August 2009
GALSANGIIN BATSUKH has been Ambassador of Mongolia to China for the last four years, adroitly developing bilateral trade and economic relations.
He is a consummate diplomat, as was shown during the years when he represented Mongolia in Canada and was instrumental in charting areas of successful cooperation between the two countries, particularly in mining. Here he tells L. BOLORMAA what the growing economic strength of China means for Mongolia.
This year marks the 60th anniversary of the establishment of diplomatic relations between Mongolia and China. How have the years been in terms of partnership and cooperation?
Sixty years of formal diplomatic ties is actually a very short period when we think of the long relationship between two neighbouring countries. But, of course, they are special because they formalised the mutual acceptance of equality and cooperation as the basis of a successful relationship. The countries recognize each other’s sovereignty, independence and territorial integrity based on international principles. We all know the decades have seen several ups and downs in the relationship, due to many internal or external factors stemming from history. Analysts might disagree on their details but there should be no quarrel with dividing the past 60 years into four broad stages.
The first, spanning the years from the establishment of diplomatic ties in 1949 to the beginning of the 1960s, was marked by active and close partnership and is known as the ”golden stage”. The second stage, from the mid 1960s until the late 1970s, saw a gradual freezing of the relationship and was a period of general stagnation. The third stage was a brief one, from the mid 1980s till the end of that decade, when the ice began to thaw and warmth began to return. The fourth stage started in 1990, and continues up to now, when the relationship first became normal and then expanded in all sectors. We can call this the period of active development. The challenges have matured the relationship in the last sixty years and now both countries look forward to the next sixty years and beyond with confidence.
What are the main features of the present relationship?
First, it is completely stable, with no tension and no unresolved issues. Our partnership in all sectors keeps expanding and mutual trust and good neighbourliness underlie all decisions. Political non-interference, economic cooperation for mutual benefit, increasing travel by both countries’ citizens to each other’s land, and close cooperation on regional issues as well on the international arena are the pillars that hold our partnership firm.
The frequency of high-level visits and talks in recent years attests to the strength of the political trust. Last year, the presidents met twice. The contents of the areas of political and military cooperation keep getting enriched and new areas are being charted on a regular basis. This is a sign of reciprocal trust. For instance, the two sides have never missed the annual consultative meeting on politics and defence since 2004. Sending observers to military exercises held in the other country has become more frequent. Recently for the first time ever, troops from the two countries took part in a joint peace-keeping field exercise. Political parties exchanged views in a forum in June, something that has never happened before.
The economic relationship, based on cooperation and complementarity of interests, is striking ever firmer roots. Mongolia is opening up access to its mineral resources, and China’s rapid economic development is increasing its demand for them. Mongolia has what China needs, and China has what Mongolia needs – this is a perfect basis on which to expand our cooperation. Mining and the development of infrastructure, and China’s investment of capital, technology and manpower to implement large export-oriented mining projects in Mongolia, to meet China’s demands and more, would be the major trend in the near future.
Trade between the two countries was USD33.6 million in 1990. This increased 83 times to USD2.8 billion by the end of 2008. At that point, Chinese investment in Mongolia was USD1.67 billion, accounting for 55.7% of the entire foreign investment in our country. At the individual level also the relationship is blossoming, as more and more people visit each other’s country. More than 2,300 Mongolian are studying in China.
I began my answer by saying our relationship is completely stable. The biggest proof of that is that as should happen to all stable relationships, ours is also getting better all that time, in all sectors.
What are the main features of the present 5-year plan to develop the economy of China?
The special thing about the 11th plan spanning 2006-2010 is that it has set targets on a scientific basis. Its basic aim is to maintain the pace of sustainable economic growth, with enough manoueuvrability to allow quick readjustment of the economy to fit the development paradigm, to reduce the past few years’ dependence on exports to achieve growth by increasing domestic consumption, to interlink urban and rural development, to strengthen sustainable social relationships, and to have more reforms. The goal is to have by 2010 GDP that is double what it was in 2000. In absolute figures that would be 26 trillion RMB, working out to a per capita GDP of 19.270 RMB.
Does investment in Mongolia figure in this plan?
The plan document does not mention investment in any specific country. However, Chapter 9 says, “There will be an open policy of developing mutually beneficial cooperation with foreign countries.” This is then elucidated as continuing to have friendly external relationships, so that economic security can be strengthened through the means of growing foreign trade, establishment of new economic relationships, and identifying and expanding areas of mutually beneficial cooperation. This chapter also defines policies and directions of foreign investment in addition to setting specific targets of increased foreign trade and investment.
Following this policy, Chinese state-owned companies have acquired substantial shares in Standard Bank of South Africa, Peru Copper Mine in Peru, Indonesian PT Bank Halim, IBM Corporation of USA, cell phone operator Paktel in Pakistan and several iron ore mines in Australia. Negotiations are on for acquiring car manufacturers like Volvo. With its enormous foreign exchange reserves China is now a major player in the field of merger and acquisition.
The Chinese policy on Mongolia is in keeping with this larger goal. China has been our largest foreign investor in the last 11 years. It has invested USD1.7 billion in Mongolia, which is 55.7% of the total foreign investment in our country.
Infrastructure development will be an important part in bilateral economic cooperation. How is China’s own railway system?
In terms of absolute figures it is very impressive. China has 76,600 km of railways, the longest in Asia and the third longest in the world. This is 6% of the world’s total railway length and China alone accounts for 25% of the world’s total passenger and freight volume. And they keep building. Last year they laid 1,719 km of new tracks, which is around the total length of the Mongolian railway, electrified 1,955 km of tracks, and overhauled a further1,935 km. It has achieved technological marvels like the super high speed trains between Beijing and Tyanjin, and between Shanghai and Khanjou and the high-altitude Beijing-Lhasa railway.
However, even this does not meet the ever burgeoning needs generated by China’s phenomenal economic growth. It has been decided to have 120,000 km of railway by 2020 and work on this is going on in stages, as planned.
Mongolia is connected to the Chinese network through the Altanbulag-Ulaanbaatar-Zamiin Uud railway, which is the lifeline of our export and import trade. Realizing how inadequate this is, we have taken up the Transit Mongolia program, to improve the operational efficiency of our existing railway network, to build new railways to meet the anticipated transportation demands of large-scale mining, and to increase the number of points where we can access the Chinese railway network to gain easier access to sea ports.
Our foreign trade is almost entirely through rail transport. Having more links to the Chinese railway network is essential for our economic growth. As consumption in China itself increases we have to sell more there and we also have to reach our products faster to the ports there for exports be yond China. Looking ahead, it is clear that we have to have more than one route to the sea. The present one uses the Tyanjin–Erilen-Zamiin Uud railway but our projected export scenario of tomorrow demands that we use other Chinese ports.
We shall need to transport our products to the Sinjaan Uigur Area in Central Asia, via Gashuun Sukhait, Bichigt and Jinjou in the Liaonin region of China. There are realistic opportunities to develop quicker access to these areas. We have a 4,700-km-long border with China and must establish 5-6 more centres, all as large as Zamiin Uud- Erilen at present. The locations have to be chosen after considering the connections to both road and rail networks in China.
Diversifying our trade outlets will not just significantly help growth of export but will also develop our outlying border regions. We have to look at the way Canada worked for local development. It established a network of trade points, which resulted in an enormous increase in the volume of trade with the USA, in the process giving a boost to domestic production and service sectors, bringing in new technology, and with it, prosperity.
We have a major problem, though. Mongolian and Chinese railways use different gauges. That is why our trains take so long at Zamiin Uud-Erilen station to be prepared to run on Chinese tracks. It is also an expensive procedure.
What factors should Mongolia consider when choosing potential sites for border ports and railway lines for transporting TavanTolgoi coal?
First and foremost, we have to think of long-term economic benefits and viability, and not just short-term cost factors and convenience. The potential outcome for the development of our domestic railway network should also be considered. Laying a railway track from Tavan Tolgoi deposit to the Chinese border will cover a little more than 150 km. It would be cheaper to lay a track to Shiveekhuren-Tsehe, transportation from where would cost the least. The shortest road from Tavan Tolgoi to the main line would be via Sainshand. That length is about 350 km.
Since these railways will primarily be used as links to the Chinese railway network it would be wiser to build them according to the Chinese standard of a narrower gauge. That would save both time and money during actual movement and transportation. The exact location of the trade centers will also have to consider distance to the ultimate sea port of destination. The opinion and preferences of the Chinese have to be considered as well, as without their consent and cooperation nothing can be done.
At one time we in Mongolia used to sing a song whose words I still remember. They went like this:
“A train is speeding along
The shining railway track
That connects Moscow and Beijing
To the capital of Mongolia,
This is a symbol of friendship,
And the road of development of the country…”
We have come farther now. Tripartite cooperation among Russia, Mongolia, and China is all set to find a companion for the “lonely” single line of those days of history. There is no time to lose if we have to take our mineral products to distant buyers.
What is China currently doing to develop its own mining sector?
China is determined to maintain its current pace of economic development and so it spends a great deal of money and effort to proper management in the mining industry to ensure optimum utilisation of its natural resources. Among the many measures taken to develop the mining industry are: reforming the economy at the macro level, encouraging banks and financial organizations to lend more, lowering interest rates, facilitating access to loans, and streamlining the procedures governing grant of various licences, particularly those allowing private entities to run mining operations.
A great deal of care is taken to make sure there is proper management of natural resources. Protecting the environment is very much a priority, and so is development of ways for improved and more efficient use of ferrous and non-ferrous metals, and coal, with reduced wastage. Improved technology is applied during production, so that there is less damage to the environment. Rehabilitation programs are mandatory, and recycling of wastes and byproducts a priority. Use of advanced technology and of modern management practices, for long restricted to developed Western countries, is now widespread in the mining sector in China.
A massive amount of investment is required in the infrastructure development of Mongolia. How much of this can come from China?
China has the money. Their foreign exchange reserve is USD2.1 trillion today and is expected to reach USD3.0 trillion soon. Following the global meltdown which has curtailed banks’ capacity to lend money, many countries of the world have been successfully approaching China for preferential credit for infrastructure construction.
It is now a most opportune time for our two countries to take our economic cooperation to new areas and to a new level.
The political relationship is already at its best and this should now be translated into developing a mutually beneficial and comprehensive trade and economic relationship. Cooperation in the infrastructural sector will be a principal component of this projected economic cooperation. Being geographical neighbours allows us to achieve so much more at less cost and also quicker. Chinese skills, technology and practices will be an asset in road building and other areas of construction.
What do we gain or lose by getting the loans in yuan?
Aid and preferential credit from China in yuan has for some years been common and has already played a significant role in expanding our economic cooperation. Aid from China is granted only in yuan. China’s aid to Mongolia between 2004 and 2008 amounted to 360 million yuan, and 20 million yuan more has come this year. Apart from that, there has been a soft loan for USD300 million. A Mongolian request for a commercial loan of USD3.0 billion is under discussion.
There is a great deal of global discussion on the choice of currency in trade with China. Many countries have opted for the yuan in preference to the dollar in bilateral trade with China. Some others like Japan and South Korea have concluded swap agreements with China. We are also seeking an opportunity to make a similar agreement, allowing for exchange of the national currencies between the commercial banks of the two countries, and use of both yuan and MNT to pay for trade. Professional organizations are now discussing these issues.
How will China’s position on the world stage change when the global recession ends?
The Government of China is confident that even during the recession, it can maintain a fairly high rate of economic growth and estimates it will be 8% in 2009. Great amounts of money are being spent to stimulate domestic consumption so that the economy does not stagnate. At a time when economic activity has slowed down in many countries,
China presents quite another picture. The Government has decided to tide over the crisis by going for generous investments and this is most visible in the infrastructure, energy and mining sectors. The result will be that when the crisis is finally at an end, China’s status in the world economic order will definitely behigher.
In the changing pattern of things, do you believe it is good for Mongolia that we have China as neighbour?
I do. China’s continuing economic reforms will only increase its status as one of the biggest and most important trade and production centres in the world. Its growing economic clout will give it a larger role in world affairs, and this pre-eminence of a neighbour offers a host of advantages and opportunities for a developing country like Mongolia.
Most items and goods of daily use in our country are produced in China. They grab our market because they are relatively cheap and also offer a wide choice to the consumer. Our exposure and access to areas of advanced technology will be quicker and easier the more we can export to their large and ever growing market. We have the advantage that China sticks to a policy of helping neighbouring countries to live in peace, create wealth, and to develop together.
However, we have to act appropriately to make the maximum use of this favorable situation, to grab opportunities that are offered. There is intense competition as so many countries -developing, developed and underdeveloped – are vying for more trade with and aid from China. How best we fare in this competition, even with the special advantages we have vis-à-vis China will depend on our political wisdom, good economic management, and social prudence.