OBrief Analysis of Important Issues O - mtac.gov.t · OBrief Analysis of Important Issues O. ......

Historical Retrospect on Mongolia-Japan Relations and Comprehensive Partnership 33

Brief Analysis of Important Issues

Historical Retrospect on Mongolia-Japan Relations and

Comprehensive Partnership Nalin

﹝Research Fellow The Insitute

of Mongolian Studies Inner

Mongolia University﹞

Abstract Japan’s repeated attempts to encroach on Mongolia over the

course of history were upset time and again by heavyweight intervention on the part of Russia. Formal diplomatic relation between Mongolia and Japan were established in 1972. Since early 1990s, a time that marked the beginning of Mongolia’s transformation to democratic system, there have been frequent mutual visits between the leaders of Mongolia and Japan. The relation has been fueled by Japan’s active support of Mongolia’s bid for democratization and market economy reform, and has entered the new stage of comprehensive partnership. Using economic assistance as a bait to permeate Mongolia, Japan is seeking to dominate Mongolia’s resource market and at the same time expand its political and economic influence to secure a tighter grip on wheel of Asia. Key Words: Mongolia, Japan, Historical Retrospect, Comprehensive Partnership

34 Bimonthly Journal on Mongolian and Tibetan Current Situation Vol.15, No.3

1. Mongolia-Japan Relationship: a Historical Retrospect

Japan has been eyeing Mongolia for a long time. As early as 1904 and

1905, Japan pocketed Liáodōng Peninsula after defeating Russia on the

battlefield, and included the northern part of Northeast China and eastern

Mongolia as part of its territory. Before World War One, Kodama Gentarō, a

Japanese official, spent some time in Mongolia in 1913 trying to sever the

bond between Inner and Outer Mongolia and China, only to see his work

undone by the Russian Empire. In July 1927, Japanese Prime Minister Tanaka

Giichi presented The Empire of Japan’s Basic Active Policies on Manchuria

and Mongolia to the Japanese Emperor, which says, “To conquer China, we

must conquer Manchuria and Mongolia first. To conquer the world, we must

conquer China first,1” hence the beginning of Japan’s outrageous policy of

using Manchuria and Mongolia as its base for aggression. Finally in 1939,

Japanese troops invaded Mongolia, setting off the Battle of Nuomenhan (also

known as the Battle of Halaha). It was a blatant declaration of Japan’s

long-term ambition of pocketing China and Mongolia and even the Soviet

Union. In May 1939, Japan’s Kwantung Army took the lead to invade

Mongolia and took over the Halaha district in the east as the springboard to its

next stop of Soviet Union to fulfill its plan to “advance north.” After learning

the intent of the Japanese, Joseph Stalin decided to go all out in teaching

Japan a lesson to fend it off forever. The Mongolia-Soviet joint force under

the direct command of General Georgy Konstantinovich Zhukov staged a

1 Dai Wen-wu, “Japan’s 300-Year Conspiracy against China,” Global Times, September 19, 2005.


counterattack at the Japanese on August 20, 1939, and spent only ten days to

defeat the Japanese imperial army. The crushing defeat made the Japanese

realize that they were simply no match for the powerful Soviet army.

Therefore, Japan declined Germany’s request for assistance in the latter’s

invasion in Moscow in November 1941. The relatively unknown battle

between Mongolia, Soviet Union, and Japan ended up having a profound

impact on World War Two, and indirectly supported China in its battle against

the Japanese as it took away a part of Japan’s military clout.

The Soviet Union declared war on Japan on August 8, 1945. Two days

later, Mongolia followed suit and entered a war with Japan. Mongolia sent a

mechanical cavalry (consisting of three battalions under the 22nd Cavalry

Regiment and one scouting unit)2 as a counter force against Japan. At this

point, the Soviet-Mongolia joint force had entered northeastern China and

Inner Mongolia and crushed the Japan’s Kwantung Army with the help of the

Chinese people. The feat directly caused the Japanese imperialism to hand in

an unconditional surrender and made a substantial contribution to the ultimate

victory in the global anti-Fascist campaign.

Interactions between Mongolia and Japan began since 1956. In October

1957, Mongolia issued a joint statement on the promotion of Mongolia-Japan

trade in Beijing along with the Association for the Promotion of Japan-China

Trade. In August 1959, the Bureau of Import and Export under Mongolia’s

Ministry of Foreign Trade signed an agreement on mutual freight shipment in

2 Huo Wen, “China-Mongolia Friendship in the Time of War,” People’s Daily, September 2, 2005.


1960 with Japan’s Association for the Promotion of International Trade.

Mongolia and Japan agreed to exchange travelers in May 1963. Then in

October 1968, the Mongolia-Japan Association was created, and in March of

the same year both countries put pen to a three-year trade agreement. In

August 1970, Gombojavyn Ochirbat, Deputy Chairperson of Mongolian

Ministerial Meeting, had a meeting with Japanese Foreign Minister Kiichi

Aichi in Tokyo and signed an agreement on the development of economic and

cultural ties.

On February 11, 1972, the Chair of Mongolian State Great Hural

declared the end of the state of war between Mongolia and Japan. On

February 19, Mongolia dropped the request for reparation and built

diplomatic ties with Japan. In September 1972, Japan set up the

Japan-Mongolia Economic Council. In April 1974, Japan granted Mongolia

the most-favored-nation treatment at the latter’s request. Later in September,

the two sides exchanged a memorandum on cultural and science exchange.

Following a five-year negotiation, Mongolia finally gave up asking

Japan to build 15 industrial projects. The two sides signed an economic

cooperation agreement in March 1977, the first one Mongolia has ever signed

with a capitalist country. Japan agreed to provide Mongolia up to USD 17

million in non-reimbursable assistance and build a cashmere and alpaca

factory (later known as “Gobi Cashmere”) in the Mongolian capital city of

Ulan Bator. The factory, which began operation in 1981, now processes over

1000 tons of cashmere and over 200 tons of alpaca per year, and produces


300,000 cashmere products 45,000 alpaca blankets. Over 90% of its products

are exported to around 10 countries including Japan and Russia.

Unsurprisingly, bilateral trade between Mongolia and Japan surged from USD

1.25 million in 1970 to USD 9.40 million in 1985 and then skyrocketed to

USD 31.40 million in 1989. Before the 1980s, economic and trade activities

between the two were small-scaled because Mongolia back then was

completely dependent on the Soviet Union and thoroughly marginalized in the

dogfight over interests between big powers, hence the lack of substantive

progress in the bilateral relationship back then. However, since the 1990s,

world politics has changed and Mongolia has experienced transition on the

domestic and diplomatic front, so Mongolia and Japan began to have wider

and deeper exchanges and cooperation in the areas of politics, economy,

culture, and education.

2. Frequent Mutual Visits between Mongolian and Japanese Top Executives

Since its democratic reform, Mongolia has seen swift development in its

relationship with Japan. In May 1989, Japanese Foreign Minister Sosuke Uno

paid a visit to Mongolia at the latter’s invitation. It was the first time a

Japanese FM landed on the Mongolian soil since the two countries established

diplomatic ties in 1972, and also a return to the Mongolian FM’s visit to Japan

in 1987. Since then, there have been frequent mutual visits between

government executives in Mongolia and Japan. Two presidents, three

parliament speakers, and five prime ministers (including a chairperson of


ministerial meeting who visited Japan in 1990) of Mongolia paid visits to

Japan between 1990 and 2004. Japan also had two prime ministers and other

top executives paying visits to Mongolia during the period.

In February 1990, Mongolian Ministerial Meeting Chairperson Sodnam

paid a visit to Japan at the government’s invitation. It was the first time in

Mongolia’s history that a top executive paid a formal visit to the West. During

the visit, the two sides agreed on mutual most-favored-nation treatment.

In November 1990, P. Ochirbat, the first President of the Mongolian

People’s Republic, and the first lady attended the coronation ceremony of

Japanese Emperor Akihito in Japan.

In August 1991, Japanese Prime Minister Toshiki Kaifu paid a visit to

Mongolia at the latter’s invitation. He is the first top government executive

from Japan as well as the West to visit Mongolia. The joint press communiqué

between Mongolia and Japan described the visit as “an event with a profound

meaning in the history of the bilateral relationship” and declared a shared

resolution to develop a relationship of the 21st century. Toshiki Kaifu

reiterated Japan’s unwavering support for Mongolia’s democratic reform and

the development of bilateral cooperative relationship under the new historical

backdrop. Japan also pledged to provide Mongolia with non-reimbursable aid

of up to JPY 3 billion (around USD 21 million).

In May 1992, Mongolian (its official designation had been switched from

Mongolian People’s Republic to simply Mongolia in January) Prime Minister

Dashiyn Byambasüren paid a work visit to Japan. While there, he attended the


second International Assistance Group Meeting for Mongolia organized by

the host country and had a meeting with Japanese Prime Minister Kiichi

Miyazawa. Japan pledged to provide Mongolia assistance of up to USD 18

million, including USD 15.30 million in cash from the international assistance

fund, USD 1.53 million worth of wheat to be purchased from China, and USD

1.15 million worth of chemical fertilizer and farming facilities. In the group

meeting, Japanese FM Michio Watanabe urged other countries to give

Mongolia as much assistance as possible, saying that this was exactly what

Japan was planning to do.

In November 1993, Mongolian Prime Minister Puntsagiyn Jasray paid a

visit to Japan. The two sides signed an aviation relationship agreement, and

Japan also agreed to grant cultural assistance and loans to Mongolia.

In October 1994, Mongolian State Great Hural Chairperson Natsagiyn

Bagabandi paid a visit to Japan. In a meeting, Japanese Prime Minister

Murayama Tomiichi told Bagabandi, “We shall further develop the bilateral

relationship and extend the scope of cooperation in the future. This will have

a positive impact on not just the bilateral cooperation, but regional

cooperation as well.” Bagabandi replied, “It has been one of the top priorities

in our foreign policies to cultivate a friendly relationship and cooperation with

Japan.” “Mongolia has always regarded Japan as a major partner in Asia.”

The meeting was perceived by both sides as a meaningful event in the

cooperation of the highest legislative bodies.

In February 1995, Mongolian Defense Minister led a military delegation


to call on Japan. It was the first time a top Mongolian military delegation

visited Japan and met with the top executives of Japan’s Ministry of Defense.

The two sides agreed to enhance cooperation in a wide scope.

In February 1997, Mongolian Prime Minister Mendsayhany Enkhsaikhan

called on Japan to mark the 25th anniversary of Mongolia’s diplomatic tie with

Japan. According to the joint statement, Enkhsaikhan explored with Japanese

Prime Minister Ryutaro Hashimoto the possibility of giving Mongolia budget

assistance and low-interest loans to improve coal mining facilities, and piling

up Japan’s direct investment in Mongolia. The ideas were well received by

Japan.

In May 1998, Mongolian President H. Bagabandi (previously Parliament

Speaker) paid a state visit to Japan. The two sides signed a joint communiqué

of "comprehensive partnership toward the 21st century." This marks the

beginning of Mongolia’s long-term, stable, comprehensive partnership with

Japan, which is one of the major achievements of this visit. The nature of this

comprehensive partnership contains four aspects: mutual understanding and

mutual respect in a long-term relationship; a reciprocal economic and trade

partnership that conforms to the standards of international relationships, a

relationship stretching across the boundaries of culture and education, science

and technology, and humanitarian assistance; cooperation toward resolving

world and regional issues. Mongolia spoke highly of the joint communiqué,

convinced that President Bagabandi’s visit to Japan had raised the cooperative

relationship to the new level of strategic cooperation.


In March 1999, Mongolian State Great Hural Chairperson led a

parliamentary delegation to call on Japan.

In July 1999, Japanese Prime Minister Keizo Obuchi embarked on a

one-day official visit to Mongolia. This was the second time a Japanese Prime

Minister set foot on Mongolian soil. While there, Keizo Obuchi reiterated the

comprehensive partnership between Mongolia and Japan, and gave written

permission to Mongolia’s plan of using the funds provided by Japan in 1999

to purchase facilities for the Mongolian National Center for Intangible

Cultural Heritage. He also signed other important documents including the

“KAIR2” documents to enhance food production and food processing quality

in Mongolia and the agreement to build a Japanese cultural center in the

Mongolian capital of Ulan Bator. Mongolia thought highly of Keizo Obuchi’s

visit, dubbing it an important one that built a brand-new foundation for future

cooperation.

In February 2001, Mongolian Prime Minister Nambaryn Enkhbayar

arrived at Japan for a week-long official visit. It was his first official visit

abroad since being elected as Prime Minister. While there, he expressed the

new government’s resolution to base its Japan policies on the principles of

having a long-term, stable, and comprehensive partnership. The Japanese

once again pledged to support Mongolia as usual, and promised never to cut

economic assistance to Mongolia.

Mongolian State Great Hural Chairperson made an official visit to Japan

from February 17 to 24, 2002 to celebrate the 30th anniversary of


Mongolia-Japan diplomatic tie. The Mongolia parliamentary delegation was

received by the Emperor, Empress, and Crown Prince of Japan, the leaders of

Japan’s House of Councilors and the House of Representatives, Prime

Minister Junichiro Koizumi, and the Minister of Education, Culture, Sports,

Science and Technology Atsuko Toyama.

Mongolian Prime Minister Nambaryn Enkhbayar stayed in Japan from

November 19 to 21, 2003 for the 10th International Assistance Group Meeting

for Mongolia. Representatives of 23 countries and 7 international

organizations agreed to provide Mongolia with loan and assistance of up to

USD 335 million. The representatives complimented Mongolia on its

achievements in recent years in terms of maintaining macroeconomic stability,

reducing poverty, and facilitating economic development, and urged

Mongolia government to take more effective measures to work more closely

with donor countries and international organizations and make good use of

loan and aid projects of international organizations to build a solid foundation

for economic development. In response, Mongolia pledged to speed up

privatization process, make good use of the loans and aid supplied by

international society, and give priority to the development of mining industry,

animal product processing, initial processing of industrial products, tourism,

and information industry. Mongolia also spoke of the plan to invest heavily in

education and health and take steps to reduce poverty.

Cooperation between foreign affairs departments in Mongolia and Japan

has stepped up in recent years. In August 2004, Japanese FM Yoriko


Kawaguchi paid a visit to Mongolia and, besides meeting the President and

Prime Minister, also had a meeting with Mongolian FM L. Erdenechuluun.

This time, Mongolia handed information about the situation of the 10,100

Japanese citizens held captive in Mongolia following World War Two. In

return, Japan gave the Institute of Paleontology under the Mongolian

Academy of Sciences and Mongolian morin khuur heritage promotion and

preservation campaign USD 400,000 and USD 150,000 respectively. In

March 2005, Mongolian FM Munh-Orgil Tsend called on Japan. While there,

he met with Japanese Prime Minister Junichiro Koizumi and spoke with

Japanese FM Machimura Nobutaka. The Japanese pledged to continue their

support for Mongolia’s political and economic reform. Japan had finalized a

five-year assistance plan for Mongolia, and this time it pledged to offer

non-reimbursable aid of up to JPY 200 million to improve Mongolia’s food

industries.

Foreign officials from Mongolia and Japan met for a routine policy

negotiation in Ulan Bator on July 14, 2005. The meeting had been held six

times since 1996. In the meeting, the two sides summed up the bilateral

relationship since 2003 and exchanged views regarding the directions and

other details of the bilateral relationship between 2006 and 2006, regional

issues, and multilateral cooperation. Mongolian President, Prime Minister,

and Foreign Minister received the Japanese delegation headed by Foreign

Minister Makiko Tanaka. Japan pledged to continue its support for

Mongolia’s political and economic reforms and social development, and


explained the development aid projects it had planned for Mongolia. The two

sides agreed to maintain interactions between top government executives,

speed up the development of economic and trade relationships and

investments, and expand cultural and civilian exchanges. Japan also made

clear its stance toward United Nations reform and its aspiration of becoming a

permanent member of the United Nations Security Council (UNSC), and

thanked Mongolia for its long-term support for Japan’s bid to join the UNSC.3

Japan voiced its support for Mongolia to join the multilateral cooperation in

Asia Pacific. As Japan finds itself becoming more like a marginalized player

in Asia, it is aware of the importance of wining Mongolia over and keeping it

as an important ally in the bid to join the UNSC. Japan’s longstanding policy

of generous aid for countries in Asia and Africa (totaling USD 221 billion by

the end of 20034) did not really earn the support it needed for the UNSC issue.

Mongolia’s acquiescence could be of immeasurable value while Japan is

struggling to keep the UNSC bid alive. In short, Japan’s dollar diplomacy

toward Mongolia has paid off.

The mutual visits between top government executives and the written

agreements all provide political basis and legal protection for the stable

development of Mongolia-Japan relationship, and also serve as active

catalysts for the establishment and development of comprehensive partnership

between the two.

3 Alet, “Mongolia and Japan Held Diplomatic Meetings,” www.olloo.mn/2005-07-15.

4 Zhang Li-xia, “Japan to Give up UNSC Bid,” Global Times, August 22, 2005, p.2.


3. Japan’s Economic Aid for Mongolia

Japan provided various forms of economic aid to help Mongolia live

through economic hardship during the transition to democracy. Japan’s

economic aid for Mongolia totaled JPY 128.28 billion (around USD 1.2

billion) between 1991 and 2004, accounting for 70% of Mongolia’s foreign

loans and aids.5 Japan provides Mongolia with around USD 45-50 million in

favorable loan, USD 30-35 million in non-reimbursable aid, and over USD 10

million in science and technology cooperation and aid per year. Japan also

mobilizes international organizations and donor countries to provide

economic aid to Mongolia on a regular basis. Between 1991 and 2003, Japan

and international organizations including World Bank called the International

Assistance Group Meeting for Mongolia ten times to provide Mongolia

favorable loans and non-reimbursable aid of up to USD 3.6 billion. Of all the

countries and organizations, Japan was the largest donor country for Mongolia,

having promised the largest sum of aid and, as a matter of fact, over 40% of

the aid received by Mongolia came from Japan.

The focus of Japan’s aid to Mongolia gradually changed from medicine,

food, and infrastructure renovation in the early days to mainstream economic

and livelihood items. Japan gave away JPY 4.5 billion worth of medical

equipment, medicine, and food between 1990 and 1991, and has been giving

USD 25 million worth of food to Mongolia every year since 1991. Japan also

approved the KP-1 Program offering wheat to Mongolia to improve food

5 Adiysurong, “Japan as Mongolia’s Top Aid Provider,” The Mongol Messenger, February 22, 2005.


safety, and has provided Mongolia with over JPY 900 million worth of wheat

on 11 occasions based on the program. Japan also provided Mongolia with the

following: 60 large-sized sedans to be used in public transportation in Ulan

Bator, USD 16 million in cash to improve the highways in the Mongolian

capital, JPY 1.399 billion in cash to revive railway facilities in Mongolia, JPY

7.7 billion worth of technologies and facilities for Xiwo Aobao coal mine, one

of the larger coal mines in Mongolia, and high-efficiency diesel power plants

and farming machines for 144 counties (out of a total of 340) in Mongolia to

supply power to pastoral areas unconnected to central power supply and help

the herdsmen digging wells. Japan also provided Mongolia with loans to built

the country’s first ever ironworks (known as Darhan Ironworks), ushering in a

new era of steel production in Mongolia. With help from Japan, Mongolia

rebuilt the Ulan Bator Fourth Thermal Power Plant, its largest power plant,

and the Baganuur open-pit coal mine, the largest coal provider for the plant,

solving the problem of constant power failure in Ulan Bator. Mongolia also

used the aid from Japan to expand the Zamyn-Üüd Train Station, located right

opposite the Erenhot Harbor in China, thus improving domestic and

international transportation capacity of Mongolia’s railways. Japan also

renewed facilities of the Second General Hospital of Mongolia, transformed

water supply system in Ulan Bator, and co-founded Mongolia’s largest mobile

communications company which has a user population of 200,000.

(Population in Mongolia is around 2.5 million by the end of 2004.)

Japan has the habit of setting up a monument containing an image of the


Japanese national flag at all the facilities it helped build in Mongolia so as to

remind the Mongolians of its generosity. Assistance and aid are supposed to

be about helping the disadvantaged and the needy, with the giver not

expecting any sort of return from the taker. As the saying goes, “After you

give a rose to someone, your hands are left with the scent of the rose.” Yet

Japan has taken the trouble to remind Mongolia of even the tiniest favor it had

done the latter. Naturally, the conspicuous reminders have become something

of a burden to the recipient of Japan’s favors.

Since the signing of trade agreement in 1990, Mongolia and Japan have

further developed their economic and trade relationships. Mongolia has been

on the receiving end most of the time, with Japan being on the giving end in

the cooperative relationship. Despite occasional ups and downs, trade volume

has been growing slowly in recent years. According to statistics by the

Mongolia Bureau of Foreign Trade, there are 164 Japanese companies in

Mongolia, making direct investments of up to USD 68.599 million in

Mongolia (See Chart 1). Japan is the fifth largest foreign investment in

Mongolia. Mongolia, however, does not have one single company set up in

Japan.

Japan’s Investment in Mongolia

Chart 1 Thousand USD


100.0 74.8

1831.7

8476.9

12688.5

904.5

3793.0

17114.6

1517.2

6859.9

3201.0532.9

2765.33769.9

0.0

2000.0

4000.0

6000.0

8000.010000.0

12000.0

14000.0

16000.0

18000.0

1990

1991

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

.7.10

мян

ган ам

.дол

лар

Source: Gangbaoledao, “Economic Relationships between Private Sectors in

Japan and Mongolia,” Internaional Forumn on Economic

Development for Private Sector in Northeast Asia: Possibilities and

Challeges, March 14-15, 2005, Ulan Bator

According to National Statistics Office in Mongolia, the country’s

bilateral trade with Japan surged sevenfold from USD 17.40 million in 1990

to the 1999 peak of USD 125.9 million, then dropped to USD 49.10 million in

2002 and rose to USD 107.9 million in 2004 (See Chart 2). Mongolia’s import

from Japan is greater than export.


Mongolia-Japan Trade

Chart 2 Million USD

Монгол-Японы гадаад худалдааны нийт эргэлт

125.9112.8

9281.4

9.4 9.7 11.1

26.931.417.4

58.8

37.950.3

72.571.9 71.7 71.9

49.1

107.9

0

20

40

60

80

100

120

140

1985

1986

1987

1988

1989

1990

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

сая ам

.дол

лар

Source: Same as Chart 1

In 2004, Mongolia imported USD 74.50 million worth of goods from

Japan, and exported USD 33.50 million worth of goods to Japan. The exports

contain mostly raw and half-processed gold, animal products, wine, fluorite

powder, copper powder, and uniforms. The imports include mostly electric

appliances, communication equipment, building materials, mechanical

equipment, food, flour and flour products, vegetable oil, granulated sugar,

beer, cigarettes, medicine, dye colors, soap, and other daily commodities. At

present, Japan is Mongolia’s fifth largest trade partner after China, Russia, the

US, and the UK. Mongolia reckoned that inconvenient transportation and

unsatisfactory quality and quantity of Mongolian products had much to do


with the fluctuations in Mongolia-Japan trade volume. Daily commodities

made in Japan have lost their advantage in the Mongolian market to the

mass-produced, inexpensive ones from China, which are in popular demand

among the Mongolian middle and lower classes.

4. Japan Uses Economic Aid to Gain Access to Mongolia’s Natural Resources

1. Mongolia has a rich stock of mineral resources. Mongolia is a

country of vast territory, scarce population, and abundant natural resources.

Over 90 types of natural minerals, 3,663 mineralized points, and 417 sites of

mineral deposit have been identified in Mongolia. The natural minerals

include coal, gold, copper, molybdenum, tungsten, iron, tin, fluorite, lead,

zinc, uranium, rare earth elements, petroleum, precious stone, gypsum, etc.

Mongolia has one of the world’s largest identified deposits of copper,

phosphorous, fluorite, coal, and gypsum. According to Mongolian geologists,

Mongolia is second only to China, Russia, and the US in terms of mineral

deposits. Copper: As one of the most important basic materials for modern

industries, copper has long been perceived as an important strategic material.

As copper deposits are concentrated in limited parts of the world, big powers

have been going all out trying to gain control over copper deposits. Mongolia

currently has 240 million tons of identified high-quality copper deposits,

mostly found in northern, central, and some of the southern provinces

bordering China. The Erden copper and molybdenum mine, a joint venture

between Mongolia and Soviet Union since late 1970s, is one of the ten largest

copper mines in the world (also the largest in Asia). Exploitable for 65 years,


Erden is Mongolia’s largest income generator, accounting for 1/3 of

Mongolia’s exports. China replaced the Soviet Union as the sole recipient of

Erden mineral products in 1990. In 2002, Canada’s Ivanhoe Mines discovered

the massive Oyu Tolgoi copper and gold deposits in Mongolia’s Ömnögovi

Province, some 80 kilometers from the China-Mongolia border. At present,

Mongolia has the world’s thirteenth largest copper yield. Gold: Gold deposits

are widely distributed in large quantities across Mongolia. Mongolia currently

has 3,400 tons of gold reserve in over 130 identified gold mines in northern,

central, and some of the western, southern, and eastern provinces bordering

China. Since the introduction of “Gold Project” in 1992, Mongolia has

yielded over 70 tons of gold, with 14 tons being exploited in 2004. At present,

there are over 120 companies of multinational joint venture or sole ownership

exploiting gold in Mongolia. Petroleum: Mongolia’s petroleum reserves are

found mostly in southern and eastern provinces. Preliminary estimates suggest

that Mongolia’s petroleum reserves can translate into 6 to 8 billion barrels.

The 13 larger basins located in the eastern, southern, and western provinces

bordering China contain over 3 billion barrels of petroleum in reserve. At

present, Mongolia consumes 400,000 to 500,000 tons of petroleum products

per year, mostly imports from Russia. Mongolia has been buying small

quantities of petroleum products from China in recent years. Phosphorous:

According to Mongolian geologists, phosphorous reserve in Mongolia is the

largest in Asia and the fifth largest in the world. Over 50 phosphorous

deposits have been found in Khövsgöl Province and Zavkhan Province in the


north, containing 5.7 billion tons of phosphorous reserve. It is expected that

phosphorous products will become Mongolia’s another major export product

after copper, gold, and fluorite. In addition, Mongolia also possesses a rich

reserve of iron, coal, lead, and zinc. Most minerals in Mongolia are

high-quality, with iron stones containing on average 50% to 60% of iron,

higher than the international average of 20% to 30%. The coals exploited by

China’s Jiuquan Irons & Steel produce an average of 8,200 cal, whereas 5,000

cal would be termed as good quality in China.

2. Mongolia’s preferential mining policies: The mining industry is an

important sector of Mongolia’s national economy. In 2004, mining industry

accounts for 17.3% of Mongolia’s GDP, 64.7% of the country’s industrial

production value, and 57.5% of the country’s export. However, the financially

disadvantaged Mongolia has not been able to invest heavily in the

exploitation of underground resources. Mongolia has conducted geological

survey on only 16.4% of its territory to date, with over 80% of national

territory still unexplored. In the face of numerous unexploited resources and a

difficult national economy, Mongolia decided in mid 1990s to encourage

foreign investments to boost the mining industry to revive local economy.

Mongolia introduced the new Mineral Resources Act and accompanying

preferential packages in 1997 allowing foreign citizens and institutions to

apply for permission to explore and exploit the country’s mineral resources.

Permission for exploration is effective for three years, and can be extended

twice, two years at a time. Permission for exploitation is effective for sixty


years, and can be extended once for forty years. With its rich mineral

resources and preferential exploitation policies, Mongolia has become a

popular target among big powers. Countries like Canada, Russia, the US, and

Australia gained a foothold here long ago, and quite a few investors from

China, Japan, and Korea have followed their footsteps.

3. Japan has been eyeing Mongolia’s mineral resources. Despite

being an economic powerhouse, Japan falls short in terms of mineral

resources, having only certain reserves of coal and zinc. Japan is heavily

dependent on imported minerals, with 95.2% of coal, 99.7% of petroleum,

96.4% of natural gas, 100% of iron stones, 99.8% of copper, 100% of alumina,

94.9% of lead stones, 100% of nickel stones, 100% of phosphorous stones,

and 85.2% of zinc stones imported from overseas. As the world’s second

largest economy, Japan has been actively seeking to secure natural resources

to make up for its lack, and has set its eyes on Mongolia. The Darhan

Ironworks, built in early 1990s with the USD 65 million loans from Japan, is

the first ironwork in the history of Mongolia, with Japan being the sole

recipient of its 100,000-ton annual steel production. Earlier this year, Japan

secured the right to exploit Mongolia’s largest copper deposits. Following the

discovery of the massive Oyu Tolgoi copper and gold deposits in Ömnögovi

Province, Canada’s Ivanhoe Mines announced the discovery of what could be

the world’s largest high-quality coal deposit located near the China-Mongolia

border in southern Mongolia at the end of 2004. The coal deposit also

contains over 17 million tons of copper and 8 million tons of gold. Ivanhoe


Mines intended to look for a strategic partner by selling 8% to 18% of its

shares of the copper and gold mine. Following negotiations with companies

from Japan, Korea, and China, Ivanhoe Mines chose Japan’s Mitsui & Co. as

its partner in the end. The two parties signed a memorandum of understanding

in Ulan Bator in April 2005 to form a strategic alliance to co-exploit the Oyu

Tolgoi copper, gold, and coal in Ömnögovi and build transportation, power

supply, and other infrastructure in the region. Production is expected to begin

in 2007. The company also owns or controls the right to exploit resources on a

125,000-square kilometer land in Mongolia. In addition, Japan is heavily

dependent on the Middle East for petroleum supply, but constant warfare in

the region in recent years has forced Japan to look elsewhere for steady supply.

Far East Russia is Japan’s major target, with Mongolia also a likeable choice.

Japan has been trying to add to its reserve of uranium, an important material

for nuclear power, and Mongolia has plenty of uranium in Dornod Province.

Japan is also interested in Mongolia’s rich stock of gold, iron, and many other

mineral resources, while Mongolia is attracted to Japan’s capitals and

advanced technologies, which would come in handy in the exploitation of

resources and pose a serious threat to other foreign contenders. In fact, Japan

can attribute its successful entry to Mongolia’s natural resources to its

long-term relationship with Mongolia, especially its economic aid.

Another aspect of Mongolia that Japan finds attractive is tourism. The

beautiful nature, complete with blue sky, white clouds, and fresh air, provides

a huge attraction to the skiing and hunting-happy Japanese. The Japanese are


even into Mongolia’s desert because they have never seen anything like this at

home. The majority of foreign tourists having a good time in Mongolia are

Japanese, with over 10,000 visiting the country every year. Japan is also

fascinated with Mongolia’s nomad culture. In 1991, Japan signed an

agreement with Mongolia to dispatch volunteers to work there. Since then,

thousands of Japanese young people have traveled to Mongolia to observe the

nomad civilization and experience the ancient nomad lifestyle visible only in

Mongolia.

5. Active Educational and Cultural Exchanges and Cooperation between

Mongolia and Japan

Since its transition to democracy, Mongolia has seen wider educational

and cultural exchanges and cooperation with Japan. The Japanese realize that

the only way to win the hearts of the Mongolian people, besides economic

assistance, is to invest heavily in educational and cultural exchanges. After

1990, each year over 200 Mongolian nationals visit Japan for short-term or

long-term studies and academic exchange, and in 2004 Japan received 500

Mongolians on academic mission. Most of their expenses in Japan are

covered by the Japan government. Dozens of government and self-financed

Japanese citizens go to Mongolia each year to study the language, culture, art,

and folk customs at universities.

Japan launched the “Grassroots Project” (an assistance project directed at

ordinary citizens) in Mongolia in 2002, switching the focus of assistance from


economy to cultural exchange. In June 2002, the Mongolia-Japan Cultural

Center, built with the MNT 4 billion (around USD 3.40 million) from Japan,

was unveiled within the National University of Mongolia. The center provides

seminars, Japanese movies, and Japanese language sessions for young people

on a regular basis, and now has become an important venue for Mongolian

citizens wishing to learn more about Japan. In 2001, Japan single-handedly

funded the building of six primary schools in Mongolia, and set up a plan to

send 10 Mongolian teachers per year to training in Japan. Since 2003, Japan

has shifted its focus of education investments in Mongolia from the capital

Ulan Bator to the pastoral areas, especially the poverty-stricken provinces and

counties. In 2003, Japan invested USD 1.5 million in 70 schools in 21

provinces and cities in Mongolia under the “Grassroots Project.” In 2004,

Japan launched another 25 initiatives costing a total of MNT 2 billion under

the same project, including renovation work for primary and secondary school

buildings, kindergartens, and hospitals and clinics, financial assistance for the

disabled, computers, DVD players, and color TVs for schools, and power

generators, transformers, new water pipes, and wastewater treatment system

for rural villages. By the end of 2004, the Embassy of Japan in Mongolia,

Japan International Cooperation Agency in Mongolia, the government of

Mongolia, Asian Development Bank, and World Bank had invested MNT 19

billion (around USD 16 million) to renovate or expand 308 educational

institutions in Mongolia. In early September, 2005, Japan provided JPY 50

million to renew the facilities of the Mongolia College of Music and Dance.


The agreement was signed between Japanese Ambassador to Mongolia and

Mongolian Foreign Minister in a rally. Since 1984, Japan has provided JPY

713.3 million in cultural assistance for Mongolia on 17 occasions.6

Japan’s non-governmental organizations have also been active providing

educational and cultural assistance to Mongolia. The Japan International

Cooperation Agency built shortwave radio centers in Ulan Bator, Govi-Altai

Province, and Muren City. Japan’s “Mongolia Partner” organization gave

away 250 blackboards to schools in Mongolia’s pastoral areas. The

representative of “Peace Tide,” another Japanese NGO, signed an agreement

with the Japanese Ambassador to Mongolia in 2004 to give photocopying

facilities to schools in Mongolia under the Japan government policy of

encouraging NGOs to provide assistance for Mongolia. According to the

agreement, the NGO will work with the Mongolian Ministry of Education,

Culture and Science to provide USD 24,000 worth of facilities to 15 schools

in Ömnögovi Province and Dundgovi Province.

Exchange works both ways. In recent years, Japan and Mongolia have

been hosting mutual cultural festivals to each other every year. The Japanese

cultural festival in Mongolia provides a good venue for the people to

understand more about Japan’s history, culture, and social and economic

development. In the Mongolian cultural festival financed by Japan in Aichi

Prefecture in May 2005, there were long song, folk song, khoomei (an ancient

throat signing), dance, and folk music performances featuring instruments

6 Alatanhuyge, “Japan Helps in Culture and Art,” www.olloo.mn/2005-09-02.


such as the morin khuur given by Mongolian artists. The numbers were well

received by the Japanese audience. In the area of sports, Mongolia has been

sharing some great success with Japan in sumo wrestling. After just a few

years, Japan-based Mongolian sumo wrestlers have surpassed their Japanese

counterparts in terms of skills. Right now Japan has around 800 professional

sumo wrestlers, from the lowest rank of deshi to the highest rank of yokozuna.

The five highest ranks are yokozuna, ōzeki, sekiwake, komusubi, and

maegashira, with yokozuna being an unparalleled position. In the 300 years

since the birth of the rank of yokozuna, only 68 sumo wrestlers have been

awarded the title. Asashōryū Akinori, a Mongolian native born as

Dolgorsürengiin Dagvadorj, began professional sumo wrestling in 1999 and

became the 68th yokozuna in the history of the sport in Japan in 2002, after

merely 25 sumo matches. He is the only active yokozuna in Japan for the time

being, and also the country’s fastest promoted yokozuna. He is known for

adopting a fighting style of ferocious attacks and employing techniques, and

has become a rising star in the world of sumo wrestling in Japan, dubbed “a

lion that shocks the island state” by the Japanese. In the Natsu (summer)

Basho in 2005, Asashōryū scored straight victories and won the Emperor’s

Cup for the 15th time. Since Asashōryū’s promotion to the highest rank of

yokozuna in 2002, the Mongolians have become more into sumo wrestling.

Of the dozens of Mongolian wrestlers in Japan, four are competing at the

makuuchi division (top division), including Asashōryū (Dolgorsürengiin

Dagvadorj), Kyokushūzan Noboru (Davaagiin Batbayar), Kyokutenhō


Masaru (Nyamjavyn Tsevegnyam), and Asasekiryū Tarō (Badarchiin

Dashnyam). Another five Mongolian wrestlers are competing at the makushita

division (third highest vision), 16 are competing in the sandanme (fourth

highest division), and 6 are competing in the jonidan (fifth highest division).

Even the lowest division of jonokuchi has Mongolian wrestlers competing in

it. Sumo training stables in Japan, well aware of the fact that Mongolian

wrestling has a lot in common with sumo wrestling, prefer to train Mongolian

wrestlers who have more strength in their leg muscles. The Japanese have

begun to wonder why the top prize in sumo wrestling, a 300-year-old martial

art revered as a national sport in Japan, keeps being claimed by Mongolian

wrestlers with only a few years of professional experience under their belt,

and why Mongolian wrestlers keep outdoing their Japanese counterparts at

home or in sumo demonstrations abroad. It is said that the Japanese believe

that this might have something to do with the fact that the Mongolian have

been having beef and mutton as staple for generations.

Mongolia has a special place in the heart of the Japanese because they

are convinced that their ancestors are Mongolian. As such, Japan’s Takara

Shuze Co. made an agreement with Mongolian government agencies in 2001

to use Japan’s science and technology to study the Mongolian gene7 and

compare it with that of the Japanese in order to uncover the roots of illness

and develop new medicine.

7Zhang Ke-xi, “Japan to Work with Mongolia to Study Mongolian Gene,” www.sina.com.cn /2001－04－23. 8 Yang Tao, “Japan to Strengthen Ties with Mongolia,” Global Times, September 15, 2004, p.7.


6. Japan’s Purpose in Developing Relationship with Mongolia

Japan’s many years of investment has begun to pay off, and the

government and the people of Mongolia are grateful for Japan’s generosity.

After Japan was hit by a massive earthquake in November 2004, Mongolia

wasted no time in pledging to take care of the 1,500 victims in Niigata

Prefecture. As a return of Japan’s generosity, Mongolia built a Japanese

captive monument near Ulan Bator (see picture below) at the request of Japan.

Mongolia also stands by Japan on the six-party talks on Korean nuclear

issue,8 and even supports Japan’s bid to become a permanent member of the

UNSC.

Japan has been maintaining relationship with Mongolia for two reasons.

Firstly, Japan needs to expand its political influence in order to play a more

active role in Asia. Japan promoted the idea of East Asia economic

cooperation in the 1980s, but it needs the approval of China, North Korea,

South Korea, and Mongolia in East Asia to make the idea work. Of the four

countries, Mongolia poses the least threat to Japan. It would be reasonable for

Japan to begin by making friends with Mongolia to secure political and

economic advantages in East Asia cooperation. Secondly, Japan has been

developing relationship with Mongolia based on the latter’s urgent need for

foreign investments. This allows Japan to exercise greater influence on

Mongolia’s politics and economy, play a more active role in Mongolia, and

get ready for the mass exploitation of Mongolia’s natural resources.


(This paper was submitted to the review panel on February 27,

2006. Review was completed on March 3, 2006, and revision was

completed on March 27, 2006.)

Japanese Captive Monument in Mongolia

Photographed by Yang Tao in September 2004

OBrief Analysis of Important Issues O - mtac.gov.t · OBrief Analysis of Important Issues O. ......

Documents

Transcript of OBrief Analysis of Important Issues O - mtac.gov.t · OBrief Analysis of Important Issues O. ......