ADB Funds Logistics Center to Help Mongolia Expand, Speed Up Trade

News Release | 14 December 2010

MANILA, PHILIPPINES - Mongolia with support from the Asian Development Bank (ADB) will build a state-of-the-art road/rail linked logistics facility that will help expand and speed up trade, and increase the landlocked country's global competitiveness.

ADB's Board of Directors approved loan and grant assistance of $45 million equivalent for the Regional Logistic Development Project, which will put up a container terminal with road and rail links in Zamyn Uud, a poor, isolated desert area on the southeast border with the People's Republic of China (PRC).

"Historically Mongolia has been a north-south land bridge for goods and people moving between the PRC and the Russian Federation and on to Europe, and developing a modern and efficient logistics center will reduce costs for exporters and importers and promote international and regional trade," said Manmohan Parkash, Advisor (Knowledge Management and Capacity Development) in ADB's East Asia Department.

In recent years, strong economic growth has seen Mongolia's trade volumes rise sharply with more than 80% of imports now coming from the PRC, via Zamyn Uud, while the bulk of exports also pass through the same border point on the way to Tianjin port in the PRC. The growth in traffic has sharply outstripped existing facilities, resulting in lengthy delays in trade and traffic movements, with up to 50 to 60 days needed to get shipments to the capital, Ulaanbaatar. With the discovery of large reserves of coal and minerals destined for markets in the PRC, the need to upgrade and modernize the crossing point has become acute.

The new terminal will have modern customs and quarantine facilities and road and rail access which will reduce transit times, expand capacity and improve staff productivity. Management of the facility will be contracted out to a private operator. ADB will also provide training and other support to government staff engaged in implementing and overseeing the project.

"This is the first ADB project to promote coordinated improvements in transport infrastructure and trade facilitation, including a logistics center, harmonized cross border regulations and procedures, and modernized customs and quarantine systems," said Mr. Parkash.

It will also create livelihood opportunities in the service sector for poor, rural herders living in areas surrounding the center, as well as opening up prospects for public-private partnerships and private investment in other transport-related infrastructure.

ADB's assistance will make up almost 63% of the total project cost of about $71.6 million. It will include a 32-year loan of $40 million from its concessional Asian Development Fund (ADF) with an 8-year grace period carrying an annual interest charge of 1%, rising to 1.5% for the balance of the term. It is also extending a grant of $5 million from the ADF.

The Government of Mongolia will provide the remaining $26.6 million. The Ministry of Road, Transportation, Construction and Urban Development is the executing agency for the project which is due for completion in December 2015.