Mongolia’s last three Prime Ministers all started their foreign visits with Japan. Mongolia was the third country that the current Prime Minister of Japan visited. The heads of state of our two countries have established a trend of prioritizing each other when they visit other countries. It demonstrates the strong political and economic relations between the two countries and their significance under Mongolia’s third neighbor policy and Japan’s view of Mongolia as its most important partner in Northeast Asia. The first free-trade agreement Mongolia concluded was with Japan, and its implementation started this year. Our expectation is that this agreement will be influential in accelerating significant growth and positive changes in foreign trade and investment.
The leaders and business-minded people of our two countries have consistently sought out ways to combine Mongolia’s natural resources with Japan’s technological efficiency. There is a lot for our governments to focus on, fix, and resolve. I would like to share my observations on Prime Minister Erdenebat’s two-day official visit to Japan on Oct 13-14.
BLACKOUT IN TOKYO
As Prime Minister Erdenebat’s group was approaching Tokyo from Narita Airport, en route to Imperial Hotel in the heart of Tokyo and next to the Imperial Palace grounds, there was a blackout at 3:40 p.m. A press officer from the Ministry of Economy, Trade, and Industry reported later in the evening that the blackout was the first in the last 30 years and that it impacted approximately 580,000 households. The power came back online after 10 minutes, which was a relief to our embassy employees, who were preparing to receive the Prime Minister, as the hotel was connected to the city’s power grid and the elevators started working again. It did not take long to restore electricity in other impacted areas.
The President of Tokyo Electric Power Company (TEPCO), which was responsible for electricity in the impacted areas of the city, said the same evening that the blackout occurred because a fire broke out at one of their substations. He bowed and apologized for the inconveniences and the discomfort that was caused – electric generators, traffic lights, and underground transportation lines stopped working for ten minutes. It caused several traffic accidents and disrupted the city’s activities.
Through the media, experts explained very well to the Japanese, who has forgotten what power outages were, what happened and what caused the blackout. They explained that the power cables that TEPCO uses are 13 centimeters in diameter, with a metal conductor wrapped in layers of paper with insulator oil. The cables are buried underground, as opposed to installed as overhead lines. However, the underground cables have not been replaced for 35 years. They explained that the fire was likely caused by the oil getting through the layers due to a malfunction and igniting when encountering a spark. TEPCO announced that all their power cables, which run a total of 1,500 kilometers, would be replaced, as two-thirds of them have exceeded their lifespan.
The day after the company informed the public of what actions they took and will take following the blackout, their stock (TYO 9501) went up in value and reached 420 JPY with an increase of 2.2 percent. This reflects how the Japanese stock exchange reacts to what is happening in real time. Also, the decision to replace over 1,000 kilometers of power cables is good news for a copper exporter like Mongolia.
WILL THERE BE A BLACKOUT IN ULAANBAATAR?
When the leaders of our country visit Japan, they often note and express deep gratitude to Japan for providing support during the numerous times Mongolia’s power sector has faced difficulties. In the 1990s, when Ulaanbaatar used to have frequent blackouts that lasted for hours, the Japanese fixed the only power station we had then and rescued the residents of the capital city from freezing in their homes during winter.
Today Mongolia’s central electric power network faces a demand for 1,100 megawatts, but it only has the capacity to supply 900 megawatts. We have talked about building an additional power station for almost 20 years and had ten ground-breaking ceremonies for Thermal Power Plant 5. Yet, nothing has actually been done so far. The government established an agreement to build this power plant with a Japanese-French-Mongolian consortium a few years ago. But, an expert from the Ministry of Energy has said that Prime Minister Erdenebat’s government has decided to expand Thermal Power Plant 3 for 350 million USD, and increase its capacity to 450 megawatts. They have postponed the construction of Thermal Power Plant 5, which is expected to require 1.5 billion USD and have the capacity to produce 750 megawatts.
What is true is that Ulaanbaatar still asks Russia for support during peak times of electricity usage. It also goes without saying, that if there was a major malfunction, we would not be able to restore power as quickly as Japan did. The Japanese company Marubeni has won a tender to build a 450-megawatt power plant next to the Tavan Tolgoi coal deposit. The plan is to provide the Oyu Tolgoi mine with 250 megawatts from this power plant and to increase domestic capacity by putting the electricity imported from China to domestic use. Also, Japan International Cooperation Agency (JICA) has made its first investment in infrastructure and will build a 50-megawatt wind farm in Umnugovi for 70 million USD. If these projects with Japanese involvement are delivered on time, there will be less likelihood of Ulaanbaatar experiencing blackouts.
STEPS TO REALIZE POTENTIAL
Prime Minister Erdenebat held formal negotiations with Prime Minister Abe last Friday and agreed to accelerate the development of the 2017-2021 action plan and determine a roadmap for the strategic partnership between Japan and Mongolia. Prime Minister Abe promised to support Mongolia generously in our mid and long-term development. Minister of Finance Taro Aso said that Japan is ready to provide soft loans to Mongolia if we receive a rescue loan from the International Monetary Fund (IMF) to overcome the economy’s decline.
During the visit, several agreements and memorandums of understanding were signed to implement initiatives, such as Energy Resources working with Sumitomo Corporation to sell and market coal, Tsagaan Chuluut Company collaborating with Suzuki Shukai to build a plant to produce batteries in Mongolia, and Dry Milk Co. working with Prisai to construct a small plant to make dry milk in the Mongolian countryside. Furthermore, a management agreement for the new airport being constructed in the Khushigt Valley was established. The government also made a payment of five million USD to Japan, which had not been made by the previous government, for developing a Tavan Tolgoi railway plan. Prime Minister Erdenebat noted during a business conference held at the Japanese External Trade Organization (JETRO) that an effective partnership between Mongolia and Japan can be achieved in the field of agriculture and farming. The conference was attended by representatives from 50 Mongolian companies and 240 Japanese businesses.
This has all been done to improve and realize the potential of the economic relations between Mongolia and Japan. However, in order to truly realize this potential, the Mongolian private sector needs to do much more to balance the trade between our two countries. Besides our traditional economic industries, we need to do more in areas such as software development, information technology, and research and development. We need to pay more attention to developing the education infrastructure for those areas.
We – the Mongolians – are confident that the high-level friendly relationship between Mongolia and Japan will have a positive impact on our economic relations in the near future.
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