstrates that most countries, including Mongolia, safeguard multilateralism and the system of free trade, instead of supporting unilateralism and trade protectionism.

The China-Mongolia FTZ is part of the consensus reached between the top leaders, which will open a huge market of almost 1.4 billion people.

It is to be noted that the population of Mongolia is less than 3.4 million. As a result, it shows China's sincerity to carry out economic and trade cooperation with Mongolia and care about Mongolia's development. The two sides are working hard to speed up feasible research on the FTZ and look forward to positive results as soon as possible.

GT: What is Mongolia's approach to the BRI?

Xing: Since China proposed the BRI, Mongolia has given active response to and support for it. Mongolian officials said many times that the country will actively participate in and support the BRI.

Mongolia also took the initiative to make changes in its development plan and proposed the alignment of its Development Road Program with the BRI.

The foreign minister of Mongolia has publicized the BRI several times at multilateral forums, appealing to more nations to participate in and build the BRI together.

It is notable that Mongolia has established the BRI fast-pass channel at the Chinggis Khaan International Airport, and some ports and stations. People participating in the BRI projects with approved certificates can pass through the BRI fast-pass channel.

In addition, Mongolia gives important suggestions in order to support and implement the BRI projects, which also shows its positive attitude.

GT: Is the cooperation between China and Mongolia mutually beneficial?

Xing: President Xi Jinping proposed building a community with a shared future for mankind. This proposal will work better when looking at neighboring countries. You cannot move your neighbors. We should have cooperation, gain mutual benefits and win-win results - these are our goals.

Probably Mongolia may gain more benefits from some projects. However, generally speaking, our cooperation is mutually beneficial and supportive of each other.

China's borderline with Mongolia is longer than that with Russia. If the border is peaceful and stable with friendly people-to-people exchanges, it will for sure bring benefits to both sides.

GT: Apart from China's support, Mongolia has accepted aid from Russia, Japan, South Korea and other countries. How is aid from these countries different and is there competition among them?

Xing: Mongolia's territorial area is very large - about 1.56 million square kilometers with the population of approximately 3.3 million.

Under such circumstances, the priority for the country is to develop friendly and cooperative relations with its two neighbors. The next step is to develop relations with other countries.

China is pleased to see Mongolia carrying out normal and friendly cooperation with other countries. However, we do not allow unfriendly actions taken place at our surrounding areas. We do not allow behaviors that do not respect China's key benefits. Mongolia said that it will respect China's core benefit completely.

GT: How can Mongolia better attract Chinese investors and protect their rights?

Xing: Investment is in fact a way of cooperation and is usually controlled by the company itself. It is not inter-governmental cooperation.

I suggest investors first learn about the country's investing environment. After evaluating the investment amount and budget, you can finally invest.

I think the first principle is to pay mutual respect; second, we should gain mutual benefit and win-win results. No one should eat the food alone. Third, Chinese companies should shoulder social responsibility in the invested country. They should not only care about making profits.

I believe if all of the above work is done well, it is very prospective for a Chinese company to invest in Mongolia.

GT: How do you comment on people-to-people exchanges between China and Mongolia?

Xing: When President Xi Jinping visited Mongolia in 2014, he announced a plan to strengthen bilateral exchanges and cooperation in fields such as youth, media and language exchanges.

China has offered 25 TV series for free to Mongolia. I can tell you there is currently a trend in Mongolia to watch Chinese TV series. It shows that Chinese culture is very popular and welcomed in Mongolia.

Moreover, the Chinese government provides Mongolia with a large number of scholarships every year. Each year, when the embassy holds tests for Chinese government scholarships, it is as popular as the college entrance exam in Mongolia.

Our embassy keeps trying innovative work to promote cultural exchanges. We have translated four great Chinese classical novels into Mongolian, which has been well received in Mongolia.

Forest fire in Inner Mongolia extinguished www.xinhuanet.com

HOHHOT - A fire that broke out in a primeval forest in North China's Inner Mongolia autonomous region Sunday has been basically put out, after an overnight battle by more than 300 firefighters.

Morgan Stanley Turns Bearish on Global Stocks as Challenges Grow www.bloomberg.com

Morgan Stanley cut its global equities allocation to the lowest in five years, and downgraded its investment recommendation to underweight, saying the outlook for stocks over the next three months looks particularly poor.

How Rio Tinto dug itself a hole in Mongolia www.afr.com

Alarm bells started to ring for the engineers working underground at Rio Tinto's Oyu Tolgoi mine when they had to abandon attempts to drill a fairly simple borehole for ventilation.

Rather than carve a discrete tunnel through the rock to surface, the bore collapsed into an ungainly void, unfit for use.

As they conducted a post mortem into the borehole failure, the engineers were mindful the incident could be the proverbial canary in the coal mine for Rio's plan to build a huge network of tunnels more than a kilometre beneath the Mongolian desert as part of a $US5.3 billion expansion.

"We are pretty confident that it is stress-related and or fault-related, or both," wrote Oyu Tolgoi's then manager of Vertical Development and Mass Excavation Scott Ramsay, when discussing the cause of the bore failure.

"If it is stress alone due to depth, then we recognise that we have a much, much greater problem, as you'd be aware, because we have not only internal vent raises, but also vertical ore passes and ore bins and underground crusher stations to excavate at 1300 metres below surface for the success of this mine".

The more things have changed at Oyu Tolgoi in the seven years since Mr Ramsay sent that letter to Oyu Tolgoi's bore drilling contractor, the more they have stayed the same.

The reliability of the rock underground at Oyu Tolgoi remains a worry. Sovereign risk in Mongolia's young democracy remains a worry.

As Rio prepares to update investors on the cost and schedule blowouts affecting the most important growth project in its global business, shareholders are wondering what sized hole the company has found itself in.

Oyu Tolgoi has been pulling modest amounts of copper, gold and silver out of an open pit in Mongolia's South Gobi Desert for six years.

Right from the start, the main game was an underground expansion project, which holds about 80 per cent of Oyu Tolgoi’s value and will turn it into one of the world's top three copper mines.

For a small, poor population that emerged from socialist rule less than 30 years ago, the prospect of hosting one of the world’s most lucrative mines for at least 40 and maybe 100 years is understandably exciting.

Mongolia casts doubt on Rio Tinto's Oyu Tolgoi expansion
The mine dominates political debate in Mongolia, and consumes half of all foreign direct investment into the nation.

A rare period of harmony between Rio and the Mongolian government emerged in 2015, when they struck an agreement that allowed the mine to borrow $US4.4 billion from lenders like Australia's export credit agency, ANZ and NAB to build a $US5.3 billion underground mine expansion that would deliver "sustainable first production’’ in the early weeks of 2021.

The $US5.3 billion budget was understood to have a 14 per cent buffer for future cost blowouts.

While Rio is the project developer and mine operator, it does not directly own a stake in Oyu Tolgoi.

The mine is 66 per cent owned by Canadia’s Turquoise Hill Resources (TRQ) and 34 per cent owned by the Mongolian Government.

Rio owns 50.79 per cent of TRQ, meaning it effectively, but indirectly, owns just 33.52 per cent of Oyu Tolgoi.

As 2018 dragged on, it was increasingly clear to people working on the project that development of Oyu Tolgoi's "shaft two" was not going to plan.

With a 10-metre diameter and plunging to depths of almost 1300 metres, shaft two was intended to be a critical enabler of the underground project, allowing equipment, people, oxygen and huge volumes of ore to move between the underground mining areas and the surface.

Shaft two was supposed to be finished in mid-2018. But it was October 2018 by the time Rio fleetingly told its shareholders there would be a "revised ramp-up schedule'' on the project.

TRQ gave its shareholders more information, saying the delays could be about nine months.

By February, Rio was more forthcoming and pessimistic, flagging “some potentially significant changes to the design” and suggesting the delays would be greater than the nine months disclosed by TRQ.

TRQ reiterated those comments, and added that work was under way to understand the impact on project cost.

Some who have worked on the project feel Rio should have told investors about the problems at shaft two sooner. An investigation by Rio’s law firm Baker Mackenzie has left the company confident it did not breach disclosure rules.

For a ''block cave'' mine to work at Oyu Tolgoi, Rio needs the weak and fractured rock to collapse under pressure from blasting and gravity.

But there are fears the rock may collapse too well; meaning the underground passages and tunnels through which the ore is extracted (known as extraction drives and ore passes) may also collapse, rendering sections of the mine unworkable.

Studies have continued through 2019 with relocation of the ore passes being a top priority.

Rio is also considering mining a different section of rock first, to target structurally reliable areas.

This may mean a section of rock with particularly high copper grades is mined later than originally planned.

''This is critical to the economics in our view as it affects the pace of ramp-up to full production and in turn affects cashflow and profitability,'' Deutsche analyst James Gurry said.

''We are therefore expecting a slower ramp-up, less concurrent caving initially but a redesign that sets up the mine optimally for the following decades of life.''

Based on this year's disclosures, the project schedule appears vulnerable to at least one year's delay and some analysts have built a two-year delay into their models.

The cost blowout is harder to quantify.

RBC has added $US500 million to the existing $US5.3 billion budget.

Deutsche has assumed an $US800 million cost blowout, taking the capital spend to $US6.1 billion.

Goldman Sachs analyst Paul Young has assumed a total cost of $US6.4 billion, which would be a billion-dollar blowout.

Some argue the true cost will be much higher than those estimates now that Mongolia has ruled Oyu Tolgoi must be powered by a domestic energy source rather than continue to import power from China.

That means a new power station must be built, and the Oyu Tolgoi shareholders have agreed to own, and therefore fund, at least 51 per cent, and potentially all of the power station.

The cost of a power station is not included in Rio's official $US5.3 billion budget.

If forced to build a power station, Rio has always wanted to do it at the Oyu Tolgoi mine site.

But on December 30 Rio acceded to the Mongolian government's desire for the power station to be built at the Tavan Tolgoi coalfields, approximately 150 kilometres from Oyu Tolgoi.

Rio's copper boss Arnaud Soirat warned in November that the Tavan Tolgoi option would take six years to complete. Less than two months later Rio had pledged to build it in four and a half years.

Most pundits expect the power solution will cost between $US1 billion and $US1.5 billion.

Rio has already set aside $US500 million in its capital spending budgets for its share of power station costs.

TRQ management did not disagree on an investor call earlier this year when an analyst suggested the power station would cost about $US1 billion.

Combined with the blowout in mining costs, the addition of the power station has left many observers predicting a total capital spending bill north of $US7 billion.

Deutsche Bank, a pillar of European finance, unveils radical restructuring. It will cut 18,000 jobs www.cnn.com

London (CNN Business) Deutsche Bank will cut 18,000 jobs and dramatically shrink its investment bank as part of a costly overhaul that marks a retreat from Wall Street after two decades of intense competition with American rivals.

The German bank said Sunday that it would shutter its equities sales and trading business, while creating a "bad bank" for €74 billion ($83 billion) in assets that eat up too much capital. The assets will be sold over the coming years.
"Today we have announced the most fundamental transformation of Deutsche Bank in decades," CEO Christian Sewing said in a statement, calling the moves a "restart."
It's a dramatic shift for the 149-year-old bank, a pillar of European finance that has struggled to produce consistent profits despite undergoing a series of overhauls.
Deutsche Bank (DB) said the job reductions would be made by 2022, bringing its headcount down to roughly 74,000 employees.
End of an era
Germany's biggest bank at one point dreamed of dominating investment banking, competing with the likes of Goldman Sachs (GS) and Morgan Stanley (MS) in Europe and abroad. It stated its global ambitions in 1999 with the purchase of Bankers Trust, an American investment bank.

But the bank — and its investment banking team in particular — struggled to find direction following the global financial crisis.
A sluggish European economy and a reluctance to reform made it harder for Deutsche Bank to compete in the expensive sector.
The division continued to suck up resources even as it fell further behind competitors. The resignation last week of the head of the investment bank, Garth Ritchie, signaled that major changes were coming.
The reforms announced Sunday will let Deutsche Bank take a step back from investment banking and prioritize more reliable lines of business such as corporate money management. But the restructuring effort won't come cheap.
The bank said that costs related to the overhaul would push it to a net loss of €2.8 billion ($3.1 billion) for the second quarter. The total cost of the restructuring will hit €7.4 billion ($8.3 billion) by 2022.
Growing pressure
Pressure for Sewing to outline a path forward increased following the collapse of merger talks with crosstown rival Commerzbank (CRZBF) and a dismal first quarter earnings report.
In the first three months of the year, profit rose 67%, but that was due entirely to yet another round of belt-tightening. Revenue fell 9%, and the company said it would be "essentially flat" for the year.
Investment banking revenue fell 13% to €3.3 billion ($3.7 billion), while costs for the unit totaled €3.4 billion ($3.8 billion).
Shares in the bank are down almost 25% in the past year and hit a record low in June.
For weeks, Deutsche Bank had telegraphed that a turnaround plan was coming soon. But analysts weren't sure how far Sewing would go.
The bank has slashed thousands of jobs since he took over in April 2018, but this will be the biggest round of layoffs under his leadership.
Deutsche Bank did not provide a geographic breakdown of the cuts, but many are expected to hit US employees. The bank employs almost 9,300 people in North America, with most of those jobs in the United States.

China to overtake US as world's biggest insurance market www.chinadaily.com.cn

BEIJING -- China is expected to surpass the United States to become the world's largest insurance market in the mid-2030s, according to a report from Swiss Re Institute.

Mayor of Ulaanbaatar receives CEO of Sabertec www.montsame.mn

Ulaanbaatar /MONTSAME/. Governor of the Capital City and Mayor of Ulaanbaatar S.Amarsaikhan received CEO of Sabertec Bill O’Brien on July 4.

Mongolia’s growth challenges www.bangladeshpost.net

The government of Mongolia has been implementing the IMF’s three-year arrangement under the Extended Fund Facility since May 2017. The government’s program aims to stabilise the economy, reduce the fiscal deficit and debt, rebuild foreign exchange reserves, introduce measures to mitigate the boom-bust cycle, and promote sustainable and inclusive growth.

Mongolia has made progress in strengthening its economy under this program. Since 2016, the economy has experienced a sharp recovery in real GDP growth, mainly driven by stronger volumes and advantageous prices of coal and copper, a high foreign direct investment (FDI) inflow for the second phase of the Oyu Tolgoi copper and gold mine, and a recovery in domestic confidence.

As a result of the strong growth in exports and FDI, gross foreign-exchange reserves increased 3.5 times, reaching US$3.8 billion. Due to booming tax revenues and relatively contained expenditures, the fiscal balance has improved and public debt has fallen to 75 per cent of GDP. In the first quarter of 2019, year-on-year GDP growth was 8.6 per cent and the inflation rate has been stable at around its target of 8 per cent.

The banking sector continues to be of concern for financial stability. As the banking system constitutes over 90 per cent of the financial sector, it is important to raise banks’ loss absorption capacities, particularly through strong capital bases and adequate supervision. To this end, the Bank of Mongolia (BOM) conducted an extensive asset quality review (AQR) of all of the country’s commercial banks, per the European Central Bank’s guidelines, to determine the overall health of the banking system. The results of the AQR led the BOM to develop important regulations relating to risk-based supervision, capital adequacy and asset impairment. Running a follow-up to the AQR is the top near-term priority in the financial sector.

Recently, the BOM has taken measures to tighten monetary and macroprudential policies. Consumer credit growth has been too fast, rising 55 per cent in 2018. Its impact on the balance of payments puts upward pressure on the exchange rate and limits progress in reserve accumulation. The sharp increase in household debt has also raised concerns about its sustainability and possible risks for the banking sector.

In response, the BOM tightened the policy rate to 11 per cent in December 2018, and in January 2019 introduced a debt service-to-income limit of 60 per cent and a consumer credit maturity limit of 36 months. The hike in the policy rate and tightening of macroprudential ratios have started to decelerate household credit growth and will help to protect households from unsustainable debt burdens. The BOM is currently working to introduce more comprehensive prudential tools, which can better ameliorate the destabilising impacts of large-scale financial flows, credit concentration and financial dollarisation.

Though the economy is in a stronger position, the benefits of the economic recovery have not been shared widely. Since 2016, the poverty rate has fallen by only 1.2 percentage points to a still high 27.4 per cent last year. Real GNI per capita in domestic currency terms has not grown since 2014 and in US dollar terms it has been sharply decreasing since 2013. This is evidence of important domestic distribution of income issues in the sense that very few residents are benefitting from the mining sector and a significant amount of the revenues generated from the country’s high GDP growth are paid back to non-residents. Considering this fact, it is important to ensure that the return of economic dynamism benefits all of Mongolia’s citizens.

The outlook for the Mongolian economy is relatively strong but it remains vulnerable to external and internal shocks. Mongolia’s narrow economic base — 90 per cent of the country’s exports are minerals and more than 50 per cent of FDI is in the Oyu Tolgoi mine project— makes it highly exposed to changes in external conditions. Almost 50 per cent of business cycle fluctuations in Mongolia are driven by external shocks such as in FDI, global commodity prices, commodity demand and Chinese growth shocks. The short periods of domestic upswing that are driven by positive changes in global commodities demand are nevertheless limiting opportunities to achieve more sustainable growth.

As adverse external shocks hit the economy, monetary policy is loosened and purpose-built budget spending is deployed, but government debts inevitably increase. What’s more, pressure on the balance of payments has resulted in substantial exchange rate depreciation, loss of foreign-exchange reserves and a deterioration in the climate for FDI.

Accumulating sufficient buffers is the key to building resilience against these shocks and ensuring strong and inclusive growth. At present, however, the balance sheets in key sectors of the economy — government, the central bank, households, banks and companies — are not strong enough and are vulnerable to exchange rate shocks. Given the challenges, it is important to take advantage of the current favourable economic environment to continue building fiscal and foreign-exchange reserve buffers, strengthening the financial sector, improving the investment environment, and pursuing sound macroeconomic and structural policies.
By Gan-Ochir Doojav

Dr Gan-Ochir Doojav is Chief Economist of the Bank of Mongolia.

Can Mongolia Shape the Modern World Once Again? www.thediplomat.com

The Tuul River snakes through the southern edge of Ulaanbaatar, Mongolia’s sprawling capital city, coiling westward until discharging into the Orkhon River near the center of the Orkhontuul sum and, ultimately, flowing into Lake Baikal in Siberia, the Arctic, and beyond. Like the Onon and Kherlen Rivers, the Tuul originates in the Khentii Mountains near the sacred Burkhan Khaldun, or “God Mountain.” According to The Secret History of the Mongols – Mongolia’s oldest literary work, chronicling the story of Temujin and his rise to become Genghis Khan (Chinggis Khaan) – the slopes of the Burkhan Khaldun served as a place of refuge, worship, governance, and ultimately burial for the world conqueror.

In the telling of anthropologist Jack Weatherford, Chinggis Khaan was more than an unprecedented and fearsome military leader: He was a nation-builder who embraced the rule of law, protected religious freedom, promoted international trade, and established new diplomatic relations among the great population centers of Asia and Europe. The Mongolian empire connected a formerly disjointed world by creating a “single intercontinental system of communication, commerce, technology and politics.” Due to Chinngis Khaan, the “globe was shaken” and a new order commenced, the historian Edward Gibbon observed.

Today, Mongolia’s reach may be less grand; but while the country faces significant challenges both domestically and regionally, Mongolia remains poised to shape the modern world. Indeed, with the United States as its partner, Mongolia can overcome its obstacles and contribute to building a “free and open” Indo-Pacific.

Mongolia must deal with substantial structural challenges. As a landlocked country with a population of only three million, the difficulty begins with geography.

All goods leaving or entering Mongolia must traverse the territory and airspace of its two more populous and powerful neighbors, Russia and China. The Trans-Mongolian Railway – Mongolia’s chief rail network – is single-track, extending nearly 700 miles from the Russian border in the north to the Chinese border in the south. When entering China, trains must switch to a new gauge, a time-consuming process.

The Russian government holds a 51 percent stake in Mongolia’s railway, an interest which hinders the development of a more efficient rail transport network. In 2016, Russia sold it 49 percent stake in Erdenet copper mine, which historically served as the country’s most important economic engine. But Moscow maintains a tight grip on the economy, supplying 90 percent of Mongolia’s energy (refined oil). This influence extends to other spheres as well. A walk through Ulaanbaatar reveals the lasting cultural legacies of Soviet rule, from the opera house to the wedding palace to the socialist murals of the Zaisan Memorial.

On the southern border, sharing the wind-swept sands of the Gobi Desert, is China. Approximately 6 million ethnic Mongols live in China’s Inner Mongolia—twice the population of Mongolia proper. With the world’s second largest economy, China receives approximately 90 percent of all Mongolian exports – such as coal, copper and other ores, crude oil, and unprocessed cashmere – and supplies Mongolia with more than one-third of its imports. China is also the country’s single largest source of foreign investment. In the words of a Congressional report, China is “Mongolia’s economic lifeline.”

This dependency has created tensions with China that spill over into other areas. For example, Mongolia has historic links to Tibetan Buddhism and the Dalai Lama, a title first created by Mongolian leader Altan Khan in the 16th century. In retaliation for the Dalai Lama’s visits to Mongolia, China has temporarily shut its borders with Mongolia and, in 2016, enacted tariffs on Mongolian products. After forcing a promise from Ulaanbaatar not to invite the Dalai Lama in the future, China’s foreign ministry boasted: “We hope that Mongolia has taken this lesson to heart.”

Expanding the Geography

One lesson learned is to expand the neighborhood. Mongolia has turned to “third neighbors” – aligned countries that do not share contiguous borders with Mongolia – for economic engagement and strategic support.

For example, through strong relationships with democratic third neighbors such as Japan and South Korea, Mongolia is working to strengthen stability and cooperation in the region. Uranium-rich Mongolia has been active in supporting nuclear non-proliferation and the peaceful resolution of disputes in Northeast Asia. In this regard, Mongolia, which balances diplomatic ties with both North and South Korea, has sought to foster stability on the Korean Peninsula. In early June, during the 6th Ulaanbaatar Dialogue on Northeast Asian Security, Japanese delegates actively sought out North Korean counterparts to lay the foundation for future negotiations on denuclearization of the nearby Korean peninsula. Japan’s efforts are particularly noticeable after the collapse of American summit diplomacy in Danang; although Tokyo’s shuttle diplomacy may be more cautious after Japanese Prime Minister Shinzo Abe’s ill-fated trip to Tehran.

Mongolia describes the United States as its “most important” third neighbor and has leveraged its relationship with Washington to shape events on a global scale. For instance, in June, Mongolia and the United States co-sponsored the 17th iteration of Khaan Quest, a military exercise simulating United Nations peacekeeping operations involving contingents from 31 countries, ranging from Australia to Zambia. Admiral Philip S. Davidson, Commander of U.S. Indo-Pacific Command, arrived in Mongolia to open the event and underscored the geopolitical significance of Mongolia. Khaan Quest also supports the country’s ongoing participation in United Nations global peacekeeping operations(around 10 percent of Mongolia’s armed forces are serving in oversees UN peacekeeping operations). The interoperability and capacity of the Mongolian military has also been strengthened through important contributions to U.S. military and coalition campaigns in Afghanistan, Iraq, and Kosovo.

Ulaanbaatar and Washington have also supported shared goals and values in partnerships on the international stage. For example, Mongolia has held the chairmanship of the U.S.-supported Community of Democracies, an intergovernmental organization based in Warsaw that advocates for common democratic values. The countries have also cooperated in the ASEAN Regional Forum. At the United Nations, Mongolia has proven a reliable ally of the United States, consistently voting with the U.S. in General Assembly resolutions. Mongolia has also curried America’s favor by enforcing U.N. Security Council sanctions targeting North Korea’s unlawful nuclear and ballistic missile programs, as recognized in the recent U.S. Department of Defense’s Indo-Pacific Strategy Report.

At the same time, Ulaanbaatar has sought to leverage its position to facilitate discourse between Washington and Pyongyang. Over the years, the Ulaanbaatar Dialogue has provided a discrete forum for track one and track two diplomacy. As the only country in Asia to transition from communism to democracy and as a verified “nuclear-weapons-free” zone, Mongolia would be an intriguing locale should there ever be another U.S.-DPRK leadership summit.

The weight of American power also affects the balance of Mongolia’s third neighbor policy. Specifically, Mongolia has reportedly resisted becoming a full member of the Shanghai Cooperation Organization (SCO), led by Moscow and Beijing, due in part to the signal it may send to Washington and other Western capitals. Similar deliberations and ambivalence impact Ulaanbaatar’s potential participation in China’s Belt and Road Initiative (BRI). Indeed, by strengthening ties with the United States, Mongolia can resist the “push and pull” of the region and chart its own course in foreign affairs.

Strengthening the Bond

During Mongolian Prime Minister Ukhnaagiin Khürelsükh’s official visit to Washington in September 2018, the countries announced the U.S.-Mongolia Expanded Comprehensive Partnership, which signaled a deepening of the bilateral relationship, particularly in economic and commercial ties. The timing was appropriate. Since 2013, with the drop in global commodity prices and China’s economic slowdown, Mongolia has experienced a relative economic slump. Ulaanbaatar’s skyline may be dotted with tower cranes, but, according to my conversations with locals, many of those construction projects have been stalled since the earlier boom period.

American foreign investment and trade can provide a means for lifting Mongolia’s economy. On June 3, 2019, in Ulaanbaatar, during a meeting of the American Chamber of Commerce for Mongolia (AmCham), U.S. Ambassador Michael Klecheski highlighted several challenges for achieving this objective.

First and foremost, Mongolia must resolve and make clear its position on Oyu Tolgoi, the mega-mining project in the south (commonly referred to as “OT”). OT is jointly owned by the Government of Mongolia (34 percent) and Turquoise Hill Resources (66 percent, of which Rio Tinto owns 51 percent). Access to what may be one of the largest copper deposits in the world could be a boon for Ulaanbaatar, which relies on mining revenues to fund at least 30 percent of the national budget.

However, in a bow to economic nationalism, Mongolia’s Parliament has called for renegotiating the terms of OT to seek an increase the government’s ownership stake, thereby injecting uncertainty into the regulatory environment and delaying implementation of the mining development’s second phase. In addition to United States Export-Import Bank financing, the U.S. government must also consider its 35 percent American equity-ownership stake in OT. U.S. Ambassador Michael Klecheski described OT as a “bellwether” for foreign investors – a test of the prospect for tapping the country’s estimated $1.3 trillion mineral wealth, the very future of Mongolia.

Second, Washington is seeking full implementation of the bilateral Transparency Agreement, signed in 2013 and entered into force in 2017. Designed to improve Mongolia’s investment climate, the agreement makes new laws and regulations affecting international commerce subject to a 60-day public comment period and requires those laws to be published in English, similar to the U.S. federal rulemaking process. The Office of the U.S. Trade Representative (USTR) described the Transparency Agreement as representing the “first time that the United States has concluded a stand-alone agreement addressing transparency in matters related to international trade and investment.” During discussions under the Trade and Investment Framework Agreement (TIFA) in April, the USTR raised concerns that Mongolia was behind schedule in setting up the electronic system for notice-and-comment rulemaking and Ambassador Klecheksi raised the issue again at the AmCham meeting.

Third and more broadly, Mongolia must show progress in battling corruption making regulatory decision-making less opaque. Transparency International, the non-governmental organization that measures public corruption, ranked Mongolia 93 out of 180 countries under the 2018 Corruption Perception Index, alongside Kosovo, Macedonia and Albania in Eastern Europe and Panama and Columbia in the Americas. In its most recent statement on the investment climate, the U.S. Embassy in Ulaanbaatar urged Mongolia to “stem constant, non-transparent amending of legal and regulatory rules, which frustrates Mongolia’s ability to stabilize its business environment and risks losing the FDI Mongolia needs to grow” by taking steps such as “[rooting] out the pervasive corruption threatening the foundational institutions of democracy.” Such actions would also help Mongolia with demands called for under its program with International Monetary Fund.

The United States is attempting to assist in the public reform process by training judges and prosecutors and awarding a second Millennial Challenge Corporation compact. Worth $350 million, the compact will support economic development by improving the water supply of Ulaanbaatar. But more can be done. For example, through the Global Procurement Initiative, the U.S. Trade and Development Agency can assist Mongolia with instituting best practices for procurement and avoid the “debt traps” and corruption that may be associated with other forms of infrastructure development in the region. In addition, Washington can explore using new authority under the so-called “BUILD Act” – signed into law by President Trump last September – to provide alternative investment sources and technical assistance for infrastructure projects.

Interestingly, the U.S. Congress has taken the lead in furthering the economic bond with Mongolia. On April 10, 2019, Congressman Ted Yoho (R-FL) re-introduced the Mongolia Third Neighbor Trade Act (H.R. 2219), which authorizes duty-free treatment for certain articles imported from Mongolia, namely cashmere wool. Mongolia produces over a third of the world’s raw cashmere, but most Mongolian raw cashmere is exported to China, and the United States buys nearly all of its cashmere products from China. Through this legislation, Congressman Yoho and like-minded bipartisan allies like Senator Ben Cardin (D-MD) are seeking to bypass China, increase trade between the United States and Mongolia, and strengthen Mongolia’s economic sovereignty. AmCham members visited Washington in late June to meet with the Trump administration and Congressional leaders to push for the new law. Jay Liotta, who serves on AmCham’s advisory board and has been on the ground in Mongolia for the past two decades, described to me the significance of the legislation: “The Third Neighbor Trade Act will build a direct relationship between the American consumer and the Mongolian people, who currently rely upon the industry to provide income to over 100,000 people, 90 percent of whom are women, and 80 percent of whom are people below the age of 35.” Indeed, if Mongolia is to build its future, consolidate its democracy and avoid the resource curse, the country will need to diversify its economy, and the United States is in a position to help.

Old Story, New Image

If you follow the Tuul’s stony riverbed to the outskirts of Ulaanbaatar, you arrive at Chinggis Khaan International Airport. In the terminal, above the comings and goings of the modern world, hangs a portrait of the 13th century hero with a benevolent gaze. One irony is that Chinggis Khaan himself never allowed his own portrait to be drawn during his lifetime, so his serene repose is merely artistic fancy. Another is that the impact of Mongolia on the contemporary globe, if not misunderstood, is widely underappreciated.

This legacy, like the future of Mongolia, is changing before our eyes. After nearly 70 years as a Soviet satellite state, the country has made a peaceful transition to democracy and embraced free market reforms. Mongolia is now authoring a new chapter in world history. In partnership with the United States, Mongolia can retell an old story with a new image – that of a 21st century state that upholds the rule of law, promotes tolerance, encourages international trade, and bridges diplomatic relations among divided nations. With the promise on its horizon, beneath its eternal blue sky, perhaps Mongolia will someday be said to have left the world “shaken” once again. That would be an irony worth pursuing.

Roncevert Ganan Almond is a partner and vice-president at The Wicks Group, and adjunct professor of law at Georgetown University Law Center in Washington, D.C. He has counseled government authorities in Asia, Europe, the Middle East, Africa, and the Americas on issues of international law. The views expressed here are strictly his own.