Mongolia, US Seek to Advance Economic Ties   – The Diplomat

In February, the fourth U.S.-Mongolia bilateral Financial Coverage Dialogue convened in Washington, D.C. The bilateral assembly centered on increasing Mongolia-U.S. commerce and funding in three key areas: crucial minerals, clear power, and digital economic system.

The 2 nations established a strategic partnership in 2019, however since then their financial actions have been disrupted by the prolonged COVID-19 pandemic. Extra concerningly for Ulaanbaatar, the lower in total international direct funding (FDI) was a major indication that Mongolia must diversify funding alternatives with all “third neighbors,” together with america.

Between 2021 and 2022, Mongolia and america each appointed new ambassadors. Through the bilateral Financial Coverage Dialogue, Mongolian Ambassador to the U.S. Batbayar Ulziidelger and U.S. Ambassador to Mongolia Richard Buangan exchanged views and shared concepts on cooperation. Either side acknowledged the significance of advancing financial ties and emphasizing a powerful Mongolia-U.S. strategic partnership.

On the identical time, given the gap and logistical challenges, america will not be among the many high locations for Mongolia’s mineral export. Nonetheless, there was growing curiosity in U.S. funding in Mongolia’s crucial mineral sector. The latest financial settlement between Ulaanbaatar and Seoul highlights these financial instructions as properly.

The beginning of Rio Tinto’s $7 billion underground mega-plant in Oyu Tolgoi definitely tasks a rise within the mining sector’s contribution to the nationwide economic system of Mongolia. With the profitable begin of the Oyu Tolgoi mega-mine, there may be potential for mining crucial minerals comparable to copper, tin, and molybdenum. The profitable renegotiation of the deal between the federal government of Mongolia and Rio Tinto additionally marks an enchancment for Mongolia’s dispute decision course of, which is essential in attracting FDI.

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The second space through which Mongolia and america are set to cooperate is the event of fresh power. Renewable power is an rising market in Mongolia, however the institution and implementation of such tasks can assist to unravel main public well being points comparable to air air pollution.

Investments in clear power will naturally diversify renewable power undertaking varieties. Whereas Mongolia can undertake clear power options from China and India – which have related air air pollution and public well being points – Ulaanbaatar can even make the most of its third-neighbor relations to amass superior information and instruments from companions like america. If applied effectively, clear and renewable power could be a game-changer for a rustic like Mongolia with a sparse inhabitants.

Whereas the Financial Coverage Dialogue is important in advancing financial ties between Mongolia and america, there are shortcomings on either side.

In 2018, one 12 months previous to establishing their strategic partnership, america Congress initiated the Mongolia Third Neighbor Commerce Act to spice up bilateral commerce, significantly within the export of textiles, cashmere, and uncooked supplies to america. One of many essential incentives for Ulaanbaatar to spice up Mongolia-U.S. relations to a strategic degree was the financial benefit it might glean. Nonetheless, 5 years later, there is no such thing as a signal of motion. The Third Neighbor Commerce Act has not moved since 2018, when it was referred to the Home Subcommittee on Commerce.

Furthermore, since 2018, the commerce steadiness between Mongolia and america has not been in favor of Mongolia. In accordance with the Workplace of the U.S. Commerce Consultant, “the U.S. items commerce surplus with Mongolia was $106 million in 2020, a 36.9 % lower ($62 million) over 2019. U.S. items imports from Mongolia totaled $12 million in 2020, down 52.8 % ($13 million) from 2019.”

The Third Neighbor Commerce Act was supposed to handle this commerce imbalance by offering duty-free entry to the U.S. marketplace for some important Mongolian exports. With the invoice stalled out, the issue stays unaddressed.

On the identical time, Mongolia must strengthen its funding atmosphere. The 2022 US Funding Local weather Assertion make clear the areas of enchancment comparable to dispute decision, unpredictable tax and regulatory burden, and different key judicial and court docket processes that will have an effect on the stream of funding into Mongolia.

Regardless of these challenges regarding either side, Mongolia and america proceed to develop different areas of cooperation. In January, the 2 governments signed a Memorandum of Consultations (MOC) for the profitable negotiation of an Air Transport Settlement, which has the potential of building a nonstop direct flight between Mongolia and america.

Advancing financial ties with america is essential for Mongolia’s third-neighbor international coverage, which seeks to cut back Mongolia’s dependence on its two border nations: China and Russia. Whereas Mongolia’s outreach to “third neighbors” incorporates political, social, protection, and cultural ties and engagements, financial actions – comparable to commerce offers and the beginning of improvement tasks – are all the time on the high of Ulaanbaatar’s agenda.

From a macroeconomic standpoint, Mongolia’s escape from a mining-dependent economic system will not be real looking. Therefore, funding from its third neighbors, significantly, from strategic companions, like america, will seemingly proceed to take priority. The diversification of funding and beginning totally different improvement tasks which are power environment friendly are good strikes that may not solely strengthen Mongolia’s funding profile but additionally have a sustainable and tangible final result.