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Madness

31th of 5, 2018


As we near the halfway mark of the year, the commodity market continues to be good, bringing hope that the country’s economy will soon be restored to health. As things look brighter, old projects are brought out of storage, and their likely implementation discussed. Some changes to the State policy on railway are almost certain to be made, and there is talk of building some railways exclusively for minerals export. We have chosen railway as the focus of this issue and give you extensive and comprehensive information on these.

In his very first media interview, B.Tsengel, CEO of Mongolian Railway, the agency for railway projects under the Ministry of Road and Transport Development, gives much information on several railways to be built to carry for export output from the bigger mines. Mongolian Railway SOSC is responsible for implementation of the New Railway project which covers the first two stages of the state policy. As you read, you will find him explaining how “once the railway is built, we stand to save more than $200 million a year on the present annual export of 12 million tonnes”. He follows this up with, “Then again, if using the railway means we can take our coal 500 km-1000 km further into Chinese territory, that would increase our export income by $500 million-$1,000 million per year.” Just consider how costly to the nation has been the series of avoidable delaying decisions on the TT-GS railway. Despite these two examples of what Tsengel offers, nobody can say for sure how much more time will pass before the railway is built.

In his interview published in our April issue I.K.Azizov, Russian Ambassador to Mongolia, revealed, for the first time, that the Ulaanbaatar Railway (UBTZ) would take up upgrading programmes with bank loans, without waiting for the results of soft-loan negotiations. He said, “Once the Erdenet-Ovoot railway becomes operational, it will require the carrying capacity of UBTZ to be raised by 10 million tonnes. Upgrading UBTZ infrastructure needs to be started as soon as possible as it will be the central railway corridor to connect Russia and China.” And he added, “Current problems have to be resolved before we talk about future gains. The Erdenet-Ovoot project is obviously of great economic importance, for both Russia and China are keen on using the west –bound railroad.” The Erdenet-Ovoot railway is to be connected with the Russian railway network through Artssuuri port and go on to Kyzyl and this is may the first project to be implemented successfully among the new railway projects. On this topic, the project implementing company’s position is also included in this issue.

A tradition has been well established in the last decade that whenever commodity prices rise and stay high, the government tends to start talking about billion-dollar large projects. At the same time attacks on mining companies are intensified. Unfortunately, when the global commodity market does not do so well, no one seems interested in the mining sector.

We hope you like the cover cartoon. We use it as it expresses reality.

At the moment both bouquets and brickbats seem to be raining on Oyu Tolgoi, and the two poles are drifting further apart. Multiple parties are reviewing the terms of the project agreement to see what revisions are needed but there are others who want change without much thought, and these are often allowing their emotions to overwhelm logic. How necessary is it to change the terms of the OT Investment Agreement and how possible would it be to get these changes made? B.Tugsbilegt traces events since the agreement was signed nine years ago to answer these questions.

The other Tolgoi -- Tavan Tolgoi – is also in the news, as efforts start being made to use it to win popular support in the next elections. The Prime Minister wants an IPO, the President wants citizens to receive dividends, but absent in all this madness is any effort to allow Erdenet Tavan Tolgoi to run as a proper business venture, free of politics. An inside article shows how a victory for populism can only mean loss to the people. 

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