With more businesses competing for market shares, it’s clear that the country is moving in the right direction.
The flat, sprawling nation,with its population of only three million, is attracting massive foreign investments that look set to change Mongolia forever. Chinbold P of Wagner Asia Equipment LLC, which has been operating in the Mongolian market for 16 years as Caterpillar’s official dealer, is optimistic about the future of the country.
“The last decade has seen the Mongolian mining industry become one of the most developed in the world and the infrastructure has improved alongside it,” he says.
“With more businesses competing for market shares, it’s clear that the country is moving in the right direction.”
Mongolia is still a poor country, having just been given “lower-middle-income” status by the World Bank. Despite having a GDP of around USD 2,000 per head, the third quarter of 2011 saw the Mongolian economy grow by 21 percent compared with the same period in 2010, driven by strong commodity prices, rising mining output, rapid infrastructure development and booming domestic demand. Meanwhile, the IMF’s forecast of annual growth averaging 14 percent between 2012 and 2016 would make Mongolia the fastest growing economy in the world for many years to come. Two words explain Mongolia’s meteoric rise – mining and China. Mongolia has vast deposits of copper, coal, gold, silver, uranium and molybdenum, to mention a few. Combined with its location next to the world’s largest and fastest-growing market for most minerals, Mongolia is set to be rich beyond the wildest dreams of a population who, just a generation ago, were largely nomadic herders. Already, minerals account for more than 80 percent of its exports, a proportion expected to rise to 95 percent, of which China buys more than 80 percent.
The ongoing construction of the massive Oyu Tolgoi mine is a key driver for the Mongolian economy. The mine will produce 450,000 tonnes of copper a year, making it one of the world’s five largest mines, with resources estimated to last 50 years. It is the main source of foreign investments in Mongolia and is expected to account for one-third of Mongolia’s GDP by 2020.
When production begins in earnest in 2013, it alone will add five percent growth to the country’s GDP. By 2013, USD 6 billion will have been invested in the development, rising to USD 10 billion by 2020.
For a country with a current GDP of USD 8.5 billion, this figure is enormous. And this is only the beginning. Mongolian coal production is expected to increase from about 16 million tonnes in 2011 to 40 million by 2020 and 240 million by 2040. Although economists are concerned about the risk of Dutch disease, whereby a sudden resource-driven boom can distort an economy, pushing upexchange and inflation rates and rendering other industries uncompetitive, this is a risk Mongolia has little option but to take.
Its comparative advantage lies in commodities and mining services - it is unlikely to be able to compete in manufacturing with “the biggest factory on the planet”, next door in China.
WWL in Mongolia
WWL offers integrated logistics services to Mongolia from North and South America, Europe, Australia, South East Asia, India and Japan, through Bill of Lading, regardless of the weight or size of the cargo. It offers multiple solutions for delivering cargo, either to the Mongolian border or to a final destination, according to individual customer requirements. WWL currently handles a variety of mining equipment, machines and trucks to Mongolia via Tianjin port. Transit, customs and terminal services in Tianjin port, as well as bonded delivery to the border, customs clearance, reloading onto Mongolian trucks or railcars and delivery to Ulaanbaatar and other sites in Mongolia, can also be arranged.