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Mongolian roads to connect Asia and Europe

Interview - February 13, 2014
The construction company helping Mongolia expand its network of road infrastructure will not only help connect remote parts of the country, but also link China and Russia – its two giant neighbors. With such a geostrategic position, President of Nasnii Zam Mr. Enkhjargal says that such construction will contribute to the prosperity of Mongolian society and give equal development opportunities to all of its economical and industrial sectors
NASNII ZAM, MONGOLIA
MR. ENKHJARGAL | PRESIDENT OF NASNII ZAM
According to the government’s Master Plan to develop a sustainable economic growth there is a lack of infrastructure to be solved. About 5000 kilometers of roads will be built in the following years in order to connect Ulaanbaatar with 12 provinces. Tell us about Nasnii Zam’s strategy to capitalize on this infrastructure investment?
 
The implementation of the Master Plan according to the Policies of the Mongolian Government to build paved roads and connect the 12 rural provinces with the capital city, Ulaanbaatar, by 2016 has already started.

At the moment, over 1800 km of the road construction work has been accomplished within the last year – it is the first time in the history of the country that Mongolia’s road constructors have built these kinds of roads over such a long distance by themselves within 1 year.

The reason why we are building roads with thousands of kilometers of length is because Mongolia is situated between China and Russia which brings the country very favorable geopolitical advantages by connecting Europe and Asia. These roads will not only connect domestic rural areas and provinces with each other – it will also contribute to the main road network system that connects the European and Asian continents.
 
The roads are the veins of a country. The sector is also a source of employment and a transversal need for the expansion of other industries of Mongolia’s economy. What is the social output of the road construction industry?
 
The road construction sector has its own obligations and tasks in order to contribute to the prosperity of the society. The main task is to connect the whole country through road systems which will enable the implementation of the following essential objectives: firstly, residents of rural areas and provinces will be able to move much faster between their place and capital city; secondly, road transportation will increase and accelerate. And last but not least, as I’ve mentioned before, with the development of transit roads between our neighbor countries we will contribute an invaluable share to the economy of Mongolia.

Furthermore, our company, as a contractor of several bigger projects of the infrastructure development, is providing a certain amount of jobs. With the creation of new jobs we are fulfilling, like other industrial entities of the private business sector, our obligations in accordance with the governmental policy and program “Mongolian citizens with stabile employment and income”. At the moment, our company employs over 500 workers – this fact gives us a reason to believe that we have reached a concrete status in the realization of the above-mentioned governmental policy.

Concerning your question about the mining sector, everything is evident – mining is one of the most important branches in Mongolia. Since a few years, the mining sector has started to gain its dominating position in the Mongolian economy. Currently Mongolia is exploring and extracting its natural resources only in particular areas of South Gobi and other southern provinces – it is just the beginning of all mining activities. The reason why Mongolia is not able to explore its natural resources in other remote situated provinces is mainly due to the underdeveloped infrastructure of these areas.

Therefore, the promotion of infrastructure development in Mongolia is crucial for the whole mining sector on one hand and for Mongolia’s agriculture with its traditional livestock farming on the other hand. It will give equal development opportunities to all economical and industrial sectors 
 
What are the limitations of the road construction industry? What are the main barriers that you have to face to build roads in Mongolia?
 
It’s been 13 years now, since the private business entities started to join the road construction sector in Mongolia and our company “Nasnii Zam” (translated as “Roads for a Lifetime”) is one of the pioneers in this branch. At that time Mongolia’s road construction sector was able to build only 34 km of paved roads yearly. At the same time the Mongolian Government had started the implementation of its “Millennium Road” Project. The new industrial sector consisting of private road construction companies was established within the realization of this project.

Today we are able to construct over 1800 km of paved roads within 1 year. The fact that one country has raised its road construction volume from 34 km to 1800 km is an immense growth itself. For now we are planning to connect 6 province centers. However, Mongolia has a territory of approximately 1.4 million square kilometers.

To connect all 21 provinces of the country with paved roads is consequently the primary objective of the project. Additionally, Mongolia has totally over 340 soumons (soumon – small administrative unit, subdivisions of provinces), which means that around 160.000 km of roads will be necessary to connect them all.

All this has made us aware that at present it is impossible to make exact road calculations, because it is obvious that this value will exceed the 160.000 km. On the other hand, it shows how important and necessary the road construction sector is for Mongolia and how big the market is in this relation.
 
There is a need to improve the quality of the roads. Nasnii Zam aims to construct world-class roads, but there is also only one paved road to Russia and other one to China. What is “Nasnii Zam” position in terms of facing those challenges in connecting Mongolia with its giant neighbors? 
 
The main target of the “Millennium Road” Project, defined by the State Government at that time, was to connect the western provinces of the country with their eastern counterparts, which means to build a paved freeway with a length of over 2800 km through the country.

Compared to all existing roads in Russia and China this freeway was designed to be the shortest road to connect them together – in the East of Mongolia it has a direct exit to the Khulungur province of Inner Mongolia (China) and in the West it has direct access to Krasnoyarsk prefecture of the Russian Federation. From Krasnoyarsk it is only 2000 – 3000 km to reach Moscow. So, this freeway was built along our broad and wide country.

Mongolia as a democratic country is able to provide enough safety and favorable conditions for international freeways within its territory. Also the hospitality and kindness of local inhabitants is one of many advantages in this relation. This giant international freeway, which connects Asia with Europe, finds its beginnings in Tokyo and ends in Istanbul.
 
Nasnii Zam owns equipment and property of about 20 billion tugriks and you are producing your own concrete and your own asphalt. As a developer, what are the benefits of producing your own concrete and asphalt? Regarding the fact that Mongolia suffers a supply shortage of concrete.
 
 “Nasnii Zam” was established 12 years ago and its growth and development is proceeding as usual according to evolutional principles and rules of the business world. Initially we started our business career with Russian equipment and machinery. Today we have over 500 employees and about 320 heavy machines and equipment.

Generally, any development must follow its time epoch. It was evident for us that an appropriate establishment and realization of such big infrastructural constructions and buildings would only be possible with most modern and innovative technology and know-how based on the latest achievements of the science and technology.

This fact was one of the reasons why we had failed on deciding how to utilize equipment’s and machinery of the world standard in Mongolia’s road construction sector. In this relation our company was also a pioneer in this field. The results of the sustainable work of our industrious staff during all these years is significant – today our company owns 3 asphalt factories including a concrete mixing facility, bitumen storage shop, own railway, diesel fuel storage etc. All these facilities and constructions, necessary for road construction, we built ourselves. This might be the reason why the productivity of our work is constantly pretty high.

Since you are producing your own concrete and asphalt, are you selling this concrete to other company in the industry or other associate industries such as real estate? Does it give you a competitive advantage against other companies of the sector? 
 
Most raw materials required for our road construction business we purchase from abroad, particularly from Russia and China. Bitumen is the most essential raw material in our business. Our company owns a bitumen shop with a storage capacity of 3200 tons. Also diesel fuel, cement and steel frameworks and fittings are imported from abroad.

All these raw materials and products we receive directly through our own railway. After distribution of the necessary volume for our own needs and requirements we also distribute them to other companies and entities with similar business activities. In addition, we are manufacturing also products widely used in the building construction sector, particularly in engineering networks and systems – like, for example, water drainage ducts, road kerns – in other words, we are manufacturing everything which is made of concrete. Our concrete facility is located just behind our office building and if you are willing to visit it, I can introduce to you our production.
 
What are your plans for future investments in term of technology?
 
Actually, my profession is car mechanic. It’s been more than 10 years now since I started my career in the road construction sector and with time I learned to love the roads.

It is without a doubt that construction of long distance roads and freeways is only possible with the appropriate technology and machinery. Therefore, I have a lot of interest in new and innovative techniques and technology in our branch. Furthermore, I regularly obtain information about domestic and international workshops, fairs and seminars and visit them within my possibilities. Thus, today, our company has quite a lot of foreign partners and collaborates organizations from abroad. We also have a lot of friends, who are professionals in this field and regularly inform us about the latest technological achievements.
 
In the international context “Nasnii Zam” is a relatively young company and in just 12 years you have gotten a leadership position. What have been the biggest achievements in your field? 
 
If I should recapitulate our achievements of the recent years, it can be summarized as the following – our company has built in total around 700 km of paved roads and more than 2000 meters of bridges within the territory of Mongolia. Since last year we have been participating in one of the biggest construction projects of the country – it is the construction of the new international airport in Khushig Valley in the Tuv province. Within the framework of this project we are collaborating with Samsung. Our company was also the first industrial entity in Mongolia, which participated in several projects financed by Kuwait’s Government and implemented for the first time in Mongolia.
 
As we said before this report is going to be distributed all over America within one of the most prestigious newspapers in order to create international awareness, attract investment, exchange of technology and even workforce. Can you tell us why an US investor should choose “Nasnii Zam” as a partner to get alliances in Mongolia?
 
In the last years the interest of the world community for Mongolia has grown enormously. Not so long ago many foreigners didn’t even know where Mongolia was actually located – they believed us to be living somewhere at the end of the world.

 Today most of the world knows that our country is placed quite centrally in the middle of the Earth. Apart from the intense development of the mining industry there are many other bigger projects, which will be implemented soon within the infrastructural development of Mongolia. Our country is getting ready and making its own preparations to meet the requirements.

Besides road construction projects there are also a lot of bigger projects in relation with the building of new railroads within the territory of the country. Thereupon, if there are interested parties with a honest desire and intension to participate in big projects in Mongolia, our company shall welcome them all and will be pleased to collaborate with every one of them.

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