Trade doubled between the China and Mongolia from USD 4 billion in 2010 to USD 8 billion in 2018, and about USD 5 billion of this total was between Mongolia and China’s Inner Mongolian Autonomous Region (IMAR) alone. Greater efficiency at the IMAR border crossing points could further accelerate this trade growth. Trade by the People’s Republic of China (PRC) and Mongolia with third party countries, including those in Europe, would also grow.

The Asian Development Bank (ADB) has approved up to $420 million for a multitranche financing facility (MFF) to improve economic opportunities and living conditions among communities along the border between the IMAR and Mongolia.

ADB Senior Financial Sector Specialist Seung Min Lee said that the programme will upgrade and modernise facilities at five border communities to ensure that the benefits of growing bilateral and regional trade can be shared by both sides of the border. The programme’s technical design, environmental improvements, and robust economic and financial returns will ensure its long-term sustainability and benefits.

The poor infrastructure and inefficient processes at the IMAR border crossings stifle the potential for development and international trade on both sides of the border. Storage and quarantine facilities are lacking, a deficiency compounded by outdated and inefficient management systems, customs procedures, and standards. A one-stop customs process has not been established, and goods clearance is not yet automated or integrated with sanitary and phytosanitary measures.

The programme will enhance living conditions and sustainability of target border regions by supporting the use of such advanced technologies as smart drip irrigation with reclaimed water for forestation, smart port management based on information and communication technology, and smart waste collection and transfer.

Three tranches are envisaged for the MFF. The first of $196.3 million will help finance the delivery of a smart port management system in the Erenhot–Zamyn-Uud economic cooperation zone (ECZ), a service area and customs supervision center at the Mandula port, and upgrade of equipment at the international hospital in Erenhot. Ecological restoration will be carried out in the ECZ, and a smart waste collection system established in Erenhot. SME financing support, the construction of a quarantine station at the Mandula port, and the establishment of a product tracing and management system and Poverty Alleviation Program (PAP) will contribute to expanding income-generating opportunities.

These first tranche activities will benefit 2.95 million people in Erenhot and Baotou municipalities by providing greater livelihood opportunities for the poor and the overall population. The programme will have strong regional spillover benefits for Mongolia, with expanded trade creating about 3,300 direct and indirect jobs in Mongolia. Health and other services will benefit disadvantaged communities on both sides of the border.

The project also closely complements other ADB projects in Mongolia, including an Economic Cooperation Zone project at Zamyn-Uud free zone approved in June 2020 that will create jobs and serve as a catalyst for diversifying Mongolia’s economy and additional financing for Regional Improvement of Border Services approved in 2019.

The total cost of the investment program is $888.35 million, of which the government will provide $351.42 million, and $116.93 million will come from other sources. The closing date for the third tranche is the end of September 2031. (ADB)