ULAN BATOR -- China is financing and building international railways and highways as far away as Kenya and Peru, yet transport links across its 4,710km border with Mongolia, its longest, remain sparse and often rudimentary.
Together announcing a "comprehensive strategic partnership," Chinese President Xi Jinping and Mongolian counterpart Tsakhiagiin Elbegdorj vowed on Aug. 21 in Ulan Bator to improve connections between the two countries. While details remain sparse, the leaders said the pact would provide landlocked Mongolia with secure rail access to nearby Chinese ports for its exports.
Mongolia's pitch to investors has long centered on its proximity to China. Mongolia's rich mineral resources, coupled with China's tremendous demand, appear a natural match -- until transport difficulties across the world's most sparsely populated country are factored in. A lack of rail lines near Mongolia's largest mines limits how much coal and ore can be shipped out of the vast landlocked nation.
Some provinces, known here as aimags, lack any road or rail links to the rest of the country. Traveling to such places involves long hours in old Russian jeeps plying dirt trails in often extreme weather. "It feels like you're the clothes tumbling in the washing machine," said Bayanjargal Anudari, a manager at Juulchin World Tours.
Yondon Manlaibayar, director general of the Department of Railway and Maritime Transportation, told the Nikkei Asian Review, "The necessity of modernization has been talked about for the last probably 20 years." The government aims to increase rail capacity by 60% by the end of 2015, he said. It also aims to link all 21 aimags by road with Ulan Bator by that time.
Laying the groundwork
Mongolia had only about 3,000km of paved roads at the end of 2012, but the addition of four paved roads totaling 1,824km connected more aimags to the capital last year. The most significant projects, backed by the Asian Development Bank and Millennium Challenge of the U.S., completed missing southern links in an all-weather road from the Russian border in the north to the Chinese frontier. Another six roads, totaling 1,679km, are scheduled for completion this year.
"(Mongolia) is a vast land and people are scattered in different aimags, so if there is a good road then there will be better trade, better transportation and much more efficient (transport) for local businesses and citizens alike," said Ikhbayar Odonchimeg, manager of the government-backed Economic Policy and Competitiveness Research Center in Ulan Bator. Good roads should reduce the cost of goods for local consumers, she said, as well as boost tourism.
But quality control and maintenance are already posing a challenge to the national road network. Prime Minister Norovyn Altankhuyag last year ordered builders to reconstruct some poorly built roads. Peter Benson, a consultant from VicRoads, which runs the roads in Australia's state of Victoria, said maintenance is getting insufficient attention and construction quality varies considerably. "It's a mixed bag," said Benson, who is advising Mongolian transport officials. "There are some really good (roads) and some really bad ones."
"Gauging" its neighbors
Wariness about Mongolia's populous and powerful neighbors is one reason for the country's underdeveloped transport links. Politicians have long debated whether rail lines should be built to the gauge, or width, used in Russia or that used in China. The wider Russian standard has so far prevailed across Mongolia's 1,908km rail network despite the faster growth of economic ties to China because of the greater fear of China seeking dominance.
Plans to quadruple the rail network, at an estimated cost of more than $5 billion, have so far stumbled on the gauge issue, with a government proposal in June to build new lines to the Chinese standard getting a frosty reception in parliament.
The government last year awarded South Korea's Samsung C&T a $483 million contract to build a 217km rail line south from the Tavan Tolgoi coal fields, one of the world's largest coal deposits, using the Russian standard. Shenhua Group, China's largest coal company, in April signed a joint venture agreement with local companies to build a 13km cross-border link to China's rail network using China's narrow gauge; six months earlier, Shenhua signed a contract to import 1 billion tons of coal from Tavan Tolgoi over 20 years.
A 27km link connecting the Samsung and Shenhua lines, including a station for transferring between the two rail gauges, is to be built later. At the moment, coal is carried to China from Tavan Tolgoi by truck.
Drivers with permission to transport goods across the border have leveraged their small numbers to demand high wages, but their status will decline when the Shenhua line opens, allowing payloads to be dropped off on the Mongolian side of the frontier for onward shipment. Under Shenhua's coal deal, 50 million tons of the fuel would be shipped south every year, compared with the 18.3 million moved last year.
Better trans-Mongolian transport could also be useful for China's trade with Russia and other parts of Europe. President Elbegdorj said he and Xi "discussed the cargo (already) traveling through Mongolia from Asia to Europe and increasing that up to 100 million tons by 2020."