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Mongolia government invites investors for road sector development

Article - March 31, 2014
Mongolia’s underdeveloped road sector has great potential to be an engine for the country’s socio-economic growth. The National Development looks to help achieve this potential, while the government is also eagerly inviting foreign companies to invest in road network projects
ARTS SUVRAGA
Mongolia’s National Development Strategy (NDS) has assigned ambitious goals for the road sector; in particular, the sector is tasked with developing a modern backbone trunk highway network of about 10,000 kilometers (km) within the next 10 years. So far, the road sector has served the country well, but it has remained small in scale, and progress in raising performance has been uneven. A large expansion in the network of quality roads is necessary in order to transport Mongolia’s mining resources to foreign markets and to connect the country in a way that fosters broad-based economic growth.

Mongolia’s road network is underdeveloped but still amounts to a sizable asset for the country. As of 2010, Mongolia had only 6,738 km of engineered roads, of which 2,830 km are paved and 2,116 km are gravel. There are only two paved road links to the Russian Federation, and none to the People’s Republic of China (PRC); as a result, most international trade is carried by railways. However, because Mongolia’s population is highly concentrated in the capital city, this paved network still reaches about 60% of the people and 70% of the GDP. Thus, although the network is small relative to the country’s area, it is large relative to the country’s economic size. The network’s asset value at replacement cost is estimated at $800 million, though it is not formally recognized as a state asset.

Mongolia’s plan to quadruple the paved road network would imply a major expansion in the quantity of civil works delivered annually by the sector. Mongolia’s National Development strategy considers road infrastructure to be a key instrument in fostering regional development. It targets the paving of the entire national paved road network (11,250 km) by 2021. Together with Ulaanbaatar’s urban development plans, this would require building about 1,000 km of new roads each year, against an average of 100 km per year during the past decade. Periodic maintenance needs for paved roads could rise to 2,000 km per year; none has been performed during the past years. Larger road programs also will require more advanced technologies, human skills, and management processes.

Network development is financed by the state budget, the development fund, donor loans, and to a small extent, private sector loans. The Road Fund has been the primary financier of road maintenance. Through these channels, Mongolia has spent 1.5%–2% of its GDP for the road sector, a level in line with international benchmarks. However, road maintenance expenditures, only $7.4 million in 2009, or less than 0.2% of GDP, appear much below other countries’ levels—typically 0.4%–1% of GDP. This reflects a large funding gap. Only 21.5% of the national and local road maintenance needs are currently covered—an exceptional situation by international standards. As a result of insufficient maintenance, Mongolia has lost sizable road assets. The expansion of the network will double total maintenance needs by the end of the decade.

So, in order to deliver on the government’s strategy, the existing small-scale, low-capacity road sector will require a thorough transformation. The government’s investment plans imply a 400% increase in the length of the national paved road network in 10 years and an equivalent acceleration in road construction and maintenance works. This $1 billion investment program would correspond to an annual investment of about 5% of GDP, well above past levels.

Indeed while the investment program is one part of the funding process, the Mongolian government has also sought help from foreign sources. Mongolia’s collaboration with the US MCC’s North-South Road Project—funded by the U.S. Government and implemented by Millennium Challenge Account-Mongolia (MCA-Mongolia) — has constructed 174 kilometers of road to reach key national and regional markets. Two link roads have also been built to connect thousands of Mongolians to the main corridor, and the project has provided road maintenance equipment to the Ministry of Roads and Transportation for the sustainable upkeep of the newly built road.
And while this collaboration between the two governments has been greatly successful, going forward, Mongolia will be looking particularly to attract foreign companies for the necessary investment needed to help carry out further road network development. This will look to be achieved through the Ministry of Economic Development’s public-private partnership program, in which the government is inviting domestic as well as foreign investors to participate in and cooperate with projects that are reflected in the following list.

Concession Contract Road Projects:
  • Narynsukhait Shiveekhuren road project
  • Telmen thermal power plant project
  • Altanbulag-Ulaanbaatar-Zamiin Uud highway road project
Concession Contract Ready Projects:
  • Tuul Songino Water Supply Complex project
  • Mining, metallurgical complex construction projects
Negotiations about the terms of the Concession projects:
  • Y Thermal power plant project
  • Tavantolgoi- Khanbogd- Khangi road project
  • Airport and the capital the road connecting project
Infrastructure and Construction projects:

Tender Projects

1. Transportation Logistics Center project in the west of Ulaanbaatar
Graphics and Design- Build- Own- Operate

2.Transportation Logistics Center project in the east side of Ulaanbaatar
Graphics and Design- Build- Own-Operate

3. "Village Reform" Programme project
Build- Own-Operate

4. 500 student dormitory at the University of Defence project
Graphics and design- Build- Rent-Transfer

5.Ulaanbaatar Conference Exhibition Center Project
Build- Own- Operate

Direct Contract Project

1.Human Development Center Complex project
Build- Operate- Transfer

Road Projects

Tender Projects

1. Tsontsengel- Uliastai 114 km Paved Road project
Build- Transfer

2.Bayankhongor- Altai 256.1 km Paved Road and Bridge project
Build- Transfer

3.AltI-Darvi 263 km Paved Road project
Build- Transfer

4.Tosontsengel 4 intersection- Numrug-Songino 167 km Paved Road project
Build- Transfer

5.Songino-Hyargas 135.5 km Paved Road project
Build- Transfer

6.Connecting the end of Dashinchilen- Orkhon bridge to the end of Murun- Tarialan 232 km Paved Road project
Build- Transfer

7. Dalanzadgad- Tsogttsetsii (Tavantolgoi) 94.8 km Paved Road project
Build- Transfer

8.Khujirt- Tuvkhun Monastery- Ulaantsutgalan 90.1 km Paved Road project
Build- Transfer

9.Dashinchilen- Ogii Lake to Khushuu tsaidam 30 km Paved Road project
Build- Transfer

10.Re-build Binder, Khentii bridge project
Build- Transfer

11. Mandal- Zuun Kharaa 15.8 km Paved Road project
Build- Transfer

12.Choir- Bor Undur 50 km Paved Road project
Build- Transfer

Direct Contract Projects

1. Bayanzurkh bureau- Nalaikh- Choir intersection road building project
Build- Transfer

Pipeline Transportation Projects:

Direct Contract Projects

1.Baganuur- Ulaanbaatar Pipeline Transportation project

2.Port Tavantolgoi- Gashuunsukhait Pipeline Transportation project

Airport Projects:

Tender Project

1.Rebuild Dalanzadgad Domestic Airport to International Airport Project
Build- Own- Operate

Direct Contract Project

1.Civil and Special use Airport in Nalaikh project
Renewation- Rent- Operate- Transfer

LINKS:

Arts Suvraga
National Developer
Ghashuuni Gol
Nasnii Zam

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