Seoul, 23rd - 24th of Oct 2012

Current situation on intermodal transport in Mongolia and recommendations to improve it

Emma Enkhriimaa NyamosorEmail : enhry@tuushin.mn http ://www.tuushin.mn

2

Contents

Economy overview, mineral export overview

Infrastructure, transport corridors

3 Challenges to local industry in liberalizing trade and transport service

4 MTO’s logistics solutions

Transport facilitation projectsTransport facilitation projects

1

2

5

6 Recommendations Recommendations

ECONOMY GROWTH

• Borders: Russia 3,485 km long, China 4,677 km long

• Total Area: 1.566 mln sq.km, roughly the same size as Alaska (1,7 mln sq.km), 3 times the size of France (550,000 sq.km)

• Population: 2.8 mln, of which over 1.2 mln in capital

• Density: 1.6 individuals per sq.km

• GDP 2011: US$ 7.9 bln, 2012H1GDP: US$ 4.7 bln

• Real GDP growth 2011 = +17.3%

• Total trade turnover = US$ 11.3 bln, +85%yoy;

(2010: US$ 6.1bln)

• Export 2011:US$ 4.8 bln + 64.4% yoy; (2010: US$2.9bln)

• Import 2011: US$ 6.5 bln + 104 % yoy; (2010 : US$3.2bln)

• Inflation rate 2011/Dec:10.2 % yoy; (2012/Dec:14.9%yoy)

EXPORT OF MINERALS(by Sep 2012, from Jan - to Sep)

• Huge reserves of copper, coal, coking coal, uranium, molybdenum,

phosphates, fluorspar, tin, zinc , iron ore, gold ,silver and oil .

• Share of coal in export is 44.3 per cent (volume 14.29 million ton), copper

concentrate 19.4, iron ore 11.8, crude oil 7.3, non proceed zinc ore 2.7, non proceed gold 2.2, fluoride spar ore 2.3 and other products 10 comparatively.

• Mongolia is very closely correlated with China: 92.1% of the exports accounted for by China.

• Coal is loaded in heavy trucks and transported by road

to China ( very few volume to Korea in conventional wagons ) through Russian sea port

• Copper shipment from Erdenet (Mongolian – Russian j/v) transported by railway to Russia as conventional bulk cargo, the containerized shipment dispatched to Japan and Korea via Xingang

• There’re over 8000 deposits of 440 different minerals in Mongolia.

THE FREIGHT TRANSPORT VOLUME( by Sep 2012, from Jan to Sep)

• The freight carried out by all modes of transport is 33.7 million ton, the increase by 1.9 million ton or 6.1 per cent compare to certain period in 2010.

• Railway transport carried out 15.0 million ton freight, the increase by 1.5 million ton or 11.5 per cent compare to certain period in 2010.

• Road transport carried out 18.7 million ton freight, the increase by 0.4 million ton or 2.2 per cent compare to certain period in 2010.

• Air transport carried out 3061.5 ton freight, the increase by 1159.7 ton or 61 per cent compare to certain period in 2010.

6

Tamsagbulag

Altanbulag

Jargalant

ULAANBAATAR

Khandgait

DARKHAN

DALANZADGAD

Khanbogd

Tsogt Ovoo

Gashuun Suhait

DORNOGOVY

TUV

DUNDGOVY

MANDALGOVY

SUKHBAATAR

Matad

Bichigt

Havirga

DORNOD

Ereentsav

Yarantai

ULGII

Ulgii

Uench

UMNUGOVY

ZAVKHAN

GOVY-ALTAI

Burgastai

ALTAI

Naranbulag

CHOIR

MURUN

Khatgal

BAYANHONGOR

UVURHANGAIBAYANHONGOR

Khankh

ERDENET

Tsahir Battsengel

TSETSERLEG

ARVAIHEER

ARHANGAI

HUVSGUL

Khar-Khorin

Lun

BAYAN-ULGII

ULAANGOM

ULIASTAIKHOVD

UVS

BULGAN

SAINSHAND

CHOIBALSAN

BARUUN- URT

UNDURKHAAN

ZUUN MOD

KHENTII

SELENGE

BULGAN

Baga-Ilenh

Oyutolgoi

Tavantolgoi

Tsagaan

suvarga

Shivee huren

Paved road

Earth road

Under consrtruction

Administrati

on level

Paved road Unpaved road Total

Concrete Asphalt Gravel Improved earth Earth road Total

STATE 38.87 2 081.8 1 440.7 1 403.0 6 254.5 11 218.9

LOCAL 54.8 421.8 521.24 499.0 36 534.4 38 031.2

TOTAL 93.67 2 503.6 1 961.9 1 902.0 42 788.9 49 250.06

ROAD NETWORK CURRENT SITUATION

ROAD NETWORK DEVELOPMENT INTERNATIONAL ROAD NETWORK

AH

Route

CAREC

routePaved

Under

constructionUnpaved Total Length Percentage

Completion

Plan

AH3 4b 593 448 - 1 041 100% 2014

AH4 4a 150 397 178 725 75% 2015

AH32 - 890 391 1 239 2 520 51% 2016

Total 1 633 1 236 1 417 4 286 67% 2016

EXISTING RAILWAY NETWORK

Tamsagbulag

Altanbulag

Jargalant

ULAANBAATAR

Khandgait

DARKHAN

DALANZADGAD

Khanbogd

Tsogt Ovoo

Gashuun Suhait

DORNOGOVY

TUV

DUNDGOVY

MANDALGOVY

SUKHBAATAR

Matad

Bichigt

Havirga

DORNOD

Ereentsav

Yarantai

ULGII

Ulgii

Uench

UMNUGOVY

ZAVKHAN

GOVY-ALTAI

Burgastai

ALTAI

NaranbulagMURUN

Khatgal

BAYANHONGOR

UVURHANGAIBAYANHONGOR

Khankh

ERDENET

Tsahir Battsengel

TSETSERLEG

ARVAIHEER

ARHANGAI

HUVSGUL

Khar-Khorin

Lun

BAYAN-ULGII

ULAANGOM

ULIASTAIKHOVD

UVS

BULGAN

SAINSHAND

CHOIBALSAN

BARUUN- URT

UNDURKHAAN

ZUUN MOD

KHENTII

SELENGE

BULGAN

Baga-Ilenh

Oyutolgoi

Tavantolgoi

Tsagaan

suvarga

Shivee huren

CHOIR

Sharyn gol

•Total length of railway-1908 km

• Railway gauge-1520 mm

•Single railway line

FUTURE RAILWAY NETWORK OF MONGOLIA

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

New Railway Construction

In Mongolia,appr.5683.5 km railway lines will be built in 3 stages :

- 1st stage , 2nd stage will cover the construction of 1933 km new railway lines from the Gobi region to East region.

- The 3rd stage over 3600 km railway lines will be constructed , connecting the Western region and Gobi region

- New rail link from Ukhaa Hudag to Choibalsan to link with existing connection ( to Transsiberian from Nauskhi to Erlian 1113 km ) estimated cost of US$ 2.5 mln per km

- Planned for capacity to ship coal output of up to 100 mln

tones per year

Sea Gates to Mongolia

Sea gates in China ( Multimodal transport )1. Xingang port – ZU (Sea/Rail/Rail, Sea/Rail/Road )

Is the nearest , the only port for Mongolian transit cargo since 1990, 2-3 block trains per day.

2. Dong Jian port – ZU ( Sea /Rail/Rail, Sea/Rail/Road ) since May 2012 , new terminal in North East, just close to TEDA, is fixed to be the port for transitcargo to Mongolia. Now Korean shipments are calling that port. Also needed to haulage the container to railway CY then dispatch.

3. Lianyungang port – ZU (Sea/Rail, Rail/Rail ) main port Central Asia including Mongolia . Busy port with 6-7 block trains per day. Busan - LYG –ZU : 3 days by sea , 1-2 days T/T, 1-2 days waiting wagon, 5 days by rail , total transit time 12 days. LAS, Long Beach –LYG : 16 days , most of USA shipments use LYG port.

4. Qingdao port – ZU (Sea/Rail ) also open for Mongolian transit cargo Inchon – Qingdao – ZU , total; transit time 25 days

Sea gates in Russia (Rail/Sea ) • Vladivostok, Vostochny , Nakhodka , Vanino , not popular used , not competitive

transport mode.• Related to future railway line , through TSR , Russian East ports is always in a

consideration

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

Difficulties in railway facilitation

1. Rail/Rail , Rail/Road mode Less capacity of terminals/transshipment facilities at Zamyn uud border Railway station :

• in ZU station there are 3 terminal/transshipment facilities, operated by UBTZ;• capacity of those facilities is 2 million ton per year;• some equipment and machineries of Facilities are obsolete or deteriorated;• not sufficient rolling stocks, crane, locomotives• shortage of different type of wagons , delay of wagon supply on time • lack of equipped especial wagon for reefer containers in Mongolia ,

also in Russia and China

All these make an influence for increase of freight congestion at border, that is followed by further stopping to dispatch trains from Tanggu and Erlian.

2. Road/Rail mode Loaded heavy trucks also have to wait in a long line, MOT’s have to pay Chinese truck rent fee, huge amount

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

3. Less capacity of terminals/transshipment facilities at Ulaanbaatar Railway station:

• not sufficient rolling stocks, locomotives for shift loaded wagons to local CY’s ;

• lack of rail cars or o/t wagon supply to local CY’s for carriage of COC’s back to Xingang port ;

• lack of modern well equipped , temperature controlled C.B.W’s at local CY’s

• lack of modern bridge crane or top spreaders at CY’s

• No repair facilities for damaged COC’s, agents SOC’s according to ISO.

This existing capacity of terminal limits in Ulaanbaatar impact to :

� the processing of increased export, import and transit freights according to global market need;

� brings difficulties to organize dispatch of block train centralized at Ulaanbaatar railway station for in/outbound shipments;

� enabling increase of COC demurrage to Shipping Lines day by day, F/F or MTO’s cost in millions of MNT yearly;

� at the end not efficient international logistical solutions.

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

Difficulties by road transportation

Due to:

• lack railway network and very few stations near to coal mining,

shortage of o/t wagon for supply to coal, o/t wagons must be transshipped again from Mongolian into Chinese wagon at border

� for now effective mode for carriage of coal is : by road.

• The coal as bulk carried by heavy trucks to China with payload 60- 90 ton , where ever the road is not standard, not paved, gravel and earth off roads, so it’s risky and not safety to 3rd party and traffic , very bad influence to ecology , highly dependent from non renewable resources of mining sector ;

• Due to not existing ISO paved road, not finished AH-3, so far international TIR carnet trucks or containerized heavy carriage impossible for transit transportation by existing road in Mongolia.

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

Difficulties by air transportation

Less capacity of International air traffic at Chinggis

Khaan International airport in Ulaanbaatar :

• no reefer air ULD’s available for export frozen meat

• limited international direct air lines service;

• limited surface operational and landing service for big Freighter Airlines;

• lack of modern techniques in existing only one warehouse for temperature controlled for perishables;

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

Difficulties in multimodal facilitation, internationally

1. Rail / Rail mode ( transshipment ) Increased transit rail charges in neighboring countries;

2. Sea / Rail mode Barriers for transit cargo to Mongolia at sea ports:

- not fixed additional charges, high shifting cost at Xingang port, increase operational charge, opening transit containers, shortage of cargo

- process of transit c/c/ much delayed for 14-30 days during high season from May till Aug.

- lack of wagon supply in China, The Railway Ministry of China plans a distribution of empty wagon/rail cars to Xingang supply loaded containers to Erlian/Zamyn uud through its F/F companies, but often delay is 7-14 days at sea port terminal.

CHALLENGES TO LOCAL INDUSTRYIN LIBERALIZING TRADE ANDTRANSPORT SERVICE

3. Rail/Rail , Rail/Road mode (TCR )

Due to over loaded Zamyn-Uud transshipment facility and not enough transit capacity

at Mongolian border, Chinese Railway has further to stop dispatching trains from

Tanggu to direction to Erlian . Or trains are waiting at substations on the way from

Tanggu to Erlian until Zamyn uud congestion get down.

4. Rail/Rail (Transsiberia – TSR )

Outdated wagons and facilities in Russian Railway, bureaucracy at Brest Station for

transit customs clearance and shortage of goods.

MTO’s logistics solutions, initiated by private sector

Private sectors involving in International logistics solution:

1. “Mongolian Vector” - International Railway Brand product !Tuushin LLC has initiated an express block train service for container transportation between Europe and Asia since 2002 successfully, which offers the best price, the shortest transit time ( from Middle of Europe to UB, 21 days, comparable to sea freight 3 times faster ) and reliable service to it’s global customers. 1st route is: Europe to Ulaanbaatar and further to China, started since Mar’2002 2nd route is: Huh-Hot, China to Frankfurt, Germany, since Mar ‘2005

The “Mongolian Vector” is organized by International team of freight forwarders consortium of Mongolia, China, Russia, Belorussia, Poland, Germany, Czech Republic, Latvia and Lithuania.

The "Mongolian Vector“ - new "land-bridge" via Transsebiria between the continents with the most vibrant economic growth surely can be right answer to the global integration of transport and logistics industry.

MTO’s logistics solutions, initiated by private sector

2. Railway wagon by Russian private companies Tuushin LLC has initiated to use Russian private wagons with cooperation of Mongolian and Russian Railways, to solve the problem of supply container railcars, o/t, covered wagons for import, export and transit cargo, since 4 years.Tuushin works with PGK and Mongolian Railway works with VGK. Even though the expanding market demand requires more wagons for railway transportation.

3. New Logistics terminal in Ulaanbaatar on PPP mode-1st time of history in the logistical industry Tuushin LLC has also initiated the project for establishing multimodal logistics terminal in Ulaanbaatar on PPP mode, which will be going implemented from 2013. The preliminary study was in 2006 and conducted pre- Feasibility study in 2008.The project’s Feasibility study is done by the DB International GmbH, Germany.The Project is going to be listed for approval by ADB in 2013, according to the Regional Logistics Development Strategy.

Zamyn-Uud multimodal freight terminal, logistics center

(land area 90 hectare)

ADB’s TA for the project on Regional Logistics Development was provided in Dec 2010.

• The first project is multimodal freight terminal/logistics center at the border station of ZU , mostly containerized cargo will be proceeded.

• The project is ongoing and will put into operation in 2015.

• The project amount is US$ 71,6 mln :

- of which US$40 mln is ADB’s loan

- US$ 5 mln is grant,

- remaining US$26.6 mln from the Government budget

TRANSPORT FACILITATION PROJECTS

ZAMYN-UUD MULTIMODAL FREIGHT TERMINAL ,LOGISTICS CENTER

The following works to be done within the project:The logistics center’s construction and building of facilities:

• Broad and narrow gauge tracks;• Storage and site construction works;• Customs and professional inspection, quarantine and sanitarian facility site works;• Level crossing bridge for railway and roads;• Access road to facility ;• Detailed environment assessment work; • Safety and protection facility works.

Trans-Asian Railway (TAR)

Asian Highway (AH)

Air Transport

HUB

ULAANBAATAR MULTIMODAL FREIGHT TERMINAL,LOGISTICS CENTER

22

LOCATION OF ULAANBAATAR MULTIMODAL FREIGHT TERMINAL, LOGISTICS CENTER

Location

– Logistics center will occupy 130 hectare land between Bumbat and Bayan station of existing railway main line.

– Very close to road and railway lines.

– 10 km distance from Halaikh city / settlement area / суурьшлын бүс/

– 34 km distance from Ulaanbaatar city at the east side

– Close to the industrial area of Baganuur and Bagahangai

– It will connect to the new airport by access road.

China

RussiaUlaanbaatar

Suhbaatar

Zamyn Uud

AH3

AH32

North-South railwayUB Logistics

Center

LOCATION OF ULAANBAATAR MULTIMODALFREIGHT TERMINAL, LOGISTICS CENTER

Project objectives:

• Increase the technical capacity to process the shipments/containers, wagon, trucks/

• Introduce technological innovation in freight handling, warehousing, supply chain management

• Promote the shift from 2PL into 4PL, to offer more customer-oriented and value added services

• Incorporate with Ulaanbaatar city municipality to achieve the decrease of traffic congestion, transport cost

• Create facilities for Customs and State Inspection Agency control and inspections.

LOCATION OF ULAANBAATAR MULTIMODALFREIGHT TERMINAL, LOGISTICS CENTER

A

C

D.2

FE

H

G

U B

D.1

Area Layout

A Railway freight

B Road

C Container

D.1Domestic bulk cargo and storage area

D.2Customs and state inspection area, guaranteed warehouses

E Bulk cargo

F Heavy cargo

G Service

HWarehouse/ wholesale trade

U infrastructure

1. Present situation and increasing volume of Mongolian import and export shipments via Xingang port, in China is not answers to transport demand. Chinese Government, Railway Ministry and Dong Jian port Authority are kindly asked to consider this issue and support liberalizing trade and transport service in East and Pacific region.

2. Establish new logistic center as a Inland Dry Depot at Zamyn uud necessarily, due to capacity of existing terminals are not enough to handle the increase freight demand , insufficient size of terminals in Ulaanbaatar ,outdated facilities , Mongolian Government shall pay more attention for implementation process.

3. Run out next step for International Single Window System project completion in Mongolia, which can connect in future original country’s and transit countries Customs Organization with Mongolian Customs through on line , which enables to local MTO’s in Mongolia , can declare the goods at transit border without delay and without paperwork

Recommendations

4. Continue a concession agreement with private sector and start as soon possible a construction of new railway line in East of Mongolia .

5. Support ideas from private sector , promote ongoing project for establishing Dry Port –Logistics hub in Ulaanbaatar on PPP based model.

6. Development of techniques and technology, human resources in transport logistics sectors are in slow process . National Institutions ii collaboration of UN/ESCAP to conduct transport logistic training continuously.

All those new consideration will be enabling to develop logistics industry and at the end

it can decrease Impacts to inflation in the country. It can contribute to regional logistics network capacity building.

Recommendations

Thank You for the attention. www.tuushin.mn

- An ordinary member of International Federation of Freight Forwarders Association (FIATA) in 1991 and then an individual member since 1998

- An accredited member of International Air Transport Association (IATA) in 2003 - An ordinary of member of International Coordinating Council on Trans Siberian Transportation

Committee (CCTST) in 1998 - A presidium member of the Mongolian Chamber of Commerce and Industry (MNCCI) in 1993 - A lifetime special member of Consideration of Asian Chambers of Commerce and Industry (CACCI)

in 2001