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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Mongolia’s Ulaanbaatar to Have New International Airport

Part of the Khoshigt Valley, site of the new UB airport

May 23 – The Mongolian government has agreed with the government of Japan on a US$270 million soft loan, repayable over 40 years at a rate of just 0.2 percent to build a new airport to service Mongolia’s capital, Ulaanbaatar. The city’s current airport suffers from occasional high winds and has a relatively short runway unsuitable for 747s and larger aircraft.

The new facility, to be built and completed by 2015, will be able to service all larger modern aircraft and affords better protection from windshear. It should reduce annual flight cancellations and delays from the current level of 2.5 percent down to 0.5 percent. The airport will be built in the Khoshigt Valley, near Terelj in Tov Aimag, about 54 kilometers from the capital. Construction on the new airport – together with a high speed motorway that connects Ulaanbaatar with the airport – is expected to be started later this year. The loan was agreed on condition that Japanese contractors and suppliers were used.

Since the late 1990s, international air traffic to Mongolia has been increasing, and it is expected that the rate will continue to increase. Capacity is set to rise from the current level of 600,000 passengers annually to roughly 2.5 million passengers annually. That is about the same as the total national population. Cargo capacity is set to increase 10-fold.

The improvements in air travel go hand in hand with plans to lessen dependence on rail links to China. Mongolia will also see the development and construction of an eastern spur from the Trans-Mongolian line heading east from Ulaanbaatar to the eastern Trans-Siberia route which will link Mongolia directly to a sea port for the first time – circumnavigating the current need for Mongolian raw materials, goods and products to pass through China prior to export. China has a history of closing the border with Mongolia at times of political and religious tensions such as the Dalai Lama’s visits to the country, so increasing alternative transportation routes to provide options other than reliance on China are increasingly being seen as a desirable policy.

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