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The trade barriers will come tumbling down

The introduction of a free trade zone (FTZ) with Mongolia will have a positive impact on the operation of the Eastern Polygon.
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The FTZ without tariff and non-tariff barriers will be established on the border between Russia and Mongolia. The initiative is to ensure unimpeded import and export of products. The market experts believe that such a solution will increase trade turnover between the countries and extend the list of transported goods, including by rail. 

At the end of June, Chairman of the State Great Hural of Mongolia Gombojav Zandanshatar visited the Russian Federation. The politician held a meeting with members of the Russian government and a separate meeting with the Governor of the Irkutsk Region Igor Kobzev. At the meeting, the two sides agreed to set up an industrial park and a joint venture (JV) to produce cashmere. 

With a view to increasing the trade turnover between the countries, the FTZ will also be created in the region, which will allow for unimpeded export of various products from Mongolia to Russia. “As part of cooperation with Russia, Mongolia’s export products, including meat, leather, wool and cashmere products, will be exported to Russia without tariff and non-tariff barriers,” TASS quoted Gombozhavyn Zandanshatar as saying.  

The introduction of the FTA with Mongolia will have a positive impact on the mutual trade between the countries and expand the current range of goods, said Dmitry Baranov, a leading expert at Finam Management Company. The initiative will also speed up transportation in both directions, enhance cargo safety and help eliminate unnecessary formalities in mutual trade, the expert adds.
Today Russia exports foodstuffs, various equipment items, metals, chemicals and minerals to Mongolia while its imports include foodstuffs and consumer goods, which, among other things, transit from China. Cars and components in containers are also imported into the country through the railroad border crossing Naushki-Sukhbaatar. 

Igor Kobzev also noted that he had reached agreements with Belarusian colleagues to supply cashmere. “We’ll create a joint venture with Mongolia and launch supplies to Belarus,” said the politician at the forum “Strong Ideas for New Times”, which was held in late June.

Deputy Minister for Economic Development of Russia Dmitry Volvach noted that Russian-Mongolian trade grew by 41.7% and reached 211.4 billion rubles as of end of last year. In January-May 2023, the volume of exports from Russia to Mongolia increased by 30% to 2,473.6 thousand tons compared to the same period last year. A total of 1,058 trains shipped cargoes over the five months - an increase of 20% year-on-year. The same period saw 695.5 thousand tons of cargoes (956 trains, a 17% growth) imported from Mongolia. 

The FTZ between Mongolia and the Russian Federation is designed to reduce transportation costs for carriers and logistics companies, as well as to create additional capacity for transit cargo shipments. 

Dmitry Baranov notes that the creation of a zone free of tariff and non-tariff barriers will have a positive impact on the transportation industry, primarily on the operation of the Eastern Polygon, creating more jobs and boosting revenues to budgets at all levels. 

In addition, one should expect the construction of various infrastructure projects along the border areas of the two countries, including transport and logistics centers for cargo handling and storage, he concludes.

Alexander Solyanik

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