Mongolia Signs Economic Deal With Japan to Offset Chinese and Russian Trade Domination

Publication: Eurasia Daily Monitor Volume: 12 Issue: 32

February 20, 2015 03:36 PM Age: 2 days

By: Alicia J. Campi

PM Ch.Saikhanbileg and PM Shinzo Abe

The new Prime Minister of Mongolia, Chimediin Saikhanbileg, whose ‘Reconciliation Government’ has been in power less than three months, visited Japan on February 9–11 to sign a Mongolian-Japanese Economic Partnership Agreement (EPA) with his Japanese counterpart, Shinzo Abe. This economic partnership agreement, effective immediately, was the first for Mongolia and the 15^th for Japan. Prime Minister Abe noted that the EPA took three years to negotiate and now “will become an important foundation for simultaneously forwarding two objectives to consolidate our relations and boost Mongolia’s economic development” (The Mongol Messenger, February 13). The Japanese also gave the Mongolians an additional soft loan worth 36.8 billion yen ($310 million), which will be used to complete the construction of Ulaanbaatar’s new international airport scheduled to open in 2016. In the February 10 joint press conference, Saikhanbileg responded by emphasizing, “The EPA is very significant to increase the flows of bilateral trade, investment and services and intercitizen exchange, as well as to connect Mongolia to global markets and regional economic integration” (The Mongol Messenger, February 13). He noted that Mongolia wanted to learn about Japanese techniques to commercialize value-added products sold into foreign markets so as to link the Mongolian market with regional industrial networks.

Mongolia is seeking to greatly strengthen its economic relationship with Japan, which it considers an important ‘third neighbor’ that can be a major factor in balancing the Chinese ($423 million in grants and loans) and Russian (in railway modernization) investment projects negotiated by the Mongolian in 2014. In 2012, the Mongolian Ministry of Finance reported that 66.4 percent of total Japanese exports ($336 million) to Mongolia were vehicles and parts, followed by much smaller amounts of machinery and chemical engineering products. Meanwhile, 53 percent of Mongolia’s $16 million in exports to Japan consisted of coal, 25 percent of mineral products, and 15.4 percent of clothing such as cashmere (Japantimes.co.jp, February 10). The government-affiliated Japan External Trade Organization (JICA), in 2012, reported a different bilateral trade volume, claiming that Japan exported $501 million worth of products to Mongolia and imported $5.60 million worth of goods from Mongolia (Joc.com, February 10). Regardless, Mongolia for Japan is but a minor trade partner, while Japan is only the fifth-largest source of Mongolian imports.

Mongolian FDI fell more than 85 percent in the past two years and its currency, the tugrik, slid by almost a third against the US dollar. This has cooled Mongolia’s 2011 world-leading growth rate of 17.5 percent to just 5.3 percent in the first half of 2014. This trade deal over the next decade will remove tariffs on about 96 percent of the traded goods (Japantimes.co.jp, February 10) and, more significantly, should bring more Japanese investment into the country’s rare-earth metals, copper, and coking coal sectors, which have not attracted new FDI because of on-going legal disputes. Furthermore, the EPA should assist Mongolia’s efforts to assume a greater role in Northeast Asian regional security affairs, particularly on North/South Korean issues in which the landlocked country has facilitated North Korean–Japanese discussions on abductees.

The Japanese foreign ministry stated that: “It is expected that this agreement will promote the liberalization and facilitation of trade and investment between the two countries and will further vitalize both economies by strengthening reciprocal economic ties in wide-ranging fields.” The EPA cites the “warm” relationship between the two countries, which was a response to globalization and closer worldwide economic integration, and complementarities that could be utilized to promote bilateral trade and investment in order to build up the Japan-Mongolia “Strategic Partnership.” It emphasizes securing a framework to enhance competitiveness and “ensure [a] predictable commercial environment for further expansion of trade and investment” for the private sector (Mofa.go.jp, February 10). Among its highlights are a most-favored nation trade clause and a commitment to transparency by making all trade administration documents available to the public in electronic form. The 11 sub-committees established by the bilateral agreement are to focus on rules of origin, customs procedures and trade facilitation, visas, trade in digital products, investment, intellectual property, government procurement, and improvement of the business environment. As a way to more smoothly resolve trade disputes, the EPA will create arbitral tribunals.

The Mongolian prime minister’s delegation to Tokyo included Minister of Education Luvsannyam Gantumur, head of the Mongolian Japanese Friendship Group and former minister of mining Davaajav Gankhuyag, Mining Minister Rentsendoo Jigjid, Minister of Construction and Urban Development Damdin Tsogtbaatar, and several deputy ministers and members of parliament. They had meetings with the head of the Cabinet of Japanese Parliamentary Advisors Masaaki Yamazaki (Montsame, February 11) as well as the Japan Bank of International Cooperation (JBIC) Deputy Director Koichi Yajima. Saikhanbileg recalled that in the past, Mongolian-Japanese economic relations were based on loans and grant aid, but now, at this new stage of bilateral private sector cooperation, the JBIC’s participation is particularly important. In June 2013, Mongolia set up a credit line of 8 billion yen ($6.7 billion) for Mongolian importers to finance the purchase of Japanese products in the mining, infrastructure, and production sectors. The Prime Minister discussed with JBIC implementation of this first phase and the creation of an additional credit line of $300 million (News.mn, February 10). Prime Minister Saikhanbileg also participated in a business meeting jointly organized by the Mongolian government and the Japanese trade organization JETRO, as well as a ceremony naming sumo wrestling grand champion Yokozuna Hakuho Munkhbat Davaajargal a Cultural Messenger of Mongolia (News.mn, February 10).

The fact that this was Saikhanbileg’s first foreign visit as head of government clearly illustrated the importance of the Japanese economic partnership to Mongolia. The Mongolians are seeking a mid-term bilateral program to build power stations, railways, steel and copper processing plants, highways, and a capital metro system. One of the most important projects already announced is Sumitomo Corporation’s participation, after beating out an offer by the US-based Peabody Energy Corporation, in a Sino-Mongolian consortium that will exploit Mongolia’s Tavan Tolgoi coal deposit. Financial media and blogs buzzed with comments on how the new EPA would give Japan access to Mongolian rare earth elements (REE), which are crucial for Japan’s automotive and electronics industries, in order to reduce its REE dependency on China (Mongoliaeconomy.com, February 13; blogs.blouinnews.com, February 11). Thus, both governments hope this new phase of economic cooperation will have the additional benefit of blunting rising Sino-Russian regional influence.

Source:http://www.jamestown.org/

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In Mongolian gold mine lies a vein of hostility

Odgerel Tsagaan, a clerk at a cashmere shop here in Mongolia's frigid, bustling capital, received a text message on her cellphone in late January from the recently installed prime minister, asking her advice on the country's economic woes.

It wasn't a prank: After notching the world's fastest GDP growth in 2011 — 17.5% — the economy in this resource-rich but sparsely populated nation has slowed sharply, expanding 6.9% last year. With slumping global commodity prices, a weakened currency and plunging foreign investment — down 70% from 2013 to 2014 — the government has been at a loss to reverse the slide.

So Prime Minister Saikhanbileg Chimed took a page from TV talent shows and offered Odgerel and the nation's 3.3 million other cellphone subscribers two options: Push ahead with more foreign investment in the mining sector, or pursue an austerity program, slashing public spending.

A village of tent-like gers, pictured in 2012, houses former nomads who moved to Ulan Bator, Mongolia, in search of jobs. (Taylor Weidman / LightRocket via Getty Images)

"The question was so general, I didn't know how to respond," said Odgerel, 28. "Both seemed like bad choices. I don't think either will help ordinary people much, and prices just keep going up."

Odgerel wasn't the only one flummoxed; only about 10% of those polled answered the unscientific, nonbinding, four-day poll.

According to the government, 56% of respondents said they favored additional foreign investment. That was enough for the prime minister to claim a mandate and propose an amendment to the country's minerals law to try to jump-start stalled projects.

Chief among them is part two of the giant Oyu Tolgoi gold and copper mine in the Gobi desert, which is being developed with the Anglo-Australian company Rio Tinto.

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The amendment would let the state swap its ownership stakes in strategic deposits like the one at Oyu Tolgoi in return for royalty payments down the road from mine developers. Otherwise, as part owner, Mongolia would have to pony up a substantial portion of the $5-billion construction cost for phase two at Oyu Tolgoi. Mongolia and Rio Tinto have been at loggerheads over how to pay for the expansion.

The stakes are high: Oyu Tolgoi's open-pit mining phase is already operating, but the underground second part is where an estimated 80% of the deposit's total estimated value lies. The International Monetary Fund has calculated that Oyu Tolgoi could account for as much as one-third of Mongolia's gross domestic product in 2021 if it reaches full production by then.

But as a small nation sandwiched between China and Russia — one that threw off communism for democracy in 1990 — Mongolia has many citizens who remain wary of ceding ownership stakes to foreign players.

I want to know, how do you want to move forward with mining? How are you going to resolve the outstanding issues?- Sukhgerel Durgenson of the environmental group Oyu Tolgoi Watch

Adding to the anxiety is nagging environmental concern about Oyu Tolgoi and other projects, and complaints that nomadic herders and others affected by the mines haven't been adequately compensated.

Sukhgerel Durgenson of the environmental group Oyu Tolgoi Watch called the prime minister's text-message tactic "totally unethical and undemocratic," and charged that his moves to cut spending in December frightened the public into voting against austerity.

"I wanted to give a third opinion, but there was no option for that," she said. "I want to know, how do you want to move forward with mining? How are you going to resolve the outstanding issues?"

On top of efforts to push Oyu Tolgoi's expansion, Sukhgerel said she was concerned about the government's recent announcement that it plans to resume granting mining exploration licenses for tens of thousands of square miles, after canceling 106 such permits in 2013 amid concern about corruption. "We don't know what chaos that will create; there is no capacity to monitor it."

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Suggesting, a bit ominously, that the battle could escalate beyond the parliament, she said, "There are groups that believe instead of just showing arms, they should have used them.... Where do you draw the line between terrorism and the right to protect my land? This is not terrorism. This is my right to protect my home and my land.

"I'm not the type that likes to support the groups that like to use force, but if they decide to push ahead with [the amendment], I wouldn't mind joining them. And I wouldn't mind bringing the local communities to join them."

Julian Dierkes, a sociologist at the University of British Columbia who follows Mongolian politics and mining closely, said there is not a particularly strong, coherent movement for "resource nationalism" in Mongolia, though some of the government's sharp and sudden changes to mining regulations over the last decade have come in response to concern about state-owned Chinese companies entering the country.

Western Australia's mining boom ebbs along with China's economy

Overall, he said, Mongolia simply lacks experience with mega-projects and suffers from an information gap vis-a-vis multinational mining companies, leading to policy swings. "Some of this is just trial and error" on the part of Mongolian policymakers, he said.

Even if Saikhanbileg's amendment is approved by the parliament, it's unclear whether Rio Tinto will jump to get Oyu Tolgoi moving forward again immediately, Dierkes said. "I don't see indications that Rio wants to sign anytime soon. Copper prices are down at the moment; I don't think they want to spend $5 billion right away."

But with elections coming up in 2016, Saikhanbileg has only a year and a half to show results. So the clock is ticking on getting some big project underway, whether it's at Oyu Tolgoi or the giant Tavan Tolgoi coal deposit or another mine. This month, with government finances looking precarious, Saikhanbileg sent out feelers to the International Monetary Fund about possible aid.

Jackson Cox, head of the American Chamber of Commerce in Mongolia, said the recent moves to resume granting exploration licenses, as well as the prime minister's text-message mandate, are positive steps toward enticing foreign investment back to the country.

But those steps have been seriously undercut, Cox said, by a Mongolian court's decision in late January to send three former mining executives — an American, Justin Kapla, and two Filipinos — to prison for five years on charges of tax evasion at their former employer, SouthGobi Resources. SouthGobi, whose largest shareholder is a Rio Tinto subsidiary, was fined $18 million.

The U.S. Embassy has expressed concern about language interpretation issues at the trial and other perceived irregularities. Kapla and his codefendants were barred from leaving Mongolia for years while prosecutors attempted multiple times to bring the case to trial. When the case was ultimately heard, Cox said, the prosecutor changed the sentencing recommendation at the last minute, switching from a fine to prison time.

"Bring it all together and it raises deep concerns on the part of international investors for investing here and putting foreign executives on the ground," Cox said.

Other corporate leaders in the mining business said privately that they believed the sentences would be overturned on appeal.

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In the meantime, though, Cox said, he's advocating for the U.S. government to suspend talks on granting Mongolia a second round of development funding under a program called the Millennium Challenge Corp., which works with poor countries "that show they are committed to good governance, economic freedom and investing in their citizens."

The program has funded projects in Mongolia to reduce noncommunicable diseases, build all-weather roads, cut air pollution and bolster vocational education.

"To have a second round of talks now is inappropriate," Cox said. "There's a dark cloud hanging over this country as long as this [tax case] is not resolved."

Source:http://www.latimes.com/

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Statement by the Spokesperson on the ratification by Mongolia of two key human rights instruments

"Mongolia's recent ratification of both the Optional Protocol to the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, and the International Convention for the Protection of All Persons from Enforced Disappearance is an important step in promoting and respecting human rights at the international, regional and domestic level. The EU stands ready to assist Mongolia in the full implementation of these key human rights instruments.

The EU encourages all countries worldwide which have not yet done so to ratify the Optional Protocol and the International Convention for the Protection of All Persons from Enforced Disappearance and to respect their provisions."

Source:http://eeas.europa.eu/

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Mongolian Leaders Visit United States to Advance New Disability Rights Legislation

United States to Advance New Disability Rights Legislation

Mongolian Leaders Visit United States to Advance New Disability Rights Legislation

Media Note

Office of the Spokesperson

Washington, DC

February 20, 2015

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Seven Mongolian leaders, including the Minister of Population Development and Social Protection, members of Parliament, and leaders of disability rights organizations, will spend two weeks in the United States exploring the legal and regulatory framework that supports the rights of persons with disabilities. This two-way Professional Fellows On-Demand exchange program will allow the delegation to draw on the experiences, challenges, and lessons learned from the disability rights movement and government agencies in the United States as the Government of Mongolia seeks to develop a comprehensive disability rights law.
While in Washington, D.C., February 22-27, the delegation will deepen their understanding of the Americans with Disabilities Act (ADA) through discussions with distinguished disability rights advocates, including Judith Heumann, U.S. Special Advisor for International Disability Rights, and John Wodatch, former Chief of the Disability Rights Section at the U.S. Department of Justice and key contributor to the ADA. The delegation will experience first-hand how the ADA was developed, is enforced and incorporated into all levels of society from equal employment opportunities, to accessible transportation and inclusive education in public schools.
The delegation will travel to San Francisco, March 1-7, to explore implementation efforts in the Bay Area with leading representatives of non-governmental organizations, universities, and local government. Site visits will include the Ed Roberts Campus, the San Francisco Mayor’s Office on Disability, the Centers for Independent Living in S.F. and Berkeley, and the Disability Rights and Education Defense Fund.
This is the second phase of the exchange program which began in November 2014 when John Wodatch traveled to Mongolia to assist in the initial planning and drafting of a disability rights law. Earlier in September, Special Advisor Heumann visited Ulaanbaatar to host a series of dialogues with government and civil society on increasing disability rights in Mongolia. This series of exchanges comes during the lead-up to the 25th anniversary of the ADA, and reaffirms the U.S. commitment to the inclusion of persons with disabilities both at home and abroad.
Follow and join conversation of this and other Professional Fellows Exchange Programs using @ProFellows and #ProFellows. For press inquiries, please contact ECA-Press@state.gov.

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