| ULAN BATOR
ULAN BATOR Aug 22 China and Mongolia have
signed 26 new deals on railroads, mining and power generation
during Chinese President Xi Jinping's state visit that began on
Thursday, Mongolia's Ministry of Foreign Affairs said.
Closer economic relations with China may be landlocked
Mongolia's answer to recent economic woes. Mongolia saw a 70
percent fall in foreign direct investment in the first half of
2014, but its southern neighbour is aiming for an expansion of
trade to $10 billion a year by 2020.
Xi's visit, the first by a Chinese head of state since Hu
Jintao in 2003, could give rise to more than 30 deals, said
Mongolian President Tsakhia Elbegdorj on Thursday evening during
a joint press conference.
The foreign affairs ministry and the Mongolian president's
press secretary both said there was at present no available
figure for the value of the deals.
"Assuming these projects move forward, these accords
represent the most significant economic development since the
Oyu Tolgoi agreement was signed [in 2009]," said Nick Cousyn,
chief operating officer at Ulan Bator-based brokerage BDSec.
The troubled $6.5 billion Oyu Tolgoi copper-gold mine
between the Mongolian government and resource giant Rio Tinto
, however, has been a drag on investment.
The latest development in the multi-year spat was a $130
million tax summons. Rio-controlled Turquoise Hill Resources,
which owns 66 percent of the project, has denied it owes any
extra tax to the Mongolian government.
Four agreements were signed on Thursday for the development
of Mongolia's rail network, with two still pending.
Poor rail infrastructure has prevented Mongolia from
capitalising fully on China's need for raw minerals, while at
the same time its lack of access to sea ports makes it overly
dependent on the Chinese market.
"Mongolia has no access to sea, so I want to emphasise the
agreements between China and Mongolia that are for railway
transportation," President Elbegdorj said.
Mongolia is keen to use China's rail network to deliver coal
and other minerals to other Asia markets, and one of the deals
will involve transhipment of resources to Chinese ports.
Elbegdorj said he and Xi had also discussed the use of the
Trans-Mongolian railway as a land route for trade between Asia
and Europe. The goal was to see the transport of 100 million
tonnes of cargo by rail to Europe by 2020, he said.
Mongolia also needs new power plants to replace aging
Soviet-era power infrastructure that is reaching peak capacity.
The nation is struggling to meet energy demand as consumption
grows in the capital and as the grid is extended to communities
in remote parts of the country.
Mongolia has been trying to tap its own resources to kick
its dependence on Russian oil imports, and one of the 26
agreements was a memorandum of understanding with China National
Petroleum Corporation (CNPC).
Last year in October, Sinopec Corp
signed a memorandum of understanding with the Mongolia-owned
miner Erdenes Tavan Tolgoi for a coal-to-liquid fuel plant.
Mongolia hopes to encourage more such projects with a new
law passed in July to update the country's regulations to
include non-conventional fuels.
Erdenes TT mines coal from Mongolia's largest coking coal
deposit, with 7.4 billion tons of coking coal resources.
(Editing by Tom Hogue)