The Asian Development Bank (ADB) will help promote regional cooperation and sustainable economic growth in Mongolia through a US$37.1mn loan approved to strengthen transport links to neighbouring countries.
The Regional Road Development Project will develop the remaining section of Mongolia’s north-south road transport corridor, covering about 428km, between Choyr and the border with the People’s Republic of China (PRC) in Zamyn-Uud.
ADB approved two loans in 1995 and 1999, respectively, in a total amount of US$50mn to rehabilitate or construct the section of the corridor between Choyr and the border with the Russian Federation.
The corridor will link the Asian highway networks of the PRC and the Russian Federation, and passes through major economic centres of Mongolia.
“As part of the Asian highway network, the project road will serve as an important route for domestic and international transit traffic,” says Hong Wang, an ADB principal project economist.
“By providing faster, safer, and more reliable road transport, this corridor will not only increase the efficiency of transit traffic between the PRC and Russia via Mongolia, but also become a sustainable source of foreign exchange earnings for Mongolia.”
As a large, landlocked country, Mongolia depends on its two neighbours – the PRC and Russia – for access to world markets and economic development. The PRC and Russia dominate Mongolia’s external trade and are major sources of its foreign direct investment.
Mongolia is currently using the port of Tianjin in the PRC to access markets in the US and other countries. However, the lack of paved roads leading to the PRC is a constraint.
By improving trade and transit, the project will significantly reduce transaction costs among the PRC, Mongolia, Russia, and other trading partners.
“The project will also support sustainable economic growth in the province of Dornigovi and Govisumber in southern Mongolia by improving local communities’ access to markets, jobs and business opportunities, and social services,” adds Wang.
Almost 50,000 people living along the project road will benefit from the project, as well as road transport operators and users, construction companies, and traders.
The project will also draw up a cross-border road transport plan to make the movement of vehicles across the Mongolian-PRC border at Zamyn-Uud and Erlan Hot more efficient, and an area development program to ensure that benefits generated from the project are shared adequately with local communities, including the poor. A road safety improvement component is also included.
An accompanying technical assistance (TA) grant of US$350,000 will create public awareness and promote prevention of HIV/Aids transmission and human trafficking on the north-south corridor.
ADB’s loan will cover 47.5% of the total project cost, estimated at US$78.1mn equivalent. It comes from ADB’s concessional Asian Development Fund and carries a 32-year term, including a grace period of eight years. Interest is 1% per year during the grace period, and 1.5% per year subsequently.
The government of South Korea will cofinance US$23.9mn equivalent, the PRC government will provide a grant of US$1.5mn equivalent, and the Mongolian government will finance the remaining US$15.6mn equivalent.
The Department of Roads will execute the project.