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COUNTRY BRIEFS


AUSTRALIA-MONGOLIA RELATIONS

Australia established diplomatic relations with Mongolia in 1972. Bilateral engagement accelerated following the introduction of democratic and free-market reforms in Mongolia in the early 1990s. The focus of the relationship to date has been on development assistance and commercial activities in Mongolia's resources sector.

Mongolia opened an Embassy in Canberra in 2008. Mongolia's first resident Ambassador, His Excellency Mr Tserendorj Jambaldorj, presented credentials to the Governor-General on 30 October 2008. In 2007, Australia appointed an Honorary Consul in Ulaanbaatar, and, in 2008, Australia moved its diplomatic accreditation to Mongolia from Beijing to Seoul. Australia's current Ambassador to Mongolia (resident in Seoul), Mr Sam Gerovich, presented credentials to Mongolia's President on 17 August 2009. In February 2011, Prime Minister Julia Gillard announced that Austrade would open a trade office in Ulaanbaatar to service the needs of Australian business.

In February 2011, the Prime Minister of Mongolia, H.E. Mr Sukhbaatar Batbold, conducted a guest-of-government visit to Australia. His delegation included several Mongolian ministers, parliamentarians and businesspeople. Prime Minister Gillard welcomed Prime Minister Batbold as the first Mongolian Head of Government to visit Australia since the two countries established diplomatic relations. The leaders witnessed the signature of four bilateral arrangements:

-- A Memorandum of Understanding on vocational education cooperation aimed at helping Mongolia build the capacity of its mining workforce, encouraging the exchange of vocational education students and staff, and encouraging the exchange of information on education systems, qualifications and recognition processes between vocational education institutes and universities;

-- A Memorandum of Understanding to promote agricultural development and the sharing of information and agricultural technologies, with the aim of improving livestock and crop production in Mongolia;

-- A Memorandum of Understanding between the two governments to foster the exchange of information on Cabinet Secretariat operations and on enhancing transparency and public access to information; and

-- A Memorandum of Understanding between the Australian Academy of Science and the Mongolian Academy of Sciences to promote the exchange of ideas and the review of collaborative opportunities in scientific fields of common interest, such as geology, water resources and agriculture.

Prime Ministers Gillard and Batbold issued a Joint Statement on 23 February 2011. (http://www.pm.gov.au/press-office/australia-mongolia-joint-statement)

Other high-level contact has included a meeting in December 2010 between the then-Foreign Affairs Minister Kevin Rudd and Mongolian Minister for Foreign Affairs and Trade Gombojav Zandanshatar in the margins of the Bali Democracy Forum. In September 2008, then-Prime Minister Rudd met with then-Prime Minister Sanjaa Bayar in the margins of the United Nations General Assembly. In July 2008 and July 2009, then-Foreign Affairs Minister Stephen Smith met Mongolian State-Secretary for Foreign Affairs and Trade Damdin Tsogtbaatar in the margins of the ASEAN Regional Forum.

At Head-of-State level, then-Governor-General Bill Hayden visited Mongolia in 1994, and Mongolia's first democratically elected President, Punsalmaagiin Ochirbat, visited Australia in 1997. Australia's Foreign Minister visited Mongolia in 1994 and 2007, and Mongolia's Foreign Minister visited Australia in 1993. Australia's Minister for Industry, Tourism and Resources visited Mongolia in October 2005.

There have been a number of parliamentary visits. In 2009, two delegations from Mongolia led by Members of Parliament visited Australia, and a group of four Australian Members of Parliament from the Australia-Mongolia Parliamentary Friendship Group visited Mongolia. In 2010, a delegation of Australian Members of Parliament visited Mongolia and ten Mongolian State Secretaries visited Australia. In January 2011, the Speaker of the House of Representatives led a delegation to the Asia Pacific Parliamentary Forum hosted by Mongolia.

Bilateral trade with Mongolia is modest, with preliminary data showing two-way merchandise trade totalling $24.5 million in 2010. This is comprised mostly of Australian exports of civil engineering equipment, instruments and tools used in Mongolia's mining industry. While trade volumes are currently small, there is significant commercial interest by Australian companies, and significant trade and investment potential, in Mongolia's minerals and energy sector. Australian mining companies have been active in Mongolia for many years, including Rio Tinto, BHP Billiton and Leighton, with significant mineral leases in Mongolia held by Australian companies.

To help promote the successful and sustainable development of Mongolia's minerals and energy sector, Australia provided practical assistance worth $750,000 to Mongolia in 2008-2010 to help build local capacity and legal expertise in mining policy and law. Australian geological, drilling, mining software and environmental management companies are also increasing their business in Mongolia.

On 21 February 2011, Trade Minister Craig Emerson launched the Mongolian Mining Projects Report 2011 (http://www.austrade.gov.au/ArticleDocuments/1358/Mongolian-Mining-Projects-Report-2011.pdf.aspx) , produced by Austrade, which outlines promising investment opportunities for Australian mining companies in Mongolia.

Since 1995, Australia has provided more than $50 million in aid to Mongolia. For 2010-11, Australia's total overseas development assistance to Mongolia is estimated to be $8.8 million. The primary focus of Australia's development cooperation program is on human resource development through the provision of scholarships. The Mongolia-Australian Scholarships Program is highly regarded by Mongolia as an effective capacity building instrument for government agencies. The program has also been highly effective in forging strong links with Mongolia's leadership. A number of alumni of the program are currently serving as government officials, members of parliament and ministers. An expansion of the program announced in February 2011 will see the number of scholarships increase from 28 to 38 per year from 2012 (see AusAID's website for more detail).

Additionally, Australia will provide Mongolia with $1.5 million in 2010-2011 to support water and sanitation, cost-benefit analysis of mining sites, and children with disabilities. The projects will be implemented by UNICEF and the United Nations Development Programme. Mongolia receives around 20 Australian volunteers each year through the Australian Youth Ambassadors for Development program (http://www.ayad.com.au) , focusing on a range of assignments including public health, environmental engineering and business development.

In June 2009, Australia contributed $5 million to a World Bank-managed fund established to assist Mongolia manage the impact of the global recession (see also Economic Overview).

In early 2010, Mongolia suffered extreme winter conditions following a drought. The severe weather, locally referred to as the dzud, caused the death of more than eight million livestock and threatened the livelihoods of Mongolian herders. In 2009-10, Australia provided $1.7 million in assistance to Mongolia in response to the adverse humanitarian situation caused by the dzud. An assessment of the impact on Mongolian herders and the economy can be found in the World Bank's March 2010 Economic Update for Mongolia.

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POLITICAL OVERVIEW

Mongolia held its first democratic elections in 1990 after 70 years of Soviet-style single-party rule. Members of the State Great Hural (Parliament) and President are both elected for fixed four-year terms (but on different electoral cycles). Executive power is shared by the Parliament and the President. The Cabinet is appointed by the Prime Minister. The President is the Commander-in-Chief and holds the power to veto legislation, although this can be overridden by a two-thirds majority in Parliament. Presidential candidates must be nominated by a party represented in the Parliament, but the President is technically non-partisan, and must renounce party membership before taking office.

There are two major political parties: the Mongolian People's Party (MPP), formerly the Mongolian People's Revolutionary Party (MPRP) that evolved from the communist single-party government, and the Democratic Party (DP) that grew out of Mongolia's 1990 democracy movement. In the five parliamentary elections held since the 1992 Constitution came into effect, power has alternated between the two major parties, or the two parties have together formed grand-coalition governments.

The most recent Parliamentary elections were held in June 2008. International observers were generally satisfied that the election was free and fair. However, allegations by the DP and minor parties of electoral fraud escalated in the days following the election, resulting in a riot that left five people dead and the imposition of a state of emergency. A subsequent DP boycott prevented the Parliament from convening for two months, with a quorum of two-thirds required to swear in new members of Parliament. Eventually, the MPP offered to share power with the DP in a grand coalition with ministerial appointments divided between the MPP and DP 60:40.

Presidential elections were held on 24 May 2009 in which incumbent MPP President Nambaryn Enkhbayar was defeated by the DP's Tsakhia Elbegdorj. President Elbegdorj was sworn into office on 18 June 2009. On 18 October 2009, MPP Minister for Mineral Resources and Energy, Dashdorj Zorigt, won the by-election for the parliamentary seat vacated by President Elbegdorj. In the 76-seat parliament, the MPP currently holds 46 seats, the DP holds 27 seats, and minor parties and independents hold three seats.

On 29 October 2009, Sukhbaatar Batbold was appointed Mongolia's 26th Prime Minister following the resignation of former Prime Minister Sanjaa Bayar due to ill health.

On 14 January 2010, President Elbegdorj announced a moratorium on the death penalty, with provision for the move to full abolition by 2011. It was also announced that all death penalty sentences would be commuted to 30-year prison terms.

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ECONOMIC OVERVIEW

Agriculture, primarily herding, was the traditional basis of the Mongolian economy, and is still important, contributing about 20 per cent of GDP and providing around 40 per cent of national employment. However, services and industry (including mining) have overtaken agriculture in terms of value. Services now account for 49.3 per cent of GDP and industry for 29.5 per cent (including mining with 25 per cent).

Mongolia's economy is small, with total GDP about US$5.8 billion (US$10.3 billion in purchasing-power-parity terms). A third of the population lives below the poverty line. Exports are the major driver of the economy. The value of goods exports is equal to about half of nominal GDP, with the major exports being copper (33 per cent), gold (24 per cent), coal (7 per cent) and greasy cashmere (7 per cent).

Mongolia's economy has recovered strongly from the Global Financial Crisis, driven by high commodity prices and strong Chinese demand. China remains Mongolia's largest trading partner, accounting for around 80 per cent of Mongolia's export revenues, predominantly copper and coal, and 43 per cent of imports. The government's budget position improved markedly in 2010, as increased mining-related revenues outpaced growth in government expenditures. Mongolia's imports in the first three quarters of 2010 increased by 51.5 per cent year-on-year to US$2.2 billion, largely as a result of mining-related imports of equipment and fuel. Exports increased by 56.6 per cent year-on-year to US$2 billion. Mongolia's GDP was projected to grow by approximately 8.1 per cent in 2010 and this strong growth is expected to continue.

Mongolia's development has been hampered by its landlocked position, a lack of infrastructure and an uncertain regulatory environment as the country has struggled to transform itself from a Soviet satellite to a free-market democracy.

Australian companies are well placed to assist in the development of Mongolia's resources sector. On 25 August 2009, the Mongolian Parliament approved legislation – including the repeal of a Windfall Profits Tax, effective 1 January 2011 – that should help to create a more certain environment for prospective investors. On 6 October 2009, the Mongolian Government signed an investment agreement for the massive Oyu Tolgoi copper and gold mine, in which Rio Tinto and Canada's Ivanhoe Mines are strategic partners. Prospective revenues from Oyu Tolgoi are estimated at US$3 billion annually, equivalent to one-third of Mongolia's projected GDP in 2010. Production is expected to commence in 2013. Leighton Holdings Limited also has extensive interests in the Mongolian mining sector, including a contract to provide mining services to a tenement of the Tavan Tolgoi coal deposit, said to be the world's largest undeveloped coking coal deposit.

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Last Updated: February 2012

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