Mongolia Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Mongolia concluded a Partnership and Cooperation Agreement with the EU in 2017. Using the GSP+ mechanisms, it can export up to 6,200 products duty-free to the EU. Mongolia’s foreign trade turnover with the EU in 2021 reached EUR 609.8 million. The total value of imports was EUR 70.8 million (a 37% increase). The EU exported goods worth EUR 539 million to Mongolia (a year-on-year increase of almost 23%). The main items of Mongolian exports to the EU were raw materials and textiles. The EU exports machinery, medicines, medical equipment, cosmetics, chemicals and food to Mongolia.

2017 2018 2019 2020 2021
Exports from the EU (million EUR) 349.9 426.9 485.4 439.4 539
Imports into the EU (million EUR) 65.8 67.1 76.2 51.6 70.8
Balance with the EU (million EUR) -284.1 -359.9 -409.2 -387.8 -468.2

Source: European Commission

Trade relations with the Czech Republic

The Czech Republic has concluded an Agreement on the support and mutual protection of investments with Mongolia. In 2021, goods worth a total of 390,205 thousand were exported from the Czech Republic to Mongolia. CZK, imports into the Czech Republic reached 13,202 thousand. CZK. In a year-on-year comparison, there was an increase in Czech exports to Mongolia by almost 18% and imports by 21%. The main items of Czech export were instruments, chemical products, machines, transport equipment, weapons, ammunition, etc. The main items of import were plastics, clothing, livestock products, leather and textile products.

2017 2018 2019 2020 2021
Export from the Czech Republic (thousand CZK) 338,219 283,747 435,521 331 449 390 205
Import to the Czech Republic (thousand CZK) 34,966 17,587 14,222 10,930 13,202
Balance with the Czech Republic (000 CZK) -303,253 -266,160 -421,299 -320,519 -377,003

Source: businesscarriers.com

Trade relations with countries outside the EU

Mongolia has a Bilateral Investment Agreement with the USA. It concluded an Agreement on the Support and Protection of Foreign Investments with Canada, and an Agreement on Economic Partnership with Japan. Mongolia’s total foreign trade turnover for 2021 was EUR 1 billion, exports EUR 8.7 billion (up 21%), imports EUR billion (up 28%) compared to the same period last year. The balance of foreign trade was in surplus of EUR billion.

China (63%) and Russia (13%) had the largest share of foreign trade turnover. The dramatic increase in the value of Mongolian exports was due to rising world mineral prices.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 4,920.5 5,533.0 5,991.4 6000.5 6,803.3
Imports to countries outside the EU (million EUR) 3,620.9 4,926.5 5 131.9 4,448.2 5,816.0
Balance with non-EU countries (million EUR) 1,299.6 606.5 859.5 1,552.3 987.3

Source: EIU, Eurostat

Foreign direct investment

Foreign direct investment in mineral resources remains a priority in the country. Vast reserves of mineral resources represent potentially lucrative opportunities for investors. However, the high-risk macroeconomic environment, little involvement of stakeholders in the implementation of clear rules require caution.

Mongolia’s long-established economic model built on exporting minerals and importing almost everything else means that the government does not put up major barriers to foreign firms’ access to the market. In recent years, the service sector represented by international brands has been especially successful (such as multiplex franchises, fitness centers, fast food, convenience stores, etc.). Investments in tourism, agriculture, or e-commerce also have great potential. Investing in politically sensitive sectors of the Mongolian economy, such as mining and quarrying, carries certain risks.

From 1990 to 3Q 2020, investments from 123 countries totaling USD 28.8 billion went to Mongolia. The 5 countries with the highest volume of foreign direct investment in Mongolia since 1990 are Canada, followed by China, the Netherlands, Luxembourg and Singapore. Canada accounted for 26% of total FDI, worth $7.5 billion, followed by China 19% with $billion, the Netherlands 15% with $billion, Luxembourg contributed 7% or USD billion and fifth Singapore with a share of 5.6% at USD billion.

The most FDI, i.e. 70% worth USD 20.2 billion, went to the mining and quarrying sector, followed by the trade and food services sector 16.8% (USD billion), banking and finance 3.2% (941 million USD), transport and infrastructure 1.2% (348.8 million USD) and the construction sector 1.3% (401 million USD).

FTAs and treaties

Treaties with the EU

The EU’s relations with Mongolia are regulated, among others, by the following selected treaties:

  • Agreement on Civil Aviation (2009)
  • Convention on the Surrender of Sentenced Persons (2016)
  • Partnership and Cooperation Agreement, PCA (2017)
  • Convention on Mutual Administrative Assistance in Tax Matters (2020)

Contracts with the Czech Republic

Mutual relations between the Czech Republic and Mongolia are governed by a number of bilateral and interdepartmental agreements and memoranda:

  • Treaty between the Czech Republic and Mongolia on the avoidance of double taxation and the prevention of tax evasion in the field of income and property taxes (1997)
  • Agreement between the government of the Czech Republic and the government of Mongolia on the support and mutual protection of investments (1998)
  • Agreement between the government of the Czech Republic and the government of Mongolia on mutual employment of citizens of the Czech Republic and citizens of Mongolia (1999)
  • Agreement on the main directions of cooperation in the field of environment between the Ministry of the Environment of the Czech Republic and the Ministry of Nature and Environment of Mongolia (2001)
  • Agreement on economic cooperation between the government of the Czech Republic and the government of Mongolia (2005)
  • Memorandum of Understanding between the Ministry of Defense of the Czech Republic and the Ministry of Defense of Mongolia on mutual cooperation (2012).
  • Memorandum on cooperation between the Ministry of Labor and Social Affairs of the Czech Republic and the Ministry of Human Development and Social Protection of Mongolia/the document is not an international treaty in the sense of public international law (2014)
  • Agreement between the Government of the Czech Republic and the Government of Mongolia on Air Services (2017)
  • Agreement between the Government of the Czech Republic and the Government of Mongolia on readmission of persons with unauthorized residence (2019)
  • Agreement between the Ministry of Education, Youth and Sports of the Czech Republic and the Ministry of Education, Culture, Science and Sport of Mongolia on cooperation in the field of education and science (2019).
  • Memorandum on cooperation in the field of civil aviation between the Ministry of Transport of the Czech Republic and the Ministry of Roads and Transport Development of Mongolia (2021)

Other agreements* on cooperation in the social, economic, educational and cultural fields were signed during the state visit of the Minister of Foreign Affairs of Mongolia D. Tsogtbaatar to Prague on 20/05/2019.

*Note: The ratification process of the Social Agreement is ongoing

Developmental cooperation

Bilateral cooperation

Mongolia is a recipient of development aid and, in accordance with the Concept of Foreign Development Cooperation of the Czech Republic for the period 2010-2017, which was approved by the government in May 2010, it was among the priority partner countries of the Czech Republic with a cooperation program. Development cooperation was mainly concentrated in the areas of energy, water supply and sanitation, agriculture and forestry. The Czech Republic provided development aid to Mongolia in the period 1996–2017 in the amount of more than USD 50 million, which ranks the Czech Republic among the most important donors. The Czech Development Agency (ČRA) has been the guarantor of the ZRS since 2010.

Czech investors can, among other things, take advantage of the Foreign Development Cooperation Guarantee (ZRS) program in Mongolia. The aim of the program is, in accordance with the Strategy of the ZRS CR 2018-2030, to support private investments in risky markets in developing countries through bank guarantees. The condition of the support is the sustainability of the implemented investments, their development impact and added value for the partner country. The support is provided in the form of a bank guarantee for the loan. The guarantee is provided only for loans from banks that have an agreement with the National Development Bank on the conditions for providing guarantees for foreign development cooperation. More information is available on the website of the National Development Bank

Multilateral cooperation

The Czech Republic participates in the work of UN agencies, Bretton Woods institutions and EU bodies. He participates in discussions on development through the relevant working groups and platforms of the WB, the EU, the UN and the OECD. It contributes financially to the activities of these institutions and ensures the implementation of accepted commitments. International organizations are implementing projects in water management, waste treatment and healthcare in Mongolia.

In Mongolia, the Czech non-profit organizations People in Need and Charita play an important role in the implementation of multilateral development projects. The fulfillment of the obligations of the Czech Republic will be based on the total volume of Czech development cooperation and the possibilities and state of the Czech development system.

Prospective fields of study (MOP)

Agricultural and food industry

Almost 30% of Mongolia’s economically active population is employed in the agricultural sector, and it accounts for about 14% of the GDP. Livestock production accounts for roughly 70% of the sector’s total production. In Mongolia, a very limited amount of cow’s milk is produced, which is due to the extensive form of cattle breeding (herding). There is a new need to reduce the number of cattle due to climate change, switch to intensive breeding and increase milk production. Czech companies can apply for the supply of technologies in the field of meat and milk processing, as well as small agricultural machinery.

Civil aviation industry

The current regional airports are outdated, not meeting the requirements for connections between the capital, remote regions and mining centers. In the country’s development plan, the Mongolian government has set the goal of building up to 5 regional airports (Dornod, Chovd, Uvs, Murun and Undurchaan) and modernizing two airports and upgrading them to international airports. There is no rescue or firefighting air service in Mongolia, helicopters and heliports are missing. A segment of small civil aviation is also developing with the aim of commercial transport and amateur flying. With its vastness and insufficient and outdated airport infrastructure, Mongolia is a suitable place to offer a unique modular system of regional airports. There is also a demand for smaller transport aircraft intended for regional transport.

Energy industry

Most of the electricity and thermal energy in the country is produced in thermal power plants. Water, wind or solar resources are used to a small extent. Demand exceeds the country’s production capacity by 30%. With the expected growth of the mining industry, it is desirable to double electricity production by 2030. Provincial governments offer significant contracts for the completion of power plants (especially coal). We are also interested in the supply of cogeneration units, gas storage tanks and smart electricity meters.

Water management and waste industry

The priority of the Mongolian government and regional administrations is to secure new sources of drinking water, their protection and appropriate infrastructure for the rapidly growing Ulaanbaatar and other provinces. The construction of a wastewater treatment plant is planned for the project of the new Emmelt industrial technology center and the tannery complex in Darchan. International organizations in Mongolia implement projects in water management, for example the American Millennium Challenge Corporation implements long-term projects in Ulaanbaatar and its surroundings for CZK 7.5 billion. Opportunities for Czech companies are found in waste management (collection, collection, sorting and subsequent use).

Transport industry and infrastructure

An important area that is gaining importance in Mongolia is the supply of means of transport (buses, trolleybuses, wagons) and participation in the reconstruction of transport networks. The capital city of Ulaanbaatar will need to renew a total of 863 buses in the coming years. The municipality is also striving for the supply of a tram system, including the construction of bridges, which are supposed to partially solve the current bad traffic situation in the city.

Healthcare and pharmaceutical industry

The Mongolian government has used the pandemic to boost demand for direct financial support from foreign donors. He intends to use part of the grants and loans to purchase technology and equipment to modernize medical facilities. CZK 930 million from the state budget will be spent on the construction and modernization of hospitals. Mongolian healthcare lacks critical infrastructure, ICU equipment, operating rooms, diagnostic equipment, sterilizers.

The entire Industry Opportunities Map (MOP) is available here.

Mongolia Trade