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Mongolia: Developing the Economic Cooperation Zone Project

Sovereign (Public) Project | 51410-001 Status: Active

The project will serve as a catalyst for diversifying Mongolia''s economy, integrating it into regional and global value chains, and increasing employment opportunities for the country's people. The focus will be the Zamyn-Uud soum (district), where the busiest international border port between Mongolia and the People's Republic of China (PRC) is located and the population relies heavily on border traffic and trade activities. The project will support the development of an economic cooperation zone between Mongolia and the PRC. It will realize the untapped economic potential of Mongolia''s existing Zamyn-Uud free zone and its strategic position along corridor 4 under the Central Asia Regional Economic Cooperation (CAREC) program. CAREC corridors link the region's key economic hubs and connect landlocked CAREC countries such as Mongolia with markets in Asia, Europe and rest of the world.

Project Details

Project Officer
Lazaro, Dorothea East Asia Department Request for information
Country
  • Mongolia
Sector
  • Industry and trade
 
Project Name Developing the Economic Cooperation Zone Project
Project Number 51410-001
Country Mongolia
Project Status Active
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3936-MON: Developing the Economic Cooperation Zone Project
concessional ordinary capital resources lending / Asian Development Fund US$ 30.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Industry and trade / Industry and trade sector development - Small and medium enterprise development - Trade and services

Information and communication technology / ICT industries and ICT-enabled services

Transport / Road transport (non-urban)

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The project will serve as a catalyst for diversifying Mongolia''s economy, integrating it into regional and global value chains, and increasing employment opportunities for the country's people. The focus will be the Zamyn-Uud soum (district), where the busiest international border port between Mongolia and the People's Republic of China (PRC) is located and the population relies heavily on border traffic and trade activities. The project will support the development of an economic cooperation zone between Mongolia and the PRC. It will realize the untapped economic potential of Mongolia''s existing Zamyn-Uud free zone and its strategic position along corridor 4 under the Central Asia Regional Economic Cooperation (CAREC) program. CAREC corridors link the region's key economic hubs and connect landlocked CAREC countries such as Mongolia with markets in Asia, Europe and rest of the world. The project will generate economic and employment activities in Zamyn-Uud through (i) construction and operation of infrastructure and facilities in the free zone, (ii) promotion of sustainable operations and management of the free zone, and (iii) establishment of a port of entry system within the free zone.
Project Rationale and Linkage to Country/Regional Strategy

International trade plays a critical economic role in Mongolia where the exports-to-GDP ratio stands at 62%. However, Mongolia's exports are constrained by the border delays, poor infrastructure, and weak regulatory environment that drive up its trade costs. This has been exacerbated by the unprecedented disruptions to the global economy due to the coronavirus disease (COVID-19) and the economic slowdown in the PRC. The pandemic has heightened Mongolia's need to facilitate international trade, which will be crucial to its post-pandemic economic recovery. An enabling environment is required for the private sector to maximize the impact of the government's emergency stimulus package and adapt to the rapidly evolving global economic and trade landscape. The development of an economic cooperation zone with project support is important to this effort. By providing the necessary infrastructure, facilities, and sustainable operations and management capacity in the zone, the project is expected to enable the private sector to build and improve production capacity and expand trade activities. In addition, the travel restrictions, border closures, and stricter border controls imposed worldwide to slow COVID-19's spread highlight the importance of strengthening the country's resilience to transboundary health risks. Greater use of technology and stronger systems will equip Mongolia's border agencies to better manage these risks, especially future pandemics, by enabling them to share information with one another and with their counterparts in neighboring countries. The port-of-entry system to be established under the project will support this interagency and cross-border interoperability and data sharing, particularly on customs, immigration, and inspection information. Improved traceability and coordinated risk management will result, making the cross-border movement of goods and people safer and more efficient.

Free zone development is one of Mongolia's economic diversification initiatives and will also strengthen Mongolia's participation in global and regional value chains. Industries established in the zones are expected to generate a variety of exports, ranging from agricultural and manufacturing products to trade-related services. Free zones can nurture the creation of industrial clusters within the country and with neighboring countries. The Zamyn-Uud free zone is 780 kilometers southeast of Ulaanbaatar and adjacent to the border crossing point at Zamyn-Uud. This is the largest and busiest border crossing point on CAREC corridor 4 and where road, rail, and air transport networks meet. It is also the border crossing closest to Tianjin, the gateway port in the PRC for Mongolia's shipments to Japan and the Republic of Korea. Under the framework of their 2011 comprehensive strategic partnership, Mongolia and the PRC signed an agreement in June 2019 to establish the economic cooperation zone to connect Mongolia's Zamyn-Uud free zone with the PRC's Erenhot zone located in the Inner Mongolia Autonomous Region. As Mongolia's largest trading partner, the PRC was the recipient of 93% of Mongolia's exports and the source of 34% of Mongolia's imports in 2018. A substantial portion of this trade goes through the Zamyn-Uud border crossing point. Developing the economic cooperation zone will reduce Mongolia's trade costs and support its economic diversification. It will also benefit the district's population of 18,930, of which about 6,000 are women who cross the border daily to engage in informal trade.

Impact Economic diversification and trade linkages with global and regional value chains enhanced (CAREC Integrated Trade Agenda 2030, Pillar 2)
Project Outcome
Description of Outcome Economic activities and employment in Zamyn-Uud free zone generated
Progress Toward Outcome The project remains a priority of the government and key to economic revitalization and post-pandemic recovery. However, domestic procedure, recent changes in management of EAs and IAs, and restrictions arising from COVID-19 pandemic resulted to project start-up delays.
Implementation Progress
Description of Project Outputs

Zamyn-Uud free zone infrastructure and facilities constructed and operational

Sustainable operations and management of Zamyn-Uud free zone promoted

Zamyn-Uud free zone port of entry system established

Status of Implementation Progress (Outputs, Activities, and Issues)

The procurement specialist, financial specialist, administrative assistant of the PIU were engaged. The recruitment of the PIU project coordinator and the infrastructure engineer is ongoing. The PIU has estimated the 6 month expenditure and is working on the registration of the advance account into the MNRM client disbursement portal.

The loan inception mission is planned on 8-9 April 2021 to discuss the Project Administration Manual updates including procurement packages and implementation action plan.

Geographical Location Zamiin Uud
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The initial environmental examination indicates that because of the nature and scale of the project's investment in civil works, adverse impacts during construction will be moderate and temporary and can be mitigated. Once the Zamyn-Uud free zone becomes operational, further impacts are expected from the economic activities of investors inside the zone and from operations of linked facilities. The EMP for zone operations has been developed to avoid, minimize, and mitigate such impacts.
Involuntary Resettlement There will be no land acquisition or involuntary resettlement resulting from project land use. The Zamyn-Uud free zone is located on state-owned special purpose land, and civil works under the project will be within the existing right-of-way or on government land allocated for such purposes under the 2011 free zone master plan.
Indigenous Peoples There are no communities within the zone, and the project location is not identified as hosting any ethnic groups.
Stakeholder Communication, Participation, and Consultation
During Project Design Interested investors, investors' associations, chambers of commerce, and other stakeholders were consulted during project preparation. A market survey was conducted from July 2019 to September 2019 through focused group discussions involving seven free zone investors, consultation meetings with the Green Zone investment council (representing 28 investors), and questionnaires involving 20 non-investor companies. The project preparation team also consulted the local business owners, informal traders, taxi drivers, non-government organizations (NGO) and the public through interviews, focus group discussions, stakeholders meetings, and public consultations. The project design considered feedback from all project stakeholders to maximize the positive impacts of the operationalization of the free zone on local communities.
During Project Implementation Since November 2020, ADB has regularly met (virtually) with the EA and IAs to discuss project implementation issues. Amidst the COVID-19 pandemic, changes in government appointments caused further delays in implementation but the EA and IAs expressed continuing commitment to facilitate project implementation.
Business Opportunities
Consulting Services

All consultants will be recruited according to ADB's Procurement Regulations and Procurement Policy, except recruitment of the core five PIU staff which will be recruited according to MOF Resolution No. 196.

Consultants will be engaged using quality and cost-based selection with the standard ratio of 80:20, consultants' qualification selection, single source selection and individual consultant selection methods. The consultant recruitment will be closely monitored and supervised by ADB.

Advance contracting is planned for engagement of PIU staff under ICS for 300 person-months totaling $450,000 and three consulting services contracts under QCBS (CS-01, CS-02, and CS-03) estimated at $2,723,300. All advance contracting will be undertaken in conformity with the ADB Procurement Policy (2017, as amended from time to time).

Procurement

All procurement of goods and works will be undertaken in accordance with ADB's Procurement Regulations and Procurement Policy. Open competitive bidding will be applied to all goods and civil works contracts estimated to cost $100,001 and above, except for package no. CW-04: Security fence, which will use limited competitive bidding due to national security matters. _Request for Quotations_ will be used for contracts for works and goods valued up to $100,000 and below.

In accordance with ADB requirements, foreign bidders may participate in bidding for open competitive bidding national advertisement contracts. The executing and implementing agencies have been advised of the need to maintain transparency and accountability in procuring goods and services, as required under ADB's Anticorruption Policy (1998, as amended from time to time). The relevant sections of ADB's Anticorruption Policy will be included in all bidding documents and contracts.

Responsible ADB Officer Lazaro, Dorothea
Responsible ADB Department East Asia Department
Responsible ADB Division Public Mgt, Financial Sector and Regional Coop Division, EARD
Executing Agencies
Office of the Deputy Prime Minister, Mongolia
Government Palace, Chinggis Khan Square, Ulaanbaatar-12, Mongolia
Timetable
Concept Clearance 03 Jun 2019
Fact Finding 28 Nov 2019 to 04 Dec 2019
MRM 22 Apr 2020
Approval 18 Jun 2020
Last Review Mission -
Last PDS Update 29 Mar 2021

Loan 3936-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
18 Jun 2020 02 Jul 2020 21 Aug 2020 30 Jun 2026 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 35.76 Cumulative Contract Awards
ADB 30.00 18 Jun 2020 0.00 0.00 0%
Counterpart 5.76 Cumulative Disbursements
Cofinancing 0.00 18 Jun 2020 0.00 0.00 0%

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.

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Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
Infrastructure/Civil Engineer Individual - Consulting Closed 13 Jan 2021 26 Jan 2021
Project Coordinator Individual - Consulting Closed 13 Jan 2021 26 Jan 2021
Financial Management Specialist Individual - Consulting Closed 30 Jul 2020 04 Aug 2020
Project assistant/Translator Individual - Consulting Closed 22 Jul 2020 27 Jul 2020
Procurement Specialist Individual - Consulting Closed 30 Jun 2020 06 Jul 2020

Contracts Awarded

No contracts awarded for this project were found

Procurement Plan