Beijing to decide expenditure of USD 1 billion loans, not Mongolia

B.Erdenechimeg

2017-05-16 17:32 GMT+8

Prime Minister J.Erdenebat`s official visit to China commenced on May 12 and it will end today. This is the second foreign visit of the Prime Minister. In Oct 2016, he paid a visit to Japan.

He is accompanied by the Minister of Foreign Affairs Ts.Munkh-Orgil, Minister of Food and Agriculture P.Sergelen, Minister of Education, Culture and Science J.Batsuuri, Head of Economic Standing Committee D.Terbishdagva and MP D.Tsogtbaatar. 

The most significant news of PM`s visit to Beijing was China`s decision to grant MNT 1 billion loans to overcome temporary economic difficulties which facing by Mongolia. 

HOW WILL GOVERNMENT OF MONGOLIA SPEND USD 1 BILLION LOANS?

Currently, this question can not be answered directly. Due to the fact that China decided to raise funding ratio of USD 1 billion loans to 95 percent from 85 percent. Therefore, USD 950 million of the loans will be spent by Beijing side and the Government of Mongolia has the right to spend the only USD 50 million. 

WHAT PROPOSAL SUBMITTED BY MONGOLIA?

Prime Minister J.Erdenebat requested price discount for transit transportation that passing through Chinese territory. Moreover, he proposed China to cooperate on Tavan Tolgoi - Shivee Ovoo railway project, ger-district housing program, and exporting meat and milk products to Chinese market.  

Within the Economic Partnership Agreement, Mongolia was enabled to export many types of goods to Japan. Now the country has the interest to trade energy coal, cashmere and ecological food products such as horse meat, honey, and seabuckthorn to Japan. However, it is geographically isolated and the products must be transported through the Chinese territory.

Therefore, PM highlighted the issue of transit transport, considering that Mongolian products will become closer to South Korea, if China cuts the variety of taxes and fees on transit transport imposed by each of their states. 

CHINA ACCOUNTS 91 PERCENT OF TOTAL EXPORT AND 31 PERCENT OF TOTAL IMPORT OF MONGOLIA 

Two parties mentioned that it needs to increase trade turnover between two countries as well as improve trade structures. China is the biggest trade partner of Mongolia. 

Mongolia traded with 127 countries as of April 2017. A total trade turnover stood at MNT 3 billion, of which USD 1.8 billion was export and USD 1.1 billion was the import. Mongolia traded a total of USD 1.4 billion with China which accounts 68 percent of trade turnover. 

Trade with China increased by 47.7 percent compared with same period of previous year. Mongolia export copper ores and concentrates, coal, oil, iron ore and concentrates, molybdenum and zinc concentrate, processed and unprocessed skins of cattle and horses, leather and cashmere to China. 

Meanwhile, we import many goods from China including fruits, vegetables, consumer products, and equipment. China accounts 91 percent of total export and 31 percent of total import of Mongolia.

During the visit of PM, China announced to provide CNY 350 million grant to Mongolia and promised to increase the grant amount to CNY 2 billion in the next three years. 

Hence, the Government of Mongolia`s foreign debt will reach USD 25.8 billion. 

In addition, Chinese side expressed their readiness to cooperate Mongolia on agricultural sector with a wide range. At first, two countries will focus on improving meat supply and improve the health of livestock. At the same time, both sides agreed to focus on expanding operations of border crossings. 

Moreover, President of the People's Republic of China Xi Jinping stated that cooperating on the comprehensive development of mining projects such as Tavantolgoi and construction of railways, power stations, copper concentrator plant based on Oyu Tolgoi mine will be consistent with national development strategies of two countries. 

This time, PM J.Erdenebat brought USD 1 billion loans from China. However, the loan term, interest rate and expenditure of the loans have not cleared yet. 

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