In February, the fourth U.S.-Mongolia bilateral Financial Coverage Dialogue convened in Washington, D.C. The bilateral assembly targeted on increasing Mongolia-U.S. commerce and funding in three key areas: essential minerals, clear vitality, and digital financial 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 general overseas direct funding (FDI) was a big indication that Mongolia must diversify funding alternatives with all “third neighbors,” together with the USA.
Between 2021 and 2022, Mongolia and the USA each appointed new ambassadors. Throughout 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 robust Mongolia-U.S. strategic partnership.
On the identical time, given the gap and logistical challenges, the USA will not be among the many high locations for Mongolia’s mineral export. Nevertheless, there was rising curiosity in U.S. funding in Mongolia’s essential mineral sector. The latest financial settlement between Ulaanbaatar and Seoul highlights these financial instructions as nicely.
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 financial system of Mongolia. With the profitable begin of the Oyu Tolgoi mega-mine, there may be potential for mining essential minerals equivalent 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.
The second space by which Mongolia and the USA are set to cooperate is the event of unpolluted vitality. Renewable vitality is an rising market in Mongolia, however the institution and implementation of such tasks might help to resolve main public well being points equivalent to air air pollution.
Investments in clear vitality will naturally diversify renewable vitality undertaking varieties. Whereas Mongolia can undertake clear vitality options from China and India – which have related air air pollution and public well being points – Ulaanbaatar also can make the most of its third-neighbor relations to amass superior information and instruments from companions like the USA. If applied effectively, clear and renewable vitality 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 the USA, there are shortcomings on either side.
In 2018, one yr previous to establishing their strategic partnership, the USA Congress initiated the Mongolia Third Neighbor Commerce Act to spice up bilateral commerce, significantly within the export of textiles, cashmere, and uncooked supplies to the USA. One of many essential incentives for Ulaanbaatar to spice up Mongolia-U.S. relations to a strategic degree was the financial benefit it may glean. Nevertheless, 5 years later, there isn’t any 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 stability between Mongolia and the USA has not been in favor of Mongolia. In response to the Workplace of the U.S. Commerce Consultant, “the U.S. items commerce surplus with Mongolia was $106 million in 2020, a 36.9 p.c lower ($62 million) over 2019. U.S. items imports from Mongolia totaled $12 million in 2020, down 52.8 p.c ($13 million) from 2019.”
The Third Neighbor Commerce Act was supposed to deal with this commerce imbalance by offering duty-free entry to the U.S. marketplace for some major Mongolian exports. With the invoice stalled out, the issue stays unaddressed.
On the identical time, Mongolia must strengthen its funding surroundings. The 2022 US Funding Local weather Assertion make clear the areas of enchancment equivalent to dispute decision, unpredictable tax and regulatory burden, and different key judicial and court docket processes which will have an effect on the movement of funding into Mongolia.
Regardless of these challenges regarding either side, Mongolia and the USA 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 creating a nonstop direct flight between Mongolia and the USA.
Advancing financial ties with the USA is essential for Mongolia’s third-neighbor overseas 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 – equivalent to commerce offers and the beginning of growth tasks – are all the time on the high of Ulaanbaatar’s agenda.
From a macroeconomic standpoint, Mongolia’s escape from a mining-dependent financial system will not be life like. Therefore, funding from its third neighbors, significantly, from strategic companions, like the USA, will possible proceed to take priority. The diversification of funding and beginning totally different growth tasks which are vitality environment friendly are sensible strikes that may not solely strengthen Mongolia’s funding profile but in addition have a sustainable and tangible end result.