Frontier s Strategy Note: 01/08/2014 LLC The outcome of President Elbegdorj s visit to Japan Japan-Mongolia summit meeting On July 22, Prime Minister Shinzo Abe held a summit meeting with H.E. Mr. TsakhiagiinElbegdorj, President of Mongolia. The overview of the meeting is as follows according to the official website. #206, Elite Office B, Chinggis Avenue 14, 1st khoroo Sukhbaatar district Ulaanbaatar, Mongolia Any inquiries for more information, any feedback, suggestions or comments that you would like share with us are welcomed as always. Please contact us at: Email: (T) 976-7011-9999 (F) 976-7011-1991 For further information and key updates please logon to: www.frontier.mn www.frontier-conference.com 01/08/2014 1
General remarks on Japan-Mongolia relations At the beginning, Prime Minister Abe welcomed President Elbegdorj to Japan, expressing his hope that the Mongolia-Japan Business Forum jointly held by Nippon Keidanren (Japan Business Federation) and the Government of Mongolia, which President Elbegdorj attended, will serve as an opportunity to further strengthen economic relations between the two countries. President Elbegdorj said he is pleased that bilateral relations are growing closer. He explained that the business forum was a success, and expressed a sense of satisfaction that he was able to hold beneficial exchanges with participants from the Japanese side on advancing bilateral economic relations further. Economic areas Both sides expressed satisfaction that an agreement in principle had been reached in the negotiations of the Japan-Mongolia Economic Partnership Agreement (EPA). They shared the view that strengthening cooperation in economic areas will be important for further enhancing the strategic partnership, and expressed their resolve to continue to deepen reciprocal and mutually complementary relations going forward. Prime Minister Abe proposed the ERCH Initiative Plus for Promoting Mongolia s Exports and Industrial Diversification, along with expressing the intention to encourage Mongolia s formulation of medium-to-long-term economic measures, through support that will include dispatching economic advisors, based on a request from the Mongolian side. President Elbegdorj expressed his gratitude. Politics and security Prime Minister Abe explained the Government of Japan s security policy etc., and both sides shared the view that they will cooperate closely in order to contribute to the peace and stability of the international community. Both sides also exchanged views on regional affairs in East Asia, including North Korea. The voices from a Japanese media on the visit The size of the bilateral trade is relatively small, but Japan apparently aims to leverage closer economic ties to boost their political relations as Japan has partly relied on Mongolian assistance in negotiating with North Korea over the abduction issue. President Elbegdorj said at the outset of a summit meeting with Japanese Prime Minister Shinzo Abe that he welcomes the substantive agreement; expressing hope the pact will obtain approval of the parliaments of both countries "early next year." The deal will bring the bilateral economic relations to "a new stage," Abe said at a joint press conference following the summit. Abe also vowed to provide support for facilitating Mongolia's exports and sustainable economic development as a complementary package of an economic initiative Tokyo announced at their summit last year. 01/08/2014 2
The size of the bilateral trade is relatively small, but Japan apparently aims to leverage closer economic ties to boost their political relations as Japan has partly relied on Mongolian assistance in negotiating with North Korea over the abduction issue. President Elbegdorj said at the outset of a summit meeting with Japanese Prime Minister Shinzo Abe that he welcomes the substantive agreement; expressing hope the pact will obtain approval of the parliaments of both countries "early next year." The deal will bring the bilateral economic relations to "a new stage," Abe said at a joint press conference following the summit. Abe also vowed to provide support for facilitating Mongolia's exports and sustainable economic development as a complementary package of an economic initiative Tokyo announced at their summit last year. In 2013, Japan's exports to Mongolia were valued at 29.3 billion yen (about $288 million) and Mongolia's exports to Japan at 1.9 billion yen. Japan's main export items to Mongolia include used passenger vehicles, which account for some 45 percent of total exports. Mongolia mainly exports coal and other natural resources. Under the free trade agreement, Mongolia will immediately abolish its 5 percent tariffs on some Japanese automobiles with engine displacement of 4,500 cc or below, while tariffs on other automobiles, including some used vehicles, will be scrapped in 10 years, according to Japanese government officials. 01/08/2014 3
Japan will introduce the tariff-quota system on some processed beef products imported from Mongolia. It will also abolish tariffs on almost all industrial products imports, including cashmere goods, in up to 10 years, the officials said. Japan is the first free trade partner for Mongolia. The two launched their talks in 2012 and held seven sessions of negotiations. Meanwhile, Abe gained support from Elbegdorj for his resolve to make Japan a proactive contributor to peace. We believe that both countries have confirmed the strong economic and political ties between the two countries. Economic relations between the two countries The working visit of President of Mongolia TsakhiagiinElbegdorj to Japan has been highlighted with President s address to the Mongolian and Japanese businessmen at the Mongolia-Japan Business Forum, co-hosted with Japan Federation of Economic Organizations, KEIDANREN. 01/08/2014 4
Over 130 businessmen from Mongolia and over 180 businessmen from Japan were present at the Forum. In his address President Elbegdorj noted: Mongolia maintained close relations with Japan at momentous historical junctures. Also President has stressed that this year sees the end of grant aid from Japan to Mongolia. From now on our two countries are entering a new era of mutually beneficial cooperation. The money the Japanese taxpayers had been giving the Mongolian people was instrumental and vital in overcoming the difficulties and challenges of development. Mongolia, which was like a just-born baby in 1990, has grown up and matured today. In the past few years the GDP has grown several-fold. The engine of the economic growth the private sector has firmly stood up on its legs. The time has come now to advance our bilateral economic relations to a new level, and it is precisely within these premises that we are meeting in Tokyo today, President mentioned at the forum. Although Mongolia and Japan have been continuously fostering bilateral relations, the scope of the cooperation has been very narrow and limited to merely a handful of companies. The bilateral trade turnover comprises only some 100 million USD. Japanese FDI to Mongolia barely reaches half a billion USD. President Elbegdorj emphasized the need to reinvigorate the bilateral relations between the two countries dramatically. In his speech at the Parliament of Japan in 2010, President Elbegdorjnoted: The time has come, let s wake up. I wish to repeat those words today. We now have all preconditions set for translating into reality those words. We have agreed to establish an Economic Partnership Agreement. I am delighted to inform you that Prime Minister Abe and I will sign tonight a Joint Statement affirming our agreement to establish the Economic Partnership Agreement said President to the audience at the Mongolia-Japan Business Forum. The two countries have been able to reach an agreement to establish the EPA after 4 years of talks. The EPA provides the legal basis and environment to boost bilateral economic cooperation. It draws a dramatically renewed landscape for successful and mutually beneficial economic cooperation between Mongolia and Japan. Let us study together, produce together, and market together. We have reached an agreement with our Japanese counterparts that our governments support the efforts of our private sectors to implement this call. Mongolia is a uniquely situated country. We border with two countries with the largest population and with the largest territory. Developing cooperation with Mongolia is consonant with the aspiration to reach out to these two huge markets together highlighted President Elbegdorj. After the speech of the President, Mongolia-Japan Business has continued and the Minister of the Cabinet Office of the Government of Mongolia Ch.Saikhanbileg, the Governor of the Bank of Mongolia N.Zoljargal, the Deputy Minister of the Ministry of Economic Development O.Chuluunbat, the State Secretary of the Ministry of Mineral Resources R.Jigjid, the State Secretary of the Ministry of Energy D.Delgertsogt, the Chairman of the Invest Mongolia Agency S.Javkhlanbaatar have made noticeable introductory presentation regarding the investment environment of Mongolia, the ongoing processes and the further action plans, projects and programs to the business people of Japan. 01/08/2014 5
The Mongolia-Japan Business Forum was co-hosted with the Japan Business Federation (KEIDANREN) which coordinates over 1,300 reputable Japanese companies and organizations in its active operation; at the same time, the Introductory Business Meeting between Mongolia-Japan businessmen was jointly organized by the Japan External Trade Organization (JETRO) along with the Invest Mongolia Agency. The businessmen were very keen on the Mongolia-Japan Economic Partnership Agreement (EPA) and they highlighted that the intensifying economic partnership between two countries will surely facilitate very fruitful investment and trade opportunities in the coming future. During this event, the Invest Mongolia Agency has informed that the TDB (Trade and Development Bank of Mongolia) and the NIB (National Investment Bank of Mongolia) are going to open their Representative Offices in Japan. Conclusion The two nations have confirmed the strong friendship between the two and signed EPA and upgraded the Erch Initiatives to Erch Initiatives Plus. Japanese Government also has announced that they will send economic advisors to Mongolia. These will serve a long term development of the economy in Mongolia and encourage bilateral trades between the two countries. Also, the presentation of the President at Keidanren was very enthusiastic and appealed to business leaders in Japan. In addition, openings of the representative offices of banks (TDB and NIB) in Tokyo will be helpful for Japanese corporations and individuals to do business in Mongolia. We were amazed and convinced that the expectations from Japanese business leaders are very high to see some 600 people have attended to a party hosted by TDB a day after the President s speech at Keidanren. However, many experts in Japan are still skeptical about the quick reactions from Japan because of the past experience. In fact, majority of Mongolian experts from Japan in Mongolia do not see imminent movements from Japanese big companies at this moment. They feel that smaller companies should have better chances to enter into Mongolian market than bigger companies much quickly. We believe smaller companies will definitely come to Mongolia much more aggressively in the near future. We saw so many SMEs discussing about potential business at a business match making sessions organized by JETRO. However, in case of bigger companies, our view is rather mixed. Companies who have invested to Mongolia before remain cautious about Mongolia. However, companies who have not invested to Mongolia before have much different views on Mongolia. They trust on the friendship and long term relations between the two countries. Therefore, we believe that the new investors havequite a huge potential to invest in Mongolia. However, Mongolia needs to be faithful and trusted partner to investors who have invested in Mongolia before. 01/08/2014 6
That is one of the most important criteria for new investors to enter in this country as well as they will always ask others whether Mongolia is the right place to invest or not. One more thing I want people in Mongolia to remember is that after going through ups and downs of economy, Mongolia has changed. But at the same time, Japan ALSO has changed a lot especially since the launch of the Abe Administration. The economy in Japan is doing much better and stock price is almost doubled since the beginning of the establishment of the cabinet. The businessmen in Japan are much more aggressively looking for investment opportunities in overseas including Mongolia. As long as safe environment is provided and reasonable opportunities exist, they will invest in Mongolia rather boldly in the future. 01/08/2014 7
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