Mongolia revving up to build Russia-China highway

By bne IntelliNews April 2, 2013

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Mongolia is planning to build its first modern highway. The route will cross the country to link China and Russia, with the Central Asia country hoping to position itself as a transit point for growing trade between the two giants.

The 1,000km Altanbulag-Ulaanbaatar-Zamiin-Uud highway will cost around $3.5bn and will be built under a concession agreement, the Montsame News Agency reports. Mongolia's Chinggis Land Development Group - a consortium involving over a dozen state companies - says it will finance 30% of the construction costs from its own funds. It hopes to find foreign investors to provide the remaining 70%, and claims to have interest from the US and Italy.

It may need to quickly make that interest concrete however, with Chinggis saying it plans to start building the highway in May, with a completion date of 2015. The investors will operate the toll road until 2040, when the asset will be transferred to the state.

The new road will facilitate trade between China and Russia, Chinggis claims, and help develop the towns along its route. While the two giants have struggled to agree on the high profile energy deals that have been expected for decades, general trade is growing - especially as the BRICS turn to one another as developed markets coninue to struggle through crisis. Goods turnover in 2013 between the pair is estimated at $80bn, but only 10% of that volume is transported by road, according to news.mn

At the same time, Mongolia has begun investing into transport infrastructure to open up export routes as it develops its raw materials.

Although exports, mainly of coal, to China, were hit by dropping demand last year, the Mongolia hopes to see them resume steady growth as the effects of the crisis recede. Projects such as the development of the Oyu Tolgoi copper-gold project should also substantially increase the volume of raw materials trade, while Ulaanbataar is also keen to develop the country's manufacturing and processing sectors.

The Chinnggis consortium - managed by the Development Bank of Mongolia - is at the forefront of the push. In March its first investments were announced, as it unveiled plans to invest $400m into road and railway projects.

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