WHEN WILL THE RAILWAY PROJECTS PRODUCE ECONOMIC RESULTS?

Ts. Elbegsaikhan

A year ago, Wang Yi, a member of China’s State Council and Minister of Foreign Affairs, visited Mongolia to exchange ideas on accelerating the implementation of development projects financed by grants and soft loans, as well as revitalizing border checkpoints. At the time, the Mongolian press wrote that “the work of connecting border checkpoints has finally broken the deadlock.” A year later, the Prime Minister of Mongolia visited China, and after a meeting with the Chinese head of state, the media reported that the two governments had finalized an agreement to connect strategically important border crossings.

Earlier this year, an article titled “Can the Minister of Border Checkpoints revitalize and expand them?” published in the Mongolian Mining Journal explained why a new revival policy, including a border checkpoints’

revitalization policy, was important and attempted to warn the Minister of Border Checkpoints to stay away from corruption schemes. It’s been less than half a year since we created a new position of a Minister of Border Checkpoints, but the fact that a second Minister has already been appointed makes me question whether this is a good start for this “new” sector. 

According to the new Minister of Border Checkpoints B. Tulga, work at the checkpoints is well underway and significant progress is being made. “Currently, construction work is underway at five border crossings. Construction should be completed by the end of this year. For example, construction work has begun at the Bichigt port, bordering the town of Zuunkhatavch, located in East Uzumchin Khoshuu of Shilin Gol

Province, Inner Mongolia Autonomous Region of China. This work is expected to be completed in December next year. The expansion of Zamin Uud - Erlian and Altanbulag- Khiagt border crossings, which have already been partially commissioned, is in full swing. The construction works will be completed this year. In addition, construction works at the Borshoo border crossing have been completed. This checkpoint will be operational by September next year.” said the Minister.

In the first six months of this year, exports increased by 42% compared to the same period last year. The minister attributed this growth to investments and port expansion. That may indeed be the case.

How do these railroads benefit Mongolia today? According to statistics, despite the construction of more railroads, there has been no increase in the volume of goods transported and exported through them. On the contrary, exports by rail have declined even compared to the period of China’s Covid policy. No matter how many more kilometers of railroad were built, it was never connected to our neighbor’s railway system, and the difference in gauge systems was never resolved. It is not yet known whether Chinese President Xi Jinping gave any clear response during the Prime Minister’s visit.

Today, more than 70% of export goods are still transported by truck. Why invest in border infrastructure and buy automated loading/ unloading systems if the government still supports the transportation of goods by heavy trucks? This is a time when the impact of the mineral market cycle, external factors and the economic situation is extremely high. And, if the government, instead of cooperating with the private sector and implementing effective policies, starts taking all the credit, time will reveal the true state of affairs.

What I mean is that since the Lunar New Year, China has ended its zero-COVID policy, lifted severe lockdowns in cities, opened up the economy and resumed industrial production. The effects of these changes will, of course, be felt in a small supplier country like Mongolia, as is normal. Very soon, when the raw material warehouses in Chinese factories are full and demand shrinks, we might again see long lines of heavy trucks stretching for hundreds of kilometers trying to cross the Mongolian border.

In addition, the Minister of Economy and Development said that the construction of another 400 km of railroad has begun. This is why I wrote in my previous article that “auto roads should come before railroads”. Railways are important, but you don’t have to wait a few years to realize that a double-gauge railroad with no connection to your neighbor’s railroad system and border terminals is not economically feasible.

Despite all this, let’s assume that thanks to the restoration and efficient operation of the ports, a lot of vehicles are passing through the border. But why are imports not growing? We can say that thanks to the competent policy, the foreign trade balance is positive and growing. However, “behind the scenes” the market is still suffering from a shortage of goods and raw materials, and inflation is still raging.

Despite all this, let’s assume that thanks to the restoration and efficient operation of the ports, a lot of vehicles are passing through the border. But why are imports not growing? We can say that thanks to the competent policy, the foreign trade balance is positive and growing. However, “behind the scenes” the market is still suffering from a shortage of goods and raw materials, and inflation is still raging.