Mongolia expects to win big from China’s Belt and Road Initiative, but it remains on guard over the dangers of too much borrowing, a high-ranking government official said at Nikkei’s Future of Asia Conference on Thursday.
Mongolia’s geographic location, sandwiched between the large economies of China and Russia, presents an opportunity, said Gombojav Zandanshatar, Chairman of the State Great Hural of Mongolia, the country’s Parliament.
“The top priority is to connect Russia and China, and also there is a discussion if it’s possible to construct gas and oil pipelines through Mongolia exporting Russian resources to China,” he said after delivering a speech.
“Actually, the Belt and Road Initiative will positively impact the Mongolian economy if implemented successfully, because Mongolia’s role and participation is especially important.”
Mongolia is organising a trilateral meeting with Russia and China to accelerate the development of an economic corridor, which includes dozens of projects, such as modernising Mongolian railroads and highways connecting the three neighbours.
Mongolian President Battulga Khaltmaa is scheduled to meet Russian and Chinese officials in Kyrgyzstan next month, he said.
But while Ulaanbaatar is eager to tap the Belt and Road for economic growth, it is wary of taking on a heavy debt load.
Mongolia received an International Monetary Fund-led bailout in 2017 after plummeting commodity prices hurt its finances. But the ratio of government debt relative to gross domestic product has been reduced, while loans from China make up less than 10% of the total, according to the chairman.
“We don’t see any high risk of debt [default] in Mongolia,” he said, adding the key is to use international credit “precisely and efficiently” to avoid risk and drive the economy.
The country, he said, is also diversifying to reduce its reliance on commodity exports.
“For instance, the Chinese middle class is expanding, demand for high-quality food products is increasing,” he said. “We have a lot of potential to export not only commodities but other agricultural and tourism-related products.”