Sector Report on Transport, Logistic and Other Infrastructure ...

The Project for Formulation of National Comprehensive Development Plan Final Report: Sector Report on Transport, Logistic and Other Infrastructure, Digital Transformation

and ICT and Urban Development

Ministry of Construction and Urban Development (MCUD)

Japan International Cooperation Agency

(JICA)

National Development Agency (NDA)

Sector Report on Transport, Logistic and Other Infrastructure, Digital

Transformation and ICT and Urban Development for

The Project for Formulation of National Comprehensive Development Plan

December 2021

RECS International Inc. PADECO Co., Ltd.

Nippon Koei Co., Ltd.



Currency equivalents (as of 14 December 2020): MNT1.00=USD 0.00038 MNT1.00=JPY 0.04 Source: OANDA.COM (http://www.oanda.com)



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TABLE OF CONTENTS

Table of Contents ...................................................................................................................................... i List of Tables .......................................................................................................................................... iii List of Figures ........................................................................................................................................ iv Abbreviations ......................................................................................................................................... vi General vi Organizations......................................................................................................................................... vii Chapter 1. Transport and Logistic Infrastructure .............................................................................. 1-1

1.1 Mongolia’s Position in Global Logistic Development ............................................................. 1-1 1.1.1 Overview – Global transit market ................................................................................ 1-1 1.1.2 Relationship with neighboring countries...................................................................... 1-1 1.1.3 Transport and infrastructure development policy in China and its impacts on Mongolia

.................................................................................................................................... 1-3 1.2 Road Network in Mongolia ..................................................................................................... 1-4 1.3 Important Issues for Transport Development in Mongolia ...................................................... 1-5

1.3.1 Stage wise development of primary roads ................................................................... 1-6 1.3.2 Planning for sub-artery roads ....................................................................................... 1-8 1.3.3 Transport system to support industrial clusters ............................................................ 1-9 1.3.4 Access improvement to primary production and tourism development areas ............ 1-10 1.3.5 Transport infrastructure development to strengthen urban functions ......................... 1-11 1.3.6 Transport infrastructure development and operation to meet changing demands ...... 1-12 1.3.7 Conditions to improve railway system ....................................................................... 1-12 1.3.8 Possibility to improve and expand passenger railways .............................................. 1-12 1.3.9 Planning for air transport network ............................................................................. 1-13 1.3.10 Border infrastructure for trans-boundary commodity and passenger movements .... 1-14

1.4 Logistic Infrastructure and Transit Trade ............................................................................... 1-14 1.4.1 Overview on transit trade ........................................................................................... 1-14 1.4.2 Existing conditions of transit trade ............................................................................ 1-15 1.4.3 Summary of logistics movements .............................................................................. 1-19 1.4.4 Summary of logistic infrastructure ............................................................................. 1-24

1.5 Development Directions, Objectives and Strategy for Transport and Logistic Infrastructure 1-24 1.5.1 Development directions for transport and logistic infrastructure ............................... 1-24 1.5.2 Development objectives and strategy for transport and logistic infrastructure .......... 1-25

1.6 Projects for Transport and Logistic Infrastructure ................................................................. 1-26 1.6.1 Road projects .............................................................................................................. 1-26 1.6.2 Railway projects ......................................................................................................... 1-34 1.6.3 Other projects ............................................................................................................. 1-34 1.6.4 Cost estimation and 1.5-lanes road development concept ......................................... 1-35

Supplement to Chapter 1: Summary of Traffic and Passengers Survey ............................................. 1-37 Chapter 2. Power and Heat Supply, Information and Communications ........................................... 2-1

2.1 Directions of Infrastructure Sector ........................................................................................... 2-1 2.1.1 Classification of infrastructure sector in Mongolia ...................................................... 2-1 2.1.2 Spatial planning ............................................................................................................ 2-1 2.1.3 Objectives and strategy for infrastructure development ............................................... 2-3

2.2 Power and Heat Supply ......................................................................................................... 2-6 2.2.1 Current situation ........................................................................................................... 2-6 2.2.2 Stability of power supply ............................................................................................. 2-9 2.2.3 Institution and organization ........................................................................................ 2-10 1.1.1 Structure of energy sector .......................................................................................... 2-10 2.2.5 Structure of heating sector ......................................................................................... 2-12 2.2.6 Power and heating situation in Ulaanbaatar ............................................................... 2-12 2.2.7 Policy and programs ................................................................................................... 2-14 2.2.8 Long-term development policy 2050 ......................................................................... 2-15



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2.2.9 Current issues in power sector ................................................................................... 2-16 2.2.10 Strategies of power supply sector............................................................................. 2-17

1.2 Information and Communications ....................................................................................... 2-18 2.3.1 Current situations ....................................................................................................... 2-18 2.3.2 Institution and organization ........................................................................................ 2-20 2.3.3 Policy and programs ................................................................................................... 2-21 2.3.4 Current structure of information and communication infrastructure system ............. 2-22 2.3.5 Long-term development policy 2050 ......................................................................... 2-24 2.3.6 Current efforts for utilization of information and communication infrastructure ...... 2-24 2.3.7 Directions and strategy on information and communications .................................... 2-25 2.3.8 Challenges on information and communication sector .............................................. 2-26

Chapter 3. Chapter 3 Digital Transformation and ICT ..................................................................... 3-1 3.1 Legal Framework and Organization Structure of Digital Transformation and ICT ................. 3-1

3.1.1 Organization and structure ........................................................................................... 3-1 3.1.2 Legislative framework and key policy documents ....................................................... 3-3

3.2 Current Situations of Digital Transformation and ICT ......................................................... 3-8 3.2.1 Current situations ......................................................................................................... 3-8

3.3 Important Issues and Challenges in Mongolia ....................................................................... 3-17 3.3.1 Key issues for DX and ICT in developing countries .................................................. 3-17 3.3.2 Issues on DX and ICT application in Mongolia ......................................................... 3-19

3.4 Application of DX and ICT in Mongolia ............................................................................... 3-20 3.4.1 Digital technology applicability and measures in Mongolia ...................................... 3-20 1.1.1 ICT business ecosystem ............................................................................................. 3-21 3.4.3 Digital services provided by the Government ............................................................ 3-24 3.4.4 ICT industrial cluster .................................................................................................. 3-30 3.4.5 Status and applicability of each sector on DX and ICT ............................................. 3-31 3.4.6 ICT infrastructure development ................................................................................. 3-35

3.5 Key Initiatives and Measures in Mongolia ............................................................................ 3-37 3.5.1 Key initiatives for ICT development .......................................................................... 3-37 3.5.2 Key measures for ICT development ........................................................................... 3-42

3.6 Direction and Strategy on DX and ICT ................................................................................. 3-44 3.6.1 Direction toward comprehensive issues on DX and ICT ........................................... 3-44 3.6.2 Strategy and suggestion on DX and ICT application ................................................. 3-48

Chapter 4. Chapter 4 Urban Development ........................................................................................ 4-1 4.1 Legal Framework of Urban Planning and Development ......................................................... 4-1

4.1.1 Legal status of settlements ........................................................................................... 4-1 4.1.2 Law on urban development .......................................................................................... 4-1 4.1.3 Mid-term strategy for Mongolia's regional development ............................................. 4-3 4.1.4 Law on Regional Development Management and Coordination of Mongolia ............ 4-4 4.1.5 Human settlement plan ................................................................................................. 4-4

4.2 Development Issues for Urban and Settlement Development and Management ..................... 4-5 4.2.1 Discrepancies between legal status and actual urban functions ................................... 4-5 4.2.2 Planned urbanization .................................................................................................. 4-13 4.2.3 Redevelopment of Ger district ................................................................................... 4-17 4.2.4 Urban and infrastructure development to enhance cities’ functions .......................... 4-20 4.2.5 Update of Ulaanbaatar master plan ............................................................................ 4-20 4.2.6 Countermeasures against over-concentration to Ulaanbaatar .................................... 4-22 4.2.7 Housing provision with public utilities in Ulaanbaatar .............................................. 4-22 4.2.8 Promotion of economic development and settlements in border areas ...................... 4-23

4.3 Development Objectives and Strategy for Urban and Settlement Development ................... 4-23 4.4 Recommended Measures in Urban Sector ............................................................................. 4-24

4.4.1 Ulaanbaatar and Capital Region ................................................................................. 4-24 4.4.2 Ger district .................................................................................................................. 4-24 4.4.3 Urban and settlement planning ................................................................................... 4-25



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LIST OF TABLES

Table 1.3.1 Pavement Conditions of Road Network in Mongolia ................................................... 1-6 Table 1.3.2 Freight Carried in Mongolia ........................................................................................ 1-12 Table 1.3.3 Passenger Carried in Mongolia ................................................................................... 1-13 Table 1.4.1 Reference of Railway Operation Performance ............................................................ 1-16 Table 1.4.2 Level of Service Comparison: Bus and Rail for Destinations in 300-600 km Range . 1-22 Table 1.4.3 Share of Ulaanbaatar Based Transport Demand by Distance Range .......................... 1-22 Table 1.6.1 Phased Development of the Ring Artery ..................................................................... 1-26 Table 1.6.2 Phased Improvement of the Inter-Aimag Roads ......................................................... 1-27 Table 1.6.3 Phased Development of Aimag Special Purpose Roads (To be improved) ................. 1-29 Table 1.6.4 Paved Road Length Expansion – Phased Progress ..................................................... 1-30 Table 1.6.5 Growth Assumptions for Traffic Projections ............................................................... 1-32 Table 1.6.6 Summary of Costs by Road Category (US$ million) .................................................. 1-36 Table 2.1.1 Types of Infrastructure .................................................................................................. 2-2 Table 2.2.1 Reliable Electricity Penetration Rate in Mongolia ........................................................ 2-8 Table 2.2.2 SAIFI in Mongolia and Other Developing Countries ................................................... 2-9 Table 2.2.3 Responsibility of Power Sector Organizations ............................................................ 2-10 Table 2.2.4 Forecast for Energy Production ................................................................................... 2-16 Table 2.3.1 Responsibilities of Information and Communication Infrastructure Related

Organizations .............................................................................................................. 2-21 Table 3.1.1 Phasing of Objective: Foster Effective E-governance That Promotes Industrial

Development and Human Development ....................................................................... 3-4 Table 3.2.1 Number of Mobile Phone Subscribers, Internet Users and Other Phone Users ............ 3-8 Table 3.2.2 Number of Computers and Computers per 1,000 Inhabitants ....................................... 3-8 Table 3.2.3 Comparison Between Mongolia, Estonia and Japan on E-government ...................... 3-10 Table 3.2.4 Number of ICT Students in Universities and Colleges ............................................... 3-11 Table 3.2.5 Number of ICT Students in the National University of Mongolia .............................. 3-11 Table 3.2.6 ICT Sector’s Key Economic Indicators, 2018 ............................................................. 3-13 Table 3.2.7 Constraints to Starting New Business in Mongolia..................................................... 3-15 Table 3.2.8 Statistics Related to Offshore Development in Mongolia and Emerging Countries ... 3-17 Table 3.4.1 Scope of Representative on DX and ICT Application................................................. 3-21 Table 3.4.2 SWOT Analysis on IT Ecosystem of Mongolia .......................................................... 3-24 Table 3.4.3 Comparison with Developed Countries by E-Government Development Index, 2020

..................................................................................................................................... 3-25 Table 3.4.4 Comparison with Developing Countries by E-Government Development Index, 2020

..................................................................................................................................... 3-25 Table 3.4.5 Implementation of Strategic Plan for Creation Mongolian NSDI ............................... 3-27 Table 3.4.6 Comparison of Download Speeds in Developed and Developing Countries, 2021 .... 3-35 Table 3.5.1 Components of Smart Ulaanbaatar Program ............................................................... 3-40 Table 3.6.1 Measures for Establishment of Ecosystem on ICT Sector .......................................... 3-46 Table 3.6.3 SWOT Analysis on Strategy of DX and ICT Application of Mongolia ...................... 3-50 Table 4.1.1 Classification of Settlements in Mongolian Law .......................................................... 4-1 Table 4.1.2 Classification of Settlements in Ministry Decree .......................................................... 4-1 Table 4.1.3 Documents of Urban Development ............................................................................... 4-2 Table 4.1.4 Categories of Land Use Zoning in Law on Urban Development .................................. 4-2 Table 4.1.5 Economic Regions of Mongolia .................................................................................... 4-3 Table 4.1.6 Deliverables of the HSP ................................................................................................ 4-4 Table 4.2.1 Population of 30 Cities to be Included in Urban Hierarchy .......................................... 4-5 Table 4.2.2 Summary of Existing Urban Hierarchy Analysis ........................................................ 4-11 Table 4.2.3 Discrepancies between Existing Urban Hierarchy and Legal Status .......................... 4-13 Table 4.2.4 Current Status of General Development Plan Formulation ......................................... 4-16 Table 4.2.5 Categories of Land Use Zoning in Ulaanbaatar .......................................................... 4-21 Table 4.2.6 Solutions to Over-Concentration to Ulaanbaatar ........................................................ 4-22



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LIST OF FIGURES

Figure 1.1.1 International Global Container Volumes .................................................................. 1-1 Figure 1.1.2 Transit Rail Container Traffic from China to Europe in 2016 ................................. 1-2 Figure 1.1.3 Transit Traffic between the Russian Federation and the People’s Republic of China

through Mongolia ..................................................................................................... 1-3 Figure 1.1.4 Logistics Hub Locations in Inland China ................................................................. 1-4 Figure 1.2.1 Current Status of Road Network (2018) .................................................................. 1-5 Figure 1.2.2 Current Status of Road Network (end of 2019) ....................................................... 1-5 Figure 1.3.1 Calibrated Traffic Flows on Main Highways According to the Survey in 2019 ...... 1-7 Figure 1.3.2 Construction Schedule of Paved Road in 2021-2030............................................... 1-8 Figure 1.3.3 Change in Number and Distribution of Livestock by Aimag, 1990 - 2015 ........... 1-10 Figure 1.3.4 Real-time Bus Operation Monitoring System in Mongolia ................................... 1-11 Figure 1.3.5 New Ulaanbaatar International Airport .................................................................. 1-13 Figure 1.3.6 Operation Time of Mongolian Borders .................................................................. 1-14 Figure 1.4.1 General Freight Railway Operational Performance ............................................... 1-15 Figure 1.4.2 Railway Freight Growth in Categories .................................................................. 1-16 Figure 1.4.3 Railway Transit Change in Commodities .............................................................. 1-17 Figure 1.4.4 Efficiency of Railway Transit Loading Ratio at Border Crossing Points .............. 1-17 Figure 1.4.5 Import Change by Entrée Locations ...................................................................... 1-18 Figure 1.4.6 Export Change by Entrée Locations ...................................................................... 1-19 Figure 1.4.7 Major Import/Export/Transit Movements in Mongolia (2018) .............................. 1-20 Figure 1.4.8 Railway Passengers by Category ........................................................................... 1-21 Figure 1.4.9 Passenger Mode Share by Travel Length in Mongolia .......................................... 1-21 Figure 1.4.10 Railway Freight Yard Comparison at China Border with Mongolia and Kazakhstan ....

.................................................................................................................................. 1-22 Figure 1.4.11 Omega Curves in Alignment of North-South Mainline from Ulaanbaatar to Nalaikh .

.................................................................................................................................. 1-23 Figure 1.6.1 Locations of Ring Artery Road Sections ................................................................ 1-28 Figure 1.6.2 Locations of Inter-Aimag Roads to Be Improved .................................................. 1-28 Figure 1.6.3 Locations of Aimag Special Purpose Roads .......................................................... 1-30 Figure 1.6.4 Phasing of Aimag Special Purpose Roads ............................................................. 1-31 Figure 1.6.5 Results of Road Traffic Assessment for 2025, 2030 and 2040 .............................. 1-33 Figure S.1 CTC counted Traffic Volume (Seasonal & Regional Summary) ........................... 1-38 Figure S.2 Goods Movement Characteristics by Regions ....................................................... 1-39 Figure S.3 Gender and Age Comparison for Four Transport Modes’ Passengers ................... 1-40 Figure S.4 Gender and Age Comparison for Four Transport Modes’ Passengers ................... 1-41 Figure S.5 Income Level Distribution for Four Modes ........................................................... 1-42 Figure 2.1.1 Classification of Infrastructure Requirement in Mongolia ...................................... 2-1 Figure 2.1.2 Concept of Spatial Framework................................................................................. 2-2 Figure 2.1.3 Problem Structure Related to Infrastructure Sector ................................................. 2-3 Figure 2.1.4 Relationships between Problem Structure, Development Objective and Basic

Strategy .................................................................................................................. 2-4 Figure 2.2.1 Install Capacity of Power Plants .............................................................................. 2-7 Figure 2.2.2 Electricity Production and Import ............................................................................ 2-7 Figure 2.2.3 Balance of Electricity in 2015 .................................................................................. 2-8 Figure 2.2.4 Electricity and Heat Demand Projection .................................................................. 2-9 Figure 2.2.5 SAIFI in Central Region in Mongolia .................................................................... 2-10 Figure 2.2.6 Current Status of Power Supply System in Mongolia ............................................ 2-12 Figure 2.2.8 Heating System in Ulaanbaatar .............................................................................. 2-13 Figure 2.2.7 Power System in Ulaanbaatar ................................................................................ 2-13 Figure 2.3.1 Number of Mobile Phones Subscribers .................................................................. 2-19 Figure 2.3.2 Number of Mobile Broadband Subscription .......................................................... 2-20 Figure 2.3.3 Organization Chart of CITA ................................................................................... 2-20



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Figure 2.3.4 Telecommunication Network in Mongolia ............................................................ 2-23 Figure 2.3.5 Transmission Backbone Network in Mongolia ...................................................... 2-23 Figure 2.3.6 International Fibre Optic Cables in Mongolia........................................................ 2-24 Figure 2.3.7 View of Iki City ...................................................................................................... 2-26 Figure 2.3.8 Location of Iki City ................................................................................................ 2-26 Figure 3.1.1 CITA Structure and Affiliated Companies and Organization ................................... 3-1 Figure 3.1.2 E-Government Policy Milestones ............................................................................ 3-3 Figure 3.2.1 Number of Employees in ICT Sector ..................................................................... 3-12 Figure 3.2.2 ICT Development Index (IDI) Comparison ........................................................... 3-13 Figure 3.2.3 Total Revenue of ICT Sector in Mongolia ............................................................. 3-14 Figure 3.2.4 Total Investment of ICT Sector in Mongolia ......................................................... 3-14 Figure 3.2.5 Infographics of Women’s Business Center and Incubator ..................................... 3-15 Figure 3.4.1 Relationship Between Major Technologies and Major Issues ............................... 3-20 Figure 3.4.2 Simplified Model of ICT Ecosystem ..................................................................... 3-23 Figure 3.4.3 Enhanced ICT Ecosystem Framework ................................................................... 3-23 Figure 3.4.4 Structure of Electronic Service Delivery ............................................................... 3-26 Figure 3.4.5 Geo Portal System .................................................................................................. 3-28 Figure 3.4.6 Cadastral Database Provided by GIS ..................................................................... 3-28 Figure 3.4.7 Mongolian Land Exchange System ....................................................................... 3-29 Figure 3.4.8 Mobile Broadband Subscription (1000 subscriptions) ........................................... 3-36 Figure 3.4.9 Mobile Data Usage Trend ...................................................................................... 3-36 Figure 3.5.1 E-Mongolia Portal .................................................................................................. 3-38 Figure 3.5.2 Database for Ulaanbaatar City Digital Maps ......................................................... 3-41 Figure 3.5.3 Components of Smart Mongolia Project ................................................................ 3-42 Figure 3.5.4 Personal ID Card .................................................................................................... 3-43 Figure 3.6.1 Concept of Open Government Data ....................................................................... 3-45 Figure 3.6.2 Yokohama City Open Data Portal Site ................................................................... 3-46 Figure 3.6.4 Digital Transformation Structure ........................................................................... 3-49 Figure 3.6.5 Mongolia’s DX Strategy and Main Directions ....................................................... 3-50 Figure 3.6.6 Mutual Cooperation Framework between Public and Private Sectors ................... 3-52 Figure 3.6.7 Economic “Ecosystem” Utilizing Open Data ........................................................ 3-54 Figure 4.2.1 Evaluation by Population Size of Cites .................................................................... 4-7 Figure 4.2.2 Evaluation by Administrative Status ........................................................................ 4-7 Figure 4.2.3 Evaluation by Distance to Ulaanbaatar .................................................................... 4-8 Figure 4.3.4 Evaluation of GRDP ................................................................................................ 4-9 Figure 4.2.5 Evaluation by Access to International Trading Port ................................................. 4-9 Figure 4.2.6 Evaluation Airport Access ...................................................................................... 4-10 Figure 4.2.7 Evaluation by Traffic Volume on Artery Roads ..................................................... 4-10 Figure 4.2.8 Evaluation by Railway Services ............................................................................. 4-11 Figure 4.2.9 Existing Urban Hierarchy ...................................................................................... 4-12 Figure 4.2.10 Planned Land Use in Unified territory Foundation ................................................ 4-14 Figure 4.2.11 Scheme of Property Contribution in Sample of Land Reorganization ................... 4-15 Figure 4.2.12 Ger District Map in Ulaanbaatar ............................................................................ 4-18 Figure 4.2.13 Land Use Plan in Ulaanbaatar Master Plan ............................................................ 4-21



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ABBREVIATIONS

GENERAL

3R Reduce Reuse Recycle 4WG Four Wheel Drive

AADT Annual Average Daily Traffic AEO Authorized Economic Operator

AI Artificial Intelligence AUES Altai- Uliastai Energy System

BRI Belt and Road Initiative

CAREC Central Asia Regional Economic Community

CES Central Energy System CHP combined heat and power

DS Dump Site EAEU Eurasian Economic Union

EES Eastern Energy System EPA Economic Partnership Agreement

FTA Free Trade Agreement FttH Fiber to the Home

FttP Fiber to the Premises FTZ Free Trade Zone

GB Gigabyte GDP Gross Domestic Product

GIS Geographic Information System GPS global positioning system

GRDP Gross Regional Domestic Product GVW Gross Vehicle Weight

GW Gigawatt HSP Human Settlement Plan

ICT Information and Communication Technology

IoT Internet of Things

IRI International Roughness Index IT Information Technology

IT/R Interim Report LBT Labor Based Technology

LCC low cost carrier

LLC Limited Liability Company LTDP2050 Long Term Deployment Plan 2050

M/P Master Plan MDDS Moringiin Davaa dump site

MNT Mongolia Tughrik MW Megawatt

NEDS Narangiin Enger

NUBIA New Ulaanbaatar International Airport

OSBP One Stop Border Post PCU Passenger Car Unit

PDCA Plan Do Check Action PPP Public-Private Partnership

PRC People's Republic of China PV Passenger Vehicle

RDP Regional Development Policy RSI Road Side Interviews Surveys

SAIFI System Average Interruption Frequency Index

SDGs Sustainable Development Goals

SDV 2030 Sustainable Development Vision 2030

SEZ Special Economic Zone SUV Sports Utility Vehicle

TDDS Tsagaan Davaa TEU Twenty-Foot Equivalent Unit

TFR Total Fertility Rate TIR Transports Internationaux Routiers

TOR Terms of Reference

TSCS Transport Sector Coordinating Society

TV Television UBTZ Ulaanbaatar Trade Zone

ULTF Unified Land Territory Foundation WAMS wide area monitoring system

WES Western Energy System



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ORGANIZATIONS

ADA Asian Dinosaur Association ADB Asian Development Bank

ALAMGaC Agency for Land Administration and Management, Geodesy and Cartography

CDC Construction and Development Center

CITA Communications and Information Technology Authority

CRC Communications Regulatory Commission of Mongolia

DEGSM Department of Electricity and Gas Supply Malaysia

EBRD European Bank for Reconstruction and Development

EC Election Commission

ERC Energy Regulatory Commission

ESCAP United Nations Economic and Social Commission for Asia and the Pacific

EU European Union

ISO International Organization for Standardization

ITPTA Mongolia Information Technology, Post and Telecommunication Authority

JICA Japan International Cooperation Agency

JPT JICA Project Team

KTZ National Railway Company of Kazakhstan

MCUD Ministry of Construction and Urban Development

MEA Metropolitan Electricity Authority

MET Ministry of Environment and Tourism MOE Ministry of Energy

MOH Ministry of Health

MRTD Ministry of Road and Transportation Development

MTZ National Railway Company of Mongolia

NDA National Development Agency NDC National Dispatching Center

NTA National Transport Authority OSNAAU

G Housing and Public Utilities Authority of Ulaanbaatar City

PLN Perusahaan Listrik Negara PWG Project Working Group

SWG Sub-Working Group

TSCC Transport Sector Coordinating Committee

UNIDO United Nations Industrial Development Organization

USUG Water Supply and Sewerage Authority of Ulaanbaatar City

WB World Bank



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Chapter 1. Transport and Logistic Infrastructure

1.1 Mongolia’s Position in Global Logistic Development

1.1.1 Overview – Global transit market

As the global logistics develop in the 21st century, position of Mongolia in connecting adjacent countries has been consistently increasing. Various regional agreements and initiatives have been promoted corresponding to the global logistics. Since 2013, the China’s Belt and Road Initiative (BRI) has been promoting regional integration connecting transport infrastructure of China toward Mongolia, Russia, and Europe. In June 2016, as an important part of the BRI, Mongolia, Russia and China established the economic corridor program to strengthen trilateral cooperation further. Within the scope of the program, 32 projects were selected including 13 transportation infrastructure projects. The Joint Investment Planning Center was established in Ulaanbaatar for its implementation.1 Also, in May 2018, China has acceded to the TIR (Transports Internationaux Routiers) Convention, a multilateral treaty that streamlines administration for international road transport.

Mongolia is located neighboring on China and Russia, and in the midway between Eastern Asia and Europe. The rapid expansion of container transit traffic between Europe and Eastern Asia needs to be analyzed for understanding the Mongolian international logistics. Containers between Eastern Asia and Europe accounted for approximately 11.1% of global demand in 2018, which was almost equivalent to the demand between Eastern Asia and Northern America (12.9%) as shown in Figure 1.1.1.

Source: Nippon Yusen Kabushiki Kaisha (2018) based on Drewry

Figure 1.1.1 International Global Container Volumes

1.1.2 Relationship with neighboring countries

Economic development in the inland regions of China has been accelerated by policies for the Chinese Western Regional Development and the subsequent BRI initiative. Surface transport, mainly by railway, has a major role in carrying goods between the inland China and Europe. The surface rail container transport between the inland China and Europe has increased steadily and reached around

1 https://theubposts.com/over-30-projects-lined-up-for-trilateral-economic-corridor/

Total 2,307.3 (11.1%)

Total 2,676.4 (12.9%)



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120,000 to 150,000 twenty-foot equivalent unit (TEU) in 2016, though it is still a small proportion to the total demand between China and Europe (Figure 1.1.2).

Russia has played a major role in mobilizing containers between East Asia and Europe with the Trans-Siberian railway and the Northern Sea route. Eurasian Economic Union (EAEU) was also established in 2015 for trade facilitation among member counters including Russia, Kazakhstan, Kyrgyz, Armenia, and Belarus. Russia is promoting trade facilitation policies with the former Soviet Union countries and aiming to increase the trade with China in line with the BRI. Russian economy has recently become more strongly dependent on Chinese trade. China has become the largest trade partner for Russia with the trade share of 21.2% in import and 10.45% in export in 2017, overtaking Germany (9.96% and 4.31%). Russia has become the largest crude oil importer from China, overtaking Saudi Arabia. Both countries aim at increasing the bilateral trade value of US$85.9 billion in 2017 to US$100 billion by 2018 and US$200 billion by 20242.

Kazakhstan neighboring with Russia and China has roles in connecting both countries and in providing both neighbors with the gateways of rapidly growing Chinese trade toward the west and Russian trade toward the south. The national railway company of Kazakhstan (KTZ) collaborating with Chinese enterprises (COSCO SHIPPING Corporation Limited and the Lianyun port) has established dry ports for transshipping cargos to Chinese railway having a different gauge. KTZ has increased its handling transit cargos rapidly and raised its handling targets of 2.0 million TEU by 2025, from 1.7 million TEU by 2020.

Source: Ministry or Road and Transportation Development (MRTD)

Figure 1.1.2 Transit Rail Container Traffic from China to Europe in 2016

The Mongolian railway with Russian gauge (1,520 mm) requires transshipment facilities at the borders with Chinese railway as KTZ does. This transshipment entails additional time and cost during transport. The logistics center in Zamyn-Uud funded by Asia Development Bank (ADB) is expected to start its operation from April 2019 and to double the transshipment capacity between railways and facilitates loading and unloading of truck cargos. The national railway company of Mongolia (MTZ) was approved by the Government of Mongolia in 2013 to organize the participation of private sector representatives to invest in the logistics center in the Tianjin port in China. Another key issue of transit is the one-way transportation of international rail cargo. Transit traffic of the wood from Russia to China accounts for the majority of transit rail cargo in Mongolia, and there exist no sizable cargos in the opposite direction from China to Russia (Figure 1.1.3).

2 For example, http://english.mofcom.gov.cn/article/newsrelease/policyreleasing/201909/20190902901188.shtml. This article shows the heads of the two countries agreed necessary actions to achieve US$200 billion turnover by 2024, at the 24th regular meeting, 16-18 September 2019.



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Source: ADB (2018) based on MRTD

Figure 1.1.3 Transit Traffic between the Russian Federation and the People’s Republic of China through Mongolia

1.1.3 Transport and infrastructure development policy in China and its impacts on Mongolia

(1) China’s policies

The “Adjustment and Revival of the Logistics Industry” adopted by the Chinese government selected 37 hub locations in China in 2009 and aimed at improving the infrastructure network of road and rail transport accordingly. Urumqi was selected as a national hub, and Baotou and Hohhot as regional hubs. It also aimed at improving the accessibility to the cities close to the border with Mongolia.

The “Midterm Plan (2015-2020) for National Logistics Hub Locations”3 by the Chinese government expanded the hub locations into 103 locations, and published the plan for transport infrastructure development. The plan aimed at the expansion of the transport infrastructure in the inland China as before. On the other hand, the plan focused on the enhancement of logistics service, in addition to just hard infrastructure development. 4 At the end of 2018, “National Logistics Hub Layouts and Construction Regulations”5 was issued by the Chinese government to continue expanding the hub locations into 212 locations and divided the logistics cities by each logistics function. In particular, Hulun Buir in Manzhouli, Xilin, and Gol (Erenhot) closed to the Mongolian border were added in the list of the hub locations (Figure 1.1.4).

(2) Mongolia’s response

In line with the advancement of logistics, facilitation for customs clearance has been promoted. In July 2017, the "Announcement of the General Administration of Customs on the Implementation of National Customs Clearance Integration Regime Reform (Announcement No.25)" was issued, announcing law enforcement nationally and customs clearance efficiency to be improved for single-window services. The reform allows the local customs offices to complete customs procedures and services. Also, since 2016, the Customs has launched authorized economic operators (AEO) certification and cross-international approval. The AEO is an accreditation system for importers and exporters with a compliance system and is expected to reduce customs expenses and time by 50% or more. Currently, there are 36 certified countries including Mongolia. The reform was sought by private enterprises, and the reform of the customs system was promoted under the BRI initiative.

The international road transport agreement was concluded between China and Mongolia in 1991, and it allows vehicles from one country to travel within the designated area in the other. Although the

3 https://spc.jst.go.jp/investigation/downloads/r_2016_03.pdf 4 Machida, I. (2018). The BRI from the Viewpoint of Transport and Infrastructure Development Policy.

Transportation & Economy December 2018. 5 http://www.ndrc.gov.cn/gzdt/201812/W020181224649723817984.pdf



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sections have been limited within about 50 km around the border, cargos can be directly transported without transshipment. Chinese accession to the TIR Convention in July 2016 was a major movement in this sector. The accession will enable to move goods in sealed vehicles or containers from a customs office in China to a customs office in other TIR member countries such as neighboring Mongolia and Russia without time-consuming border checks at intermediate borders. The service is operated at only five locations including Erenhot and Manzhouli. TIR was launched to secure mutual transportation among European countries, joined by Russia and Central Asian countries, and with China’s affiliation allows Chinese trucks to move goods to a customs office in Europe. The participation will also enable Mongolian trucks to deliver European cargos to China.

Meanwhile, the standardization of road infrastructure is in progress. Bangkok based United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has just begun discussions on regulations for gross vehicle weight (GVW) and axial load on the Asian Highway in 2019. Axial load regulations affect pavement maintenance and transportation efficiency of private operators. How the conditions for road maintenance and vehicle regulations are affected by these regulations need to be watched carefully.

Source: Doris Fung Economist

Figure 1.1.4 Logistics Hub Locations in Inland China

1.2 Road Network in Mongolia

Figure 1.2.1 shows the status of the national road network development as of 2018, where red straight lines present the achievement of the paved road network expansion from Ulaanbaatar. Figure 1.2.2 shows the updated status of the national road network by the end of 2019. A total of 1,773.33 km of paved roads was built and put into operation during 2016-19. Of the national quality road network, 7,227.5 km or 48.4 % was connected to the capital city by 17 Aimag centers, 95 Soums and five border crossings by paved roads. The black straight lines show the target sections to be completed by 2020.

The national policy aimed to connect the Ulaanbaatar and each Aimag Center with paved road by 2020, and four Aimag Centers, i.e., Altai, Uliastai, Khovd and Olgii were not connected as the internal road sections in the Bayankhongor Aimag and Zavkhan Aimag were under construction as of the end of 2019. The rehabilitation, safety improvements, and 4-lanes expansion of Ulaanbaatar – Darkhan road, an arterial part of the road network connecting Russia and China, have been conducted with the support of



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ADB /European Bank for Reconstruction and Development (EBRD).

Source: JICA Project Team based on Road Transportation Development Center (2018)

Figure 1.2.1 Current Status of Road Network (2018)

Source: Statistical information of road and transportation sector-2019, MRTD

Figure 1.2.2 Current Status of Road Network (end of 2019)

1.3 Important Issues for Transport Development in Mongolia

Through analyses on existing study reports and policy documents, limited field surveys and discussions with experts and other stakeholders, important issues have been identified for transport development in Mongolia. They are listed below. Each issue is discussed in sub-sequent sections.

(a) Prioritization of road sections for stage wise development of primary road network for economic corridor development;

(b) Planning for sub-artery roads to expand economic development by corridors;

Red: Already Paved in 2019 Black: will be paved by 2020



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(c) Planning for transport system to support industrial clusters including access roads to link agricultural areas and primary processing, primary and secondary artery roads to link indigenous industries and export industries, airports, and other terminal facilities, and related logistic facilities;

(d) Measures to improve access to primary production and tourism development area; (e) Development of transport infrastructure to strengthen urban functions, consistent with urban

hierarchical structure, city networking linked with neighboring regions and countries as well as city road improvement in major cities;

(f) Need for transport infrastructure development and operation to meet changing demands due to regional development;

(g) Conditions to improve railway system linking regions and with the neighboring countries to make it part of the multi-modal transport system for commodity transport;

(h) Possibility to improve and expand passenger railways; (i) Planning for air transport network with improvement of airport facilities and functional division

of airports at different hierarchical tiers; (j) Border facilities and associated institutional measures to facilitate trans-boundary commodity

and passenger movements.

1.3.1 Stage wise development of primary roads

The present road network in Mongolia comprises 15,446km in length, of which 45.5% are paved in 2018, as shown in Table 1.3.1.

Table 1.3.1 Pavement Conditions of Road Network in Mongolia

Pavement condition Length (km) Ratio Asphalt 7,024.3 45.5% Being built 562.8 3.6% Gravel 275.79 1.8% Improved earth 203.8 1.3% Normal earth 7,380.12 47.8% Total 15,446.8

Source: MRTD

The traffic volume distribution on state roads in Mongolia is shown in Figure 1.3.1. The radial roads emanating from Ulaanbaatar are paved, but the inter-Aimag roads in western and eastern Mongolia are operated as gravel or earth road. The traffic survey conducted as part of the NCDP show freight traffics on road between mines and Ulaanbaatar, and in particular heavy freight movement are observed from the Tavan Tolgoi mines to China borders. It should be noted that most of sectional traffic volume as annual average daily traffic (AADT) in passenger cars are smaller than 500 vehicles per day, and the range of AADT will not exceed 18,000 per day, which could be handled by two-lane road.



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Source: JICA project Team

Figure 1.3.1 Calibrated Traffic Flows on Main Highways According to the Survey in 2019

Two routes are proposed by previous studies including the JICA preliminary study in 2017 for the economic corridor developments, i.e., the green development corridor in the east-west direction, and the industrial growth corridor for north-south direction. The road network prioritization has been summarized by the previous study as shown in Figure 1.3.2, presenting the economic corridor development with peripheral roads in parallel directions. It should be noted that the expressway development along the north-south industrial growth corridor (Asia Highway: AH3 expressway, 997km) and prioritized sections for new pavement 15,276km were proposed. The action plan of the Mongolian Government (2016-2020), section 2.108~2.124, explains the prioritized development policies for the road transport and logistics.

The Transport Sector Coordinating Society of the Central Asia Regional Economic Community (TSCS-CAREC) reported updated status of its designated corridor development, as of April 2018, including five road, one airport and three railway projects, for engineering specification, financial sources and development status6.

A phased road development program for the NCDP is prepared covering the following steps in line with the NCDP phasing.

(a) Designation of target economic corridor, identification of target road and railway sections, and clarification of the present status of development.

(b) Specification of development quality/quantity goal for the target year 2040, and interim targets at 2025 and 2030.

6 CAREC Corridor Implementation Progress, Planned Actions and Support Needs, Mongolia, 17th

Transport Sector Coordinating Committee (TSCC) meeting, 18-20 April, 2018, Istanbul

Blue: Car Yellow: Small Goods Vehicles Red: heavy Goods Vehicles Purple: Bus Green: Rail Passenger Access/ Egress Black: Rail Freight Access/ Egress



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(c) Clarification of section by section achievement of the target road sections for the three target years.

(d) Clarification of the three-years rolling investment plan, covering the first (2021-25), second (2026-30) and final (2031-40) periods. The rolling plan shall present the necessary amount of the development budget in each period, and present the target values of physical improvement and budget execution, and assign the monitoring organization for the PDCA (Plan Do Check Action) cycle assessment.

(e) Involvement of international investors and development partners as the monitoring organizations, e.g., JICA/ADB/CAREC, other than the domestic institutions. This is essential to share the progress of development and absorb external financial capacity.

(f) Designation of target economic corridor, identification of target road and railway sections, and clarification of the present status of development.

Source: Information Collection Survey on Copper Industry in Mongolia, JICA (2014)

Figure 1.3.2 Construction Schedule of Paved Road in 2021-2030

1.3.2 Planning for sub-artery roads

In planning for sub-artery roads, two technical directions may be applied: i) road development and maintenance technologies with economy and adequate cost, and ii) application of drone and aircraft as alternatives for urgent transport and delivery modes. For i), the labor based technology (LBT) application for road development in rural areas could be considered, including sand-bag road structure construction application. For road maintenance, the roughness measurement in rural areas where road inspections cannot be implemented adequately by the road authority can be outsourced to a private company having regular trips by applying smartphones measurement applications for International Roughness Index (IRI) including video-based monitoring.

The “1.5-lane road development concept” in Japan can be referable for the sub-artery road development in Mongolia. It will not develop a 1.5-lanes-width road development along all through the section; however, it is combination of 1-lane and 2-lanes width with proper passing lanes distribution and safety



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arrangement7. It is recommended to consider for road development in the mountainous area, where requires larger civil and environmental costs for wider road development.

For ii), it is difficult in a large land with low traffic demand to maintain a network of high quality paved roads that can always ensure a cruising speed of about 90 to 100 km. As an alternative, drones can be used if urgent transportation of goods is necessary. For example, the Rwanda Zipline8, known for its blood emergency transport system startup realized an all-weather delivery service with a radius of 80 km and up to 1.8 kg. It is possible to consider wider application of this mode in Mongolia, applying to remoted areas without paved roads.

1.3.3 Transport system to support industrial clusters

It is urgent to secure a transportation network from major mines to export markets. There is a high urgency of railway development from the Tavan Tolgoi mining site to China (in the standard gauge, connecting with the Chinese railway network). The heavy traffic of coal export vehicles at the Chinese border causes inefficiency due to the anti-smuggling operations at the border, and it is thought that the situation will be completely changed if the delivery would be shifted to the railway.

In recent years, the number of livestock has increased rapidly in the provinces surrounding Ulaanbaatar (Figure 1.3.3). Delivery demands related to meat processing and wool processing will also be a challenge facing Mongolia. It is necessary to consider the transport system tailored to the market. Necessity of cold chain delivery and centralized logistics park for agro-products processing should be considered.

Due to the low transport density, efficiency improvement of freight transport service is quite high. Information technology (IT) application for consignment-demand matching could be applicable to improve the efficiency.

Vertical industrial clusters based on primary products such as crops and livestock products as well as mining products should be promoted by the industrial cluster development strategy as proposed in the Main Report (Section 6.3). Transport infrastructure should be strengthened to integrate value-added production by the economic strategy and effective infrastructure development by the spatial strategy. Specifically, transport links between the primary production areas and processing centers and between the processing centers to export points should be strategically strengthened in view of establishing marketing outlets for specialized products produced by respective clusters.

Links between the border areas and their neighboring areas should be strengthened by applying the multiple access model for spatial development. A multiple access model is proposed to develop secondary towns by strengthening links with cities in neighboring countries. As globalization proceeds, such settlements in peripheries may become more important and develop by turning disadvantages of remoteness from the center to advantage of closeness to neighboring countries. This model may be applicable to Mongolia neighboring on Russian and China. Several secondary towns in peripheries may be developed by strengthening links with cities in Russia and China.

For, instance, a sea berry cluster has been identified promising in Aimags of Western Region by the Aimag and Soum Centers Regional Development Investment Program undertaken with ADB support. To realize this, technical cooperation should be provided to develop high value products for export markets. Considering the location of production Aimags for sea berry, the export markets for high value products may be sought to the west, possibly Europe, rather than exporting low value products such as sea berry juice to the east (e. g. Japan).

7 As for reference, Niigata prefecture shows its guideline for introduction. If proper 2-lanes road width

were applied, it requires 7 to 9 meters-width for construction; on the other hand, applying the 1.5-lanes road concept, some sections would be developed as 5.0 m (4.0m for traffic for both ways, and 0.50m x 2 for shoulders). https://www.pref.niigata.lg.jp/sec/dourokensetsu/1196266573957.html

8 http://www.flyzipline.com/service/

https://www.pref.niigata.lg.jp/sec/dourokensetsu/1196266573957.html



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Source: Data Collection Survey on Agriculture and Livestock Farming Sector, JICA 2017, p. 3-125

Figure 1.3.3 Change in Number and Distribution of Livestock by Aimag, 1990 - 2015

1.3.4 Access improvement to primary production and tourism development areas

The main transport mean in rural areas is roads, which can be organized into private transport and shared transport such as buses. The private transport includes a wide variety of vehicles such as passenger cars, four-wheel drive (4WD), and sports utility vehicle (SUV), and horses may be included here. Generally, Mongolians are used to running around in 4WD with the "feeling of running through in nature", which may lead to the destruction of nature. On the other hand, it is the attractiveness of Mongolia to go "a way without a way", which may be allowed within the natural capacity. It is generally necessary, however, to issue directives to regulate such nature destruction activities and develop access roads. In addition, it is possible to include in the cost-benefit calculation the suppression effects of natural destruction as an economic benefit of road improvement. Discussions in this area require coordination with the environmental protection sector.

The bus transport industry is a sector that relies on the operation of a small-scale private enterprise, and



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recent IT application improves reliability of the bus services (Figure 1.3.4). Most buses and omni-ride taxis has been equipped with the global positioning system (GPS) monitoring system, and the land transport authority monitors the intercity bus operation on 24 hours a day/7 days a week basis. Providing real-time location information, vacant seat information and reservation system etc. using smartphones have already been common for passengers. The real-time monitoring system is used for enforcement of speed violation and work time control of buses drivers.

Source: JICA Project Team

Figure 1.3.4 Real-time Bus Operation Monitoring System in Mongolia

1.3.5 Transport infrastructure development to strengthen urban functions

The population gap between the secondary cities in Mongolia following Ulaanbaatar, Darkhan (with approximate population of 96,000) and Erdenet (86,000), and the capital city is large. Establishment of hierarchical urban road structures may not be important even for the secondary cities.

A ring road or bypass can be the interface connecting the city and the national road systems. However, many local cities do not need a ring road, and probably a bypass is sufficient. The Project will assess the road transport demand and necessity of bypass roads in cities across the Country. The target cities for bypass development so far identified include Darkhan, Erdenet, Murun and those cities on the way to Lake Khuvsgul.

For urban transport in Ulaanbaatar, it is necessary to refer to the urban transport master plan prepared by JICA in 19999. The master plan suggested policies and criteria to provide ring road and bypass functions to harmonize transit traffic with urban traffic, the NCDP should incorporate those idea into the plan. The expressway for the New Ulaanbaatar International Airport (NUBIA) of 32 km length

9 It should be noted that a mid- and long-term masterplan for road network development of Ulaanbaatar city was developed in the fall of 2020, by the Ulaanbaatar city.



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will constitute important part of the urban transport system for the capital city as the first expressway in Mongolia, and it will create a new classification in the road network.

For the north-south corridor, there is a 992km expressway plan (Gingis development) with a concession, but there has been no current progress. If this progress is not made, it is necessary to consider traffic management for transit traffic in cities along the route.

1.3.6 Transport infrastructure development and operation to meet changing demands

Demand-supply balance in the future will be assessed quantitatively reflecting the demand projection by regional development, and gaps are identified with respect to infrastructure capacity, maintenance needs and service levels. As the transport density is generally low in Mongolia, some proposed road development may be assessed as “oversupply”. In such a case, however, the rationale to justify the development may be applied based on "national minimum to ensure nation-wide accessibility" and "redundancy in road network for national security".

1.3.7 Conditions to improve railway system

The total length of Mongolian railways is approximately 1,800 km, most of which operate on a single track. Rail transports account for 40% of cargo traffic on a ton basis, and 75% on a ton-kilometer basis (Table 1.3.2). A major issue is the maintenance of the facilities that had developed with the support of the former Soviet Union, which would not allow trains to operate at a sufficient speed. An overall survey is needed for rail operation improvement, aiming at reviews of infrastructures, locomotives, coaches, switching facilities that affect sidelines and service schedules, etc.

The feasibility study by JICA on introduction of efficient railway track maintenance work in Mongolia (May 2017, Token Kogyo) examined the possibility of monitoring with track inspection equipment. The report points out the low level of track maintenance.

Table 1.3.2 Freight Carried in Mongolia

1990 1995 2000 2005 2010 2015 2016 2017 2019

in million ton -km Total 6,971.6 2,437.1 4,418.3 10,267.7 12,124.8 13,844.3 16,615.3 19,162.4 23,601.8 Railway 5,087.8 2,279.5 4,282.5 9,947.7 10,286.7 11,462.6 12,371.0 13,493.3 17,384.1 Road 1,870.9 152.9 126.1 311.0 1,834.0 2,374.0 4,236.2 5,661.3 6,203.8 Air 8.0 4.5 9.4 8.9 4.2 7.7 12.2 13.2 13.9 Water 4.9 0.2 0.3 0.1

in thousand tons Total 54,038.5 8,950.8 10,643.4 23,670.5 29,415.9 32,197.3 40,398.4 53,981.1 68,997.6 Railway 14,517.1 7,298.0 9,158.5 15,586.3 16,804.0 19,150.8 19,989.1 22,765.1 28,143.0 Road 39,438.9 1,648.5 1,480.4 8,081.7 12,610.2 13,043.7 20,406.2 31,212.9 40,848.8 Air 10.9 2.7 2.9 2.0 1.6 2.8 4.9 5.4 5.8 Water 71.6 1.6 1.6 0.5

Source: Mongolia Statistical Yearbook 2017 and 2019

1.3.8 Possibility to improve and expand passenger railways

Cars and buses account for 98% of the number of passengers in Mongolia, while the railway accounts for around 22% of total passenger kilometers (Table 1.3.3). The railway is an important mode of long-haul trips.

In Mongolia, it is necessary to transfer passenger rail vehicles on another chassis with a forklift at the Chinese border (Zamyn-Uud) because of the variation of the gauges: 1,520mm in Russia and 1,435mm in China. The transfer takes around 6-8 hours.



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Table 1.3.3 Passenger Carried in Mongolia 2000 2005 2010 2015 2016 2017 2018 2019

in million passenger-km Total 1,946.0 2,646.3 3,607.5 4,061.4 4,072.6 4,377.7 6,598.1 7,146.2 Railway 1,067.2 1,234.3 1,220.0 996.7 955.5 973.2 993.7 1,111.5 Road 364.2 639.8 1,480.2 1,940.5 1,959.9 2,040.9 2,919.9 2,925.1 Air 514.6 772.2 907.2 1,123.3 1,156.5 1,363.2 2,684.2 3,109.4 Water

0.04 0.9 0.7 0.4 0.3 0.2

in million passengers Total 93 192.8 250.7 260 264 215.7 197.0 173.0 Railway 4.3 4.2 3.5 2.8 2.6 2.6 2.6 2.9 Road 88.4 188.2 246.7 256.5 260.7 212.2 193.0 168.4 Air 0.3 0.3 0.4 0.6 0.7 0.8 1.4 1.6 Water 0.01 0.05 0.03 0.02 0.01 0.01

Source: Mongolia Statistical Yearbook 2017 and 2019, National Statistical Office of Mongolia

1.3.9 Planning for air transport network

The major construction works of the NUBIA, located in the south of Ulaanbaatar and the existing international airport (Figure 1.3.5), has been completed, but facility operation and management and operation training delayed due to COVID-19 and need for training airport operation and management staff. The operation started finally in 2021.

Source: Mitsubishi Corp

Figure 1.3.5 New Ulaanbaatar International Airport

Ulaanbaatar is a large consumption area in the region, and major air freights are destined to Ulaanbaatar, but the import volume is not large. It is necessary to identify the goods and products to be exported from the new airport, confirm the required transport specifications, and examine the necessity for maintenance of cold chains and so on.

By expanding the capacity of the international airport, a positive cycle of changes can be expected such as the increase of the low cost carrier (LCC) flight services, including an increase in air travel and price decline in summer high season, and an increase in tourists.



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1.3.10 Border infrastructure for trans-boundary commodity and passenger movements

Mongolia has vast land with dispersed population and long national borders. As the transportation density is low, most borders do not operate on a 24 hours a day/7 days a week basis and have limited operation time (Figure 1.3.6. There are also borders that perform irregular operations such as opening only in odd-numbered months. It is necessary to develop cargo and passenger facilities, customs facilities, luggage scanners for preventing smuggling, and facilities for long distance drivers at the borders along the Asian highway and economic corridors.

In general, the efficiency of the customs at border facilities and customs clearance operations can be improved with packaged efficiency policies, which are called One Stop Border Post (OSBP) and single window system. It requires a bilateral agreement with Russia and China on customs procedures. It is presupposed that Mongolia investigates and organizes its existing bilateral and multilateral trade promotion agreements such as free trade agreement (FTA) and economic partnership agreement (EPA) and etc.

Source: Ministry of Road and Transportation Development (MRTD) and JPT Note: International borders accept transit passengers and goods to/from other countries

Figure 1.3.6 Operation Time of Mongolian Borders

1.4 Logistic Infrastructure and Transit Trade

1.4.1 Overview on transit trade

“Transit” is the strong keyword for NCDP transport sector as mentioned in Section 1.1.1. Transit can bring foreign money and has a large potential growth. For landlocked countries, continual coordination with neighboring countries is essential for promoting their export, therefore transit requests of neighboring countries should be respected. The promotion of transit including China and Russia and industrial development are set as the core themes by the three-party talks among Russia and China. In 2019, there were also many political negotiations and seminars on the theme of transit. ADB, World Bank (WB) and other donors are also paying attention to transit. Infrastructure development to support transit transportation is underway such as container transit facilities at Zamyn-Uud and Ulaanbaatar trade zone (UBTZ) container yard business at the Tianjin port. The strong policies including China’s Belt and Road concept and Russia's Far Eastern development will also boost the transit demand.

It should be noted that promotion of “transit” is not accepted for all stakeholders in Mongolia. The JICA Project Team (JPT) reported importance of transit growth in the Progress Report and convened the

P24h/C9-208-17

9-18/S

10-18/SS

Paved RoadGravel RoadImproved Earth/Dirt

Tsagaannuur/9-18/S

Ulkhan/9-17/SS

Tes?/8-17/S

Borshoo?/8-18/S

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8-17/SS

8-17/SS/P

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9-19

8-17/SS/P

Bayankhoshuu8-17/SS/P

Khangi8-17/SS/P

Shiveekhuren8-17/SS/P

Bulgan9-18/SS

Bulgan?9-19/SS

Sumber?8-17

International BorderBilateral Border

Border – temporary open

Potential locations for Domestic counting surveys(Traffic police stations-38)

Road pavement condition by color

Oyu Tolgoi

Tavan Tolgoi

Baganuur

Boroo

Tumurtiin

Major Mining Sites



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Transit Seminar on 19th June 2019, where two of six comments from floor revealed their strong preference in export-oriented promotion in transport development. On the other hand, there was another focus on transport investment, i.e., coal export. The main interest of coal export was the rail route development from Tavan Tolgoi, including two directions i.e., China via Gshuun Shait and Sainshand via Zuunbayan. The decision on the latter seemed too urgent; however, the latter will rely on capacity of the north-south corridor along the railway, which will be also used for international transit corridor.

It can be said that the capacity of the north-south railway is limited. Delays in domestic freight transportation including export have been often observed. Imported cargo to the capital from China, transferred in Zamyn-Uud and transporting from Zamyn-Uud to Ulaanbaatar by road is becoming significant. The transport distance is more than 500km and originally has an advantage in rail, but recent road improvement has induced a shift from rail to road. Additionally, the Tavan Tolgoi - Zuunbayan main line connection and main line congestion in both China and Russia will become more serious.

There are institutional and physical reasons why the north-south railway is insufficient in capacity. UBTZ is a non-Mongolian company owned by 50% of Russian interests, and the main line schedule and priorities are not determined by Mongolia's will, so it is uncertain whether transport schedules for resource exports can be secured in the future. By accepting transit, Mongolian exports may not be able to be prioritized. Actually, passengers train and international transit freight trains have operational priority to domestic and export trains. The commodities transported are mainly natural resources, which are difficult to containerization and the directional traffic are biased. Physical reasons are old design, i.e., single track, steep and winding alignment including the famous omega-curve, non-electrification, limited number of diesel locomotive and cargo as well as infrequent and inadequate maintenance.

1.4.2 Existing conditions of transit trade

(1) General performance of UBTZ

The macroscopic view of the Mongolian railway sector is summarized in Table 1.4.1 with comparison of central Asia landlocked countries. Looking into the productivity10 of freight transport per railway length, the Mongolia railway sector keeps better performance than Uzbekistan and Turkmenistan (Figure 1.4.1). However, Kazakhstan has two times higher productivities than Mongolia, and China and Russia are four time higher productivities to Mongolia, although those have double track network in main lines.

10 Freight traffic billion ton-km

Source: Ministry of Road and Transportation Development (MRTD) and JICA Project Team

Figure 1.4.1 General Freight Railway Operational Performance



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Table 1.4.1 Reference of Railway Operation Performance Mongolia Uzbekistan Turkmenistan Kazakhstan Pakistan Japan

Statistics 1) Rail network length (km) 1,810 4,669 3,115 16,040 11,881 27,823 2) Freight traffic (million tons) 25.7 82.3 26.8

5.0

3) Freight traffic (billion ton-km) 15.3 22.9 12.0 266.6 4.7 20.9 4) Passenger traffic (million-pax) 2.5 20.6 6.5

52.2

5) Passenger traffic (million pax-km) 993 3,758 1,811 18,200 21,200 430,405 Year 2018 2015 2012 2017 2015-16 2016

Source

MRTD https://www.adb.org/sites/default/files/linked-documents/48025-003-ssa.pdf

http://www.ijte.ir/article_46512_2d12604966c8d3000df0361f3ba6badb.pdf

http://stat.gov.kz/official/industry/18/statistic/7

https://www.pakrail.gov.pk/images/yearbook/ybbt.pdf

http://www.mlit.go.jp/tetudo/tetudo_tk2_000045.html

Estimation Productivity: Freight/Network length (billion ton)

8.45 4.90 3.85 16.62 0.40 0.75

Productivity: Passengers/Network length (million)

0.55 0.80 0.58 1.13 1.78 15.47

Source: MRTD and JICA Project Team

(2) Rail based freight transport

The rail-based freight traffic in Mongolia gradually increases as a whole (Figure 1.4.2). The total freight traffic in 2018 was 25.7 million ton and 15.3 billion ton-km. The railway transport has major four sectors, i.e., import, export, domestic movement, and transit. The domestic movement is biggest in the amount basis, but the export and transit come larger than domestic sector in turnover (ton-km) basis. Each sector has grown since 2016, and export and transit have grown more rapidly than others.

Source: MRTD statistics

Figure 1.4.2 Railway Freight Growth in Categories

https://www.adb.org/sites/default/files/linked-documents/48025-003-ssa.pdf





























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(3) Transit details

The Russia-China railway directional transit volume (tons) in recent four years with commodity classification, presented below, show apparently biased in directional volume (Figure 1.4.3). The traffic volume from Russia to China is five times larger. The major commodities from Russia to China are timber (63% of the directional transit) and chemical (24%). The major items from China to Russia are machines/equipment (43%), miscellaneous goods (17%), and coal (13%).


Figure 1.4.3 Railway Transit Change in Commodities


Figure 1.4.4 Efficiency of Railway Transit Loading Ratio at Border Crossing Points

Figure 1.4.4 shows efficiency of the transit train by direction. As explained on biased loading from Russia to China, the figure shows nearly 100% loading coming from Naushki (Sukhbaatar) and outgoing with 80% ratio at Eren Hot (Zamyn Uud). On the other hand, transit train from China to Russia keeps just 20% loading ratio.

Timber cargo may be carried in a container but chemical bulk cargo may need a proper tanker wagon, which explains biased loading of transit. Further containerization may improve the productivity.

(4) Import details

Figure 1.4.5 shows value and amount of import by handling locations and by mode (rail or truck). It is apparent there are two major entrée points, i.e., Ulaanbaatar by rail, and Zamyn-Uud by road. Imports in Zamyn-Uud are transferred and carried by individual freight operators to domestic destinations.

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Naushki Eren Hot Solovievsk Other

2015 2016 2017 2018

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

Naushki Eren Hot Solovievsk Other

2015 2016 2017 2018

Loading ratio at BCPs - Inbound

Loading ratio at BCPs - Outbound



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Figure 1.4.5 Import Change by Entrée Locations

Some freight operators in the Narantul market, the biggest local wholesale market in the capital, says the rail transport share of Zamyn-Uud – Ulaanbaatar was 90% in rail in 2014 but it comes 50% more recently, as slower operation at the mainline than truck as well as too much concentration in the small freight terminals in Ulaanbaatar. The highway improvement tends to accelerate such shift.

The other locations including Orkhon, Sainshand, Selenge by rail, and Gashuunsukhait by road are minor. The import value handled in Ulaanbaatar always exceeds the value in Zamyn-Uud, but the import amount in Zamyn-Uud in 2014-15 exceeded the amount in Ulaanbaatar. It should be noted that the import value in Ulaanbaatar by road are increasing gradually.

(5) Export details

The biggest export exit in value and amount is the Gashuunskhait, where coal export from Tavan Tolgoi mining is handled (Figure 1.4.6). Shiveekhuren located next to Gashuunskhait shares the amount of the coal export. It is apparent that the road based export amount from Tavan Tolgoi are quite significant as compared to rail based traffic. The present rail based export is from Darkhan (iron/coal), Sainshand (coal/oil), Orkhon (copper). The export value from Orkhon comes larger due to copper.



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Figure 1.4.6 Export Change by Entrée Locations

1.4.3 Summary of logistics movements

Figure 1.4.7 shows a summary of major movements of export, import and transit, quantities and locations of major commodities by transport mode in 2018. The largest amount of the trades is coal exports at Gashuunskhait and Shiveekhuren. All the exports are handled by road and delivered to China. The mining export from Darkhan-Uul and Sainshand by rail are in the second group. It is apparent that most of the export from Darkhan and Sainshand are delivered to China; however, the national statistics do not show the country-wise data, and therefore, the direction of the arrows in the map are only indicative.

The major entry locations of imports are Ulaanbaatar, Zamin-Uud, Darkhan, Selenge, and Orkhon. At Zamin-Uud, the imports from China were devanned and delivered mainly to Ulaanbaatar and regional cities. At Selenge (Altanbulag), the imports from Russia were handled. Some imports by road at Ulaanbaatar can be seen. Rail-based import are handled mainly in Ulaanbaatar. It is unclear that the origin of rail-based import is Ulaanbaatar. The rail-based transit amounts are also shown in the map, which take the main line passing Ulaanbaatar.



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Figure 1.4.7 Major Import/Export/Transit Movements in Mongolia (2018)

(1) Passengers on railways and other modes

The railway passenger amount and turnover in recent four years are shown in Figure 1.4.8. It is apparent the number of domestic passengers is quite large, and international passengers is small.

Estimation of passenger mode share per travel length (inter-Aimag movement only, therefore the passenger trip in 0-300km range would be smaller than actual as this does not contain the inner-Aimag movement) is one of achievements of the JPT (Figure 1.4.9). The majority is private cars, and buses, rails and air share the rest. The following can be suggested.

The passenger volume in the range 0-300 km and 300-600km shares 40% and 45% respectively. The present distance of major cities from Ulaanbaatar are less than 600km, and such major city distribution will not change drastically in the future, and therefore, the travel volumes in 0-300 km and 300-600km range will remain large continuously.

The share of rail is major in the range of 300-600km as destinations in Orkhon, Dornogovi and Selenge Aimags accessed with UBTZ mainlines are included. The share of the bus in this range are smaller than rail, but the rail tariff is cheaper as shown in Table 1.4.2.

The 4% share of air transport in the range of 300-600km is flight from Ulaanbaatar to Oyu Tolgoi, for which demand gradually increased in recent five years, while other air flight demand decreases.

In the range of 600-1,200km, buses are the dominant. In the range of 1,200-1,800km, air and buses are in competition (Figure 1.4.3).

The share of Ulaanbaatar is dominant for more than 300km distance. The movement between Orkhon (Erdenet)-Selenge (Darkhan/Sukhbaatar) shares the rest in the 0-300km range.



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Figure 1.4.8 Railway Passengers by Category


Figure 1.4.9 Passenger Mode Share by Travel Length in Mongolia



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Table 1.4.2 Level of Service Comparison: Bus and Rail for Destinations in 300-600 km Range

Bus Rail (2nd class) UB - Erdenet MNT 19,300 / 7-8 hrs 14,700 / 11hrs 10 min UB - Darkhan MNT 12,200/ 3-4 hrs 6,000 / 6hrs 45min UB – Choir (Shivee Govi) MNT 4,100 / 4 hrs 5,800 / 5hrs 12min

Source: MRTD statistics Note: JICA Project Team survey based on the National Transport Authority (NTA) timetable for bus ignoring

recent road maintenance, UBTZ timetable for rail, shortest hours. One-way, one-person e-ticket price at Sep 2019.

Table 1.4.3 Share of Ulaanbaatar Based Transport Demand by Distance Range

Range(km) 0-300 3-600 6-900 9-1200 12-1500 15-1800 18-2100 21-2400

UB Share 79% 96% 92% 96% 92% 93% 0% 0% Source: JICA Project Team estimation

(2) Transit interface

The aerial photos in Figure 1.4.10 presents the interface capacity of railway transit through Mongolia and Kazakhstan, as the railway freight wagons should be replaced at the border due to difference of rail gauge. The Khorgos terminal was newly developed in 2012 for exclusive use for container handling instead of Alashenkou handling conventional bulk cargos. There are two main lines connecting between the China and Kazakhstan, and the Khorgos connection are used mainly for container block trains, and Alashenkou is used for other bulk cargos. On the other hand, the Mongolia and China container interface has just completed in March 2019 in Zamyn-Uud, and they are just connected with the single track railway.

Source: Google Earth, obtained at Sep 2019, almost in the same scale

Figure 1.4.10 Railway Freight Yard Comparison at China Border with Mongolia and Kazakhstan



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(3) North-south mainline and branch lines

Along the north-south mainline, there are several branch lines connected to mines and power plants as follows:

Sainshand-Zuunbayan petroleum processing sites, Airag – Bor Ender mining sites, Bagahangai – Baganuur coal mining sites, Ulaanbaatar branch lines to gravel quarry sites and thermal powerplants, Salkhit – Erdenet mining sites, Darkhan – Sharingol coal mining sites, and Mainline – Bold Tumur Eruu Gol iron ore sites (MTZ owned and operated).

All the lines are connected to the single-track north-south mainline. The difference of operators make integrated and synchronized operation difficult.

(4) North-south mainline physical conditions

The Trans-Mongolian mainline (north-south mainline) has 1,110km length, single track for whole section, with 80km/h maximum speed. The oldest 43km section between Ulaanbaatar and Nalaikh coal mine was established in 1938 to bring the coal to the capital Figure 1.4.11. There are two “Omega” curves at hill climbing on the way to Nalaikh. It can be said that the hilly and old-standard design of the section including the omega curves forces the train operation slow. The Ulaanbaatar railway bypass to be mentioned later will overcome the steep hill section as well as the congestion of Ulaanbaatar and represents a better idea than installation of double track along the existing hilly alignment.

Source: Google Earth, obtained at Sep 2019, almost in the same scale

Figure 1.4.11 Omega Curves in Alignment of North-South Mainline from Ulaanbaatar to Nalaikh



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1.4.4 Summary of logistic infrastructure

The following summarizes findings of transport and logistic survey reported above.

The productivity of Mongolian railway operation is better than that in other landlocked central Asian countries and considered reasonably high for single-track-based infrastructure. While further assessment is necessary, the capacity of mainline operation faces saturation due to institutional and physical constraints.

Transit freight volumes are growing but the export and domestic freight operation are also in high volume. This situation supports both of pro-export and pro-transit interests.

The domestic freight movement concentrates at Ulaanbaatar where oldest standard alignment still remains, making the section busiest.

The coal export amount from Tavan Tolgoi and Oyu Tolgoi is quite large beyond expectation, which should be immediately shifted to railway. Perhaps the new rail connection (direct connection to Gashunskhait) cannot carry all export and road carriage should remain to be used. It seems the present export coal amount cannot be handled along the north-south mainline which faces congestion, although the Tavan Tolgoi-Sainshand railway connection construction has started.

Use of railway by passengers is still confined to the range of 300-600km length, but it may survive due to cheaper tariff, and it would constrain freight operation if the number of passengers increase including international passengers.

1.5 Development Directions, Objectives and Strategy for Transport and Logistic Infrastructure

1.5.1 Development directions for transport and logistic infrastructure

Based on the analysis on existing conditions and important issues in the transport and logistic sector, and reflecting the prospects of transit trade and logistic infrastructure, the following should be pursued for the transport and logistic sector to support the NCDP.

(1) Transport infrastructure for services development

1) Strengthening spatial structure

Given the vast national territory and existing transport infrastructure, road transport will continue to be the main transport mode in the cities and regions. The ring artery and inter-Aimag roads are proposed by the NCDP as reported in the Main Report to strengthen the national spatial structure in the whole of Mongolia and realize more balanced development of Regions and Aimags. The ring artery should be established as part of long-term strategy to support national socio-economic development linking major cities in the central part of Mongolia.

Development or upgrading of inter-Aimag roads is undertaken in stages based on priority according to prospect of traffic volume and industrial development such as primary production, processing and marketing as well as provision of social and public services.

2) Area-wise development through the nation-wide network

In the near future, the harmonization of intercity traffic and inner-city traffic will be required for major cities as well as Ulaanbaatar. Bypasses should be constructed around the Aimag centers in the near future. Also, sub-artery road improvement should be prioritized.

Traffic density in most regions will remain to be low in the foreseeable future so that it is impossible to



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realize the nation-wide network of paved roads. However, the connectivity should be improved between Aimag centers and Soum centers. Reasonable road standards such as gravel road should be invented for the inter-Aimag and Soum roads to ensure reasonable transport performance comparable to paved roads. Also, introduction of institutional mechanism to improve rural access roads should be promoted.

3) Urban development and social services delivery

The new expressway connected to the international airport will change the road transport network in and around Ulaanbaatar. The change will induce a geographical shift of freight traffic movement to the suburbs of the capital city. The Ulaanbaatar rail-bypass project will further promote the shift. Along with this shift, the Ulaanbaatar city road network and road-based traffic services including bus transport should be restructured to upgrade urban functions including high grade social services and complementarity between the capital city and the surrounding capital region.

Urban functions of a few selected cities should be enhanced through development of the city road network and road-based traffic services. Development of air transport linking selected cities would be realized to ensure mobility of people throughout the Country.

(2) Logistic infrastructure for export and transit trade

The NCDP will pursue both export and transit promotion by improving capacity of the north-south corridor. Various methodologies for capacity development of the corridors should be considered as a packaged program, but the Ulaanbaatar rail bypass project will realize significant capacity development and thus should be prioritized.

As both the export and transit needs are pursued, the UBTZ needs to re-consider the necessity of passenger service operation, which is usually operated as the first priority to freight. Instead, national bus services with competitive and nation-wide operation could be further promoted to develop a higher quality network.

The low utility of railway freight yards in Ulaanbaatar should be removed from the city to its suburbs to improve the railway operation efficiency and complementarity with road delivery services. The property value of the freight yards in Ulaanbaatar can be a financial resource for the railway development including the Ulaanbaatar rail bypass project and new railway network development.

The new railway development from Tavan Tolgoi and Oyu Tolgoi mining sites should be prioritized to mitigate the inefficient road-based transport particularly for coal. It is apparent that quantity of the export amount at present will require the immediate development of this railway.

(3) Regional road development for diversification of economy

In line with artery network development, selective improvement of roads to support industrial cluster development shall be strongly linked with diversification of economy in each Region. Primary production areas should be connected to processing bases and the urban and export markets through regional road development. Logistic network development in Regions is a key to support the establishment of industrial clusters. Therefore, based on industrial distribution, important regional roads should be prioritized.

Diversification of economy will be attained connecting to artery roads with regional roads. In this sense, accessibility to major tourism areas should also be improved through road development for bus and railway development for passengers.

1.5.2 Development objectives and strategy for transport and logistic infrastructure

(1) Development objectives of transport and logistic infrastructure

Along the directions presented above, development objectives of the transport and logistic sector as part of the NCDP are defined as follows:



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(a) To strengthen the spatial structure of Mongolia; (b) To support diversification of economy and export products; and (c) To facilitate social services delivery in urban and rural areas.

(2) Development strategy for transport and logistic infrastructure

To support the attainment of the development objectives, strategy for transport and logistic infrastructure is established with the following components:

(a) Stage-wise development of artery roads with the ring artery and inter-Aimag roads, (b) Prioritized improvement of sub-artery roads for specific purposes, (c) Selective improvement of roads to support industrial cluster development linking primary

production areas, processing bases and export markets, (d) Railway development to support exports and transit trade, (e) Development of air transport network to ensure mobility of people throughout the Country, (f) Enhancement of urban functions of Ulaanbaatar and a few selected cities, (g) Improvement of border infrastructure to facilitate export and transit trade, (h) Improvement of access to major tourism areas, (i) Establishment of conditions to increase passengers on railway, (j) Removal of transport bottlenecks for export products including coal, (k) Improvement of rural access roads to facilitate social service delivery, and (l) Introduction of institutional mechanism to improve rural access roads.

1.6 Projects for Transport and Logistic Infrastructure

1.6.1 Road projects

(1) Artery road network

As road transport will continue to be the most important transport mode in Mongolia, continuous efforts should be made to maintain and upgrade the road system to support the national socioeconomic development. The artery road network should be strengthened with the ring artery and inter-Aimag roads. In particular, the ring artery should be improved in steps and a high grade highway system should be established in the long run. Unpaved and degraded sections of the proposed ring road should be undertaken during Phase 1, and development of new sections especially in mountainous areas during Phase 2. Phased development of the ring artery is summarized in Table 1.6.1, where priority corresponds to Phases 1 and 2 and 0 for road sections already implemented. Locations of road sections are shown in Figure 1.6.1.

Table 1.6.1 Phased Development of the Ring Artery

Category Code Project (Names of Aimag)

Length (km) Status Priority Terrain Lanes Length

option Est Cost (US$)

Ring artery

RA1 Darkhan~Erdenet (Darkhan-Uul, Selenge, Orkhon)

190 A1001-1002, paved 2 lanes 1 Flat 4 1 71,060,000

RA2 Bulgan~Murun~A603/A1102 crossing (Bulgan, Khuvsgul, Zavkhan)

599 A0902, 50% paved, 50% normal soil

2 Hill 2 50% 67,207,800

RA3 Uliastai~Altai (Zavkhan, Gobi-Altai) 194 A1103,

normal soil 2 Mount. 2 1 58,044,800



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RA4 Arverkheer~Mandalgovi~Choir (Uvurkhangai, Dundgovi, Govisumber)

114 A3401 - A37 normal soil 1 Flat 2 1 21,318,000

RA5 160 A37 normal soil 1 Flat 2 1 29,920,000

RA6 UB~Darkhan (UB, Tuv, Selenge, Darkhan-Uul)

211

A0401, already on-going by ADB

0 Hill 4/2 1 0

RA7 UB~Choir (UB, Tuv, Govisumber) 200

A0101, recently upgraded and work is ongoing for Nalaikha

0 Hill 4/2 1 0

Inter-Aimag roads are also improved in steps following the priority determined by the NCDP. A total of 225km length may be improved during Phase 1, and additional 1,023km during Phase 2. Phased improvement of the inter-Aimag roads is summarized in Table 1.6.2, where priority corresponds to Phases 1 through 3 and 0 for road sections already implemented. Locations of road sections are shown in Figure 1.6.2.

Table 1.6.2 Phased Improvement of the Inter-Aimag Roads

Category Code Project (Names of Aimag)



Inter-Aimag roads

IA1 Choibalsan~Undurkhan (Khentii, Sukhbaatar, Dornod) 225 A0502,

paved 0 Flat 2 1 0

IA2 Choibalsan~Baruun-Ur t~Sainshand (Dornod, Sukhbaatar) 497 A2201, A35,

normal soil 2 Flat 2 1 92,939,000

IA3 Matad~Khuut~Barun-Uud (Dornod, Sukhbaatar) 163

no road (parallel to A2201 above)

3 Hill 1.5 1 27,432,900

IA4 Choir~Undurkhan (Govisumber, Khentii) 225 A35 normal

soil 1 Hill 2 1 50,490,000

IA5 Ulaangom~Khovd (Uvs, Khovd) 163

80% of the section (A1701) are in normal soil,

2 Mount. 1.5 1 36,577,200

IA6

Arverkheer~Shiveekhuren ~China (Uvurkhangai, Bayankhongor, Umnugovi)

451 A29, normal soil 3 Mount. 1.5 1 101,204,40

0

IA7 Darkhan~Altanbulag~Russia (Darkhan-Uul, Selenge) 122

A0402-0403, paved, under ADB ongoing

0 Flat 2 1 0

IA8 Khovd~Ulgii (Khovd, Bayan-Ulgii) 220

A0305, paved recently by ADB

0 Mount. 2 1 0

IA9 Govisumber~Darkhan Soum of Khentii (Govisumber, Khentii) 93

Normal soil, minor, close to Baganuur, parallel to A35

2 Hill 2 1 20,869,200

IA10

Bayankhongor~Shargaljuut~Naiman lake~Ulaantsutgalan~Khujirt (Bayankhongor, Arkhangai)

270

No road, mountainous, tourist/nature destinations

2 Mount. 1.5 1 60,588,000

Source: JICA Project Team and RDP (translated)



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Figure 1.6.1 Locations of Ring Artery Road Sections


Figure 1.6.2 Locations of Inter-Aimag Roads to Be Improved

(2) Aimag special purpose roads

In addition to roads constituting the artery road network, some roads need to be improved to support the development of Aimags and Soums. These roads will serve specific purposes such as tourism, trade and mining, which are important for development of respective Aimags and Soums. The Aimag special purpose roads development project is formulated to serve these functions respectively. Roads in this category are summarized in Table 1.6.3, where priority corresponds to Phases 1 through 3 and 0 for road sections already implemented. Locations of these roads are shown in Figure 1.6.3.



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Table 1.6.3 Phased Development of Aimag Special Purpose Roads (To be improved)

Category Code Project (Names of Aimags)



Tourism

T1 Jargaitkhaan~Umnudelger~Binda (Khentii) 166 Jargait to northeast,

normal soil road 2 Hill 2 1 37,250,400

T2 Norovlin~Dalal (Khentii) 56

A19, Northeast place in Khenti aimag, normal soil

2 Hill 2 1 12,566,400

T3

BatUlziit~Tuvkhun monastery~Tsenker hot springs~Tsetserleg (Uvurkhangai)

100 A0602, Most are in Arkhangai, paved 2 Mount. 2 1 29,920,000

T4 Arverkheer~Khujir (Uvurkhangai) 56 A0602, paved, hot

springs access 2 Mount. 2 1 16,755,200

Border trade

B1 Choibalsan~Ulkhan port~Russia (Dornod) 224 A21, gravel 1 Mount. 2 1 67,020,800

B2 Choibalsan~Khavirga port ~China (Dornod) 125 A2202, A23, normal

soil 1 Flat 2 1 23,375,000

B3 Choibalsan~Ereentsav port~Russia (Dornod)

215 A2202, normal soil 2 Flat 2 1 40,205,000

B4 Baruun-Urt~Bichit port~China (Sukhbaatar)

272 A2002, expected to be complete in 2020, on-going

0 Flat 2 80% 0

B5 Undurkhan~Ulikhan port~Russia (Khentii, Dornod)

250 A19, normal soil. Connecting to T2 2 Mount. 2 1 74,800,000

B6 Sainshand~Zuunbayan ~Khantanbulag (Dornogovi)

200 A39, Petro processing site, normal soil

1 Flat 2 1 37,400,000

B7 Altai~Burgastain~China (Gobi-Altai) 320

A1104, partially improving, 60% normal soil

3 Mount. 1.5 60% 43,084,800

B8 Khatgal~Khankh~Russia (Khuvsgul) 180

A1101, Along the Khhvgol lake, tourism oriented, 50% paved, 50% normal soil

1 Hill 2 1 40,392,000

B9 Ulgii~Altai~Tavanbogd (Bayan-Ulgii) 118

A15, very mountainous, normal soil

3 Mount. 1.5 1 26,479,200

B10 Ulaankhus~Khukh~Ereg port ~Russia (Bayan-Ulgii)

113 Unclear but mountainous section 3 Mount. 2 1 33,809,600

B11

Khutg Undur~Teshig~Baga Ilenkh port~Russia (Bulgan)


B12 Numrug~Tes~Artssuuri~Russia (Zavkhan) 200

Partially the work on A0603 is on going for paving, but A0604, 60% are normal soil.

2 Hill 2 1 44,880,000

Mining M Tavaltolgoi~Gashuun Sukhait ~China (Umnugovi)

250 A0203 paved on going / completed in 2020

1 Flat 2 1 46,750,000

Mining / Other

O1 Bulgan~Khisig Undur~Gurvanbulag (Bulgan)


O2

Murun~Shine Ider ~Jargalan ~Tsetsuukh (Khuvsgul, Zavkhan)


O3 Dalanzadgad~Bayandalai~Gurvantes (Umnugovi)

220 A33, partially paved, 50% normal soil, 25% improved soil

3 Mount. 1.5 75% 37,026,000

Source: JICA Project Team and RDP (translated)



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Figure 1.6.3 Locations of Aimag Special Purpose Roads

(3) Priority summary

Based on the proposed priority, the phased target road sections are shown in Table 1.6.4 and Figure 1.6.4.

Table 1.6.4 Paved Road Length Expansion – Phased Progress

Phase Up to 2020 Phase 1: 2020-2025

Phase 2: 2025-2030

Phase 3: 2030-2040 Total

Length of paved road (km) 7,587 1,478 2,684 1,516 13,265

Percentage (%) 57% 11% 20% 11% Note: These figures are the net length of paved road expansion, therefore widening of existing paved road are not

included in this table. Source: JICA Project Team estimation



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Figure 1.6.4 Phasing of Aimag Special Purpose Roads



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(4) Traffic demand projection

A traffic survey was conducted by the JPT as part of the NCDP as reported in Supplement to this chapter. Based on the results of the survey and statistical data, the JPT prepared a comprehensive traffic demand model and assessed the road investment scenarios mentioned above. For the traffic demand in future, the high growth case and the low growth case were proposed in view of low growth scenario due to the COVID-19 effects.

It is assumed that the traffic will be increased by the three factors, i.e., population growth trend, GDP growth trend and GDP per capita growth trend. The trend of those factors in recent 10 years were analyzed and the low and high growth scenario were estimated based on the analysis. The details are shown in the other report for transport analysis (Report on Mongolia Transport Modelling - Appendix)

For low growth case, population growth from 2010 to 2015 averaged 1.84% per annum. It was assumed that this growth rate would be maintained from 2019-2020 but would then gradually decline to two-thirds of this amount by 2040, i.e., to 1.23%. The details are shown in the table below.

Given the impact of COVID-19, it was assumed that there would be zero growth in GDP per capita from 2019-2021. In 2022, GDP per capita growth would return to 2.80% per annum (equivalent to the average over the period 2015-2019) but would gradually decline to 1.50% per annum by 2040.

GDP growth is calculated as the combination of population growth and GDP per capita growth. 1.84% in 2020; 4.61% in 2022 and declining gradually to 2.74% by 2040.

For high growth case, population growth from 2010 to 2019 averaged 1.91% per annum. It was assumed that this growth rate would be maintained from 2019-2020 but would then gradually decline to three-quarters of this amount by 2040, i.e., to 1.43%.

Similarly to lower case, it was assumed that there would be zero growth in GDP per capita from 2019-2021. In 2022, GDP per capita growth would return to 4.32% per annum (equivalent to the average over the period 2017-2019) but would gradually decline to 1.50% per annum by 2040.

GDP growth is calculated as the combination of population growth and GDP per capita growth. 1.91% in 2020; 6.26% in 2022 and declining gradually to 2.95% by 2040.

Table 1.6.5 Growth Assumptions for Traffic Projections Low growth case High growth case

Year Population Per capita GDP

GDP Population Per capita GDP

GDP

2020 1.84% 0.00% 1.84% 1.91% 0.00% 1.91% 2022 1.77% 2.80% 4.61% 1.86% 4.32% 6.26% 2025 1.66% 2.52% 4.23% 1.78% 3.62% 5.46% 2030 1.50% 2.12% 3.65% 1.66% 2.70% 4.40% 2040 1.23% 1.50% 2.74% 1.43% 1.50% 2.95%

The traffic volume per road capacity ratio (VCR) was evaluated by road section to assess the needs of further development of road network. The target years are 2025, 2030, and 2040. The evaluation reflects railway development, mining production, and cross-border trade growth as well. Results are shown in Figure 1.6.5, where traffic demand estimation for road traffic is shown on PCU basis.

The major findings of the evaluation can be listed as follows:

The largest estimated impact on road traffic is due to the shift of mining delivery by road to rail, from Tavan Tolgoi mines to the China borders; the railway will give significant efficiency improvement; and

Volume-Capacity Ratios remain significantly below 1.0 under any network development scenarios for 2025, 2030, and 2040, which means that it would appear that existing transport network



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development plan for Mongolia is likely to be sufficient, at least for the inter-Aimag network.

Base Case (2019)

Blue: Car Yellow: Small GV Red: heavy GV Purple: Bus Green: Rail Passenger Access/ Egress Black: Rail Freight Access/ Egress

Low Growth case 2025

High Growth case 2025






Figure 1.6.5 Results of Road Traffic Assessment for 2025, 2030 and 2040



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(5) Bypass roads

One of reasons for traffic congestion in Ulaanbaatar is that the city traffic and the through traffic are mixed in the city road system. This situation may be aggravated by the operation of the NUBIA. To alleviate the problem, a bypass road should be constructed and selected city roads improved. This will contribute to improvement in the logistics chain reliability of Ulaanbaatar and its surrounding areas. The project will be implemented in steps through Phase 1 and Phase 2.

It is expected that some Aimag centers should also face the need to reconcile the urban traffic and intercity traffic in the next decade. For Erdenet, the intercity road, the Eldenet-Bulgan highway, is passing through the city center and city traffic and intercity traffic are mixed to cause congestion in the city center. Orkhon and Bulgan Aimags have conceived a bypass route avoiding the developed areas and prepared a plan to develop the section as two-lanes paved road. The suburban and local cities bypass development project will be implemented first for Erdenet and Murun during Phase 1, followed by other selected cities during Phase 2.

1.6.2 Railway projects

Ulaanbaatar is the major destination of domestic coal supply and various import products by rail. The north-south rail mainlines are congested by the supply operation to Ulaanbaatar. The railway alignment between Ulaanbaatar and Nalaikh were designed in 1930s with old engineering specifications to pass the steep section in Nalaikh, which makes the rail operation slow. A bypass rail link, the Bogd Khan link, was proposed by the ADB rail sector study in 2018 and recommended by the JICA Ulaanbaartar master plan in 2010. These proposals should be reviewed and the baypass project implemented during Phase 2. The bypass rail link will run along the NUBIA district, which will enhance the integration of multimodal freight handling between road, rail and air transport. The project team studied local interests of freight forwarders in the multimodal freight handling functions around the bypass rail link and NUBIA.

The capacity of the north-south mainline operation faces saturation due to institutional and physical constraints. Various approaches to capacity development should be reviewed and measures formulated including both institutional and operational measures and physical improvements during Phase 1 for implementation subsequently.

Four routes are being studied for coal transportation along with coal mine development in Umunugovi Aimag. Route 1 (Nariinsukhait coal mine → Tianjin port) via China, Route 2 (Tavan Tolgoi coal mine → Tianjin port), Route 3 (Tavan Tolgoi coal mine → Bichigt → Jinzhou port), and Route 4 via Russia (Tavan Tolgoi → Suhkbaatar → Vladivostok port) were evaluated for costs involved. Priority for implementation should be established in terms of supply-demand of energy in international market, export destinations and routes, and establishment of coal value chain for economic efficiency and regional development.

1.6.3 Other projects

Logistic infrastructure in border areas should be improved to facilitate export and transit trade. Free trade zones (FTZs) in Altanbulag (Selenge Aimag), Zamiin-Uud (Dornogobi Aimag) and Tsagaannuur (Bayan-Ulgii Aimag) may be prioritized as well as the new special economic zone (SEZ) near the NUBIA.

The air transport network should be established to ensure mobility of people throughout the vast territory on the Country. Selected Aimag airports should be upgraded as international airports and priority may be given to Khovd and Choibalsan to serve the western and the eastern territories respectively.

Related to transport and logistic infrastructure development, urban functions of selected cities as well as Ulaanbaatar should be enhanced. In Ulaanbaatar, the land made available by relocation of freight terminal inside the city along the existing railway corridor should be effectively utilized for logistic and urbanization functions. The logistics terminal demands in the surrounding area of NUBIA should be clarified to enhance the relocation of the freight terminals from Ulaanbaatar.



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The following measures should also be implemented:

(a) Simplified road standards application for Aimag centers - Soum centers network development (1.5 lane road concept), and

(b) Bus network reliability improvement.

1.6.4 Cost estimation and 1.5-lanes road development concept

(1) Data

Recent bid results of road procurement during 2015 to 2018 have been reviewed and the average unit rates for road investment derived in local price.

ADB : 48186-005 Ulaanbaatar-Darkhan-Altanbulag Widening Project

311km, US$60 million (including small capacity building, contingency, financial cost) for widening and rehabilitation and overlay work of existing corridor along relatively hilly sections with heavy traffic route. The unit rate is estimated to be approximately US$200,000/km.

The MRTD local bid result summary during 2015-1811

Repaving (pavement cost, particularly for new sections constructed after 2010): US$35000/km based on 51 samples.

Earthwork+ repaving and reconstruction are applied to old road sections for improvement. The Earthwork+ repaving: US$130,000/km based on 24 samples.

Reconstruction: 79 samples for intercity road development in all terrain categories: US$187,000/km.

Based on the analysis above, the unit rates are determined to be US$187,000/km for flat sections, US$224,000/km for hilly sections, and US$299,200/km for mountainous sections, which include design, contingency and financial cost. The estimated cost in Table 1.6.1 and 1.6.2 are based on these unit rates.

(2) Concept of 1.5 lane roads

The “1.5 lanes road development concept” was applied to road development in Mongolia. Regarding the road projects in mountainous areas, generally, the necessity of project cannot be justified economically due to its high investment cost with small and sparse traffic demand. The “1.5 lanes road development concept” suggests the smaller investment cost by developing single track road with passing-lanes sections in proper intervals. This policy introduced in Japan since 2004 for road sections with the AADT smaller than 1,500 vehicles in mountainous regions. In this consideration, the concept is applied to the sections in mountainous area or sections in hilly area with low priority. It should be noted that the IA3 applies the 1.5 lane road concept even in the hilly sections; however, its status in the road network is not clarified in the present network. Some road sections in mountainous areas are proposed with 2 lanes development, i.e., B1, B5 and T4, because those are classified as national network and/or highly consistent with the NCDP development concept.

(3) Summary of cost estimate and priority

The estimation of investment cost for the proposed NCDP projects consistent with RDP’s road projects are US$1,348 billion in total for all periods, including all category proposals. The estimated investment cost for the prioritized road sections of the ring artery is US$122 million by 2025, and total costs of roads in other categories are US$265 million by 2025. It should be noted that this cost

11 Lifetime of international and country level roads, the expenses per km, expenses/budgets on the road

2015 and 2018 years: The results of road maintenance procurement result for 2015-2018 provided 181 bid results for recent road rehabilitation (repaving, earthwork+ repaving, and reconstruction).



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estimations are based on local bids results, which may smaller than the bid price in international bidding conditions.

Table 1.6.6 Summary of Costs by Road Category (US$ million) Category 2020-2025 2025-2030 2030-2040 Total

Ring artery 122 125 0 248 Inter-Aimag roads 50 211 129 390 Tourism 0 96 0 96 Border trade 168 188 103 459 Mining & other 47 0 107 154 Total 388 620 339 1,348




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Supplement to Chapter 1: Summary of Traffic and Passengers Survey

The JPT conducted comprehensive traffic counting survey and passenger interview surveys during March to November 2019. The following sections show essential information regarding the present status of regional traffic and passenger characteristics in Mongolia. The more information will be published by the other traffic counting database summary report.

(1) Intercity road traffic characteristics by seasons and regions

Figure S.1 summarizes the counted vehicle volume with seasonal and geographical difference. The figure shows counted intercity traffic volumes at 26 CTC locations. In order to understand the characteristics and trends of traffic volume by region, locations are categorized into five groups, i.e., central, northeast, southeast, southwest, and western borders. The vertical axis also shows the seasonal traffic differences.

The horizontal axis shows the counted traffic volumes. The actual counts have eight classifications of vehicles; however, it was aggregated into three categories, i.e., passenger cars, freight vehicles, and buses. The counted traffic volume was converted to Average Daily Traffic with daily weighting method (2 weekends + 5 weekdays), as the CTC were done on one day during weekdays and one day during weekends.

The followings can be noted:

Traffic volumes are heavy in the group of the central areas surrounding Ulaanbaatar, and lower in the other regions;

At most observed locations, the intercity daily traffic volume does not exceed 3,000 vehicles per day, even on the PCU basis, and even in summer;

It can be said that the traffic volumes in summer are larger than those in spring and autumn/winter; In some points, traffic volumes are three to four times larger, i.e., Murun (#9 on the

map), Hatgal (11), Bayanhongol (26), Tosonsengal (28); Murun and Hatgal are on the tourist corridor for Khusgul Lake visitors; and

Autumn/winter data were not able to be obtained as of severe climate condition for survey.

(2) Goods movement characteristics by season and region

Figure S.2 shows the breakdown of freight truck loads by region classified above. The vertical axis shows the season and the horizontal axis shows the breakdown of the cargo in percentage. The following are observed:

Animal products, energy and mining, vegetables and wood are major commodities in all region; The share of animal products becomes larger in autumn/winter than other seasons; The central area’s variety of goods are well balanced and the composition is stable; for other area,

a few categories of goods occupy the majority, particularly in remoted areas; and The proportion of energy/minerals increased in the south-east groups in summer and western

borders in spring. In addition, there were many cargoes such as animal products, vegetables and wood.



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Figure S.1 CTC counted Traffic Volume (Seasonal & Regional Summary)

0 1000 2000 3000 4000 5000 6000 7000

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

SummerSpring

Autumn/WinterSummer

SpringSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

SpringSummer

SpringAutumn/Winter

SummerSpring

Autumn/WinterSummer

Spring

12

46

78

910

1114

1516

1819

2021

2425

2627

2829

3031

32(Veh)

PV GV BUS

South West24 Arvaikheer25 Tsetserleg26 Bayanhongor27 GoviAltai28 Tosontsengel29 Uliastai

North West7 Erdenet8 Bulgan9 Murun10 HutagUndur11 Hatgal

Western border30 Ulaangom31 Hovd32 Ulgii

Central1 Nalaikh Choir2 Nalaikh Terelj4 Zuunmod6 Darkhan

South East14 Mandalgovi15 Dalanzadgad16 Choir18 Sainshand19 Choibalsan20 Chingis21 Baruun Urt Post



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Figure S.2 Goods Movement Characteristics by Regions

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spring

Summer

Autumn/Winter

Central

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spring

Summer

Autumn/Winter

North West

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spring

Summer

Autumn/Winter

South East

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spring

Summer

Autumn/Winter

South West

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Spring

Summer

Autumn/Winter

Western border

Animal Products Energy and Mining

Machinery and Electrical Equipment Metals and Metal Products

Vegetable Products Wood, Paper and Related Products

Beverages and Oils Chemicals and related Products

Computers, Office, Communication Glass and Non-Metallic Products

Textiles, Leather, and Apparel Transportation Equipment and Parts



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(3) Passengers characteristics

Figure S.3 and Figure S.4 show the gender and age distributions of passengers of the four modes, i.e., bus users in RSI (Road side interviews surveys), passenger vehicle (PV) users in RSI, air passengers, and rail passengers. Figure S.3 shows summary of gender balance by mode, and Figure S.4 gives more detail summary for age balance and gender balance by mode with seasonal difference. The following can be noted:

The gender ratio result shows apparent difference12; rail passengers have highest occupancy of female users than other modes;

On the other hands, the passenger car users are highly biased to male; For the age ratio, generally, the category of 25-45 years old shares majority in passengers; For passenger vehicles, it is clear that males responding share larger, and ages of 25 to 45 years

old were the most frequent in any season; on the other hand, the share of females in bus and rail passengers and youths and elders comes larger in bus passengers;

The youth ratio in air passengers are relatively high in spring; and It may be said the traditional railway services are gender and generation friendly than other

modes, e.g., most of sleep car conductors of railway are females.


Figure S.3 Gender and Age Comparison for Four Transport Modes’ Passengers

12 The assigned interviewers are trained to make unbiased sampling before the survey.

0% 20% 40% 60% 80% 100%

Rail

Airline

RSI PV

RSI BUS

F M



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Source: JICA Project Team Note: RSI: Road side interview, PV: Passenger vehicles,

Figure S.4 Gender and Age Comparison for Four Transport Modes’ Passengers

(4) Income level distribution

Figure S.5 shows the similar analysis on income distribution by mode. It is apparent that the air service users are in much higher income categories than others. It was expected that car passengers’ income level would be comparatively higher than bus and railway users; however, there were not apparent differences between those three modes.

0% 20% 40% 60% 80% 100%

Spring

Summer

Autumn/Winter

Spring

Summer

Autumn/Winter

Spring

Summer

Autumn/Winter

Spring

Summer

Spring

Summer

Autumn/Winter

Spring

Summer

Autumn/Winter

Spring

Summer

Autumn/Winter

Spring

Summer

Autumn/Winter

Rail-

FRa

il-M

Airli

ne-F

Airli

ne-M

RSI P

V-F

RSI P

V-M

RSI B

US-

FRS

I BU

S-M

~25 25~45 45~60 60~



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Figure S.5 Income Level Distribution for Four Modes

0% 20% 40% 60% 80% 100%

Airline

Railway

Car

BUS

Spring

0% 20% 40% 60% 80% 100%

Airline

Railway

Car

BUS

Summer

0% 20% 40% 60% 80% 100%

Airline

Railway

Car

BUS

Autumn/Winter

less than 300003 tugrug 300001~500000

500001~700000 700001~900000

900001~1100000 1100001~1600000

1600001~2100000 over 2100001 tugrug



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Chapter 2. Power and Heat Supply, Information and Communications

2.1 Directions of Infrastructure Sector

2.1.1 Classification of infrastructure sector in Mongolia

Cost effective infrastructure development to support various socioeconomic activities under budget constraints is an important issue in Mongolia's national development. Considering the development stage of the Mongolian economy, sensible use of rich resources and protection and enhancement of social environment with unique socio-cultural heritage are critical in pursuing sustainable socioeconomic development. Along this line of recognition, the Japan's aid policy focuses on two main areas related to infrastructure sector as follows:

(a) Achieving balanced economic growth in harmony with the environment through the development of quality infrastructure to support growth, and

(b) Realizing inclusive society by improving the quality of basic social services.

In order to meet these challenges, types of infrastructure required should be classified in general along with urban and rural situations (Figure 2.1.1). Especially in Ulaanbaatar, rapid population inflows from rural areas are progressing, and many residents continue to live in areas called the Ger district where basic infrastructure is not adequately developed. It is difficult to provide basic services in the district, and the area suffers also from air pollution, solid waste problems, and soil erosion. Therefore, the strategy for infrastructure development should be tailored to each area.


Figure 2.1.1 Classification of Infrastructure Requirement in Mongolia

2.1.2 Spatial planning

The spatial framework set for regional development planning is a comprehensive framework, consisting of distribution of urban functions (points), structure of artery network (lines), and land use pattern (areas). This concept is shown in Figure 2.1.2.



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Figure 2.1.2 Concept of Spatial Framework

In spatial planning, infrastructure development as described here constitutes part of urban functions (points), and other functions supporting industry and living environment through the development of electricity supply and information and communication technology (ICT) are not considered. In short, infrastructure sector is divided into two types as shown in Table 2.1.1.

Table 2.1.1 Types of Infrastructure

Type of infrastructure Description Infrastructure covering wide areas Power supply Information and communication

Regardless of urban or rural area and settlers or nomads, this type of infrastructure supports all the industries and living conditions. In evaluating this type of infrastructure development, the diffusion rate, usage, intensity of use, user costs and so forth in the whole Country should be considered.

Infrastructure supporting the function of specific area Natural disaster prevention Sewage treatment Water supply Solid waste management

According to city hierarchy and spatial distribution of cities, functions of core cities and development of safe cities should be determined with consideration for environmental protection and disaster prevention as well. The connectivity within each city through high quality infrastructure should be considered to support economic and social development. Each Aimag or city needs different types of supportive infrastructure.


An optimal system of cities, villages and regions with quality infrastructure shall be conceived by regional spatial analysis to achieve functions assigned to them respectively. The effective measures corresponding to regional issues can be realized by strengthening the spatial structure. Especially, in a country that has a large land such as Mongolia, a macro and meso spatial plans are vitally important. As described above, the concept of “points”, “lines” and “areas” should be consolidated as bases for spatial planning. The definition of the “points” depends on the scale of planning. In macro and meso level, a city is treated as “points” for example. Urban functions of cities along an international artery should be enhanced such as economic corridors (lines) in Mongolia for regional development. Along with the corridor development, land use should also be considered around the corridor. The function of cities and industrial development by economic corridor are linked with existing and future land use patterns (areas).

National capital

Surrounding area(Development as a hinterland)

Regionalcore cites

Soumcenters

（Development of industrial integration and logistics core point）

“Existing land use pattern” and “Indicative land use planning”

Artery network (Corridor)

Soumcenters

Ruralservicecenters

Local growth cities

Artery network analysis

*Road & Railway（Multi-function cities）

（Social services function）

(Specialized growth function ）

Analysis on urban hierarchy

Local service towns



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2.1.3 Objectives and strategy for infrastructure development

(1) Problem analysis

This analysis can sort out existing problems in Mongolia by applying cause-effect relationships. It visualizes the relationships between problems by establishing a problem tree for easy understanding. It starts by identifying the core problem. Starting with identification of the core problem, the tree is developed both upward and downward by considering the causes and effects of the core problem. The JICA Project Team (JPT) first created the problem structure based on the problem tree prepared based on existing materials, interviews with relevant persons and field surveys.

In the first meeting on the urban and transport infrastructure sub-working group (SWG), the JPT presented the problem structure and explained the effectiveness of visualizing kind of the cause-effect relationships. Such an analysis should be done by participatory approach in a workshop including cross-sector participants. In Chapter 3 of the Main Report, the problem structure for regional development is presented integrating analyses by sector. A problem structure focusing on infrastructure sector is shown in Figure 2.1.3.


Figure 2.1.3 Problem Structure Related to Infrastructure Sector

The problem structure confirms the following points, while the structure may be further elaborated through cooperation work among the sub-working group and further analyses.

Several problems at local level are strongly related to urban problems such as population concentration;

Infrastructure issues cause a wide range problems: not only economic, but also environmental and social problems; and

When examining the necessity and priority of infrastructure development, coordination among other sectors is necessary.

Factor

Core problem (Red letter)

Infrastructure problem

Phenomena

Lack of appropriate rural development plan in each aimug Negative effect on

tourism industry

Around 3,000/Y death due to air pollution

Expantion of Ger district around the

center of cityWeakness of

industrial sector

Lack of alternative energy source

Air pollution in UB(ambient and indoor)

Environmental deterioration

Coal-dependent energy situation

Economic loss / decline of GDP

High cost for treatment for desease related to

air pollution

Declining social services due to

deterioration of fiscal

A cause of Grobal Warming and Climate

Change

Decline of Human Development Index

Declining disposable income in each

household

Much poverty population in rural

area

Lack of conprehensive

national development plan

Lack of social servicein rural area

Low employmentrate in rural area

Local level

National level

Low capacity of promoting FDI

Lack of institutional/organizational

framework

Weak spatial structure due to inadequate

spatial planning

Climate change

Increase of Zod

High poverty ratio in urban area

Geoogical feature(land lock area)

Heavy amount of coal stove emission

in Ger district

Lack of attraction in

rural area

Lack of processing industry of primary

products

Insufficient support services for agriculture

and livestock

Mining-dependent industry

Urban level

Lack of capacity of regional

geovernment officials

Insufficient management/capacity

of sewage system

Heavy traffic jam

Population and industry concentration in urban

area

Lack of coordination among

sectors/ministries

Lack of infrustructure such as communication tool, water supply, heat

supply and solid waste facility in rural area

Lack of appropriate animal husbandry

promotion

Lack of tourism promotion

Lack of water resource

Insufficient decentralization ofdevelopment administration

without transfer of financialresources to local government

Limited logistic capacity of Central

Government

Limited transportation

networkDeforestation and degradation of the

grassland

Lack of strategic investment

Dessertification



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(2) Objective analysis

Whereas the problem analysis is to clarify existing situations, an objective analysis aims to find all possible solutions. This analysis develops the foundation for deriving implementation strategies of the NCDP. The analysis shall be conducted by transforming causes and effects relationships of the problems into the relationships between means and ends (Figure 2.1.4).

By converting the problems based on problem structure, development objective shall be defined as follows:

(c) Enhancement of a function for quality lives through development of supportive infrastructure in rural areas;

(d) Proper management system with adequate capacity for sewage system and solid waste management for environment and quality lives;

(e) Diversification of energy sources for sustainable supply and consumption of the power for energy security;

(f) Stepwise development of artery and regional roads for development of industry and circulation of commodities; and

(g) Development of not only urban road network, but also detour and ring road around Ulaanbaatar.


Figure 2.1.4 Relationships between Problem Structure, Development Objective and Basic Strategy

(3) Basic strategy for infrastructure sector

Also, the problem structure confirms the following recognition of interrelationships among several factors:

Several problems at local level are strongly related to urban problems such as population concentration;

Infrastructure issues cause a wide range problems in, not only economic but also environmental and social problems; and

When examining the necessity and priority of infrastructure development, coordination among other sectors is necessary.

According to this recognition, the strategy of infrastructure sector should be considered comprehensively. In infrastructure development, a concept of “leaving no one behind” pledged with adoption of the 2030 agenda related to SDGs can be placed in the prime position in the strategy. The development concept in terms of infrastructure sector in Mongolia consists of following points: 1) to eliminate disparity between local/rural and urban areas, 2) to consider economy, environment and social at the same time, and 3) to formulate projects optimized without focus on one specific sector.



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Under these concepts, specific and effective strategy can be established as follows.

1) Innovation on infrastructure sector

In general, in low population density area, labor productivity tends to be low. Especially, Mongolia is one of the lowest population density countries in the world. Also, the disparity between urban and rural areas, represented by population and industry concentration in Ulaanbaatar, can become a cause of low productivity as a whole.

By applying innovations created in Japan or other countries, innovations in Mongolia can be realized more effectively. Through innovative social reform, labor productivity in Mongolia shall be enhanced drastically to alleviate the disparity and to solve social and economic problems simultaneously. Especially, infrastructure sector can fully utilize the innovations by adapting ICT and other technologies suitable to local areas.

As described in Chapter 5 of the Main Report, labor productivity must be enhanced to achieve the target of gross domestic production (GDP) growth set by the NCDP macro development framework. Innovations can contribute to achieving higher productivity in industry and service sectors supported by basic infrastructure. In this sense, it is necessary to build infrastructure with innovations to realize such quality that is related to industry and service sectors.

2) Cost effective infrastructure development

Cost effective infrastructure development is an important issue to support various socioeconomic activities under budget constraints in Mongolia's national development.

Also, according to Mongolian long-term development policy 2050 (LTDP2050), the Mongolian Government suggests the measures such as “Create and develop an electronic database with respective infrastructure” as follows:

Create a big-data based database with the necessary technical infrastructure that enables citizens, the government and business entities to exchange and use information online,

Increase the speed of Internet and improve the ability of the local population to use it, Develop spatial data infrastructure and use it for decision-making at all levels, and Create an integrated addressing database using geographical information system (GIS), and

introduce it to citizens and organizations.

These measures are consistent, in a large part, with the infrastructure strategies of the NCDP mentioned below.

Public-private partnership (PPP)

In 2009, the Mongolian Government announced a policy to promote infrastructure development through PPP, utilizing private funds, and has been working on improving the institutional environment to promote PPP with the support from JICA and other donors.

Under the situation of growing investment needs on infrastructure in line with government priority projects, utilizing PPP and concessions can optimize a budget to accelerate economic growth by leveraging the financial resources, technology and management system of the private sector. Therefore, PPP should be utilized fully in not only Ulaanbaatar or other major cities, but also regional cities or Soum centers in order to ease the disparity of basic infrastructure and social service between local and urban areas.

Longer lifespan of facilities based on proper maintenance system

In order to prevent deterioration and malfunction of infrastructure facilities in aging and lengthen their lifespans, appropriate planning for longer lifespan infrastructure with a concept of preventive maintenance should be established. As a result, lifecycle cost on infrastructure facilities can be suppressed. A key to realize longer lifespan is as follows: 1) maintenance cycle with regular inspection

https://ejje.weblio.jp/content/To+prevent

https://ejje.weblio.jp/content/deterioration

https://ejje.weblio.jp/content/lengthen

https://ejje.weblio.jp/content/the+life

https://ejje.weblio.jp/content/the+life



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for facilities, 2) database system with information necessary to repair and revise, and 3) human resource development for judging conditions of facilities in a technical manner.

In addition, decentralization of authority with regard to infrastructure management is also a key to facilitate preventive maintenance on a regular basis.

Advanced technology and management

Advanced technology has a high potential in order to take full advantage of the characteristics of Mongolian cities in infrastructure sector. Taking sewage heat for example, the sewage water flowing through the cities has characteristics that it is cooler in summer and warmer in winter than the ambient temperature. By using this temperature difference to obtain heat, it can save energy and reduce greenhouse gas emissions. Especially in Mongolia, air pollution in winter is specific issues in not only Ulaanbaatar, but also other major cities. Such kind of technology can mitigate social and economic problems at low cost and with small resources consumption.

Management of construction by-products is also important. In the planning stage, strengthening monitoring of construction by-products and reducing by-products should be considered strategically. It is necessary to promote recycling and reduction of by-products, and promotion of the use of recycled materials through thorough sorting at construction sites and removal and transport to recycling facilities.

(4) Integration with HSP

It can be understood that the goal of human settlement plan (HSP) is to create a system of urban and rural settlements based on optimal regional structure with network service infrastructure for supporting economic development. This can be summarized as follows:

The ultimate goal is to support economic development; It is important to consider the purpose of social development on the basis of the social

development goals; and A system of cities and villages should be strengthened by the regional structure supported by the

optimal arrangement of service facilities.

In these points, the infrastructure sector plays an important role in building an effective system of cities and villages as well as promoting economic activities through “points” development (urban function) and supporting land use (“areas”) development with various type of infrastructure suggested by the NCDP. These outputs should be integrated into the HSP comprehensively.

2.2 Power and Heat Supply

2.2.1 Current situation

(1) Energy resources

The capacity of power supply provided by domestic plants/facilities is not sufficient at present. The power is imported from the neighboring Siberian region of Russia and the Inner Mongolia autonomous region of China to make up for the shortfalls. In particular, power shortages occur during the winter peak season when demand increases. In addition, new mining development projects have been promoted in the southern area and continued increase of population in Ulaanbaatar have been projected. As the result, a large amount of additional power supply capacity will be required.

Most Mongolia's energy demand is covered by coal fired power plants with remaining small amount by hydro, wind, solar and diesel stations (Figure 2.2.1). This situation causes environmental deterioration and is not preferable from the viewpoint of energy security even if all coal fuel is produced at home. The Mongolian Government is trying to promote renewable energy. However, its share in the total power supply, expected to be 23% as of 2019, has not increased despite the drastic improvement by introduction of wind power and solar power in the past several years.

Although crude oil has started to be produced in Mongolia, there is no oil refining facilities, and gasoline,



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heavy oil, kerosene, etc. are imported from Russia and other countries. Oil refining facilities are under construction by the support of India. In addition, power generation projects in Mongolia depend basically on thermal power generation using domestic coal as fuel, and combined heat and power (CHP) plants co-producing steam in winter are being operated. Although the balance of supply and demand for consumer use has been almost achieved, provision of additional domestic power for industrial demand including mine development is required.

In 2015, power mostly equivalent to a quarter of the total electricity generated was imported from Russia and China (Figure 2.2.2). Even in the winter when the demand for electricity peaks (around middle of January), increasing imports can cope with the situation without increasing domestic power generation. However, the price of imported power is higher than that of Mongolia's domestic power, and if it continues to increase, the cost of importing electricity will become excessive.

At present, domestic power self-sufficiency rate is about 80%, and import amount from neighboring countries is about 20% (about 85% from China and 15% from Russia as of 2015). In recent years there has been a slight decline in import dependency.

Source: Ministry of Energy (MOE)

Figure 2.2.1 Install Capacity of Power Plants

Source: MOE

Figure 2.2.2 Electricity Production and Import

(2) Electricity balance

The per capita electricity production was reported at 1,945.800 kWh in December 2017. This represents an increase from the previous year of 1,872.200 kWh for December 2016. The data are updated yearly, averaging 1,374,442 kWh from December 1989 to 2017, with 29 observations. The data reached an all-time high of 1,945.800 kWh in 2017 and a record low of 1,235,000 kWh in 2001. Energy usage by industry is shown in Figure 2.2.3.



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Source: MoE

Figure 2.2.3 Balance of Electricity in 2015

(3) Power penetration rate in Mongolia

The National Statistics Office in Mongolia has released data for reliable electricity indicators available for 2015, 2016 and 2017 and its target in 2030 (SDV target year) as shown in Table 2.2.1.

Table 2.2.1 Reliable Electricity Penetration Rate in Mongolia Description Unit 2014 2015 2016 2017 2030

Share of the households using reliable electricity % 89.0 99.2 99.2 99.1 100.0

Source: National Statistical Office

(4) Heat supply system

Driven by population growth, urbanization, and economic development in Ulaanbaatar, the demand for heating has been increasing rapidly. The current district heating (DH) infrastructure that serves most urban buildings, however, is insufficient, unreliable and deteriorating due to the lack of funds for investments and maintenance.

Heat supply systems operating in Mongolia are divided into the following types according to their capacity, scope and level of efficiency.

Central heating system with a combined heat and power plant; Central heating system with a heating plant; Partial heat supply system with a boiler; Independent heating systems with low pressure boilers and other sources such as underground

pumps, and Low-power independent heating systems such as traditional Ger stoves, improved stoves and

electric heaters.

These different heat supply systems have their advantages and disadvantages, and since all systems are commonly coal-based, the most pressing issue is the impact on ambient air quality.

Ulaanbaatar heating supply is provided by Amgalan Thermal Power Plant, Thermal Power Plant No.2, No.3, and No.4 through 379.5 km power line with 200-1200 mm diameter and 10 pump stations to serve more than 11,900 buildings and facilities. The total heat load for consumption is 2924.2 Gcal (Giga calorie)/hour. The thermal energy is sold at tariffs approved by the Energy Regulatory Commission through 16 customer service centers of the Housing and Public Utilities Authority and 66 offices of private license holders.



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(5) Electricity and heat demand projection

Electricity and heat demands are expected to grow due to the economic development. The demands are projected by MoE as shown in Figure 2.2.4 for electricity and heat separately. The annual average growth of electricity demand is projected to be 1.75% between 2019 and 2030. The demand growth for heat is projected also at relatively low rates as compared to anticipated economic growth.

Source: MoE

Figure 2.2.4 Electricity and Heat Demand Projection

2.2.2 Stability of power supply

The reliability of power supply is often expressed by the system average interruption frequency index (SAIFI), which is the “number of annual power outages (times) and annual outage time (minutes) per customer”. Comparison of SAIFI in Mongolia with selected countries is shown in Table 2.2.2. The quality of electricity in Mongolia is characterized by voltage fluctuation and frequency instability.

Table 2.2.2 SAIFI in Mongolia and Other Developing Countries

Country or region SAIFI 2008 2009

Mongolia (Central Region) 18 16 Indonesia (PLN) 13.33 10.78 Thailand (MEA) 2.3 1.85 Philippines (Meralco) 1.38 1.48 Malaysia (Tenaga Nasional Berhad) 0.87 0.76

Source: JPT, based on the following information: Mongolia – Annual Report 2009, Energy Regulatory Commission Indonesia – Perusahaan Listrik Negara (PLN) Statistics, 2000–2010 Thailand – Annual Report 2003–2010, Metropolitan Electricity Authority (MEA) Philippines – Financial and Operating Results, 1Q, Meralco Malaysia – Electricity Supply Industry in Malaysia, Performance and Statistical Information 2010,

Election Commission of Malaysia (EC), formerly Department of Electricity and Gas Supply Malaysia (DEGSM)

The SAIFI in Mongolia had been improved from 10 in 2015 to 8 in 2016 and also 2017, but increased to 15 in 2018. However, the majority of combined heat and power plants, transmission and distribution networks were built between 1960-1980 and installed with outdated technology and equipment. The amount of electricity consumed for internal use is 1.5 times higher and the transmission and distribution loss is two times higher than the world averages respectively. These facts demonstrate that the Country needs to phase out low-efficiency energy generation and adopt highly efficient energy usage. For example, the electric cables in Ulaanbaatar, constructed in 1970 to 1980, have become outdated. MoE realizes that these cables should be renovated step by step for stable power supply.



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Source: Annual Report 2011, Energy Regulatory Commission

Figure 2.2.5 SAIFI in Central Region in Mongolia

2.2.3 Institution and organization

Institutions and organizations having responsibilities in different aspects of the power supply sector are shown in Table 2.2.3.

Table 2.2.3 Responsibility of Power Sector Organizations Organization Responsibility and current situation

MoE (Ministry of Energy)

- Responsible for policy making on energy development including electric power.

- Development of energy resources and energy use, import/export of energy, power plants, power transmission lines, etc.

ERC（Energy Regulatory Commission）

- Operated by license fee income from electric power related businesses. - Regulating power generation, transmission, distribution and power supply - Monitoring and evaluating the licensees’ activities

NDC (National Dispatching Center) - Maintaining supply/demand balance of power

National Power Transmission Grid - Managing transmission of electricity

Power generation and distribution company

- There are nine companies in whole Mongolia and 16 companies on generation and distribution respectively.

- Although there is a policy of privatization, only the Daruhan Selenge Distribution Company has been privatized so far.


1.1.1 Structure of energy sector

The total installed electricity generating capacity of eight combined heat and power plants of 1,161МW meets the majority of domestic energy demand. In 2016, peak load of the energy system reached 975 МW and 21% of energy demand was imported. The facts demonstrate there is high risk of running short of energy resources in emergency cases.

The Mongolia power system consists of four separate segments (Figure 2.2.6). Central Energy System (CES) including the Dalanzadgad Energy System in the South Gobi, Western Energy System (WES), Altai- Uliastai Energy System (AUES), and Eastern Energy System (EES).

Of 330 Soum centers in Mongolian, 329 are connected to the electricity grid. Most Soums are connected to the internal grid, and remaining Soums are provided energy from the Chinese or Russian



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grid. Only one Soum (Altai Soum) not connected to the grid gets the electricity from renewable sources. Altai Soum of Govi Altai Aimag is supplied by an off-grid electricity supply system consisting of a 311kW photovoltaics and three diesel generator sets with a total capacity of 220kW covering 246 household and 41 buildings.

The CES is supplied by five CHP plants, covering the main cities of Ulaanbaatar, Darkhan, Erdenet and 13 Aimags. The installed generation capacity in the CES is around 1,100 MW, but the available capacity is only around 900 MW in 2016 due to down-rating of old generation units. The CES comprises three generation companies, one heat distribution company and six power distribution companies. The Parliament approved on April 23, 2020 the implementation of storage battery system installation on the CES to allow storage of imported power from Russia during night for effective use and saving of imported power.

Three Aimags, Bayan Ulgii, Khovd and Uvs in the WES is served by one power supply company. In 2014, the peak demand in the WES was 32 MW and the total energy consumption was 130GWh, of which 106 GWh was from Russia and 1.7 GWh from China respectively. The 12 MW hydropower plant in Khovd generated 39 GWh.

The EES and the AUES have a power capacity of 33MW and 15MW respectively. The CES is connected with the EES, the AUES and the Russian power grid. The EES and the AUES are connected at 110 kV. On the other hand, it is connected with Russia at 220 kV. The WES is connected with Russia as well.

The amount of electricity imports from Russia is equivalent to about 7.4 % of the total demand of Mongolia. The Mongolian grid is connected to a large grid in Russia, and stability has been improved by having Russia adjust its voltage. In addition, there are also cases where the southern mines within the CES area import electricity directly from China.

Power is imported from Russia at 220 kV and 110 kV to the Central Power System and Western Region Power System respectively. The Oyu Tolgoi deposit is supplied by 220 kV electricity imported from China through overhead power lines. Also, the border checkpoints of the General Customs Administration and some border checkpoints of the General Authority for Border Protection are supplied with imported energy through 10-15 kV overhead power lines.

The WES is supplied by the Durgun hydropower plant and electricity imported from Russia. In order to increase the capacity and independence of the WES, the Mongolian Government are working to implement the following renewable energy projects with foreign loans and grants:

90 MW hydropower plant in Erdeneburen Soum of Khovd Aimag, 10 MW solar power plant in Myangad Soum of Khovd Aimag, and 10 MW wind power plant in Umnugovi Soum of Uvs Aimag.



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Source: MoE

Figure 2.2.6 Current Status of Power Supply System in Mongolia

2.2.5 Structure of heating sector

Ulaanbaatar, Darkhan, Erdenet, Choibalsan and Dalanzadgad have centralized heat supply systems with combined heat and power plants which vary in capacity. Thermal power plants in these cities generate about 91 % of Mongolia's electricity and about 70 % of heating. Urban heat supply systems were commissioned in 1961 to 1987, with Ulaanbaatar being the first with the largest capacity. All large-capacity heating systems are owned and managed by the State through a State-owned joint stock company.

Central heating supply systems with heating plants and diesel stoves that produce only heat serve Aimag capitals of Khovd, Bayan-Ulgii, Uvs, Dornogovi, Selenge, Khuvsgul, Bulgan and Sukhbaatar Aimags. Other Aimag capitals have partial heating systems with heating stoves.

The installed capacity of the central heating systems operating in Aimag capitals is 20 to 30 MW, and its efficiency is not high, and the efficiency of the partial systems with heating boilers is even lower. Low-capacity partial heating systems are used for heating in public buildings such as schools, kindergartens, and hospitals in urban Ger district as well as in Soum centers and Aimag cities without central heating systems.

2.2.6 Power and heating situation in Ulaanbaatar

(1) Power supply

The power supply in Ulaanbaatar is operated and provided by three thermal power plants of the Central Power System, which have 30 substations (110kV) set up by the "National Transmission Authority" and several substations (35kV) installed by the "Ulaanbaatar Distribution Corporation". The total capacity of these thermal power plants is 907.5 MW.

(2) Heat supply

Four State-owned enterprises, comprising three combined heat and power plants and one heat only boiler plant, produce heat for Ulaanbaatar’s district heating system. Ulaanbaatar has three types of district heating distributors, Ulaanbaatar District Heating Company (UBDHC), Housing and Public Utilities of



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Ulaanbaatar City (OSNAAUG) and Private City Housing Companies (PCHCs). UBDHC, State-owned enterprise, is responsible for heat transmission in the primary network. It serves 43.7 % of residential customers and 8 % of entities and factories, including buildings with individual heat substations. OSNAAUG is a municipally owned company, responsible for heat distribution in the secondary networks. It serves 38.1 % of residential customers and 25.7 % of entities and factories. It is responsible for public central heating with approximately 140 group substations. The small PCHCs, which also have responsibility for secondary network distribution, serve the remaining 18.2 % of residential customers.

Source: MOE

Figure 2.2.7 Power System in Ulaanbaatar

110KV substation35/10KV substation

Source: MOE

Figure 2.2.8 Heating System in Ulaanbaatar

Legend

Heating pipeline under construction (2020)

Existing heating pipeline

Priority heating pipeline

Heating pipeline planed Master plan

28 МВт

50 МВт

40 МВт

250 МВт

300 МВт

50 МВт



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2.2.7 Policy and programs

Energy law of Mongolia

The purpose of this law, enacted in 2001, is to regulate matters relating to energy generation, transmission, distribution, dispatching and supply activities, construction of energy facilities and energy consumption that involves utilization of energy resources and tariff license.

Renewable energy law of Mongolia

The purpose of this law is to regulate generation and supply of energy utilizing renewable energy sources and tariff license. This law stipulates regulation on license and price. A license for generation of electricity and heat shall grant the right to generate electricity and heat using a renewable energy. The Energy Regulatory Commission shall set tariffs and prices of energy generated and supplied by renewable energy power sources to be connected to a transmission network.

State policy on energy 2015-2030

Mongolia has adopted the “State policy on energy” in June 2015. The main objectives of the policy are to build the energy security of the Country, assure sustainability of the energy sector development and create the basis for faster deployment of renewables in the future. The policy establishes interim and final goals in two stages as follows.

First stage for 2015-23 is a period for establishing required capacity reserve margin of fuel and energy sources, establishing a foundation for renewable energy development, accomplishing normative documents of the energy sector, introducing and localizing international standards and improving the legal environment, based on “National medium-term program to implement energy policy 2018-2023”

Second stage for 2024-30 is a period for exporting electricity and sustainably developing renewable energy. It is expected that distribution and supply networks will be fully privatized, and the energy sector will be operated by regulated and competitive principles. This is the period when Mongolia will be connected with neighboring countries through high capacity direct current electricity transmission lines and exporting electricity to abroad.

Action program of the Government of Mongolia for 2016-2020

In this program, the Mongolian Government will fully ensure the sustainable and reliable supply of energy as a core of economic security of the Country, and create conditions enabling to export energy. The point to be noticed is that methane gas contained in coal layers is positioned as a feasible alternative energy. Furthermore, it is expected to create the legal environment and infrastructure necessary for gas supply system and commence the project to build a plant for extracting clean gas fuel from coal seams.


Renovating and expanding several thermal power plants, and construction of new hydropower plant are suggested in this program. Also, it is suggested that connecting the regional power grid to high-voltage overhead transmission lines, gradually resolving the issue of electricity supply to mega projects of heavy industries and creating a smart grid system shall be promoted.

The program is aimed at increasing the quality of, and access to heat supply and improving the comfortable living environment for citizens by ensuring the step-by-step construction and expansion works of new thermal sources in cities, Soums and other urban areas.

In view of technical aspect, introducing innovations and new technologies to save energy, and increasing efficiency and reducing losses are described, and gradually transferring the energy pricing and tariffs into a rational market system is recommended.

Mid-Term National Program to Develop the State Policy on Energy (2018-2023)

The program defines renewable energy expansion plans and the Mongolian electricity sector in the context of international climate mitigation efforts, and targets as well as measures for improved energy



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efficiency in the energy supply sector such as the reduction of transmission and distribution losses or own energy consumption.

Also, the program defines a policy on heat supply including 1) improving the efficiency of urban central heating systems, expanding the scope of their services and introducing cost-effective advanced technologies, 2) improving the efficiency of district heating systems in Aimag capitals and integrating tariffs, 3) transferring Aimag capitals with partial heat supply systems to efficient central heating systems, 4) reducing central heating supply in Ulaanbaatar, and 5) introducing heat storage technology.

Mongolia Sustainable Development Vision 2030 (SDV2030)

In energy and infrastructure sector, the SDV2030 describes to “ensure stable, reliable and full supply of energy domestically and export energy”, and targets are as follows:

Phase 1 (2016-2020): Domestic supply of 85% of domestic demand for energy, Phase 2 (2021-2025): Domestic supply of 90% of domestic demand for energy, and Phase 3 (2026-2030): Domestic supply of 100% of domestic demand for energy.

Regarding renewable energy, “increasing the share of renewable energy in the consumption of total energy, and seek for new energy sources” is described, and targets are as follows:

Phase I - (2016-2020): Increase the share of renewable energy in the consumption of total energy to 20 percent, and initiate preparation for a nuclear power plant; and

Phase II - (2021-2025): Increase the share of renewable energy in the consumption of total energy to 25 percent and complete the preparation for a nuclear power plant.

Five-year general guidelines for the development of Mongolia in 2021-2025

In economic sector, priority measures are described in the guidelines as follows.

Establish the basic infrastructure including power supply for economic promotion, Achieve full supply of energy domestically and establish sustainable and independent system,

and Expand the power and heating sources in regional towns utilizing PPP.

These measures are mostly consistent with the NCDP strategy for power supply sector.

2.2.8 Long-term development policy 2050

(1) Energy self-sufficiency

In the Mongolian Long-term Development Policy 2050 (LTDP2050), importance of improving competitiveness and attracting foreign investment are suggested. Thus, there is a need to target at generating the electricity and meeting energy demands fully from local sources and improving energy networks. This means that securing energy sufficiency can contribute to national power security, stable supply, and suppression of trade deficit on power.

Furthermore, the Mongolian Government aims to become an export-oriented country by increasing the energy sources through the measures as follows:

Join the Asia regional integrated energy networks and export energy, Introduce new products in the energy sector and substantially increase renewable energy

production, and Conduct research on the use of new energy sources, including the creation of low capacity nuclear

power plants.

(2) Strengthening the position of leading industries of the economy in global markets

The Mongolian Government emphasizes the points listed below for industrial development:



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Encourage using the various sources of energy, renewable energy like solar and wind energy, biomass, liquid or gaseous, thermo energy, fuel cells, and other new sources of energy, and strengthen the policies on energy supply to international markets, and

Implement a policy on increasing the nuclear energy share in the energy balance.

(3) Forecast for energy production

According to the LTDP2050, forecast for energy production are as summarized in Table 2.2.4.

Table 2.2.4 Forecast for Energy Production

Development scenario Growth rate of energy production compared to current level 2025 2030

Baseline scenario 33.2% 53.8% Green economy scenario 33.2% 53.8% Combined scenario 46.7% 84.9%

Source: Long-term development policy 2050

Implementation of the state policy on monopoly and tariffs' exemption to encourage multiple suppliers in the energy sector will be valuable in the long run for the development of efficient energy production based on low-cost raw materials, the promotion of sustainable consumption, and the provision of reliable and safe energy services. The establishment of an integrated energy network is the beginning of all this work. For the reliability and safety of energy supply in large settlements, it is necessary to create the systems of energy rings by placing the energy sources at proper location respectively.

2.2.9 Current issues in power sector

(1) New coal-fired power plants

At the CES, the development of the Tavan Torgoi coal mine and the Oyu Torgoi copper mine in the South Gobi region is expected to increase power demand significantly in the near future. At present, most power supply to coal mines in the south region relies on import from China. Furthermore, on average 6 % annual increase in electricity demand is expected in the whole CES supply area. There is also a problem of aging power plants built long time ago. They cannot fully perform the installed generation capacity due to the aging. Some of the current power plants would be retired in the near future.

As the countermeasure of the situation, 700MW and 300MW coal fired power plants are planned to be constructed near Ulaanbaatar and in South Region respectively. The construction of these plants aims to stabilize the power supply in the CES and decrease the dependence on China for sustainable socioeconomic developments. Other coal-fired power plants have been planned to be established in the future.

(2) Renewable energy

At present, five mega solar power projects (Zuunmod, Zamyn-Uud and so on) are planned to install a total of 60 MW capacity. The Tsetsi wind farm in the Gobi desert started operation with 50 MW in 2017. JICA has supported this wind farm through the loan of “Private Sector Investment Finance” which is a type of ODA to support for development projects by the private sector in developing countries.

Some hydro and wind power plants are now under construction. However, the Mongolian Government would freeze the construction of new renewable energy plants such as solar power and wind power. This is because it is difficult for these sources to provide stable energy due to dependence on natural conditions. For instance, wind-power cannot generate electricity on the situation under minus 30 degrees C due to equipment failure. Regarding solar power, it is also difficult to generate electricity stably all year round due to fluctuations of solar radiation.

The Law on Renewable Energy was amended on June 6, 2019 to conduct the renewable energy source



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projects on a competitive basis in order to ensure the regulation of the energy system and the normal and reliable operation of the system. In the future, there is a need for a renewable energy source to regulate the integrated power system. The Mongolian Government is pursuing a policy to develop hydropower plants and other renewable energy projects included in the “National medium-term program to implement energy policy 2018-2023” in accordance with energy system operation procedures. In addition, the Mongolian Government will improve the quality of renewable energy supply by promoting smart grid described below.

(3) Smart grid

MoE has been making effort to promote a smart grid system for stable and sustainable power supply. A policy of introducing a smart grid comprises four segments as follows:

Integration of demand and supply systems through appropriate information analysis such as smart meters,

Remote control system realizing quick maintenance when accident or deterioration has happened, Overall system improvement for adjustment of demand and supply amount, and Streamlining of flow of power generation, transmission and distribution.

Implementation of the smart grid has already been partly introduced in Ulaanbaatar, Darkhan and Selenge.

The World Bank is supporting the efficient use of energy. The Mongolian Government is partially introducing smart energy policies and techniques and technologies in the energy system. The wide area monitoring system (WAMS) has been introduced to record normal and emergency power system operation processes. Current and voltage values and their angles are constantly monitored at 24 points of the Central Energy System. Also 0.4 kW cable lines and meters of Baganuur and the South Eastern regional electricity distribution network and the Erdenet-Bulgan electricity distribution network are being upgraded within the framework of World Bank cooperation.

2.2.10 Strategies of power supply sector

(1) Levelling of power demand

There are much seasonal fluctuations on the power demand in Mongolia. It is important to suppress peak power demand in winter. On the other hand, daily fluctuations pose serious problems as well. Shifting peak time with concerted efforts is necessary to cope with the fluctuations. It is an effective method to shift the operation day and time of factories and households in a planned manner, for example. Using heat storage systems to store the electric heating is also effective. In order to control peak power, it is necessary to adjust the use of electricity in public spaces or public buildings at the initial stage. They shall serve for demonstration to raise the consciousness of people on efficient usage of electricity. Promotion of thermal insulation materials or enhancement of the people’s consciousness for power saving would be effective to cut the peak demand as well.

(2) Stable power quality

In remote Soums or Bags in some Aimags, there are places located very far away from the power plant. In such cases, the power supply would be inferior in quality. In order to provide quality power, preferably at least 50 km distance should be secured. Therefore, construction of small plants with 5-10 MW in important connection points would be effective to secure the quality. These plants would be coal fire plant at present but transfer to renewable energy plant or combined heat and power plant is necessary in the future.

(3) Diversification of energy sources

In terms of energy security, it would be desirable to reduce the dependence of electricity import from Russia and China. In order to proceed toward energy-independence, it is necessary to promote



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diversification of energy sources. For the long-term future, alternative energy sources such as nuclear or geothermal power might become options. In introducing these power plants, environmental and social effects and national security should be evaluated comprehensively and carefully.

Law on Energy was amended in 2015 and gas supply related issues were reflected in the law. Also, the “State policy on energy 2015-2030” and “National medium-term program to implement energy policy 2018-2023” reflected implementation of study on gas supply. An agreement has been reached to develop “Methane gas supply chain development master plan” under technical assistance of ADB in 2020-2022. Share of electricity generated by methane gas, gas consumption and supply of Mongolia will be calculated and studied in detail within the framework of the master plan.

The most promising measure for alternative energy source is to expand a capacity of hydroelectric power generation with pumped storage. This enables to not only provide the power as renewable source, but also contribute to stable power supply utilizing the pumping function. MoE is pursuing to implement projects such as construction of hydropower plants, hydroelectric power stations and pumped storage power stations within the framework of “State policy on energy 2015-2030” and “National medium-term program to implement energy policy 2018-2023”.

(4) Support of industrial promotion

Reliable power supply is vitally important for industrial promotion, especially for IT or precision equipment industry. As described later on information and communication technology, Mongolian should take full advantage of the high mobile network penetration rate. Also, distribution of industrial land use should be considered at the national level to attract foreign direct investments (FDI) through providing stable power supply on a priority basis.

1.2 Information and Communications

2.3.1 Current situations

(1) General review of information and communication in Mongolia

Mongolia is one of most sparsely populated countries in the world. Moreover, there is a wide variance of population distribution between rural and urban areas; especially the over-concentration of population in Ulaanbaatar has been remarkable. Mongolia has a unique characteristic that there are a large number of nomadic people in the countryside and in the Ger districts around the major cities. This population distribution has made it more difficult for communication tool such as line telephones and internet connections to disperse throughout the Country. With almost half the population concentrated in the capital city, most landline technologies have been deployed there. In rural areas, wireless technologies have superiority rather than landline systems due to sparse population. It is easy to make international or domestic calls in Ulaanbaatar and Aimag centers. Some technologies are still unpopular in many Soums, but it is now possible to use mobile (cellular) phones in most areas of the Country.

As Mongolia has increased its wealth, so has people’s demand for information and communication infrastructure. As the result, the market has kept growing annually since the early 2000s. The World Bank had implemented the Information and Communication Infrastructure Development Project from 2006 to 2013. The objectives of this project were 1) to assist the recipient country in significantly increasing the coverage and use of relevant information and communication services among the rural population through an incentive program designed to encourage the participation of private operators in the rural segment of the information and communication market, and 2) to increase private sector participation in the delivery of e-government services, thereby improving public sector utilization of information and communication infrastructure. Through this project, mobile voice services had been significantly improved, and the number of telephone and Internet users had been significantly increased as well. As for e-government, the services provided in partnership with the private sector increased from the baseline of one in 2006 to three in 2012.

https://ejje.weblio.jp/content/hydroelectric+power+station

https://ejje.weblio.jp/content/hydroelectric+power+station



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(2) Information and communication infrastructure in Mongolia

Mongolia’s information and communication infrastructure has changed extensively during the last ten years. The most significant change has been the extension of the fiber optic backbone network deployed in 2000. Nowadays, the network occupies 43.3% of total national telecommunications infrastructure and 52.4% of this network is owned by the Mongolian Government and 47.5% is owned by Railway Authority of Mongolia.

The baseline of the Mongolian telecommunications network consists of about 5,200 km of digital system radio relay lines, over 13,000 km of fiber optic network, around 27,000 km of air lines, and 23 VSAT (Very small aperture terminal）stations. There are international Intelsat satellite stations, which provide services with over 332 communication stations with a capacity of 135.2 thousand telephones. The high-speed optical cable network installed covers 21 Aimag capitals and most of Soums in Mongolia.

(3) Current status of diffusion on internet service and mobile phone

Statistically, Mongolia has an advantage compared to other developing countries with respect to mobile phone services and internet penetration. Only quite remote areas from urban areas cannot connect to Internet. Out of 330 Soums, 19 are left behind at present. However, in the near future, these Soums would be able to access the Internet. Mobile phone services are provided to the residents in all Aimags and Soums as shown by the fact that about 5 million subscribers exist at present (Figure 2.3.1). Regardless of settlers or nomads, most people in Mongolia can enjoy the accessibility to Internet and mobile phone services. Some of them have two or more mobile phones. The number of Internet subscribers has been increasing year by year to reach around 3.989 million as of 2018 (Figure 2.3.2). On the other hand, the number of fixed telephone subscribers is less than 370,000 as of 2018.

Source: Communications Regulatory Commission of Mongolia (CRC) http://www.crc.gov.mn/en/k/S/11

Figure 2.3.1 Number of Mobile Phones Subscribers

http://www.crc.gov.mn/en/k/S/11



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Source: Communications Regulatory Commission of Mongolia (CRC) http://www.crc.gov.mn/en/k/S/11

Figure 2.3.2 Number of Mobile Broadband Subscription

2.3.2 Institution and organization

All ministries have an IT division which can promote some activities for the IT sector. Communications and Information Technology Authority (CITA), in charge of the information and communication development sector in Mongolia is coordinating with them. CITA, consisting of five sections as shown in Figure 2.3.3, is the organization directly under the Prime Minister. Main responsibilities of CITA are formulation of policies and regulations, promotion of information and communication industry, protection of information security, and operation of the universal service fund. The fund has been created with contributions from supportive budgets by foreign countries and electric wave usage fees from telecommunications carriers in order to maintain a uniform nationwide telephone service with high public utility.

Source: CITA

Figure 2.3.3 Organization Chart of CITA

As an independent regulatory organization, Communications Regulation Commission (CRC) has been managed by the chairman and six members. CRC has responsibilities of collecting radio wave usage fees from communication companies and of supervising radio wave usage works. Responsibilities of these information and communication related organizations are summarized in Table 2.3.1.

http://www.crc.gov.mn/en/k/S/11



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Table 2.3.1 Responsibilities of Information and Communication Infrastructure Related Organizations

Organization Responsibility and management entity CITA (Communications and Information Technology Authority)

- Formulation of policies and regulations - Promotion of information and communication industry - Protection of information security and universal service fund

CRC (Communications Regulation Commission）

- Collecting radio wave usage fees from communication companies - Supervising radio wave usage works - Issuing the license necessary for providing mobile services

Affiliated Organizations

- Radio and Television (TV) broadcasting network - National data center - National IT park - Mongolian Telecommunication Company - Mongol Post Company - Information Communications Network Company

Private companies - There are four mobile operators such as Mobicom and so forth - There are three wholesalers and 50 retailers who provide Internet services

(i.e. Internet providers) Source: JICA Project Team

2.3.3 Policy and programs

Law of Mongolia on telecommunications, 2001

The purpose of this law is to regulate relations between governments, citizen and legal persons engaged in the creation, utilization and protection of communications network in Mongolia, issued in 2001. At present, revision of this law is under progress.

State policy on the development of information and communications technology (2017-2025)

Main expected outcomes from the implementation of this policy are conforming the information and communication development to the global trend, enhancing e-governance, digitizing other sectors, and increasing the types of e-government services and its prompt delivery.

The policy shows eight goals to be achieved. Related to industrial development, the policy states, “to increase competitiveness on global markets by developing information and communication product industry, promoting national digital content and software development, and introducing information and communication to industrial processes, controls, and monitoring.” It is implemented in phases as follows.

Mid-term 2017-2020: In this phase, it is envisioned to enhance sector growth and highly skilled human resources and create new market and IT clusters for intensive development of information and communication sector. Also, knowledge based, and export-oriented industry shall be developed.

Long-term 2021-2025: In this phase, it is envisioned to create new industry sectors that are economically efficient and based on high tech and innovation. Measures will be taken to release new products and services, and to enhance the share of digital economy.


Related to the information and communication sector, several programs have been suggested in this program. The programs that were picked up as enhancement method using information and communication technology are: 1) Enhancement of usage environment of wireless Internet services shall be promoted in tourism sites and social facilities such as libraries and so forth, 2) Enhancement of the capacity dealing with information by hospitals and introduction of electric medical record so that various referral procedures become easy and quick, and 3) Enabling the possibility to establish a data center and an information exchange high speed network connecting Asia and Europe to provide state protection and ensure its information security.



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The Mongolian Government will provide an integrated e-development policy, planning and management to ensure that public services become more responsive, accountable and accessible by all to save time and costs for citizens. Building the required infrastructure to meet the growing demand for public information and communication services through expanding the coverage and increasing the capacity is suggested in the program as well.

Mongolia Sustainable Development Vision 2030 (SDV2030)

The objective expressed in this vision is to “Expand information technology and telecommunications coverage, install and increase the use of high-speed networks in rural area, and launch a national satellite”. In the final phase of 2026-30, targets are to provide high-speed Internet connection for 90% of the population, digitize no less than 85% of public services, and launch and use a national satellite. Also, it describes the importance of enabling the Internet usage in recreation and camping areas, and of utilizing libraries.

2.3.4 Current structure of information and communication infrastructure system

Generally, the telecommunications infrastructure consists of three main layers: access networks, national backbone networks, and international infrastructure.

(1) Access networks

The access network is the key part of the telecommunications infrastructure that provides access to the end users such as individuals, private entities and organizations who use telecommunications services and applications. The access network comprises: 1) fixed-line infrastructure like conventional copper telephone lines and coaxial cable television networks, 2) fiber optic network that connects directly to premises and dwellings—the so-called fiber to the home (FttH) and fiber to the premises (FttP), and 3) wireless/mobile network which in many countries including Mongolia are more widely used than fixed lines at present.

The mobile network in Mongolia includes hundreds of thousands of base stations throughout the Country, each serving a relatively small area (Figure 2.3.5). With 7.2 fixed-line telephones per 100 people and 140 mobile phone subscribers per 100 people, it is obvious that mobile networks play a greater role in communication among nomads and alerting them of impending disasters. However, fixed lines, specifically fibre optic, will always be superior to mobile access in facilitating high-bandwidth data transfers and low-latency exchanges.



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Source: CITA

Figure 2.3.4 Telecommunication Network in Mongolia

Out of the 4.9 million mobile phone subscribers, 1.7 million (35%) are smartphone users who can access the Internet through their mobile devices. This highlights the importance of mobile networks not only for basic voice services, but for data services as well. Barriers to mobile broadband adoption include various limits of the mobile broadband network relating to its coverage, capacity and quality, and/or the high cost of mobile broadband and smartphones.

(2) National backbone networks

The national backbone network is the next main component that connects the numerous parts of the access network with each other. It comprises the wireless base stations, switching centers, operation and maintenance facilities, and international gateways. The national backbone network normally uses fiber optic connections due to the high-capacity demand on them. Microwave radio links are also used because of their comparatively low operation costs and simple and speedy services at the local level. However, they are gradually being switched to fiber optic connections due to the growing demand for broadband data services on the access network, particularly in heavily populated areas.

Satellite connections are used to back up the national backbone connections, especially in remote areas. Network redundancy is important to improve network and service reliability. In terms of network topology, Mongolia’s fibre optic backbone infrastructure consists of several big interconnected fibre rings. A ring structure is a better solution for creating redundancy, because if one ring is broken, virtually all locations along it can still be reached by routing traffic in the other direction around the ring. A total of 10 fibre rings can be identified on the map in Figure 2.3.6.

Source: CRC, http://www.crc.gov.mn/en/k/2ll/1L

Figure 2.3.5 Transmission Backbone Network in Mongolia

(3) International infrastructure

The international infrastructure connects a country to the rest of the world, and usually consists of fiber optic subsea cables with very high capacity. Landlocked countries such as Mongolia connect with terrestrial transit connections through countries with coastal landing stations or by using satellites.



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Mongolia has three landing stations for international fibre optic cables in two border towns, connecting the Country to its neighbors and the rest of the world (Figure 2.3 7). The geographic spread of the landing stations and the multitude of cables at each one provides the Country with good diversity to protect against service disruptions. Mongolia’s international bandwidth transit speed is 150 GB.

Source: ITPTA, 2013

Figure 2.3.6 International Fibre Optic Cables in Mongolia

(4) Advantage of Mongolia

Principally, all three layers mentioned above, preferably with redundancy, are essential for effective communications. Mongolia in short is marching hand in hand with global trends. Almost all Soums are connected to a mobile network. A total of 2.6 million people in Mongolia have access to the Internet and 3.3 million people are registered as active mobile users including herders. With this situation, Mongolia has an advantage for information and communication development compared to other developing countries.

2.3.5 Long-term development policy 2050

Mongolia’s long-term development policy 2050 (LTDP2050) emphasizes that it is the time to start dealing with the 4th industrial revolution and the development of artificial intelligence and building the economic and social relations in the new era. Many of these technologies are based on the development of information and communication sector. The funding for science and innovation development in Mongolia accounts for MNT36.3 billion in 2020 or 0.25 % of the gross domestic product. However, the world average is 1.7 %.

The priorities such as information technology, new material technology, biotechnology and renewable energy seem to be on the waiting list. It is also possible to address the following issues in the long term development policy such as the labor cost of scientists, research work, evidence-based policymaking and implementation, coordination and integration mechanism, higher education institutions and scientific community, knowledge-based economy, and creating a soft infrastructure for innovation.

2.3.6 Current efforts for utilization of information and communication infrastructure

(1) Social sector

With the vast land area, Mongolia faces challenges in delivering health services to its citizens especially



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those living in rural areas. Use of information and communication infrastructure in the health sector has been pursued as patient-centered services regardless of time or location. The Government has tackled to establish an “Integrated electronic database system of medical records” to share much information such as patient’s conditions, supported by World Bank and other donors.

In the educational sector, information and communication infrastructure has been introduced especially in secondary schools for computer training and informatics as a subject since long time ago and also in university curricula since 1982. Also, the persons involved in education have become capable of sharing easily student’s information with other schools by using information technology.

(2) Agriculture and livestock sector

In other sectors such as livestock, agriculture and so forth, information and communication infrastructure has been introduced to enhance their activities. Establishment of proper pricing system between farmers, buyers and wholesalers has been promoted by utilizing information and communication infrastructure. For instance, in order to enhance the traceability for herd of livestock with IC chips, diffusion of IoT (Internet of Things) technology, which can manage the birthplace or route of livestock, would be effective for not only farmers, but also buyers. High traceability can contribute to managing the influence of foot and mouth disease for livestock and to structure proper pricing system. At present, there are the challenges of high price of IC chips and establishment of a cooperative system between farmers.

2.3.7 Directions and strategy on information and communications

(1) Directions

In recent years, there are many countries and regions that are concerned about the decline in labor productivity due to population decline like in Japan, the increase in disparity between urban and rural areas, and the decline in social services. On the other hand, the 4th industrial revolution represented by IoT centered on information and communication, big data, artificial intelligence (AI), robots and sensors, etc. is aiming to solve these problems while improving productivity. In addition to economic activities such as production and consumption, the social habits including work styles and lifestyles are about to change dramatically by advanced technology.

Strategy

The information and communication infrastructure should be positioned as one of the important elements in development planning, not just only micro innovation. In Japan, for example, considering the potential impact of information and communication related innovation, the sector is expected to contribute to improvement of productivity through increasing the utilization rate of existing facilities, increasing operational efficiency, and improving capital productivity.

Contribution to industrial development

Efficient production of value-added products taking advantage of domestic resources through innovations utilizing information and communication infrastructure is indispensable for industrial development in Mongolia. The innovative revolution already being implemented in Japan and other countries is represented by the active use of IoT and AI in the operation and management of power generation facilities in the energy industry, and I-construction such as digital earthworks, 3D surveys by drone, etc. in construction industry. From the resource management viewpoint, the innovations can contribute to proper management for minerals and forest resources, etc. utilizing the cloud and geographic information system (GIS). Also, it contributes to grasping resource location information with technological innovation of ICT and improving the efficiency of management of the resource industry. These technologies enable to use limited resources in an efficient and sustainable manner and promote the realization of alternative socio-economy promoted by the NCDP.



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Growth strategies in urban and rural areas

In order to achieve sustainable economic growth, 1) increasing the potential growth rate of local core cities by improving productivity and 2) promoting the creation and exploration of new markets while balancing the city and locality by technology, will become important to create more attractive cities and regions.

Utilization of digital tools is considered to be the key to achieve high productivity. In recent years, not only in developed countries, but in developing countries as well, there are many inexpensive advanced tools that are easy to use for small and medium-sized enterprises and individuals. Proactive use of these tools enables high productivity in even local areas.

2.3.8 Challenges on information and communication sector

In the situation of wide spread of mobile Internet connections, incorrect and unfavorable information without solid ground such as exaggerated or biased information posted by social networking service may entice people in rural areas without proper ability to digest information for migration to urban areas. It might promote population concentration in Ulaanbaatar or other large cities through disparity in availability of information and capacity to utilize proper information in the society. In primary or secondary education, the capacity to correctly cope with information should be cultivated among the youths throughout the Country.

On the other hand, information and communication infrastructure should become excellent tools to promote the characteristics of both urban and rural areas for not only industry, but also lifestyle, tradition and culture. In addition, all the people in Mongolia will have a two-way communication tool regardless of settlers and nomads. It can make it possible to realize efficient management of livestock farming, efficient logistic with traceability and liquidation of the labor market.

Source: https://shiftlocal.jp/1880

Figure 2.3.7 View of Iki City

Source: Google Map

Figure 2.3.8 Location of Iki City

An example of regional development by taking advantage of advanced technology is found in Iki City located in the Southern-most island of Kyushu in Japan, where a plan to build a smart sixth-industrialization model in 2030 has been pursued, making full use of innovation of manufacturing industry by using IoT and AI. The plan successfully brings about integration of new technology in each process from primary production to marketing integrating the business from primary industry through secondary industry to tertiary industry (thus sixth-industrialization). With smart agriculture of high efficiency supported by advanced technology throughout the industry in Iki City, they have built the image of a “cool” farmers and established original brands. Also, with the new initiatives to accept foreign internships and to combine agriculture and IT sectors, they are increasing the inbound demand capitalizing on remote island characteristics and inter-island exchanges with other islands. As the result, the population of Iki City has gradually increased year by year despite the disadvantage of small island in remote location

Iki city



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Chapter 3. Chapter 3 Digital Transformation and ICT

3.1 Legal Framework and Organization Structure of Digital Transformation and ICT

3.1.1 Organization and structure

There are two key government organizations for policymaking and regulation in terms of digital transformation (DX) and ICT in Mongolia as follows.

Communication and Information Technology Authority (CITA), and Communications Regulatory Commission (CRC).

(1) Communication and Information Technology Authority (CITA)

CITA is a government agency that formulates and implements ICT policies directly under the Prime Minister of Mongolia. Other main operations are to promote the ICT industry, protect information security, and manage the budgets supported by other countries and royalties from telecommunications carriers. The CITA organization chart is shown in Figure 3.1.1.

Source: CITA

Figure 3.1.1 CITA Structure and Affiliated Companies and Organization



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Main responsibilities and duties of departments and divisions related to DX, ICT and industrial development by digital technologies are as follows.

Communications and Post Policy Planning Department (CPPPD): 1) Develop communications and postal policies and programs, 2) introduce and adopt advanced technologies related to radio frequency and space communications, and 3) provide general policy guidance and coordinate its implementation.

Information Technology Policy Planning Department (ITPPD): 1) Develop information technology policies and programs, 2) promote socio-economic development through e-government and innovation, 3) ensure information security, develop system integration and provide general policy guidance, and 4) coordinate its implementation.

System Integration Division under the ITPPD: 1) Set up database system with integrated enterprise architecture among all government organizations, 2) implement open data policy, and 3) introduce new technologies and solutions for digital signature and information exchange system.

Public Administration Department (PAD): Promote administrative and human resource management, legal advice and support, economic activity, sector standardization, diplomatic relations, monitoring and evaluation in policy implementation, and sector statistical action.

Also, CITA manages the National Information Technology Park (NIIP) established in 2002. It aims to create a favorable environment for business enterprises and collaborations for the information technology entrepreneurial and offshore outsourcing companies and henceforth provide a complete management support and assistance for them to grow and develop on their own. Also, the NITP provides examination and training at professional level by teachers with international certificates to improve, advance, and develop the professional IT skills. In 2017, the NITP officially organized International Computer Driving License which is globally recognized IT practice skill assessment test.

The National Data Center is providing ICT services to government and business organizations and ensuring accessibility and promptness of the government data flow. Since its establishment, the Center has been providing ICT services to government organizations and private companies and storing government data in dedicated storage, ensuring information security and providing professional advice and trainings.

(2) Communications Regulatory Commission (CRC)

CRC is an independent regulatory authority of the Mongolian Government. CRC was established based on the Communications Act of 2001, and is in charge of regulating and supervising a wide range of subjects including competition issues, provision of networks and services for fixed line and wireless telecommunications, television, radio, and satellite transmission, spectrum management, postal services and the Internet to ensure that the public interest is well-served. Main objectives are:

To support innovation and expansion in ICT, broadcasting and postal markets, through the efficient and impartial oversight of network and service providers and the enforcement of their obligations including the Universal Service Obligation Fund (USOF);

To protect the interests of users of networks and services in the sector in which we regulate; To increase tele-density and access to ICT and Telecommunications services in the country at

affordable prices, and To establish an interconnection regime that allows fair, transparent, prompt and equitable

interconnection.

(3) IT structure of ministries and agencies

The Government Cabinet has 17 members, including Prime Minister, Deputy Prime Minister, Head of



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the Cabinet Secretariat and affiliated ministers. The accompanying law to the government structure and composition also outlines to have 12 regulatory and 23 implementing agencies within the Cabinet.

All ministries and agencies have an IT unit (department/center). The status and name of IT units of ministries and agencies and its number of IT engineers are varied. For example, the Ministry of Finance has 10 departments and 16 divisions. The IT Division belongs to the Public Administration Department. The Ministry has two agencies, the General Department of Taxation and General Customs Administration. The IT Center of the General Department of Taxation has 32 IT staff members and IT Center of General Customs Administration has 15 IT staff members. Also, the Information Technology Center of Custom, Taxation and Finance state-owned enterprise belongs to the Ministry of Finance.

(4) Organizational capacity

As all ministries and agencies have IT units, it is realized that the structure and organization of ICT policy, regulation, and implementation in Mongolia is sufficient as an organizational capacity. However, as stated in "Open Data Readiness Assessment"13, “While Mongolia has invested relatively well in ICT infrastructure and government information systems, the data administration of public bodies and the ICT capacity of public servants is not so strong, and information technology capabilities are not taken into consideration as part of an employee’s performance”. Therefore, the Mongolian Government should pay more attention to ICT capacity building of public servants.

3.1.2 Legislative framework and key policy documents

In the past years, a number of activities were implemented to enhance the usage of ICT as a key tool for development. Relevant laws and regulations, policy and strategic documents, in particular, the State Policy on Development of ICT (2017-2025) and E-Government National Program have been developed. Specifically, the Government has continued to pay greater attention to the usage of ICT in realizing better governance.

There are a number of sector specific key legal and policy documents, which govern the ICT sector of Mongolia ratified by the Mongolian Parliament. The key ICT policy documents are described below.

Source: “ICT Sector Development and Smart City Initiatives in Mongolia”, Communications Regulatory

Commission, 2018

Figure 3.1.2 E-Government Policy Milestones

13 Government Cabinet Secretariat of Government of Mongolia, Open Data Readiness Assessment

Mongolia, 2018. Retrived from https://www.smart.gov.mn/wp-content/uploads/2019/02/ODRA_report_eng.pdf November 14, 2020.



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(1) Mongolia’s Long-term Development Policy 2050 (LTDP2050)

The Vision2050 has nine fundamental goals and 50 objectives, and will be carried out in the following three phases:

Phase I (2020-2030) creates and develops effective E-Government policies and legal environments to enhance information security.

Phase II (2031-2040) improve productivity and efficiency by introducing advanced communication technology and innovation in all sectors of the economy and society.

Phase III (2041-2050) extends e-government to support capacity building.

Implementation phases and general direction of activities of objective “Foster effective e-governance that promotes human development” are shown in Table 3.1.1.

Table 3.1.1 Phasing of Objective: Foster Effective E-governance That Promotes Industrial Development and Human Development

Phase I (2020-2030) Phase II (2031-2040) Phase III (2041-2050) Establish and foster effective e-

governance policy and legal environment for information security

Improve productivity and efficiency by introducing ICT

breakthroughs and innovations in all sectors of the economy and

society

Develop e-governance for human development

Efficient E-Governance Effective E-Governance Citizen-Centered E-Governance

- Establish and refine the legal environment for the development of e-governance

- Create and develop an electronic database with respective infrastructure

- Regardless of time and distance, make public services fast with less procedural steps

- Enhance information exchange among government agencies as well as between government, civil society and business organizations.

- Reduce administrative costs and improve service delivery

- Increase information transparency by enabling electronic public voting during the decision-making process of public organizations

- Bring e-governance policy and legislation to comply with international standards

- Fully circulate electronic database into economic relations

- Reduce the time citizens spend on public services

- Strengthen public service transparency by fully transferring activities by citizens, government and businesses into a cloud information technology

- Create favorable policy and legal environment for an e-governance that supports human development

- Develop the infrastructure for integrated electronic database in compliance with international standards

- Foster citizen-centered and smart governance

- Improve the quality of information exchange between citizens, government and business entities, and increase its competitiveness

- Cultivate social relations free of bureaucracy and corruption, and comply e-governance technology with international standards

Source: Mongolia’s Long-term Development Policy 2050

(2) Five-year general guidelines for the development of Mongolia in 2021-2025

In terms of science and innovation, a basic concept in short-term action plan has been suggested in the guidelines as follows.

Purpose 2.4

Purpose 2.4 shows the importance of promoting science and technology fields and building an effective national innovation system as one of the main poles for sustainable development in Mongolia. This clause includes the following points related to the NCDP strategy as short-term action.



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Apply new knowledge and patents to industry, promote commercialization, and amend the law to promote industry-academia collaboration through the introduction of the new taxation system and economic incentives, and

Improve statistical data collection and monitoring and evaluation systems in line with international standards.

In addition, the key objective of governance in the guidelines is “to become a country with a smart-sustainable governance that ensures human development, an established civil service with optimal administrative and organizational structure, a fully operational people-centered civil e-service, an increased cooperation between the public sector, private sector and civil society in all areas, with human rights protected, with a fair justice system and free of corruption”. The E-Mongolia (integrated system of citizens, public and private sectors) has an objective “To develop an effective E-government policy and legal environment to ensure information safety and security” as follows.

Create a legal environment for developing E-governance and connect the population with high speed Internet;

Ensure that harmonized policy and planning being in place to create an integrated e-database and relevant infrastructure;

Improve the information exchange between government agencies and among government, civil society and business entities, so that administration expenses are reduced, and the effectiveness of services increased, and

Create an environment to increase public information transparency and receive feedback from citizens and communities electronically.

(3) State Policy on Development of Information and Communications Technology (2017-2025)

The State Policy on Development of Information and Communication Technology has eight goals to apply ICT development to global trends, promote e-government, digitize in all sectors, and improve E-government services and their speed of delivery. The policy will be implemented in two stages: mid-term - 2017-2020 and long-term - 2021-2025. In Phase 1 (2017-2020), it will focus on the development of the ICT field and aim to develop new markets along with the growth of the sector and the promotion of highly skilled human resources. In Phase 2 (2021-2025), it is aimed to form a new industrial sector with high economic effects through advanced technology and innovation. The main objective in the policy to accelerate the development of Mongolia related to the promotion of DX and ICT, and industrial development by digital technologies are as follows:

To create favorable environment for the sectorial development by optimizing the legal system and organization of the ICT sector;

To increase ICT service types, accessibilities and quality of services (QoS) based on advanced technology;

To increase competitiveness in the global markets by developing a production of ICT products, supporting national digital content and software industry, and introducing ICT in industry automation, control and monitoring;

To support for investment based on public-private partnership aimed at building a pilot plant to manufacture final products and installing high cost and efficient equipment, and

To develop e-governance by increasing productivity and efficiency of operations of public organizations, enhancing the democratic, non-bureaucratic, transparent and accountable status of governance, supporting innovation and improving the development of E-Government.

(4) E-Government National Program

The Mongolia Government approved the “E-Government National Program” in 2019. This program



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aimed at improving policy regulations and the legal environment for the development of E-government, developing information and communication infrastructure, and digitizing public services to provide open access to citizens. Also, there was another purpose of improving the knowledge and skills of civil servants regarding information technology and providing information to citizens in terms of the use of e-government services in this program.

Also, it is aimed to improve the productivity and efficiency of government operations, build democratic, open and transparent governance, and reform public services, which is the core concept of government's provision of electronic services. In order to promote them, the following nine goals were set up.

Improve the digital literacy of the people; Develop an environment for e-government; Develop government e-services and hard/soft infrastructure with integrated policies and plans; Guarantee the security and integrity of Aimag's electronic data and databases and develop open

data and information from one source; Support the exchange of domestic information and communication producers and providers to

provide public services in electronic form; Develop e-participation to improve public participation and ensure transparency in government

decision-making; Establish an information technology audit system; Develop appropriate and ethical use of information and communication techniques among

governmental organizations and staff at all levels; and Improve productivity and efficiency through the development and introduction of innovation in

information and communication technology in all socio-economic sectors.

(5) Action Program of the Mongolian Government for 2020-2024

The Mongolian Government has outlined its Action Plan for 2020-2024 in conformity with the National Security Concept of Mongolia, “Vision-2050” Long-Term Development Policy 2050, reflecting Election Platform of the Mongolian People’s Party and based on the proposals from other political parties, civil society, citizens and communities. The Mongolian Government has formulated its objectives and targets within the framework of the following six set of issues by paying particular attention to 1) successfully overcoming the economic and social challenges caused by the pandemic, 2) ensuring human development, 3) realizing economic and social development, 4) improving environmental balance and governance, 5) ensuring regional and local development, and 6) preserving the continuity of the previous government policy.

Other sets of issues have the following ICT and e-government related objectives.

Develop e-learning platform and develop and prepare e-content; Explore and prepare appropriate forms and options of training to enable those households and

population with no access to TV or internet to participate in e-learning; Create a legal environment for e-learning system; Create opportunities to support lifelong learning for citizens of all ages by developing e-learning

platform, e-training programs, e-content and e-lessons; Establish an integrated public health information database within the framework of the “E-

Mongolia” program and use remote technologies for diagnosis and treatment in local areas and create e-early detection and recall system;

Ensure the quality and safety of medicine and medical devices, increase their availability and create e-registration and e-monitoring system;



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Establish an integrated system of e-registration of permits and monitoring within the framework of the “E-Mongolia” program, reduce the number of government permits and multiple layers, create a business-friendly legal framework and streamline the monitoring procedures;

Develop an integrated national geo-database, introduce e-system and provide responsive public services;

Digitize the entire labor and social welfare sector within the framework of “E-Mongolia” program and make public services more transparent, responsive and accessible to citizens;

Create opportunities for individuals and legal entities to directly participate in the stock exchange trading through e-trading platform based on advanced technology;

Introduce an integrated e-fiscal system, make public services responsive and efficient, and create an environment for transparent and efficient spending of foreign assistance, loans, current and investment funds;

Introduce technological advances in the tourism sector within the framework of the “E-Mongolia” program and expand foreign advertising;

Build satellite cities of Ulaanbaatar as a necessary infrastructure for supporting the e-economy and service sector;

Create a favorable business environment by improving the protection of private property, investment and intellectual property rights, enhance the legal environment for e-contracts and transactions, consider e-contracts and transactions as evidence in courts, digitize some of the court activities and improve the legal environment to provide support for the private sector as wealth producers, and

Uphold consistently the legitimate rights of Mongolian citizens and entities abroad, improve the quality and accessibility of public services to citizens and increase the number and types of e-services.

(6) Mongolia Sustainable Development Vision 2030 (SDV2030)

The vision has outlined sustainable development objectives in the information and communications sector such as development and utilization of infrastructure, improving access, removing the digital divide and enabling public access to broadband. The Mongolia's Long-term Development Policy 2050 includes indicators that reflect the results of SDV2030 and Mongolia's sustainable development goals. Therefore, it has been revoked by decree No.52 of 2020 issued by the Parliament of Mongolia.

(7) Project to train 10,000 programmers

To increase the number of jobs in the information and technology sector, a new project was started by the Ulaanbaatar mayor’s office and the Department of Science, Industry and Innovation in Ulaanbaatar in May 2020. The goals of this project are: 1) to train highly skilled human resources, 2) to train teaching staff, 3) to improve software training programs, and 4) to make the world competitive “10,000 programmers”. This project is expected to be further implemented aiming at implementing smart technological solutions in many areas from traffic planning, regulation and control, to protecting the safety of citizens and reducing crimes.

(8) ICT related national standards

Nowadays, there are more than 200 standards 14 in the field of ICT and post. In addition to the development of new standards in information and communications, international standards are being

14 A standard is ddocument created and approved by stakeholders and interested parties, which is designed

to be used as a rule, guideline, or definition. The preparation, application and promotion of national standards are set out in the Mongolian law on "Standardization and Conformity Assessment".



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adapted to local conditions to make national standards.

In the past years, CITA has been actively cooperating with the National Agency of Standardization and Measurement and CRC to determine, plan and develop essential and priority standards of the sector. In order to ensure further development of standards and improve their quality, it is essential to study and define standardization gaps of information, communications and postal sectors, enforce valid standards, and improve their utilization, public advocacy and promotion as well as the need to attract investment for the development of standards. There are 13 standards available on information security, including “Rules of Information Security Management” and “System and Requirements for Information Security Management”.

(9) Overall review

There are about 30 policy documents, programs and regulations approved by the Parliament of Mongolia, more than 60 approved by the Mongolian Government, and more than 40 approved by CITA. Also, more than 200 standards in the field of ICT and e-government in Mongolia. Therefore, it would be concluded that the policy and legal environment is sufficient for the development of ICT, e-government and promotion of DX in Mongolia.

3.2 Current Situations of Digital Transformation and ICT

3.2.1 Current situations

(1) Background

1) Overview

In recent years, many countries are concerned about deterioration of social services due to aging of population, labor shortages and low labor productivity. On the other hand, efforts to enhance labor productivity to cope with the 4th industrial revolution have been conducted rapidly in many countries such as the development of robotics, artificial intelligence (AI), blockchain, nanotechnology, quantum computer, biotechnology, Internet of Things (IoT), 3D printer and autonomous driving. Along with this trend, work style and lifestyle in socioeconomy have been changing year by year.

In Mongolia, there is an advantage on development of information and communication infrastructure compared to other developing countries in general. The trend of the number of mobile phone subscribers, smart phone users, Internet users, etc. are shown in Table 3.2.1 and Table 3.2.2.

Table 3.2.1 Number of Mobile Phone Subscribers, Internet Users and Other Phone Users Item 2016 2017 2018 2019 2020

Mobile phone subscribers(thousand) 3,110.2 3,786.9 4,085.9 4,360.4 4,422.5 Mobile broadband/Internet users(thousand) 2,281.3 2,171.0 2,423.6 3,072.7 3,455.2 Smart phone users (thousand) 2,019.1 2,436.7 3,302.0 3,216.1 3,273.8 Fixed phone users 263,131 146,027 147,865 157,261 162,852

Source: https://stat.crc.gov.mn/

Table 3.2.2 Number of Computers and Computers per 1,000 Inhabitants Item 2014 2015 2016 2017 2018 2019

Number of computers 525,444 581,025 596,554 617,703 639,427 663,883 Number of computers per 1000 inhabitants 182 196 197 199 202 208

Source: https://www.1212.mn Mongolian statistical database of National Statistics Office

Most recently, COVID-19 has been affecting economic and industrial activities since the pandemic started to spread at the beginning of 2020. To overcome this situation, it is recognized that it is important to build a robust and resilient economic and social system that can flexibly respond to crises and enable sustainable socioeconomic development through enhanced international cooperation. Since this recognition is consistent with the philosophy of SDGs, it is considered that the demand and

https://stat.crc.gov.mn/

https://www.1212.mn/



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motivation for achieving the SDGs is increasing worldwide.

2) Needs for e-government

The need for e-government may be clarified in a broader context of “good governance”. Good governance involves a multifaceted approach, and application of ICT is one of the important elements that can achieve good governance. Utilizing ICT along with other reforms, the Mongolian Government today is able to deliver a wide range of services from ration cards, driver licenses and land records to health, education and municipal services in a timely manner.

With necessary political support and requisite process including the application of ICT, it can go a long way in facilitating good governance. Major benefits of E-Governance are described as below.

Improved and enhanced delivery of government services; Empowerment of citizens through greater access to government information and ability to access

Interact and participate; Enhanced transparency and increased accountability of the government; Increasing the internal efficiency and revenue generation by the government, and Improving the relationship between the government and the citizens.

(2) General review on digital transformation and ICT in Mongolia

1) Socioeconomic situations

It is commonly observed in industrial development that labor productivity tends to be relatively low in regions with low population density. Especially, Mongolia is the lowest density population country all over the world. In addition, an inflow of population to the capital area of Ulaanbaatar can expand further the disparity between urban and rural areas, and therefore, there is a concern that low productivity tends to be aggravated in rural areas. In order to keep pace with the world development trend, it is necessary for Mongolian development to promote digital transformation (DX) and implement the ICT innovation as promoted in the whole world including Japan.

It is realized that sustainable socioeconomic development based on the significant enhancement of productivity with innovation should be achieved, which would address to the different types of economic issues as well as social issues. Especially, due to the influence of COVID-19, urgent movement toward DX and ICT promotion is required to reduce the economic and social impact and realize the robust and resilient socioeconomy.

2) E-government promotion

According to E-Government Survey 2020 published by United Nations, Mongolia ranks 92 out of 193 countries by e-government development index (EGDI), which assesses E-government development standard at the national level. EGGI is a composite index based on the weighted average of three normalized indices consisting of the telecommunications infrastructure index (TII), the human capital index (HCI) and the online service index (OSI).

Taking Japan and Estonia for reference, a comparison between these countries and Mongolia is shown in Table 3.2.3 on the promotion of E-government. Estonia is considered one of the most advanced countries for DX and ICT promotion in the world. The citizens in Estonia can do basically anything online except for a very few things like getting married or divorced and selling or buying real estate. Also, even foreigners are able to apply for the e-residency which gives the right of residence (electric residence). The person who acquired the right can get some kinds of digital services such as opening a bank account, electronic signature, and corporate registration.

Japan ranks the highest on e-government among Asian countries as well as Singapore and Korean. However, the legal framework for e-government in Japan focuses on personal digital security and access to digital data. Therefore, compared to Estonia, it is said that Japan lags behind for the digital



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environment open to the outside world despite the high economic standard.

Table 3.2.3 Comparison Between Mongolia, Estonia and Japan on E-government Item Mongolia Estonia Japan

Region Eastern Asia Northern Europe Eastern Asia Population (thousand) 3,296 1,315 127,974 Income Value (USD, GNI per capita) 3,720 18,190 38,550 EGDI (E-Government Development Index) 0.6497 (Rank 92) 0.9473 (Rank 3) 0.8989 (Rank 14) TII (Telecommunications Infrastructure Index) 0.6135 0.9212 0.9223 HCI (Human Capital Index) 0.8063 0.9266 0.8684 OSI (Online Service Index) 0.5294 0.9941 0.9059 E-participation index 0.6071 (Rank 87) 1.000 (Rank 1) 0.9881 (Rank 4)

Characteristic of the country Landlock country, low population density and nomadic culture

Small country, but most advanced ICT country

Most advanced country economically in Asia

Source: JICA Project Team based on E-Government Survey 2020 published by United Nations and Mongolian Statistical Yearbook 2019

In the last decade, Mongolia showed a great progress in e-government. The data show that in 2003 Mongolia scored 0.343 and ranked 103 of 193 in comparison to the United States (0.9271, ranked 1), Singapore (0.7463, ranked 12), and South Korea (0.7441, ranked 13) , respectively in 2003. By 2020, Mongolia showed significant improvement in the index, with its score moving up to 0.6497 and its rank to 92. On the other hand, other previous E-Governance world leaders have changed. Denmark has superseded the U.S. with a score of 0.9758, taking the top rank, South Korea, now ranked 2 with a score of 0.9560, has surpassed Singapore (0.9150, ranked 11) in 2020. Currently, the Mongolian Government is eager to move forward with E-government with continuous challenges linked to multiple contextual factors such as resource limitations, a lack of digital infrastructure, and insufficient capacities or capabilities.

3) Human resources on ICT sector

Education on ICT sector

The number of students majoring in ICT has been steadily growing and ICT is becoming a preferred major subject among students. According to the 2019 NSO statistics, there are a total of 148,446 students studying at universities and colleges, of which 5,626 are studying information technology and computers (Table 3.2.4). The number of ICT students in Mongolia has been increasing in recent years due to the following reasons:

The number of organizations and enterprises utilizing ICT and information systems in their daily activities is increasing;

The ICT employment rate of graduates is relatively high compared to other professions; Some ICT students get jobs during their studies; Salaries of ICT workers are comparatively higher than in other sectors; ICT graduates have opportunities to work in other fields; for example, as a teller in the bank,

human resources specialist, marketing specialist, or project manager etc.; and The number of young Mongolians working in Silicon Valley is growing every year, and their

public outreach is an excellent incentive for young people to choose the ICT profession.



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Table 3.2.4 Number of ICT Students in Universities and Colleges

Academic year 2015 2016 2017 2018 2019 Number of students majoring in mathematics and computers* 4,989 4,785 4,182 5,659 5,626

*Including all ICT related professions Source: NSO, https://www.1212.mn/tables.aspx?TBL_ID=DT_NSO_2001_013V2

Recent changes in the number of ICT students by field/course in the National University of Mongolia is shown in Table 3.2.5.

Table 3.2.5 Number of ICT Students in the National University of Mongolia

Academic year Total PhD students

Master students

Bachelor students, by specification Software

engineering Computer

science Information

system Information technology

2020-2021 1135 22 91 399 195 217 211 2019-2020 1319 26 98 489 218 242 246 2018-2019 865 19 85 315 127 156 163 2017-2018 755 19 79 281 82 140 154

Source: IT Department of National University of Mongolia

In 2019, 867 students graduated from universities and colleges in the field of information and communication technology, of which 10 graduated with diplomas, 784 with bachelor's degrees, 72 with master's degrees and one with doctoral degrees. They specialize in software engineering, network administration, information systems and management, hardware engineering, telecommunications engineering, electronics engineering, optic communications, television and radio technology, satellite and wireless communications, information technology, etc.

In the National University of Mongolia, 70 to 80 % of the graduates are employed, but they are not much linked with job prospects and the labor market demand. Also, there is an issue that the graduates’ knowledge seems to be more theoretically oriented and lacks practicality.

Given this situation, the NCDP is developing a pilot project of “Action Research on the Establishment of Linkage between Industry and Academia” targeting the IT sector and building a framework (promoting human resources matching, joint research, etc.) that promotes systematic collaboration between the industry and the academia.

Employment in ICT sector

The CRC report (Figure 3.2.1) states that in 2018, there were 12,082 employees in the Mongolian ICT sector. As of 2019, there were 13,215 employees in the ICT sector (1.1% of total employees in Mongolia) in 5,334 registered companies out of 199,271 companies (2.7% of total registered companies in Mongolia). According to these statistics, the number of ICT professionals has been growing year by year. The Research Institute of Labor and Social Welfare reported the average monthly salary of ICT industry professionals was MNT 1,304,000 in 2019, which is higher than the national average salary (MNT 1,124,300).



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Source: White Paper 2018, Performance and accountability Report, CRC Figure 3.2.1 Number of Employees in ICT Sector

4) Application of DX and ICT for private sector

The Mongolia’s Long-term Development Policy 2050 (LTDP2050) defined activities to be implemented within the “Support the information technology industry and increase its contribution to the economy” as follows: Create the institutional mechanism for export-oriented development of the information

technology sector; Expand research and development in the field of information technology, and develop

knowledge-based innovative new products and services, and soft and hard infrastructures; Develop information and technology clusters and support access to the foreign markets; Create a financing mechanism for the information technology sector; Encourage national software companies in the digitalization work of government activities, and Improve the investment environment in the field of information technology and e-commerce, and

encourage the investors. However, in current situations, organized coordination between objectives defined by public policies and direction of private entities is insufficient in terms of advanced technology application.

(3) ICT development in Mongolia

1) ICT development environment in Mongolia The ICT development index (IDI), which has been published annually since 2009, is a composite index that combines 11 indicators within three categories (ICT access, ICT use and ICT skills) into one benchmark measure. It is utilized to monitor and compare developments on ICT world between countries and over time. The main objectives of the IDI are to reveal the following15:

Level and evolution over time of ICT developments within countries and the experience of those countries relative to others;

Progress in ICT development in both developed and developing countries; Digital divide, i.e. differences between countries in terms of their levels of ICT development, and Development potential of ICTs and the extent to which countries can make use of them to

enhance growth and development in the context of available capabilities and skills.

15 https://www.itu.int/en/ITU-D/Statistics/Pages/publications/mis/methodology.aspx



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By the IDI, Mongolia ranks high among developing countries, but lags behind Estonia, the United States and neighboring Russia and China. As of 2017, Mongolia ranked 91st overall (Japan ranked 10th with 8.43 points).

Source: JICA Project Team based on World Bank's TCData360 tool (https://tcdata360.worldbank.org)

Figure 3.2.2 ICT Development Index (IDI) Comparison

2) Economic indicator on ICT sector

The ICT sector of Mongolia comprises information technology, telecommunications, radio and TV broadcasting, and postal services. The economic indicators in these fields of the ICT sector are improving year by year. The total revenue of the sector reached MNT 1,263.2 billion in 2018 (Table 3.2.7) with an increase of MNT 158.9 billion as compared to the previous year. According to service types, 50.8% of the total revenues of the sector are generated from mobile services, 9.78% from IPTV, 7.43% by Internet services and 7.41% by information and communication services with remaining generated from other services such as fixed telephone services, VoIP, content, cable TV, radio and TV broadcasting, and postal services.

Table 3.2.6 ICT Sector’s Key Economic Indicators, 2018 Indicator Amount, MNT billion

Total revenue of ICT sector 1,263.2 Total Investment of ICT sector 179,3 Total revenue for state budget of ICT sector 194.4


Source: White Paper 2018, Performance and accountability Report, CRC,

https://tcdata360.worldbank.org/



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https://crc.gov.mn/en/k/2na/1H

Figure 3.2.3 Total Revenue of ICT Sector in Mongolia

Source: White Paper 2018, Performance and accountability Report, CRC, https://crc.gov.mn/en/k/2na/1H

Figure 3.2.4 Total Investment of ICT Sector in Mongolia

(4) Supporting ICT business start-ups in Mongolia

1) Key initiatives for supporting start-ups in Mongolia

Most ICT business start-ups in Mongolia were established in 2013-16. In terms of direction, start-ups are led by information, communication, technology and services, and expected to continue to grow. Some start-ups have succeeded in the initial public offering (IPO) in the Mongolian stock market, which serves as another source of funding. However, the investment climate for start-ups is generally poor in Mongolia. With few resources, entrepreneurs are often left alone to seek their own funding from private individuals. The lack of available capital greatly stifles the development of innovation-driven enterprises.

The current business ecosystem would largely benefit from a network to connect private investors with entrepreneurs as well as the creation of programs to educate entrepreneurs on how best to search for funding. Nine public areas in Mongolia where start-ups can work and get advice are: Club Coworking, UB Lab 33, Space Ger (NITP), Open Innovation Lab, MakerHub, Khan Bank Incubation Center, National Information Technology Park (NITP), Mongol Accelerator Startup Mongolia, and Women's Business Center and Incubator.

Club Coworking (https://www.theclub.mn/) is a shared workspace in the center of Ulaanbaatar, offering high-speed Wi-Fi and comfortable working space for the networking and collaboration community. Women's Business Center and Incubator founded in July 2016, as the Ulaanbaatar's first women-focused business service center, is committed to helping entrepreneurs start and grow their business through educational workshops, one-on-one support, coworking and business facilities, and connectivity with local resources. Figure 3.2.5 illustrates activities at the Women's Business Center and Incubator information as a reference. Two significant initiatives for supporting start-up are described below.



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Source: https://asiafoundation.org/wp-content/uploads/2017/03/WBC-Infographics_EN.pdf

Figure 3.2.5 Infographics of Women’s Business Center and Incubator

Startup Mongolia NGO

Startup Mongolia NGO has been working since 2011 to spread the word about starting a business in Mongolia, build a system, cultivate a culture, motivate young people to start a new business, mentor them, create an environment, connect with investors, incubate them, and support innovation and high technology. Startup Mongolia NGO has introduced three main activities of TechStars Investment Company, which operates in more than 100 countries, to provide practical skills and knowledge to start-ups and entrepreneurs in Mongolia.

National Information Technology Park (NITP)

NITP provides incubation services for start-up companies, provides high speed Internet connection for companies located in the NITP. The Incubator and Business Development Center of NITP aims to provide a pleasant and comfortable environment to incubate start-up IT businesses. The center cooperates with the start-up businesses and provides financial, management, legal and consulting services, support for developing products for domestic and foreign markets, and prepares start-up companies to create innovation.

2) Constraint for star-ups in Mongolia

A detailed survey conducted by the Mongolian National Chamber of Commerce and Industry defines the top constraints for start-ups in the ICT sector. The results show 60.9% of total surveyors named cost to start a new business as a key constraint, 57.5% access to finance, and 48.7% time constraint as main obstacles for starting a new business. Top constraining factors for start-up growth in Mongolia are: initial costs to start a new business, access to finance, and time needed to start a new business.

Table 3.2.7 Constraints to Starting New Business in Mongolia Financial constraints Survey results, % Level of constraints

Limited opportunity for financing based on financial guarantee 47.6 moderate Less development of credit options such as ventures, angel investors

45.0 moderate

Inadequate legal protection for the borrowing entity 42.9 moderate Low development of integrated credit information system 30.0 least Breach of contract 31.3 least

Source: Survey Results on Mongolian Business Environment 2017, Mongolian National Chamber of Commerce and Industry



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(5) Offshore development in Mongolia

1) General situation and trend

Outsourcing software development (offshore development) projects are becoming increasingly more popular every year. The total value of outsourcing ICT services may exceed US$ 413.72 billion by the end of 2021. The reason for such an increase is found in the practice's decreasing cost and increasing efficiency in general.

In software development, outsourcing has become one of the top trends in the past couple of years. Non-tech businesses look for expert knowledge outside of their team, while over 60% of software development companies outsource at least part of their development processes. Most frequently, QA/testing stage is handed over to the experts in this field. Project management and planning are also common in development outsourcing.

Main selection criteria when it comes to outsourcing the development projects are as follows:

Technical education level of the resources, Software developers ranking, Location and time zone differences, English language skills, Project complexity-related experience/product development competencies, and Resources availability/technical competency diversity.

The reasons and downsides of offshore software development are as follows.

Reasons

Better exposure to well-educated and highly trained global talent, Lower costs (companies save as much as 30% thanks to software development outsourcing), and Better risk management due to the ability to partition software development operations.

Downsides

Political and economic volatility: in some of these best offshore software development countries, political power can change in one night and completely alter business prospects;

Language barriers: most of prominent countries in terms of offshore development are not English-speaking countries, with the notable exceptions of Australia for example; and

Time differences: software development projects often rely on collaboration that can suffer if the other side is in a completely different time zone.

2) Development potential of offshore development in Mongolia

To examine the potential of “offshore development”16 in Mongolia, Table 3.2.8 compares China, India, the Philippines, and Vietnam, where offshore development is thriving, targeting emerging countries. China, India, the Philippines and Vietnam have larger population and GDP than Mongolia. On the other hands, the number of IT/ICT companies per capita is the highest in Mongolia.

Developed countries and large investors are interested in the ICT sector and start-ups in these countries, and good practices of these countries, especially start-up development, outsourcing, ICT development for export and ICT knowledge, would apply to Mongolia.

16 Entrusting computer system development, operation, maintenance, management, etc. to an overseas

company with low labor costs



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Table 3.2.8 Statistics Related to Offshore Development in Mongolia and Emerging Countries

Indicator Mongolia Comparison countries China India Philippines Vietnam

Population (2021) (thousand) 3,199 1,450,000 1,339,000 110,000 102,000 GDP(US$ billion) 11.14 (2017) 14,861 (2019) 2,835 (2019) 377 (2019) 260 (2019) Number of IT/ICT enterprises 5,334 (2019) NA 31,922

(2019) 3,508 (2017) 50,000 (2018)

Average monthly net salary (after tax), US$ 394.63 1,035.51 444.60 308.62 425.09

Average salary of experienced developers/engineers, 2020-21

US$1,158 US$6,017.29 US$1,145.7 US$1,714.1 US$1,329

Average salary of developers/engineers, 2021

US$702 US$2803.80 US$572.19 US$730.62 US$818.96

Communication/language skill

Mongolian (official)

Chinese (official)

Hindu(official), English

Filipino, English (both

official)

Vietnamese(official),

English Development possibility (Trend of offshore development performance or number of the case)

Increasing Much experience

Much experience

Many designers

Many developers

Source：Compiled by the JICA Project Team

(6) Importance of DX and ICT in NCDP

The application of DX and ICT had been dealt with as one sector among several infrastructure development sectors in the NCDP since the commencement of the Project. The current situation and development strategy related to information and communications infrastructure are described in Chapter 2 of this sector report. On the other hand, the movement of DX these days is accelerating in many countries and regions, and its importance is also increasing. Therefore, DX and ICT should be considered as a foundation of industry and a media of strengthening and connecting each sector, etc. Also, the NCDP regards the enhancement of industrial productivity as one of the most important issues in Mongolia. It is vital to satisfy the demands for industrial promotion including human resources development. In addition, the importance of priority ICT-related measures, E-government, construction of various databases, and so forth should be considered for the national digital strategy.

The socio-economic framework and development alternatives are evaluated in Chapter 5 of the Main Report. The framework begins with the population and GDP forecast by sector up to 2030. In the framework, supply and demand in the labor force (labor population) and labor productivity in each sector are balanced mutually. It states that it is necessary to improve labor productivity in order to make up for the labor shortages in 2030 by promoting DX, ICT and some measures.

3.3 Important Issues and Challenges in Mongolia

3.3.1 Key issues for DX and ICT in developing countries

In terms of the promotion of digital technology, its technological capabilities, legal framework, implementation measures, and organizational systems differ greatly depending on countries or regions, and the problems faced by each have their own unique characteristics. In such a situation, two distinct approaches should be taken: 1) promoting DX to solve highly universal development issues found in many regions, and 2) tailor-made responses to issues unique to each country and region by the application of DX and ICT. In terms of the former approach, the important issues that are expected to be solved by the mainstreaming of DX are shown below.



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Important issue 1 Inclusiveness

Important issue 2 Information equality

Important issue 3 Data collection and analysis

These issues are mainly due to the reliability and imbalance of marginal data, and the inadequate information sharing system between the government and communities. Considering deeply these issues, it is necessary to try to expand the implementation of streamlining DX and ICT. Each issue shall be described in detail below.

(1) Inclusiveness

SDGs were adopted at the United Nations Sustainable Development Summit for the period up to 2030 as the development goals of the international community, succeeding the Millennium Development Goals (MDGs). MDGs have achieved more than expected results in some parts such as poverty reduction. On the other hand, some kinds of disparities have been widened between developing and developed countries and within each country. It has also become clear that there are the people who are in a difficult position due to gender, age, and the existence of disabilities. They tend to be left behind from economic growth. It can be said that the demand for “development that leaves no one behind” that SDGs are aiming at has been raised in the context of inclusiveness in each country and region.

The rapid spread of the Internet from the 1990s to the 2000s was expected to facilitate the collection of marginal information and further increase the momentum for improving inclusiveness. However, in developing countries, statistical data tends to be inclined to a specific side in each region or field, and in many cases data are collected and analyzed under the initiative of the central government, which would undermine the importance of individual data such as household surveys. In addition, there are some situations where there are no systematic data on the environment and land, which makes it difficult to collect and analyze. As a result, there are concerns that local residents will be left behind from the socio-economic development by the central initiative, and their vulnerability to environmental and land problems would not be resolved.

(2) Information equality

It is important to avoid kinds of harmful things caused by the promotion of digital technology in compliance with the solution toward information asymmetry and effective information sharing with the people who do not utilize ICT device. In developing countries, there are a lot of people living in villages who cannot access to ICT environment. Significant improvements in the communication environment due to the leapfrog advancement can facilitate the occurrence of technical breakthroughs, but there is a concern that the gap between those who have and those who do not have would have widened.

At the distribution stage in a supply chain, ICT has been utilized, and POS (point of sale information management) systems and EDI (electronic data interchange) have been becoming established. All of these are on the premise that information sharing between individuals or companies based on ICT is applicable. As a result, farmers and vendors who do not have an ICT device would be often left out of the supply chain as the information vulnerable. Also, a missing link would happen in the supply chain.

(3) Data collection and analysis

For example, SDG goals and targets such as "improving adaptability to climate change and disasters" and "reducing the impact of climate change" are more important on a global scale. SDGs, however, do not have a concrete suggestion to associate natural disasters with each goal organically. Basically, efforts to achieve the individual goals of SDG are interrelated with other goals and targets, and it is necessary to understand their structure and share them among stakeholders. Based on this understanding, it is required to collect data based on setting up the appropriate goals including indicators by accurately comprehending the interrelationships between goals/targets of SDGs.



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The approach to these requirements shall be summarized in two points: 1)"what kind of data should be collected" and 2)"what way is necessary to collect data". The former is that the promotion of SDGs by a multi-sector approach enables the establishment of more rational and comprehensive measures to select the data to be collected. In order to collect appropriate data, therefore, integrating various activities through the structural analysis based on mutual understanding is important institutionally and organizationally.

In the context of the latter, it is expected that mainstreaming of DX will enable accurate and balanced data collection. In promoting SDGs, the establishment of a structured collection method for statistical data, along with the setting of appropriate indicators, is the basis of formulating action plans and monitoring/evaluation systems for the mainstreaming of DX.

3.3.2 Issues on DX and ICT application in Mongolia

(1) Important issues

The common issues related to ICT in developing countries are described above, and important issues in Mongolia in the application of DX and ICT are now summarized. Important issues in Mongolia consist of (1) delays in the development of communication infrastructure due to the vast land area, (2) issues related to digital services for nomads distributing widely in the large territory, and (3) the speed of digital technology prevailing.

Related to the issue (1), the fourth-generation mobile communications system (4G) has been spreading, and also there is a basic strategy for preparing and promoting the fifth-generation mobile communications system (5G). However, it is said that Mongolia is one generation behind the developed countries where the transition from 4G to 5G is currently progressing.

The issue (2) is a problem of inclusiveness for nomads who do not have a fixed settlement and have difficulty in inheriting digital services. Settlers living in Soum have relatively easy access to the governmental service, but it is considered difficult for nomads to receive distance education, digital social services and so on.

In terms of the issue (3), the Central Government has already developed digital technology in a manner similar to that of developed countries; however, there is a concern that the gap between urban and rural areas and between the Central Government and local governments would widen, and the cities would become even more urban. It may induce the further migration to the cities.

(2) Challenges for achieving SDGs

Mongolia has been pursuing sustainable development in line with the achievement of SDGs as represented by SDV2030 and Mongolia VNR (Voluntary National Review) report. Also, the NCDP aims for paradigm shift from 20th century development model to an alternative socio-economy supported by appropriate or intermediate technology. These technologies would enable social innovation based on the collection of micro social data close to residents.

It is essential for DX and ICT based on mobile web infrastructure to build a database for supervising social data related to residents living in rural areas and set up an information collection and evaluation system for a huge number of indicators related to SDG goals and targets. Innovations in ICT make it possible to collect, transmit, process, and display data dynamically and quickly in a participatory (horizontal) manner.

Social innovation should be the creation of a new foundation for information sharing and collaboration between the government and residents through connecting these technologies. For example, in SDGs monitoring and evaluation, it is important to draw out the actual situation from inside of the community rather than an outsider evaluating the satisfaction of needs. It is indispensable for the residents to take the initiative in inputting a huge amount of index data to improve the information capacity of the residents and promote community development.

In the past, ICT had been used by the supply side for the transmission of measures and policies, and the



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poor communities tended to be alienated. At present, however, the demand side such as the community is requesting various kinds of information. In a sense the requests from the community have become the central position in terms of the transmission of information. On the other hand, it is difficult to achieve the comprehensiveness required based on SDGs only by means of this transition, and it is necessary to have two-way exchanges with the government and to form and implement appropriate measures accordingly. Setting appropriate goals can motivate the community to disseminate information.

3.4 Application of DX and ICT in Mongolia

3.4.1 Digital technology applicability and measures in Mongolia

(1) Scope of application of digital technology

The main issues related to DX and ICT application in developing countries are described above, and Figure 3.4.1 shows the relationships between each of major ICT components to address these issues. For the purpose of mainstreaming DX, it is necessary to integrate individual ICT technologies as a kind of aggregation and incorporate them into a realistic framework such as E-government. Of course, the achievement shall be represented not only by e-government, but also data catalogues, digital currencies, quality improvement of social services, utilization of geospatial data, etc. There are typical digital technologies promoted by the fourth industrial revolution including IoT, big data, AI, robots and sensors, etc. In the context of digital technology in developing countries, these technologies are expected to play a part in solutions to major issues. In recent years, blockchain technology has become more widespread worldwide, and various innovations have occurred due to improvements in information confidentiality and versatility.


Figure 3.4.1 Relationship Between Major Technologies and Major Issues

Table 3.4.1 summarizes the range of typical digital technologies that are considered to be applicable to Mongolia in socio-economy, urban development, infrastructure and governance. It is effective to consider the possibility of applying these to core projects, development policies, and sector-specific development strategies in the NCDP.

IoT Big data AI

IoT is utilized to collect big data. Big data is required to enhance AI analysis accuracy.

Guarantee of inclusivenessInformation equality

Electric Government

Blockchain

IoT can provide big data. AI can analyze big data to grasp local needs.

Information confidentiality and versatility



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Table 3.4.1 Scope of Representative on DX and ICT Application Application IoT Big data AI

Socio-economy and industry

・ Social services unified in the region (Aimags)

・ Data acquisition in social infrastructure

・ Visualization of supply chain and ensuring traceability (especially livestock)

・ Centralized management of statistical data

・ Future forecast by data mining and grasping abnormal values

・ Search for business opportunities in the supply chain

・ Product tracking (especially livestock)

・ Analysis of statistical data for each Aimag

・ Rationalize socio-economic framework

・ Macro and micro economic analysis

Urban development and environment

・ Resilient city ・ Smart and compact city ・ Acquisition of

environmental data in the field

・ Data-driven urban design and environmental conservation

・ Smart planning (simulation of migratory behavior in cities and so forth)

・ Renewable energy prediction, analysis and stable operation

・ Analyze urban problems by machine learning

・ Analyze big data related to climate change and so forth

・ Interactive city planning decision making

Infrastructure ・ Infrastructure management and maintenance by digital facility ledger

・ Immediate response in an emergent disaster

・ Disaster prevention management in facilities

・ Master data management ・ Infrastructure management

and maintenance by digital facility ledger

・ Monitor the permafrost situation

・ Extend facility life and maximize stock effect based on digital ledger

・ Rationalize facility management for longer lifespan

Organization・institution・governance

・ Cross-sectional data collection

・ Multiple database ・ SDGs monitoring

・ Strategic risk management ・ Secondary use of public data ・ SDGs monitoring

・ Data-driven policy making utilizing big data

・ Rationalize the SDGs indicators for enhancement of governance


(2) Innovation by 5G

The Japan Business Federation “Keidanren” has published "Society 5.0 for SDGs Digital Co-creation for International Expansion", which summarizes proposals on how private companies can utilize DX and Japanese know-how in developing countries’ development. For example, in strategic human resources planning, the BOT (Build-operate-transfer) model has been used to in-house the ability to promote digital transformation to realize outcomes overwhelmingly faster than the case where most orders are placed externally each time. It is advocating that it will be possible to promote service development, etc. at twice or three times the speed of the above.

1.1.1 ICT business ecosystem

(1) Start-up ecosystem

1) Components

A large number of start-ups are related to the ICT sector in Mongolia. According to Startup Commons17, a start-up ecosystem is formed by people, start-ups in various stages and various organizations in a location (physical and/or virtual), interacting as a system to create new start-up companies. The start-up ecosystem would be composed of the following components:

Ideas, inventions and researching, Start-ups at various stages, Entrepreneurs, Angel investors, Start-up mentors and advisors, and Third people from other organizations with startup activities.

17 https://www.startupcommons.org



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Policy towards innovation ecosystem development draws from the understanding that primary sources of innovation ecosystem productivity are the quality of institutions (regulation and framework conditions for innovations), quality of the actors (competencies and skills) and the quality of links (networking and developing relevant organizational forms).

GFA Consulting Group's report “The current state of the startup and entrepreneurship ecosystem in Mongolia” identifies five key ingredients needed to create a start-up business and innovation ecosystem as follows18.

Skills

Creating human resources on a long-term basis to attract, develop, and network people with different skills, knowledge, and experience by creating flexibility in the labor market. Start-up Mongolia NGO is actively working to provide practical skills and knowledge to start-ups and entrepreneurs.

Density

There is a need to create more business hubs, develop a network of business consultants, and increase media awareness of the industry. The important part of the ecosystem is linking scientists and researchers to businesses. There are nine public areas in Mongolia where start-ups can work and get advice as mentioned above.

Culture

It is necessary to organize regular events and activities in order to create an entrepreneurial culture. Examples include the "Startup Business" program and DrinkEntrepreneurs in Mongolia, existing in more than 40 cities worldwide, especially in South Asia since 2013.

Labor and capital

The government needs to create the infrastructure to support investors in the sector and stimulate the economy with respect to labor and capital markets.

Legal system

It is important to adapt an open tax system, create a legal environment and ensure stability in order to attract investment and increase capital resources in the high-risk sector.

Combining these five key ingredients together will create an ecosystem and more favorable environment for entrepreneurs and start-ups.

2) Requirements

GFA Consulting Group surveyed 400 people about Mongolia's entrepreneurship and startup ecosystem. According to the survey, the average age of start-ups is 24-33 years, and start-ups start with 2-5 founders. Most innovative start-ups need MNT 10-20 million in start-up funding to design, market their products, raise the next level of funding, and attract specific customers to reach sales. The development of youth-led start-ups requires following support from the Central Government, local governments, and non-governmental organizations:

Start-up financing, Mentors/consultants, Training and capacity building, Legal and tax support, and Accommodation and equipment.

18 Environmental research and recommendations to support youth employment and starting business,

Project report, GFA Consulting Group



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(2) ICT ecosystem

1) General concept of ICT ecosystem

To achieve ICT development and bridge digital divides, the comprehensive ICT ecosystem should be developed promptly. Also, establishing the ICT ecosystem is a challenge of national public policy and regulation in competitive global markets.

An ICT ecosystem is defined as "the network of organizations that drives the creation and delivery of information technology products and services". To understand the ICT industry’s health and well-being in the context of an ecosystem, there are three crucial ICT ecosystem metrics: productivity, robustness, and innovation. The ICT ecosystem is strong in all three of the most important hardware, software, and services sectors.

The ICT ecosystem must address the society’s fundamental needs while minimizing the destruction of available energy and strength embodied in conventional ways of conducting business. It applies particularly to ICT services in growth economies where users are eager to use ICT to improve the quality of life.

The development and quality of the ecosystem and the government’s preparedness, and active involvement of businesses and population are all essential to ensure that citizen will benefit from the ICT ecosystem. Policymakers and stakeholders must adopt a long-term and holistic vision to address ICT ecosystem related issues and challenges.

The government has a key role to play in establishing and boosting the ICT ecosystem in a country. As a policymaker, the government should create a favorable and optimal environment in which the ICT ecosystem can flourish, and it should be a provider of essential ICT services within the country.

The ICT ecosystem’s architecture is depicted by four modularized, hierarchically-structured layers as shown in Figure 3.4.2. Layers consists of network element providers, network operators, content and application providers, and final consumers.

Figure 3.4.3 shows the enhanced framework, which considers the elements as the network operators, service, application, platform and content providers and places people in the center of the eco-system who are influenced bay, and influence other parts of the system. In the framework, “Infomediaries” are included as the ICT practitioners (also known as knowledge workers). The factors of gender, generation, ethno-linguistic, historical context and affordability, access and utilization are placed within the elements as shaping the various relationships between people with the ICT system.

Source: Fransman, Martin, Innovation in the

New ICT Ecosystem

Figure 3.4.2 Simplified Model of ICT Ecosystem

Source: Kathleen Diga & Julian May (2016) The ICT Ecosystem

Figure 3.4.3 Enhanced ICT Ecosystem Framework



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2) Analysis for promotion of ICT ecosystem in Mongolia

Based on the study on Mongolia’s current situation related to ICT development, the main characteristics of the ICT ecosystem have been identified by the SWOT analysis as shown in Table 3.4.2.

Table 3.4.2 SWOT Analysis on IT Ecosystem of Mongolia Strengths Weaknesses

- Many star-ups are engaged in ICT sector, showing a potential to promote ICT ecosystem.

- The Mongolian Government has implemented a series of activities utilizing ICT that enables building E-Governance.

- E-Mongolia electronic platform serves as a one-stop shop for various government services.

- Utilization of ICT for daily life is increasing. - The fast-growing ICT market and expanded ICT

use in daily life are driving policymakers to improve current ICT policy and legislation and develop a new regulatory framework.

- Lack of comprehensive concept, long-term policies and strategies, and roadmap for ICT ecosystem.

- Lack of comprehensive R&D and assessments surveys on design, development and implementation of ICT ecosystem.

- Weak system reliability and interoperability among government organizations.

- Data security and integrity issues.

Opportunities Threats - Bringing together government organizations,

businesses, and NGOs. - Effective use of loans, assistance, and supports from

international and donor organizations such as World Bank and ADB.

- Globalization and worldwide best practices in ICT ecosystem.

- Outsourcing of the ICT systems development of crucial public sectors to foreign companies.

- Cybercrime, cyber-attacks and security loopholes.


3.4.3 Digital services provided by the Government

(1) Mongolia’s position in public sector ICT

These days ICT has penetrated into almost all sectors of the economy and society of Mongolia. Much increased effort and attention have now been given to the integration of ICT into the public sector. The Mongolian Government is implementing a series of activities using ICT that enables building e-governance such as enhancing the legal environment to develop E-government, improving information technology infrastructure, developing e-content of the government, providing online public services to citizens, increasing participation of citizens in the decision-making process, narrowing the digital divide, and developing human resources. The governmental and state organizations started taking initiatives to use ICT as one of the means to open up their services to citizens.

The EGDI, which assesses e-government development at the national level, is a composite index based on the weighted average of three normalized indices. The first index is derived from the telecommunications infrastructure index (TII) based on data provided by the International Telecommunications Union (ITU), the second index from the human capital index (HCI) based on data mainly provided by the United Nations Educational, Scientific and Cultural Organization (UNESCO), and the third index from the online service index (OSI) based on data collected from an independent online service questionnaire conducted by UNDESA, which assesses the national online presence of all 193 UN member states, complemented by a member state questionnaire19.

Mathematically, the EGDI is the weighted average of normalized scores on the three most important dimensions of e-government, namely OSI, HCI, and TII. It presented as follows.

19 United Nations E-Government Survey 2020 “Digital Government in the Decade of Action for

Sustainable Development”, UN



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Table 3.4.3 presents the EGDI values of Mongolia and selected developed countries in 2020. Mongolia is in the high EGDI group, and selected four countries are in the very high EGDI group.

Table 3.4.3 Comparison with Developed Countries by E-Government Development Index, 2020

Country EGDI Rank

Rating class

OSI value

HCI value

TII value

EGDI (2018)

EGDI (2020)

Mongolia 92 H3 0.5294 0.8063 0.6135 0.5824 0.6497 China 45 V1 0.9059 0.7396 0.7388 0.6811 0.7948 Estonia 3 VH 0.9941 0.9266 0.9212 0.8486 0.9473 Russian Federation 36 V2 0.8176 0.8833 0.7723 0.7969 0.8244 USA 9 VH 0.9471 0.7911 0.9182 0.8769 0.9297

Source: UN E-Government Survey 2020 “Digital Government in the Decade of Action for Sustainable Development”

Mongolia’s EGDI value is 0.6497 and global rank is 92. Mongolia increased its average EGDI value from 0.5824 in 2018 to 0.6497 in 2020.

All developed countries in comparison have improved their average EGDI values since 2018. Estonia is the leader in e-government development. Mongolia and all selected countries have EGDI values above the global average of 0.60. Estonia and the USA with respective EGDI values of 0.9473 and 0.9297, and global rankings of 2nd and 9th are in the highest (VH) rating class of the very high EGDI group and are among the world leaders in e-government development. Russian Federation and China with respective EGDI values of 0.8244 and 0.7948, and global rankings of 36th and 45th are in the higher (V1 and V2) rating class.

Table 3.4.4 presents the EGDI values of Mongolia and selected developing countries in 2020. Mongolia and selected three countries are in the high EGDI group.

Table 3.4.4 Comparison with Developing Countries by E-Government Development Index, 2020

Country EGDI Rank EGDI Rating class OSI value HCI value TII value Mongolia 92 0.6497 H3 0.5294 0.8063 0.6135 India 100 0.5964 H2 0.8529 0.5848 0.3515 Philippines 77 0.6892 H3 0.7294 0.7544 0.5838 Vietnam 86 0.6667 H3 0.6529 0.6694 0.6779


(2) E-government

The Mongolian Government implemented a total of 19 projects and programs including one-stop service centers, kiosk machines, digital services by www.ezasag.mn (Governmental Service Electronic Platform) and creation of public key infrastructure within the framework of the E-Government National Program 2012-2016.

Through the implementation of these projects and programs, digital signatures have been introduced and 6.4 million citizens and legal entities were served by kiosk machines and 2.8 million citizens and legal entities were served by public service centers of the Ulaanbaatar city. It was estimated that an average of MNT 9 billion per year is saved and 1 hour and 40 minutes are saved per one service.

In addition, the Aimag and capital city administrations are delivering services to citizens through public service centers and one-stop service centers. A total of 24 service centers have been established so far. Ulaanbaatar citizens have been able to receive 25 services from the ezasag.mn portal system. E-kiosk



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has been installed in 95 locations in the city, in the centers of Aimags and in Soums, to streamline the provision of public services. Also, the Integrated Center of Public Services was launched in January 2016, providing E-kiosk with 245 services such as certifications and recommendations regarding living environment and welfare.

As of 26th April 2021, 410 services of 36 organizations connected to the e-Mongolia can show that 82% of the 496 electronic services approved by Government Resolution No. 259 of 2017 are connected to the electronic system of public services. Of these 410 services, the Ministry of Food, Agriculture and Light Industry has the most or 76 services, 69 services of Ulaanbaatar city agencies, and 61 services of the Ministry of Justice and Home Affairs.

In Mongolia, in order to receive government and other services, citizens must submit at least the ID card reference and other relevant documents. It means that citizens must physically visit the Soum, city, Aimag or state registration office to get a reference with necessary documents prepared. In the frame of E-government, citizens can get an ID card reference from the e-Mongolian web portal. In addition, citizens can easily access the online services related to civil registration from the e-Mongolian web portal, such as getting ID card, inquiry on registration number, inquiry on change of registration number and issuance of a new one, ID card reference and reference on obtaining a national foreign passport for the first time, etc. As another example of E-government service, there are 48 tax services on the e-Mongolian web portal. citizens and business entities can pay all types of taxes through the system, as well as obtaining tax inquiries/references. E-government delivers government services directly to citizens and business entities using advanced technologies and it is reorganizing the traditional administrative structure (Figure 3.4.2). It can restructure government organizations, reduce operational costs, increase efficiency and make services more transparent to consumers.

Source: CITA

Figure 3.4.4 Structure of Electronic Service Delivery

(3) Geographic information system (GIS) platform

Government agencies such as ALAMGAC have made use of geographic information system (GIS)

Kiosk machines

Civil servants

Government organization

“KHUR” state information exchange system

National Data Center

One stop service center Public service center Web portal

Request Service Service



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technologies for diverse purposes including pastureland monitoring and disaster risk reduction planning since 1992. Also, there is a rising demand and need for spatial information that use drawings and maps in the fields including urban planning, resources, environment and anti-disaster. The GIS based technology has steadily widened its range of application, and seen its importance growing.

1) National spatial data infrastructure

The World Bank Group has focused on the value of geospatial information management in low/middle income countries including Mongolia. This initiative is based on the recognition that SDGs rely on geospatial technology to achieve the targets and use location as an information integrator. Through support from the World Bank, ALAMGAC has formulated the platform of national geospatial data infrastructure on its website.

Geographic information providers, including government agencies and commercial sources, use geoportals to publish descriptions (geospatial metadata) of their geographic information. Geographic information consumers, professional or casual, use geoportals to search and access the information they need. Thus, geoportals serve an increasingly important role in the sharing of geographic information and can avoid duplicated efforts, inconsistencies, delays, confusion, and wasted resources.

Spatial information is any position-based information that answers the question “where”. It plays an important role in making public services more accessible and faster, and in all kinds of planning. For instance, the system is a foundation for proper urban planning. With the help of this system, the location of schools, kindergartens, railways and where to do farming is identified or determined. GIS data such as topographic maps, cadastral maps, and land use maps are collectively managed by a platform called geoplatform. As a result, anyone in the agency can access the necessary data and create, edit, and manage the GIS data prepared in domestic. In addition, by combining it with a portal site that is open to the public, the GIS data in the platform can be made public. It can be used as a catalog and can be downloaded free of charge.

SDV2030 specifies that a national spatial infrastructure would be created. Directives to develop spatial data are included in the national development programs. A draft new law for spatial data infrastructure is under discussion. The implementation of the Strategic Plan for Creation of Mongolian National Spatial Data Infrastructure (NSDI) is shown in Table 3.4.5.

Table 3.4.5 Implementation of Strategic Plan for Creation Mongolian NSDI

Year Goals Expected results

2014-2016 Goal I: Create a basic database for the national NSDI that meets the quality requirements and standards.

The Spatial Data Infrastructure (SDI) of the Land sector or the first version of the SDI will be created.

2016-2018

Goal II: Create the Integrated Geoportal for spatial data.

Established the Data exchange infrastructure for distributing the Spatial Data Integrated Fund of the Land sector to the end users or the next version of the SDI including the Data Warehouse and Geo portal will be created.

2018-2024

Goal III: Establish the National Committee of the NSDI and create the NSDI for data exchange between the governmental organizations.

SDI shall be introduced in the nationwide. In this manner we shall create the first version of the NSDI and introduce throughout the country.

Source: http://ggim.un.org/meetings/2014-IGSI_Beijing/documents/08_Mongolia_NSDI_ANGLI.pdf

Currently, 13 existing laws regulate the creation and use of spatial databases in Mongolia. However, there is no legal framework for ensuring linkages between databases, creating a spatial data and an integrated information system, and ensuring the integrity of spatial data. As a result, spatial databases (geographic databases) have been created by ministries, agencies, organizations, and project units at different levels and in different ways.

https://en.wikipedia.org/wiki/Geospatial_metadata

http://ggim.un.org/meetings/2014-IGSI_Beijing/documents/08_Mongolia_NSDI_ANGLI.pdf



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Source: https://geoportal.nsdi.gov.mn/alagac/home/

Figure 3.4.5 Geo Portal System

2) Urban development cadastral database

GIS data such as topographic maps, cadastral maps, and land use maps are collectively managed by a platform called geoplatform. As a result, anyone in agencies can access the necessary data and create, edit, and manage the GIS data prepared in the domain. In addition, by combining it with a portal site that is open to the public, the GIS data in the platform can be made public. It can be used as a catalog and can be downloaded for a fee.

Also, there is a national cadastral database that contains information and data necessary for registering fixed assets. In each phase of urban development project planning, implementation and maintenance, information on construction, buildings and related infrastructure/equipment information will be updated in the database. Persons in charge of the development of the country, Aimags and cities, companies and citizens are able to utilize the cadastral information and development plan information as needed.

Source: ALAMGAC

Figure 3.4.6 Cadastral Database Provided by GIS



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3) Mongolian land exchange system

In August 2018, the Mongolian land exchange system, a digital platform for conducting auctions of land acquisition and land tendering was launched. This integrated platform not only allows people to participate in land auctions and tendering activities using their computers, laptops, tablets and smartphones from wherever they are, but also receive information about the land and land acquisition, auction and post their advertisement for land sale or lease.

Source: ALAMGAC

Figure 3.4.7 Mongolian Land Exchange System

Also, various services regarding land such as the market prices for land, information about land deposit and land lease registration and distribution of cadastral map, copy of certification and land payment receipt are available to users. The Mongolian land exchange system is directly connected to the Mongolian national spatial data infrastructure, cadastral information database and other databases.

(4) Enhancement of digital literacy in Mongolia

Citizens' digital literacy is very important for the development of e-government. One of the National e-Governance Program objectives is to "Enhance public awareness of digital literacy." To achieve this objective, the following digital literacy works shall be carried out:

Organize training to provide background knowledge and skills of ICT to citizens to comply with international standards;

Reduce the digital divide among citizens through increasing Internet speed in rural areas to improve efficiency and accessibility of government services;

Develop simple software for the elders, herders and citizens in rural areas to deliver government e-services;

Develop and use electronic integrated management system of the education sector; Organize ongoing training and activities to improve the capacity of specialized skills and

implement policies for developing information technology entrepreneurship; and



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Establish specialized ICT training halls for people with disabilities and target groups and organize ongoing training.

UNESCO has defined that “Digital literacy is the ability to access, manage, understand, integrate, communicate, evaluate and create information safely and appropriately through digital devices and networked technologies for participation in economic and social life.” The importance of digital literacy is evidenced by many national and regional efforts to develop and implement digital literacy frameworks and strategic plans to bolster citizens’ digital literacy.

Information technology and English language trainings play an essential role in the development of digital literacy. Mongolia’s strength lies in the fact that all Mongolian secondary schools and universities offer information technology and English courses.

3.4.4 ICT industrial cluster

(1) ICT clusters classification

An ICT cluster is a form of technological cluster in which production mostly of software generates ICT knowledge as patents and innovative solutions, services and products. A classification of ICT clusters can be made based on their products or main activities of firms involved.

An ICT cluster that generates low-value ICT services such as the Bangalore ICT cluster means that firms in this type of ICT cluster are mainly outsourcing activities for large firms because they offer professionals at relatively low costs. A low-value ICT cluster provides different ICT services to important companies that externalize different phases of the ICT products lifecycle such as customer support or quality assurance and testing processes. They tend to depend on a few worldwide ICT companies for external input of technologies and financial support.

An ICT cluster that generates high-value ICT activities such as Silicon Valley, Boston Route 128, Cambridge Technology Cluster or Taiwan IT cluster means that the firms develop innovative, generic products. They fuel their development by innovating and producing new technologies.

(2) Conditions for establishing an ICT industrial cluster

1) Conditions and resources needed for ICT clusters

The initiative for the ICT cluster development takes root in areas having strong connections to important research and university centers, because the ICT clusters are a particular type of technology clusters. The resources for the ICT cluster are a base of qualified ICT professionals, a clear financial regulations and opportunities provided by government and venture capital invested by large ICT firms which are extending or relocating their production.

2) Establishment of ICT cluster

The clustering process requires following:

People-to-people contact, Consensus on key issues among players/members involved, Collaboration at multiple levels, and Community wide involvement in the process of building new linkages between communities,

businesses and government.

Cluster members can be divided into four broad categories: core businesses, small businesses, soft support infrastructure and hard support infrastructure.

Core businesses

These are businesses that are the lead participants in the cluster, often earning most of their income from customers who are beyond the cluster’s boundary.



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Support businesses

These are businesses that are directly and indirectly supporting the businesses at the core of the cluster. They may include suppliers of specialized machinery, components and raw materials; and service firms including finance/venture capital, lawyers, design, marketing and public relations. Often these firms are highly specialized, and are physically located close to the core businesses.

Soft support infrastructure

In a high-performance cluster, the businesses at the core and the support business do not work in isolation. Successful clusters have community wide involvement. Local schools, universities, polytechnics, local trade and professional associations, economic development agencies and others support their activities and often are key ingredients in a high-performance cluster. The quality of this soft infrastructure and the extent of teamwork within it are keys determinants of the development of any cluster.

Hard support infrastructure

This is the supporting physical infrastructure such as roads, ports, waste treatment, communication links, etc. The quality of this infrastructure needs to at least match competitive destinations, be they local or further afield.

These four separate elements in a cluster can be portrayed as circles, built around the core.

3.4.5 Status and applicability of each sector on DX and ICT

(1) Application status of ICT for public social protection by the Government

The Mongolian social protection system consists of 1) social insurance (retirement, unemployment, or sickness) and 2) social welfare (specific benefits to protect vulnerable groups, including the poor, disabled and child allowances). The Ministry of Labor and Social Protection (MLSP) is the national and central authoritative body for the social protection sector. MLSP has three subsidiary agencies at national level.

Social protections are regulated by a number of laws. The top priorities were the maintenance and improvement of social welfare services for the most vulnerable. Although there are various forms of assistance and support in social welfare, actual contribution to families and individuals are still low. Therefore, there is a need to develop and use a centralized registration database of beneficiaries and develop and use ICT systems in order to register and select beneficiaries, deliver and monitor social protection and social welfare services to target groups promptly and cost effectively. The Mongolian Government pays considerable attention to the use of ICT in the identification, delivery, and monitoring of social protection assistance and services to the targeted beneficiaries. ICT is used to improve the operational processes of Mongolian social protection agencies and customer services. The Government attempts to streamline social service delivery and bring greater speed, certainty, and transparency to the process.

(2) Possible application of ICT for each sector

1) Industrial development and agriculture/livestock development

Agriculture/livestock is one of the major industries in Mongolia; however, the supply chain is underdeveloped and there is a problem that their produces and products cannot be traded with intermediaries at appropriate prices. Furthermore, primary products are often put on the market as they are without processing, and the development of new specialty products is delayed and not added new values.

It is important to promote the creation of new ideas and businesses by expanding horizontal connections between producers and different industries. Through utilizing ICT, it would become possible to encourage interactions regardless of the issue of physical distance, and anyone can acquire correct information anytime/anywhere and raise the knowledge of producers.



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Degradation of grassland has been occurring due to excessive livestock farming, global warming and population concentration in specific areas. In addition, Dzud and desertification have a serious impact on pasture growth. On the other hand, the number of workers in the livestock industry is on the increase, and the total number of livestock is also increasing. There are many households that specialize in livestock as a livelihood, and therefore there would be a big problem that they may lose their income source due to the decline of pasture capacity to feed them and the infectious diseases of livestock. Mongolia characterized by water shortages due to desert areas and severe winters still lacks facilities for growing vegetables all year round. It is necessary to efficiently manage and maintain pasture areas and forage cultivation with ICT, and to manage water resources and soil for agricultural products to promote their growth. The technological solutions that are considered applicable in Mongolia are shown below.

E-learning utilizing big data and AI for primary product producers; Utilizing the improvement of traceability applying blockchain technology to guarantee price and

quality; Proposing cross-industry exchanges with big data and AI to encourage opportunities to create

new businesses; Promoting logistics by utilizing autonomous driving technology; Managing the growth conditions of feed and crops with IoT such as temperature, humidity,

oxygen concentration, etc.; IoT monitoring the status of livestock (individual body temperature, milk intake, amount of food

consumed, etc.) and adjusting the amount and composition of food with the system, and Managing grazing and pasture with UAVs and self-driving tractors.

2) Mining development

Coal mines and abundant minerals such as copper, gold and rare metals play a major role in economic growth in Mongolia. With the discovery of new minerals, the development and construction of mining sites are expected to increase in the future; however, it is necessary to resolve a shortage of engineers with specialized knowledge and to create new added value. It is important to utilize ICT to digitize basic information, reinforce the shortage of human resources, and pass on the technology through the training of new engineers. The technological solutions that are considered applicable in Mongolia are shown below.

Robotic unmanned mining or remote controlled mining; VR mining training; Mining by a robot that has acquired skillful techniques utilizing deep learning, and Creating a database of quarry information using UAVs and sensors.

3) Tourism development

Many tourism sites are not developed properly to allow visitors to enjoy the Mongolian culture and history. Also, transportation access within and between regions has not been developed adequately. Since many tourists visit in a short period of time and take standard sightseeing tours, the economic effect is limited to a specific area in a short period. Needs surveys, marketing, and promotions utilizing ICT should be conducted to meet the needs of tourists with diverse interests. In order to solve the problems of movement between regions far apart, ICT should be applied. The technological solutions that are considered applicable in Mongolia are shown below.

Leveraging MaaS to enable seamless movement within and between regions; Utilizing IoT and big data to perform data mining such as lifestyles peculiar to Mongolian

nomadic culture and utilize it for marketing;



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Inputting information from travelers and locals into big data and propose travel plans that suit various tastes with AI, and

Utilizing VR and AR for online tourism and use it as a steppingstone for on-the-job tourism.

4) Environmental and social considerations

Since coal is the main fuel and is also used for energy in plants and households, air pollution caused by combustion is serious, and the PM2.5 value is more than 10 times higher than the world standard value. In addition, the amount of garbage collected is increasing; however, the actual amount collected is not grasped due to illegal dumping and littering. The development of pollution treatment facilities has not progressed due to political and economic reasons, and the aging of the facilities is also a problem. It is important to practice a sharing economy that shares energy, services, and goods and reduces the burden on the environment. In addition, there is a possibility that ICT can be used to financially support the construction of treatment facilities that not only reduce the environmental load but also improve the environment. The technological solutions that are considered applicable in Mongolia are shown below.

A service that allows the people to easily buy and sell unnecessary items from their smartphones; Awarded point for products and actions that have a low environmental impact; Supporting finances for protection of the environment with crowdfunding, and Processing images taken with UAV to measure the amount of dust accumulated and the

environmental conditions.

5) Social development

In social development, SDV2030 is focusing on health and education. On the educational side, under the influence of the nomadic culture unique to Mongolia, the male’s completion rate of higher education is lower than that of a female because male tend to drop out of school in the middle of compulsory education to help their families, and they cannot get a job other than nomadic activities and stay in the poor. There is also a concern that children and their families will move to urban areas for education, breaking traditional lifestyles.

In terms of health, the number of doctors is small throughout the Country and there is a large difference in access to health care services between urban and rural areas. It is important to address these issues, eliminate the negative effects of physical distance, and provide access to education and healthcare anytime, anywhere by utilizing ICT. In addition, ICT would be able to contribute to the improvement of regional disparities by providing information on opportunities for occupations and scholarships and healthcare by taking advantage of its ability to transmit information. The technological solutions that are considered applicable in Mongolia are shown below.

Taking online classes from the home mobile device and providing information on scholarships and employment placement;

Providing information for building a healthy physical, and Getting medical treatment online using ICT.

6) Water resource development

Both river water and groundwater are not well developed in the whole country, and there are large differences in availability depending on regions. Many households use pit latrines in Ger district. For the purpose of getting clean water, there are areas where children are engaged in water transportation, or contaminated water from factories is discharged without adequate treatment, and children have to go to distant wells to fetch water. As a countermeasure, it is important to grasp the usage status of sewage and clean water by managing the quality and quantity of water with ICT, and to minimize the wasteful use of precious water resources. The technological solutions that are considered applicable in Mongolia are shown below.



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Understanding the water quality and usage status of wells and water and sewage treatment facilities with IoT, and

AI estimates the risk of water pipe rupture and assists in prioritizing maintenance

7) Logistics and transportation

The main mode of transportation are cars and buses which use roads, but there are many places where road pavement is undeveloped in rural areas. Although the road infrastructure is under development, a degree of supply and demand for paved road need to be investigated and prioritize them comprehensively.

Railroads have become an important means of freight, but their use for passengers has not progressed, and maintenance of railroad tracks supported by the former Soviet Union is a bottleneck. As a countermeasure, it is important to utilize ICT in regions with low traffic volume and introduce new means of transportation in a relatively short period of time to improve traffic access. In addition, by utilizing IoT to visualize supply and demand as a judgment of the priority of infrastructure to be developed in the future, it would be possible to efficiently improve traffic problems. The technological solutions that are considered applicable in Mongolia are shown below.

Introducing UAV (unmanned aerial vehicle) and autonomous driving technology as new means of transportation;

MaaS (mobility as a service) that enables seamless travel to destinations; Utilizing IoT sensors to check the number and location of passengers in real time, and Image processing models by deep leaning to identify road and railroad conditions and present

areas that require maintenance.

8) Infrastructure development

In Mongolia, many infrastructure facilities built during the socialist era have become over-aged, and their renewal and maintenance pose a heavy financial burden in not only Ulaanbaatar, but also other major cities especially Erdenet and Darkhan. As a countermeasure, it is necessary to take "preventive maintenance" measure to extend the lifespan of the targeted infrastructure by repairing it at the early stage when the damage to the infrastructure is minor. For this purpose, it is important to actively utilize a huge amount of data and ICT for proper maintenance. In addition, as for new facilities, it is necessary to take measures to reduce lifecycle costs from the viewpoint of earthquake resistance, longer life, and rationalization of construction. The technological solutions that are considered applicable in Mongolia are shown below:

• Creation of facility management database utilizing big data and IoT; • Visualization of infrastructure facilities that require high earthquake resistance such as bridges

being equipped with high-performance accelerometers, etc.; • 3D model of buildings and civil engineering structures, and utilize them in planning, survey,

design, construction, and maintenance to improve work efficiency; • Introduction of ICT into the construction production system (i-construction), and • UAV surveying and field surveys.

9) Urban development

The rapid population influx into Ulaanbaatar continues, and the city is expanding in a disorderly manner against the plan. Despite the lack of land in the Ger district, infrastructure development has not caught up with the rapid population growth. As a countermeasure, it is important to utilize big data for the management of urban development. Traffic information, infrastructure data and environmental data such as air and water quality can be integrated and analyzed by AI with big data. Also, ICT including AI and big data is useful for urban development management and planning. The technological solutions that are considered applicable in Mongolia are shown below.



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Using IoT sensors to measure water quality and CO2 concentration at waste collection sites to help improve the environment, and

Using AI to identify important issues by identifying automatically opinions from residents.

3.4.6 ICT infrastructure development

A strong and well-developed ICT infrastructure is an important factor for effective e-government and digital transformation. Affordable and widely available high-speed broadband Internet and secure access to technologies are essential for digital transformation. Without them, government cannot effectively provide its services to public, and citizens cannot make use of them.

(1) Date transfer (communication) infrastructure

Download speeds through Internet are compared in Table 3.4.6 between Mongolian and selected other countries. The speeds in developed countries are generally closer to or higher than the world averages for both mobile broadband and fixed broadband. As for developing countries in Asia, they are much lower than the world average. The speeds in Mongolia are slower than a half of the world average for both mobile and fixed broadbands.

Table 3.4.6 Comparison of Download Speeds in Developed and Developing Countries, 2021

Country Download speeds

Mobile broadband Fixed broadband Rank # Speed, Mbps Rank # Speed, Mbps

Global average 46.94 97.52 Mongolia 108 19.51 83 43.18 China 4 148.62 18 163.52 Estonia 32 54.46 47 87.06 Russian Federation 89 23.64 52 81.94 USA 20 70.25 12 180.84 India 131 12.40 63 55.34 Philippines 83 26.24 92 38.46 Vietnam 54 38.36 62 58.21

Source: Global Speeds February 2021, https://www.speedtest.net/global-index

(2) 4G and 5G networks

CRC has approved licenses to use radio spectrum for 4G LTE service to Mobicom Corporation LLC, Unitel LLC and Skytel LLC in 2016. At present, the 4G (4th generation of the broadband cellular network) is generally widespread in Ulaanbaatar and other core cities, but there is only a communication network equivalent to 3G (3rd generation of the broadband cellular network) or less than 3G in local cities and Soum levels. On the other hand, there are further policies aimed at creating a basic 5G (5th generation of the broadband cellular network) environment.

According to CRC, the number of 4G LTE subscribers rose to 1.9 million in 2019, which has increased by 9 times in the last three years (Figure 3.4.8). Due to expanding the implementation of backbone networks, mobile companies have provided higher bandwidth speed on 4G LTE, covering the broader area including rural areas. Along with it, the amount of mobile data usage on 4G LTE has been increasing in 2018 and 2019 (Figure 3.4.9).



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Source: http://www.crc.gov.mn/en/k/2ll/1L

Figure 3.4.8 Mobile Broadband Subscription (1000 subscriptions)

Source: http://www.crc.gov.mn/en/k/2ll/1L

Figure 3.4.9 Mobile Data Usage Trend

1) ICN report

According to the material released in November 2019 by ICN (Information Communications Network) LLC, a broadband service provider, Goal 3 of the eight main goals listed in Government Policy on Information and Communication Development is as follows.

【Goal 3】

The 4G has been introduced, and the basic conditions for the 5G have been created. Services utilizing high-speed mobile broadband networks have been launched. (Example: Internet from home and FinTech). In conclusion, in order to achieve this goal, prefectural companies are involved and active cooperation with the organization is essential.

2)ESCAP report

The report "Mongolia in the Digital Age National Digital Strategy Primer for Mongolia" sponsored by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and produced by the Mongolian Government including CITA, the Pathway Commission, and local implementation partners proposes the nationwide dissemination of 4G/5G and shows the following as specific actions.

【Action plan】

CITAs in partnership with mobile network operators (MNOs) should begin conducting research and planning on 5G network allocations and investments. Within this, all pricing schemes, tax incentives



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and infrastructure sharing policies will cover a wider service area, giving the majority of Mongolians access to 5G. CITA should guarantee this measurement. As a result, it is expected that 5G will be introduced in the near future and plans will be prepared to enable 5G to be used nationwide.

In 2020, a working group with representatives of service providers was established and a policy direction for the introduction of 5G were jointly developed and approved. According to the action plan, the 5G licensing will begin in 2023.

3.5 Key Initiatives and Measures in Mongolia

More effort and attention have been directed recently to the integration of ICT into the public sector. The Mongolian Government has implemented a series of activities utilizing ICT that enable building E-governance such as enhancing the legal environment to develop E-government, improve ICT infrastructure, developing e-content of the government, provide online public services to citizens, increase participation of citizens in the decision-making process, narrow the digital divide and develop human resources. The government and state organizations started taking initiatives to utilize ICT as one of the means to open up their services to citizens.

3.5.1 Key initiatives for ICT development

(1) ICT development for individual e-services

More and more works and attention are paid to integrating ICT in other sectors of Mongolia such as education, health, transportation, agriculture, environment, etc. Most Mongolian citizens have a personal ID number. According to the Government Resolution No 338, it has been agreed to issue an electronic card to every Mongolian citizen, who has reached 18 years of age and who had been registered in renewed registration that was held in 2010-11. The issuance of the new electronic ID card started in 2012. The advantages of using the ID card system are shown as follows:

Strengthen the relationship between government services and citizens; Provide a secure and shared platform for delivering public services; Reassure citizens that their data are protected and can be securely exchanged; Modernize identity documents; Enable the deployment of E-government services and applications, and Facilitate the delivery of public services such as health care, social protection and education

services at reduced administration costs.

The new ID card includes an embedded microprocessor containing all personal data with biometric facial and fingerprint ID systems linked to a secure database serving government agencies.

(2)E-government promotion

In terms of DX and ICT promotion, e-government programs and projects are the keys for digital development. They consist of several key measures and programs as follows.

1)Mongolian National Data Center

The Mongolian National Data Center (NDC) was established by Government Resolution #183 in 2009, according to the implementation of project framework such as “E-government”, “E–Mongolia”, “Registration integrated unified system”, “Ensure national information security” national programs. The center is providing ICT services to government and business organizations and ensuring accessibility and promptness of the government data flow. NDC is responsible for the following.

By providing the dedicated environment for government database, NDC ensures availability, reliability, safety and security of system servers storages;

NDC ensures the integrity and the interoperability solution of government databases;



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NDC serves as a consultant of professional methodology on information technology and data processing to other government IT specialists;

NDC gives support predicting and preventing information security incidents, help incident response to computer emergency to customers of NDC, government entities and private sectors, and

NDC is responsible for the consumption and the operation of Mongolian Internet exchange service (MIX) and monitoring MIX infrastructure and consulting on security threats.

2)E-Mongolia

The Mongolian Government approved the “E-Mongolia National Program” (Resolution 216) in 2004. The program has four major components: 1) Policy, legal and regulatory framework, 2) Telecommunications and information infrastructure, 3) Utilization of ICTs and governance and other applications, and 4) Developing human resources. Extensive efforts are being undertaken by CITA, ICT companies, organizations and individuals to achieve 16 objectives outlined in the program.

In 2019, the Government of Mongolia passed Resolution 73, the “National Policy on E-Governance”. The main objective of the policy framework is to enhance the already existing E-governance structure on a legislative and a practical level. The policy aims to utilize cyberspace, information technology, and innovation to expedite government services to reduce backlogs and eliminate government agency bureaucracy. The incumbent administration’s Government Action Plan for 2020-2024 includes the implementation of E-Mongolia services and will provide a soft-opening of 181 government services as of October 1, 2020.

E-Mongolia platform was developed based on a model of Estonia’s DX forms within the framework of cooperation with the Estonian government. In adopting e-governance services, Mongolian policymakers looked to Estonia and Singapore as possible models. KHUR and DAN state service systems will be transferred into the E-Mongolia unified platform, which will enable citizens to be provided with transparent, accountable and fast state services without bureaucracy. E-Mongolia electronic platform, which is intended to serve as a one-stop shop for various government services, was launched officially on October 1, 2020. By November 2020 there are 119 services for citizens and 116 services for legal entities out of total 181 governmental services planned to be delivered online to the citizens have been transferred into the online platform so far.

Services

Family related

Social welfare

Employment

Civil engineering activities

Driving licenses and vehicles

Common use

Economy and finance

Business

Permission, specification, conclusion

Tax and payments

Health related

Education

Citizenship and migration

Law enforcement

Immovable properties

Source: https://e-mongolia.mn/home

Figure 3.5.1 E-Mongolia Portal

Citizens/Economic entities/Foreign nationals

All services Civil engineering activities Business Education

Family related Driving licenses and vehicles

Permission, specification, conclusion

Citizenship and migration

Social welfare Common use Tax and payments Law enforcement

Employment Economy and finance Health related Immovable properties

Services



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The system, which compiles and integrates government services to provide easy and smooth round-the-clock access, now allows citizens to obtain 181 government services through a mobile application (iOS and Android) and online website such as references, submission of a request to government services, tracking of application processes without limitation of geography, locations, time and so on.

Furthermore, users are able to submit their requests and petitions to the government agencies, and get address location, office hours, and service conditions of the government agencies. Other government service systems such as e-barimt (VAT promotion system under the Ministry of Finance) and e-halamj (social welfare services under the Ministry of Labor and Social Protection) have also been integrated into the E-Mongolia platform. It is said that another 492 government services will become available on the system within the next year.

E-Mongolia application users will not be charged for data used while accessing the application until the end of 2020 in agreement with mobile service providers such as Mobicom, Unitel and Skytel as part of their social responsibilities. Since the launch of the E-Mongolia system on 1st October 2020, its mobile application has been downloaded by 61,829 users, and providing various types of public services 138,891 times in total. The system, which compiles and integrates government services to provide easy and smooth round-the-clock access, now allows citizens to obtain various types of government services through a mobile application and online website.

3)E-kiosk machines

In 2012, the Mongolia Government completed the implementation of an electronic identification infrastructure and issued cards to over 2.3 million eligible citizens and has started to use this infrastructure for the delivery of services to citizens using service kiosks and intends to make more electronic services available. E-kiosk - ATM like machine for public service delivery was launched in 2013. By introducing the E-kiosk machines to the services in Mongolia, the citizens have had the possibility to receive the governmental services from the machines that are located closest to themselves. The system of E-kiosk machines, software and equipment have been registered as state property in May 2015 and transferred to the National Data Center which is currently responsible for their usage and maintenance. In order to limit the spread of the COVID-19 epidemic and reduce the risk of infection, the E-kiosk service is temporarily closed from November 2020.

4)Citizen’s feedback 11-11 Center

Results of the survey in 2011 on the quality and effectiveness of the services provided by the General Authority for State Registration indicate that the Government needs to improve accountability and responsiveness, transfer the delivery of some services to electronic formats, improve customer service, promote one-stop shops, and eliminate bureaucracy. The absence of feedback mechanisms on government service delivery is one of the key constraints to improving the quality and effectiveness of services. In order to introduce a robust data feedback mechanism, the Mongolian Government has initiated a citizen engagement and feedback “11-11 Center” to speed the response time for citizen’s comments and complaints received through 10 different channels in an attempt to promote an open, transparent and accountable government.

5)Ulaanbaatar City initiative: “Smart Ulaanbaatar” program

The Smart Ulaanbaatar program was approved at the regular assembly of the City Council in 2014. The program describes work, principles, operations, management and financing for building smart governance and smart city from 2014 to 2020 in the Ulaanbaatar city. It involves all infrastructure and citizens of the city. Smart Ulaanbaatar is a mega program, which requires huge financial resources, human capital and knowledge. Key components are shown in Table 3.5.1.



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Table 3.5.1 Components of Smart Ulaanbaatar Program

# Components Work Areas Number of Indicators

Number of Activities

1 Smart Governance

Smart city planning, legal reform, organizational reconstruction, good governance, and open data 24 61

2 Smart Economy

Innovative city, best business environment, public private partnership, excellent investment options, brand creation of Ulaanbaatar and city support employment

18 30

3 Smart People Educated, intelligent, creative citizens, friendly, loyal, lovely people, healthy and active community 10 11

4 Smart Services

Government-citizen services, government-business services, service management and equal access to services 11 24

5

Smart Environment

Green, healthy environment, informational infrastructure (Wireless City), soft infrastructure (central database and portals), mobility (smart transportation and car sharing), technology and smart infrastructure (power, water, waste management)

17 18

6 Smart Living Safety, stress free living, smart education, smart healthcare, smart buildings, tourism and attraction 8 8

Source: Smart Ulaanbaatar Program

For example, within the “Smart Service” component, the indicators of “Government-citizen services” work area are defined as follows.

• Public service centers will be established regionally taking into account population density and space;

• Communication with citizens through a single electronic window is efficient and effective, and • Research on people's lives will be carried out on a regular basis.

Activities accomplished within the project are:

• Ulaanbaatar Smart Bus Project (2015-2016);

• Ulaanbaatar Data Center established and connected to the National Data Center (2016);

• Every local government of the city connected to the integrated network (all 153 local primary units)

• E-public services introduced, and

• Database for Ulaanbaatar City Digital Maps (2017)

Figure 3.5.2 shows the database for Ulaanbaatar city digital maps with the website titled “Urban Development Shared Database of Ulaanbaatar city”, and describes that “the purpose of this website is to put thematic information related to urban planning into GIS system which is reflected in the action plan of the Governor of the Capital city and mayor of Ulaanbaatar for 2016-2020 and disseminate it to the public. From the featured application menu, it is possible to get detailed information such as Ulaanbaatar city master plan, land to be privatized, location of schools and kindergartens, their capacity, access and geographic locations of public organizations”.



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Source: https://ulaanbaatar.maps.arcgis.com

Figure 3.5.2 Database for Ulaanbaatar City Digital Maps

6) KHUR government information exchange system

The KHUR 20 government information exchange system is one of the basic components of E-government that meets international standards and facilitates government-citizen services and activities. It aims to take public service information to a new level through interconnected, centrally managed platforms, and to facilitate access to public services for citizens and businesses. Within the scope of the “Direction of the policy to be adhered to on the governmental information exchange system” approved by CITA in 2016, NDC developed the KHUR governmental information exchange system based on the open source platform with the architecture “Enterprise service bus”. KHUR provides the necessary infrastructure for inter-agency data sharing and exchange.

Government Resolution 259 (2018) about some measures to provide public services in electronic form defined the list of public services to be connected to the state electronic information exchange system with 176 services and the list of public services to be provided electronically using the government electronic information exchange system with 320 services. These services are to be implemented as e-services under the KHUR system.

The list of all registered web services is available at https://developer.xyp.gov.mn/docs/services.html. The web site also has information and guidance for connection to the KHUR system.

7) Smart government project

The Parliament of Mongolia approved a law “Smart Government Project” financing agreement and on Smart Government Project Financial Agreement between Mongolia and International Development Association (US$19.4 million) on July 9, 2016. The development objective of the project is to use ICT to improve accessibility, transparency and efficiency of public services in Mongolia. The implementing agency is the Cabinet Secretariat of the Mongolian Government. Beneficiary agencies

20 KHUR is assigned name.

Featured Application

Development directions 2030 of UB

Time between bus stops Air pollution and sources of pollution

Housing Buildings and Structures That Do Not Comply With Requirements of Building Usage

Maps Complains



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are Cabinet Secretariat, National Statical Office, CITA, and General Authority for Intellectual Property and State Registration. Figure 3.5.3 shows the key components of the project.

Source: http://www.smart.gov.mn/en/sub_1/

Figure 3.5.3 Components of Smart Mongolia Project

8) DAN integrated system of authentication

DAN stands for decentralized authentication network which is the platform operating thoroughly with the other independent systems of public as well as private sector services and authenticate the customers to access those services easily. Mongolian National Data Center has introduced DAN digital recognition system to the public during ICT Expo 2018, held between September 30 and October 2. DAN integrated system of authentication is the platform to create an opportunity for confirming and identifying when citizens get all varieties of e-services in the e-environment. The DAN system, the next version of the KHUR digital service system, identifies and verifies persons online, allowing citizens to have online services and is able to work closely with non-interrelated private and public service systems.

Once DAN is penetrated, the citizens could access the public services anywhere using their own mobiles or laptops. This system creates a great impulse to intensify the mobile services all around Mongolia. Therefore, it is more affordable for State and private sector services to work associated with each other without any dependence. Once customer using the DAN system to access, it will be able to access all the systems connected to the DAN system. The system advantages are:

Systems using the DAN system do not need to save username and password; It decreases the cost of authentication development in the e-environment; and It creates an opportunity to provide information security from one spot to each system using the

DAN system.

Connection information to the DAN system is available at https://developer.sso.gov.mn/

3.5.2 Key measures for ICT development

(1) E-residents promotion

1) General information of e-residency and e-residents

E-residency is a system that allows people to become a location independent citizen of another country.

https://developer.sso.gov.mn/



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This type of residency has several merits, including but not limited to the options of registering a completely global, digital online company, and opening a bank account and managing your business from anywhere in the world. The benefits are multiple. First, e-residency can help bypass business-related restrictions or bureaucracy that is common in some countries. Second, one can benefit from the policies, infrastructure and business environment of the country you are now an e-resident of.

Nowadays, several countries around the world are implementing e-residency programs. For instance, the Estonian e-residency program (https://e-resident.gov.ee/) launched in 2014, and since then has been flourishing among freelancers and digital nomad communities. Currently, Estonia is the only country that already has a tried, tested and implemented e-residency program, together with double-tax benefit treaties and ties to several countries.

For another example, in 2018 Azerbaijan launched its e-residency and m-residency (mobile residency) programs (https://dth.az/become-resident). These programs allow entrepreneurs around the world to set up and run a location-independent business in Azerbaijan, using all the cross-border e-services of the digital trade hub of Azerbaijan. E-residency and m-residency are essentially the same, though e-residents receive token for authentication and electronic signatures, while m-residents are issued with special Asan İmza (mobile ID) SIM card that performs the same function. Azerbaijan is the world's second country, after Estonia, to offer e-residency and the first country to offer m-residency.

2) Mongolian personal digital ID card

Every Mongolian citizen has a personal ID number. According to the Government resolution No 338, it has been agreed to issue an electronic card to every Mongolian citizen over 18 years old who had registered in renewed registration held in 2010-11. In 2012, the digital/electronic ID cards were distributed among all citizens as part of secure identification. The electronic ID card system has the following advantages:

Strengthening the relationship between government services and citizens, Providing a secure and shared platform for delivering public services, Reassuring citizens that their data are protected and securely exchanged, Modernizing identity documents, Enabling the deployment of new e-government applications, and Facilitating public services such as health care, social protection, and education services at

reduced administration costs.

The ID card includes an embedded microprocessor containing all personal data with biometric facial and fingerprint ID systems linked to a secure database serving government agencies such as the state registration, electoral authority, taxation, customs, social insurance, social welfare etc. (Figure 3.5.4). The electronic ID card is used also for non-government services. Every commercial bank and telecom operator in Mongolia recognizes digital identification.

Source: http://www.infomongolia.com/ct/ci/3242

Figure 3.5.4 Personal ID Card

Introduction of electronic ID card is considered as a major achievement of Mongolia in the digital age.

https://dth.az/become-resident

http://www.infomongolia.com/ct/ci/3242



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(2) 5G policy and implementation

In 2020, CITA approved a policy document on introduction of the next generation mobile communication system in Mongolia. The next generation mobile communications system includes 4G/LTE, LTE-Advanced, 5G, and 6G systems. As defined in this policy document, the next generation 5G hyper-connected intelligent network will have an enhanced mobile broadband, allowing massive machine type communications, and ultra-reliable and low latency communications services. According to this document, 5G network licenses will be issued from 2023 and Mongolians will able to use the 5G network from 2023.

On March 5, 2021, KDDI, KDDI Research of Japan, and Mobicom Corporation of Mongolia started testing a disaggregated cell site gateway device that integrates network hardware manufacturers' systems to prepare for 5G networks. MobiCom Corporation has been dispatching its engineers and staff to its shareholder KDDI Group since 2018, under its employee exchange program named “KDDI Mobility”, in order to improve their business and technological knowledge and skills, and to accumulate experience and introduce world-class ICT services in Mongolia.

CITA is planning to test 5G technology in July 2021. Therefore, CITA decided to register companies being interested in participating in the testing from March 5 to March 19, 2021.

It is assumed that the following should be taken into account when introducing the 5G network in Mongolia.

Conduct a study on the current infrastructure of mobile communications; Carry out a detailed cost-benefit analysis of the of upgrading the data transmission equipment

and technology from the network transmission station to the main network system and building new stations;

Study the experience of countries that have already introduced 5G networks; Accelerate the digital transition of the market before the introduction of the 5G network in

Mongolia and increase the digital consumption of consumers to make full use of all the advantages and solutions of 5G technology;

Investigate whether there is a real need to introduce a 5G network nationwide and determine the network coverage based on a detailed estimate of the needs of the 5G network in everyday life; and

Introduce a 5G in the limited area based on needs and requirements.

3.6 Direction and Strategy on DX and ICT

3.6.1 Direction toward comprehensive issues on DX and ICT

(1) Direction for promotion of DX and ICT in Mongolia

1) Guarantee of inclusiveness

Low inclusiveness issue described in 3.1.2(1) is largely related to the promotion of decentralization and the accumulation of information on a community basis. In order to spread the technical breakthrough by ICT promotion and mainstreaming DX to the rural areas in developing countries and contribute to the improvement of inclusiveness, mutual understanding and cooperation between the Central Government and local governments and communities are indispensable for the development.

Data collection should be carried out in line with raising the awareness of the community to contribute to SDGs and fulfilling transparency and accountability, and it is necessary for the government to improve the capacity of digital technology on the basis of awareness enhancing inclusiveness of development.



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2)Correction of information inequality

The gradual transition from a local value chain to a global value chain is effective for utilizing local resources and creating employment opportunities in the region. In addition, an internalization of the value chain is important for the local economy as well, and the internalization results in the promotion of various types of regional employment. Then, employment expansion, income improvement, and economic diversification shall be promoted simultaneously. To realize this, it is necessary for each player related to the value chain to establish the structure of digital technology for collecting information and improving the efficiency of production and distribution required for the entire supply chain so that missing links do not occur.

3) Data collection and analysis promotion

For the purpose of evaluating how much and in what way social services and social security policies are contributing to the improvement of the lives of residents, it would be effective to make the detailed data into a dashboard to be visualized. This is partly similar to the GIS platform provided by ALAMGAC mentioned above; it is, however, intended to realize the development vision and strategy, etc., and possible to strategically reflect them in the development of infrastructure and other sectors strategy based on the appropriate data collection method.

4) Open data promotion

According to the Organisation for Economic Cooperation and Development (OECD), open government data (OGD) is a philosophy, and increasingly a set of policies that promotes transparency, accountability and value creation by making government data available to all. Public bodies produce and commission huge quantities of data and information. By making their data sets available, public institutions become more transparent and accountable to citizens. By encouraging the use, reuse and free distribution of data sets, governments promote business creation and innovative, citizen-centric services21.


Figure 3.6.1 Concept of Open Government Data

The significance and purpose of promoting open data are as follows:

Improving transparency and reliability of government responsibilities and roles; Promotion of public participation and public-private collaboration, and

21 OECD, https://www.oecd.org/digital/digital-government/open-government-data.htm



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Economic revitalization and administrative efficiency.

Yokohama City is the most advanced city in Japan utilizing open data. As exemplified by Yokohama City, the open data should be published in such a data structure and format that are suitable for machine enabling reading. Yokohama City has endeavored to publish data in formats that are easier to use, not dependent on a specific application with data structures that can be searched and extracted.

Source: Yokohama City HP (https://data.city.yokohama.lg.jp/) translated by JPT

Figure 3.6.2 Yokohama City Open Data Portal Site

The Mongolian Government has already commenced the publication of open data such as various maps, social data, infrastructure data, cadastral data and so forth. In addition, it is useful to adopt the API (Application Programming Interface), utilization of editable format data and two-way database between the public and the private sectors. Also, it may be desirable that such kinds of services would be provided to citizens and companies from regional governments.

(2) Establishment of ecosystem on ICT sector

Based on the SWOT analysis (Table 3.4.2), measures to be considered by the Mongolian Government and the private sector to create a favorable and optimal environment for the IT ecosystem in Mongolia are summarized in Table 3.6.1.

Table 3.6.1 Measures for Establishment of Ecosystem on ICT Sector

Item Measure Application

Government/ public sector

Private sector on IT/ICT

1 Policy/Law/Institution

To improve the legal environment and a linkage between regulatory environment and investment ✔

To strengthen a linkage between institutional capacity, effective sector regulation and economic efficiency ✔ ✔

To develop and implement regulations necessary for the development of information technology ecosystem ✔

To make government’s IT procurement open, transparent, and controlled, and reduce a corruption ✔

2 Human resources

To provide opportunities for Mongolian youth working for large foreign companies such as Google, Facebook, IBM, and Oracle to work remotely with Mongolian IT companies

✔

To stabilize and support MOSA and NGOs activities on coordination of activities of IT companies and cooperation ✔ ✔

Yokohama City

Data set Organization Group Tag

Search for open data Overview of Yokohama

To solve social issues and create new values and services Based on the idea that public data held by the city is an important asset, Yokohama City has been working on the promotion of open data from the viewpoint of sharing and utilizing the data with citizens. In this "Yokohama City Open Data Portal", in addition to statistical data such as population, open data published by Yokohama City such as data on child-rearing, economy, and region can be searched by keywords and fields, and publicly available. You can use functions such as a dashboard that visualizes data with graphs and maps.

Yokohama City open data portal site Open catalog Utilizing API Opinion Terms of service

https://data.city.yokohama.lg.jp/



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with the government To prepare ICT human resource with a unified plan ✔ ✔

3 Financial and supportive measure

To support information technology investment ✔ ✔ To provide financial supports and advice to start-up companies ✔

To provide long-term loans with low interest to start-ups and to provide tax exemptions ✔

To strengthen ICT infrastructure ✔

4 Networking/Ecosystem

To improve the cooperation of government and local IT companies ✔ ✔

To strengthen the collaboration network among IT companies ✔

To create more business hubs, create a network of business consultants that will allow IT companies to work together ✔ ✔

5 ICT production

To support a high-level R&D in information technology and high technologies ✔

To extend the government’s IT product and service procurement from the domestic market, especially from local start-up companies

✔ ✔

To support start-up companies to enter foreign markets and to incubate and grow up 2-3 local IT companies as international companies

✔ ✔

To develop IT products, which can be sold in the international market ✔


(3) Mongolian Government initiatives

1) Goals and criteria

In recent years, the Mongolia Government has been paying close attention to DX and ICT application. The Mongolian Government should set up the criteria and expected outcomes for DX and ICT sector shown in Table 3.6.2.

Table 3.6.2 Criteria to Ensure Implementation and Expected Outcomes of the State Policy on Development of DX and ICT Sector

Goal Criteria Unit 2016 (base)

2020 2025

1 ICT network and infrastructure

Bandwidth of high-speed network connecting Asia and Europe

Gbit/sec 120 10 times increase

80 times increase

Capacity of the backbone network connection across all provinces

Gbit/sec 10 100 500

High speed broadband network connection at province centers

Gbit/sec 1 10 20

Capacity of Soums and settlements Mbit/sec 155 516 2048 2 Innovation,

Research and Development of ICT

A loan guaranteed by intellectual property and intangible capital

Number of projects granted with loan

1 25 50

Existence of technology experimenting, testing and certification laboratory

Number - - 1

3 Smart governance based on ICT advancement

E-service index

Index indicator

0.51 0.57 0.7

E-participation index Index indicator

0.71 0.74 0.8

Number of integrated databases Number - - 1 Citizens’ digital literacy % 32 50 90

4 ICT service

Penetration of households connected to broadband Internet

% 29 50 70

Penetration of population who uses the Internet

% 27 60 90

Penetration of active mobile users who % 4.53 40 70



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uses next generation technology 5 ICT production

High technology and telecommunication productions and products growth

% 0.02 25 50

Supply of brand products of national software companies

% 9 20 40

Supply of national digital content in Mongolian

% 9 25 50

6 Enhance the environment of ICT markets, investment and competition

Investment growth rate of ICT sector % 8 12 20

Income growth rate of ICT sector % 8 12 20

7 Information security

Cyber security technical index of ITU Index indicator

0.83 0.9 1

Cyber security cooperation index of ITU Index indicator

0.63 0.7 0.83

Except for the "Digital Transformation Overview” published in 2018, it seems there is no significant research on e-readiness22, DX, and ICT application in Mongolia. The main indicators related to DX and ICT application of Mongolia are shown in Figure 3.6.3.

Source: Translated from Digital Transformation, 2018 from https://cabinet.gov.mn/

Figure 3.6.3 Mongolia’s DX-related Indicators

3.6.2 Strategy and suggestion on DX and ICT application

(1) Overview of DX and ICT application from a strategic viewpoint

The strategic needs and efforts necessary for DX are often more urgent and present in markets with a high degree of commoditization. A DX strategy aims to create the capabilities of fully leveraging the possibilities and opportunities of new technologies and their impact faster, better and in more innovative way in the future.

However, DX should not start with technology, but rather focus on the problem first with the ultimate goal of addressing various types of issues. Technology is a component of the solution, not the overall cure. DX is not just a process that takes place through the introduction of ICT technologies. DX covers a strategy, culture, processes, interactions, transactions, innovations, competitiveness, changes,

22 Country's capacity and state of preparedness to participate in the electronic world



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internal and external factors, industries, people, and customer engagement, etc. (Figure 3.6.4).

Source: https://www.ionology.com

Figure 3.6.4 Digital Transformation Structure

Digital transformation requires a strategy that as any other strategy defines the goals and objectives, current situation and how to move forward on DX. Therefore, the DX strategy should be able to answer the following questions:

Where we are now; Where we want to be, and How we are going to get there.

Positive outcomes of successful DX strategy in the government are:

Improved operational efficiency; Improved citizen’s participation in decision making; Enhanced customer and citizen experiences; Greater agility and flexibility; Better change management, and Better risk management and security.

The DX strategy should be related with data, information, technologies, human aspects etc.

1) Strategic plan and direction

The strategic plan and main directions on DX and ICT application of the Mongolian Government are shown in Figure 3.6.5. The main directions of DX and ICT application are government organization’s change, citizen’s e-participation, mobile governance, and creation and development of open data.

Search for open data Overview of Yokohama



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Source: Translated from Digital Transformation, 2018. https://cabinet.gov.mn/

Figure 3.6.5 Mongolia’s DX Strategy and Main Directions

Especially during the COVID-19 epidemic, the Mongolia Government is focusing on DX and ICT applications. However, there is no high-level strategic policy document or study on DX. Government agencies are making success in DX and providing e-services to citizens. It is good that some government organizations have adopted and implemented DX strategic plans. For instance, the Civil Aviation Authority of Mongolia (www.mcaa.gov.mn) has approved and is implementing a Digital Transformation Strategic Plan.

(2) SWOT analysis on DX and ICT application

Based on the study by the JPT on current ICT and e-government related policy and research documents, and analysis of the current situation, the main findings were identified in the SWOT analysis in Table 3.6.3.

Table 3.6.3 SWOT Analysis on Strategy of DX and ICT Application of Mongolia

Strengths Weaknesses • The Mongolia Government devotes great effort

and attention to the integration of ICT into other sectors of Mongolia such as education, health, transportation, agriculture, environment, etc.

• The Government has implemented a series of activities utilizing ICT that enables building e-governance such as enhancing the legal environment to develop e-government, provide online public services to citizens, increase participation of citizens and develop human resources.

• Recognition of the importance and needs of DX and ICT application is sufficient.

• E-Mongolia electronic platform serves as a one-stop shop for various government services.

• The Government and state organizations take initiatives to utilize ICT as one of the means to open up their services to citizens.

• No clear digital transformation roadmap. • Lack of comprehensive research and

development (R&D) on design and implementation of DX and ICT application.

• Lack of e-readiness assessments surveys and studies on DX and ICT application.

• Digital divide between rural and urban communities and between privileged and marginalized groups of society.

• Undeveloped infrastructure in some remote areas.

• Weak system reliability and interoperability among government organizations

• No uniform standard or public sector-accepted software and hardware product specifications.

• Overlapping between ICT projects. • Data security, data integrity and privacy



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• The fast-growing ICT market and expanded ICT use in daily life are driving policymakers to improve current ICT policy and legislation and develop a new regulatory framework.

• Due to the increasing competitiveness of the mobile communication sector, mobile content services have been growing dramatically.

• Strong supports from international and donor organizations, such as World Bank, ADB.

problems. • Some of public e-services and government

websites not user-friendly. • Unsophisticated delivery of services provided to

citizens in remote areas. • Most of government business processes not

standardized.

Opportunities Threats • Integrate ICT into many sectors including the

private sector. • Bring together government organizations,

businesses, and NGOs. • Take COVID-19 pandemic as one of the factors

to encourage not only public services, but also the more online services of private sector.

• Effectively use loans, assistance, and supports from international and donor organizations such as World Bank, ADB.

• Develop rapidly e-governance methodologies, IT solutions, and tools.

• Adapt to globalization and worldwide best practices in e-government such as Estonia, Singapore and other advanced countries.

• Misunderstanding that ICT is just a computer literacy or knowledge of widely used applications.

• Outsourcing of the IT systems development of crucial public sectors to foreign companies.

• Dependency of IT systems and network.


For increased efficiency in operation of government organizations and timely decision-making and ensuring transparency of the public services, the strategy for DX and ICT application is of critical importance.

(3) Suggestions and recommendations on DX and ICT application

To implement DX and ICT application successfully, the Government need to develop following three core competencies.

• Awareness: It is a government ability to detect and monitor changes in its environment including its internal and external factors. The main barrier to the implementation of DX strategy is a lack of awareness of the of digital government and DX in the public sector and society.

• Informed decision-making: It is a government ability to make the best decision possible in a given situation. As citizens become more connected and informed, their demand for public engagement and consultation increases. This is a great opportunity to strengthen democratic governance, create more inclusive decision-making processes and government operations, and leverage data, information and knowledge from the broader society to deliver public value.

• Fast execution: It is a government ability to carry out its strategic plan quickly and effectively. A key dimension for successful DX is speed. The Government needs the agility to execute its strategic decisions with speed.

These competencies are not technologies but are technology-enabled capabilities. The development of a digital government strategy with strong ownership and support across society should integrate the views and interests of all relevant stakeholders to create a common vision of how digital technologies can be used to improve societal well-beings, thus enhancing the government’s ability to make the transition.



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(4) Practical strategy for DX and ICT application

1)Promotion ICT industry initiated by private sector

DX and ICT application is indispensable for the development of SMEs. Although ICT infrastructure and software technology at present have been developing gradually by the effort of the Government, international organizations and large companies, these are not utilized efficiently. Horizontal development of ICT industry including SMEs would be able to raise the bottom of whole industry.

To develop the ICT industry, offshore development should be promoted further utilizing the high potentials such as high technological skills, relatively low wages and multilanguage capacity of Mongolian, especially younger experts on the IT/ICT sector. In line with utilizing some institutional measure provided by the Government or public organizations, it should be necessary for Mongolia to accumulate know-how based on past cases and achievements in the analysis of issues peculiar to offshore development caused by communication, culture, development system and progress, and solutions to them.

The establishment of ICT industry as mentioned above can enhance the rapid promotion of DX and ICT application in not only the private sector, but also the public sector. ICT implemented in the private sector shall also be reflected in the public sector and be facilitating further DX and ICT applications. It is important to build a cooperative system between the public and the private sectors for that purpose.

For the purpose of promoting ICT industry, the public sector and the private sector should cooperate in an organized systematic manner on the basis of mutual supporting concept. This concept is based on the understanding that start-ups or enterprises can play an important role for ICT industry prosperity in Mongolia. The Government or public organizations should create the basic environment such as ICT infrastructure or policy framework with institutional measures.


Figure 3.6.6 Mutual Cooperation Framework between Public and Private Sectors

2) Establishment of model city/Aimag on advanced technology application

By designating a city or Aimag that is active in promoting ICT business or has a high potential to realize an attractive ICT environment, industrial cluster development on ICT business should be accelerated to revitalize regional economy. This would ensure that the model city/Aimag would be established in a timely manner in line with the latest trend on the ICT sector. To promote a model city/Aimag, following three measures should be undertaken: Development of local information and communication infrastructure, Promotion of innovative application development by private enterprises such as star-ups, and Training of IT/ICT engineers.

E-Government, E-Mongolia, E-Residents

ICT infrastructure development Institutional measures for

supporting start-ups and ICT enterprises

Expanding open data

ICT and start-up ecosystem creation Offshore development with

advanced human resource andtechnology

Dissemination of cutting-edgetechnology from ICT industry to other field Providing basic environment

for ICT development Adjustment of comprehensive

measure for ICT development

Supporting government initiatives

Development and penetration ofadvanced digital technology Public sector Private sector



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Candidate model city and Aimag may be Tsetserleg and Darkhan-Uul, respectively. In Darkhan-Uul, application of ICT to livestock and farming activities is promising taking advantage of high agricultural potential of Selenge Aimag. Also, Tsetserleg can be the ICT center in the central Mongolia. Tsetserleg and Darkhan-Uul can take advantage of the proximity to Ulaanbaatar for its primacy. In the process of establishing model cases, it would be effective to learn from digital advanced countries such as Estonia and China.

3) Cooperation and experimentation

Although it is said that DX and ICT application is challenging, it is crucial to lay out strategies to promote direction for development. As mentioned above, 5G is the basis of major technologies such as IoT, AI, big data, and so on for DX. The expansion of its coverage requires significantly more substantial investment in the infrastructure than 4G. In order to integrate 5G network environment and the new technologies with the society, the cooperation among the National Government, local governments, and domestic/international companies is needed to increase the pace of the application of DX and ICT to the society.

Development of Agro-IT park and industrial park are proposed in the NCDP for an efficient production and logistics environment in some targeted industries such as manufacture, agriculture, livestock, and mining industries. In the further discussion on the proposal, concrete strategies on DX and ICT application can be considered and discussed. They provide great experimental venues to implement such technology. The experience and know-how accumulated in the parks can be applied to other locations all over the Country.

4) Small start utilizing technology

In sub-section 3.4.5 for 4G and 5G, several policies describe the plans for the nationwide 5G network. In order to expand the coverage of the 5G network, it is also necessary to consider implementing short-term and concrete policies or action plans in the 5G network environment. One example would be to allow site owners or business owners to install the infrastructure for the 5G network at a particular site such as a district or factory so that it can promote DX in the area or industry. For example, the installation of the infrastructure on the mining site will promote not only faster network speed or higher job efficiency with ICT tools but also introduction of major state-of-art technology like VR, i-construction and autonomous driving. The small start would bring in a lot of experience and lessons for other fields or industries.

5) Contribution to economic activities

The Yokohama City municipality carried out the "Open Data Utilization Business Support Project" from 2015 to 2016. For the purpose of creating new businesses that utilize data (open data, big data, etc.) in Yokohama, the following programs were conducted:

Dissemination and enlightenment event for utilization of the data, A program to invite suggestions of business plans and brush up the plans through utilizing data,

and Training for human resources (data scientists) who can utilize data for business.

By utilizing public data released as open data, companies, NPOs and civilian organizations in the city would be able to utilize them at a wide range of stages of the market economy. Then, new businesses and services that utilize the local resources and human resources unique to the city will be created, which contributes to the revitalization of the Yokohama economy and the promotion of small and medium-sized enterprises in the city.

Organic “ecosystem” should be constructed through unitizing open data for revitalization of regional economy. Ecosystem means that an overall large system consisting of cooperation between stakeholders, connecting the products of each company and networking human resources (Figure 3.6.7). In economic sector, it is expected that open data would become a kind of catalyst.



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Source: Yokohama IT DATA business news (http://opendata.yokohamalab.jp/about-project) translated by the

JICA Project Team

Figure 3.6.7 Economic “Ecosystem” Utilizing Open Data

(5) Measures for individual issues

1) Delays in development of communication infrastructure due to the vast land area

It is assumed that communication infrastructure in Mongolia will gradually spread over time. For the time being, it will spread mainly in urban areas where individuals can enjoy the ICT or other technology as a communication tool and business operation. In order to expand the infrastructure to rural areas, it would be effective for regional governments to take an initiative to promote it through cooperation with the Central Government, ICT enterprises, researchers and rural communities. If the demand for a communication infrastructure does not increase in rural areas as expected, telecommunications carriers would not invest in infrastructure. They are reluctant to wait longer for demand to spread spatially.

Therefore, as well as establishment of cooperation among stakeholders, it is important for local governments to grasp the needs of users (local residents) exactly and acquire the literacy to identify its necessity through the promotion activities in a timely manner.

2) Issues related to digital services of individual nomads

Since Mongolia has large land size and small number of populations scattered throughout the Country, it is the most difficult but most important issues to achieve the inclusive development in Mongolia. Especially, for the herders scattered widely, the digital technology has not been integrated. It is expected that the achievement of breakthroughs in mobile data communications could expand the coverage area and make it easier for nomads to access the communication environment.

Thus, local information platform dealing with information on DX and ICT should be established, which enables herders and local administrations to communicate with each other. Also, it is expected to enhance inclusive development in Mongolia.

In Estonia, every person can provide digital signatures using their ID-card, Mobile-ID or Smart-ID, so

NGOs, civilian organizations

Citizens

Enterprises within the city

Utilizing data

Experts

Universities, institutions

Data analysis, visualization

Huma resource development

Utilizing data Holding events

Formulating project

Enterprises outside the city

Issues

Publication of data

Networking

Distribution of information

Huma resource outside the city

Yokohama City

In order to promote implementation of business by utilization of open data and so on, human resource networking activities through structuring “ecosystem” are indispensable.

This cycle is aiming at giving birth to new business utilizing various types of information resources and innovation through establishment of learning and networking opportunities.

http://opendata.yokohamalab.jp/about-project



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they can safely identify themselves and use e-services. E-residency is a transnational digital identity that anyone in the world can apply to obtain access to a platform built on inclusion, legitimacy and transparency. E-residency then have access to the EU business environment and can use public e-services through their digital identity.

Estonia’s e-business register is an advanced and secure tool that allows entrepreneurs to register new business online in just minutes without having to go to a notary or some other officials. From 2011, most companies have been established over the Internet using the e-business register and this process has been reduced from five days to couple of hours.

These kinds of electric services can be applicable to Mongolia. E-residency, especially, is effective for nomads and settlers in rural areas who have difficulty in accessing to public services. Also, e-business register system can enhance the business environment so that domestic investment and FDI would be promoted utilizing easy registration system.

3) Distribution speed of digital technology

Speaking of digital IDs, if the authentication infrastructure is standardized, each municipality may have its own interface. The important thing is that the underlying system should be of open source and prevail to outside. If the system is not open, individual systems would be created for each local government, and it would never be connected to DX as a whole.

Open data would enable to realize the people-centered initiatives. For example, for future public-private partnerships, local governments should include open source requirements when ordering systems. By this system, the efforts and initiatives of each local government will spread throughout the Country.



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Chapter 4. Chapter 4 Urban Development

4.1 Legal Framework of Urban Planning and Development

4.1.1 Legal status of settlements

There are several classifications and criteria for settlements in Mongolia stipulated by laws, resolutions and decrees. They are mutually inconsistent. Since most of the laws, resolutions and decrees are still valid, making legal status of settlements unclear.

The Law on Legal Status of Cities and Villages and the Law on Legal Status of the Capital City show definitions of cities and settlements as summarized in Table 4.1.1. The Decree No.130 of the Minister of Infrastructure in 2004 defined settlement classification as shown in Table 4.1.2.

Table 4.1.1 Classification of Settlements in Mongolian Law

Classification Population Name of City

City

Capital - Ulaanbaatar

State ranked 50,000- Erdenet, Darkhan

Aimag ranked 15,000-50 000 Choibalsan, Murun, Khovd and other 15 cities

Village 500-15,000

Source: Law on Legal Status of Cities and Villages, Law on Legal Status of the Capital City (translated)

Table 4.1.2 Classification of Settlements in Ministry Decree

Classification Population Name of City

City

Large 500,000-

Big 100,000-500,000

Medium 50,000-100,000

Small 20,000-50 000

Village Urban 500-20,000 Mining, transportation, recreation, resort and tourist

village

Rural 500-10,000 Soum centers and Bagh centers

Source: Norm and Rule of City Planning and Construction of Cities and Villages in the Decree No. 130 of the Minister of Infrastructure by March 30, 2004

4.1.2 Law on urban development

(1) Overview

The Law on Urban Development provides a legal framework of urban planning in Mongolia to regulate land use, construction and urban development. It defines procedures and duties of both the public and the private sectors for urban planning and development.

Table 4.1.3 shows eight documents related to urban planning administration. Under a city and Soum master plan, seven categories of land use zoning can be set as shown in Table 4.1.4 according to the law.



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Table 4.1.3 Documents of Urban Development

No Name of Document Description Planning Duration

Responsible Agency Budget

1 Human Settlement Plan

National scale plan as the highest ranked urban plan which is a comprehensive spatial plan of Mongolia

15-20 years

Urban Planning Institute

State 2 Regional Development Plan

Regional scale plan to develop regional centers

10-15 years

3 Industrial Development Plan and General Plan of Free Zone

Project or master plan of infrastructure development for industry and tourism development

4 Aimag, Capital City, Soum and District Development Plan

Aimag scale plan with boundary of urbanization promotion zone and urbanization restriction zone

Local budget and local development fund

5 Cities and Villages General Plan

Development policy, boundary and plans of urban development zoning and infrastructure. Licensed

legal body (limited to Mongolian nationality)

Capital, regional pillars and state ranked cities: State Others: Local

6 Partial General Plan Detailed spatial plan including architecture and infrastructure 5-10

years

Local budget and local development fund 7 Construction Area

Development Plan Detailed plan of urban development project

8 Urban Redevelopment Plan

Detailed plan of urban redevelopment project

Source: Law on Urban Development (translated)

Table 4.1.4 Categories of Land Use Zoning in Law on Urban Development No Category Description

1

Residential housing

Zone for individual and public housing with comfortable living conditions and social infrastructure. Small or medium enterprises without polluting environment are allowed. It is divided into sub-categories as 1) Detached house and ger housing, 2) Lower apartment (1-3 stories), 3) Middle-rise apartment (4-6 stories), and 4) High-rise apartment (7- stories)

2

Common use

Zone for buildings for administrative, cultural, scientific, education, banking and financial, health, trade, parking, green and parks. It is divided into sub-categories as 1) Administrative, banking and business services, hotels and services, 2) Residential, educational, cultural and scientific institutions, and health organizations other than Special purpose zone, and 3) Small and medium enterprise, trade commercial without adverse impact

3

Industrial Zone for buildings and facilities for light and heavy industries, enterprises for food, mining, chemical, biological, nano technology, transportation, logistics, public utilities and warehouses, green areas, parks, parking spaces and engineering infrastructure. It is divided into sub-categories as 1) Industrial, 2) Engineering infrastructure, and 3) Residential housing and common use

4

Public recreation and tourism

Zone for forests, resorts, health treatment facility, tourist camps, public use, rivers, lakes, pools, public green areas, parks and gardens, protective green belts, sports fields and their complexes It is divided into sub-categories as 1) Peri urban tourism, 2) Environmental protection, and 3) Parks, gardens and green

5 Agriculture Cultivated farms, intensive and semi-intensive livestock industry, pigs or chicken farms,

summer cottages gardening, greenhouses, fruits and flowers nurseries, agricultural buildings, hayfields and warehouses.

6 Individual Temporary residential settlement away from a city or settlement, with limited or without



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summer cottage

engineering infrastructure

7 Special purpose

Facilities for special purposed building such as contagious disease or psychiatric treatment, health research, civil and military defence, prisons, solid waste disposal sites, cemeteries and others which are unsuitable in other zones.

Source: Law on Urban Development (translated)

(2) Urban development documents

Since 2019, Aimag, Capital City, Soum and District Development Plans have been added in urban development documents and requirements of each document has been defined more clearly. Each of Aimag, Capital City, Soum and District Development Plans defines urbanization promotion zone and urbanization restriction zone. Cities and Villages General Plans define urban development zoning and require 1) minimum area of garden, greenery and parking (more than 10%), and 2) maximum building cover ratio (less than 70%).

(3) Relevant organizations

In the recent case of the current Ulaanbaatar urban development and management master plan, MCUD was in charge of provision of its terms of reference (TOR) and technical support to Ulaanbaatar Municipality. However, the Urban Planning Institute which is a government owned enterprise is assigned as an organization responsible for developing the urban development documents which covers more than Aimag level since Law on Urban Development in 2019.

(4) Current issues

Legal structure and division of responsibilities among relevant agencies regarding urban planning and development are clearly defined and documented in Mongolia. Detailed requirements and components of plans are described more clearly in the Amendment of Law on Urban Development in 2019. However, the requirements of and relationship among plans are still partially unclear. Formerly, detailed requirements and components of plans beyond the city scale are generally provided by MCUD in each case respectively. It might cause separate provision of detailed requirements and components of plans for each case which result in inconsistent contents and quality between plans. Requirements of plans shall be defined more clearly by developing enforcement order or guidelines which show basic planning contents and technical issues for consistent planning in all Aimags and Soums.

4.1.3 Mid-term strategy for Mongolia's regional development

This strategy divides Mongolia excluding Ulaanbaatar into four regions: Western, Khangai, Central and Eastern Regions for macro level economic development. It designates regional development pillars as cities with central functions of each region. The definition of Regions, constituent Aimags of each Region and regional development pillars for each Region are summarized in Table 4.1.5.

Table 4.1.5 Economic Regions of Mongolia No Category Aimag Regional pillar

1 Western region Bayan-Ulgii, Gobi-Altai, Zavkhan, Uvs, Khovd Khovd, Uliastai

2 Khangai region Arkhangai, Bayankhongor, Bulgan, Orkhon, Uvurkhangai, Khuvsgul Kharkhorin, Erdenet

3 Central region Govisumber, Darkhan-Uul, Dornogovi, Dundgovi, Umnugobi, Selenge, Tuv Darkhan, Zuunmod

4 Eastern region Dornod, Sukhbaatar, Khentii Choibalsan, Undurkhaan

5 Ulaanbaatar region The capital city, its districts, satellite towns.

Source: Mid-term Strategy for Mongolia's Regional Development (translated)



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4.1.4 Law on Regional Development Management and Coordination of Mongolia

This law aims to manage and coordinate regional economic development among regions by the Coordination Committee consisting of governors and mayors of Aimags and Ulaanbaatar. However, regional development has not been comprehensively managed in terms of socio-economic development23.

4.1.5 Human settlement plan

(1) Overview of contents

The Human Settlement Plan (HSP) is a comprehensive spatial plan covering the whole of Mongolia. A requirement of the HSP is defined by the Law on Urban Development as “Structure of regions and system of urban and villages formulation based on infrastructure network which can boost socio-economic development in order to achieve improvement of human society with a comprehensive assessment to environmental conditions, natural resources, ecological balance, negative impact of urban development and so on”. Prioritized key components of the HSP are development and coordination of network of transportation, electricity supply and communications.

Currently, the Mongolian Government has been updating the HSP since 2018. Expected deliverables in formulating the HSP are as shown in Table 4.1.6.

Table 4.1.6 Deliverables of the HSP Type-I Type-II Major items

Report

- Current situations - Policy - Action plan for implementation - Strategy for planning and implementation - Drawings - Appendix

Mapping

Current situation

- Current situation - Demography - Economic development and activity - Historical transition of territorial administrative unit - Social facilities - Infrastructure - Environment - Recreation and tourism resources - Historical and cultural resources - Construction raw material

Evaluation

- Natural condition - climate - Land - Permafrost and cold weather - water - geology and earthquake - agriculture - Capacity of pasture land and grazing assessment - Urban and village development - Territorial urban development - Vulnerability and risk assessment

Policy of human settlement planning

- Population allocation - Mining and manufacturing - Agriculture - Social facilities - National urban structure

23 Land Management Plan (2019)



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- Urban development - Infrastructure - Transportation and logistic - Recreation and tourism - Historical and cultural resources

Others

- Organizational and territorial administration organization of Mongolia

- Differences in location and roles of urban settlements - Population settlement system - Recreation, recreation and tourism - Environmental, historical and cultural preservation

Source: TOR of HSP (translated)

(2) Relevant organizations

The HSP will be approved by the State Great Khural in 2021 through discussions in a national committee chaired by the Prime Minister. Important players of the HSP formulation are 1) MCUD as the main responsible organization, 2) Agency for Land Administration and Management, Geodesy and Cartography (ALAMGaC) in charge of managing the Construction and Development Center (CDC), and 3) CDC as a main technical agency to survey and study necessary for the HSP formulation. Operation and management of the HSP will be conducted by the Urban Planning, Design and Planning Institute under CDC.

(3) Schedule of updating the HSP

According to a working schedule of the updated HSP formulation in the terms of reference (TOR) of the HSP as of July 2020, researches has been completed in September 2020, discussion and upgrade shall be conducted until the end of 2021, and the period from 2022 to 2040 is an implementation phase.

4.2 Development Issues for Urban and Settlement Development and Management

4.2.1 Discrepancies between legal status and actual urban functions

(1) Background

All cities are classified in laws and resolutions, although required urban development documents differ in the cities’ classifications as described above. There exist some discrepancies between the legal status and an existing hierarchical structure of urban centers. Actual status and functions of cities are analyzed by socio-economic indices to assess development potentials based on existing conditions to clarify the discrepancies.

(2) Target cities for hierarchical analysis

The cities to form the urban hierarchy are selected as those satisfying one of the following conditions: 1) population size larger than 10,000 persons and 2) annual population growth rate higher than 4% and population size larger than 6,300 persons. In addition, Kharkhorin is included although its population growth rate is lower. Table 4.2.1 shows the target cities.

Table 4.2.1 Population of 30 Cities to be Included in Urban Hierarchy

City Population in 2018 Legal status 1) City Population

in 2018 Legal status

Ulaanbaatar+Nalailkh 2) 1,428,037 Capital Tsetserleg 22,138 Erdenet+Bulgan 2) 111,251 State ranked/

Regional pillar Undurkhaan 21,857 Regional pillar

Dar khan 86,749 State ranked/ Regional pillar

Zuunkharaa 20,191



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Choibalsan 46,710 Altai 18,931 Moron 40,510 Zamiin-Uud 18,930 Ulgii 36,024 Baruun-Urt 18,252 Arvaikheer 31,917 Zuunmod 17,279 Regional pillar Bayankhongor 31,308 Uliastai 16,696 Regional pillar Ulaangom 31,279 Choir 12,773 Regional pillar Khovd 30,068 Regional pillar Mandalgovi 12,443 Baganuur 29,512 Bor-Ondor 3) 8,981 Dalanzadgad 25,998 Kharkhorin 8,958 Regional pillar Sainshand 25,023 Khanbogd 3) 7,200 Sukhbaatar 23,151 Tsogttsetsi 3) 6,800

Source: National Statistics Office Note:1) Table 5.2.1 & Table 5.2.5

2) Annual growth rate higher than 4% and population size larger than 6,300 3) Conurbation of multiple cities within 100km: Ulaanbaatar (1,373,150) + Nalailkh (37,608) and Erdenet

(98,652) +Bulgan (12,599)

(3) Evaluation of development potentials by multiple criteria

The development potentials are evaluated for each city. Evaluation criteria are set to cover six categories including the population, access to national capital and foreign countries, size of economy and infrastructure as listed below:

Size of urban population, Administrative status: National capital, Aimag center, other, Access to Ulaanbaatar, Gross regional domestic products (GRDP), Access to international trading port, and Infrastructure (airport, artery road, railway).

Size of urban population

Evaluation by size of urban population is shown below (Figure 4.2.1)

Score = 𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑈𝑈𝑃𝑃𝑃𝑃𝑃𝑃𝑈𝑈[𝑃𝑃𝑝𝑝𝑃𝑃𝑃𝑃𝑃𝑃𝑝𝑝]10,000

Results:

Urban population of Ulaanbaatar is overwhelmingly large. Population of cities excluding Ulaanbaatar, Erdenet and Darkhan are small, less than 50,000. Zuunkharaa and Zamyn-Uud have more than 15,000 urban population which is a criterion of Aimag rank city in the Law.

0123456789

10

0 10 20 30 40 50 60 70 80 90 100110

Scor

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Population [thousand]



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Figure 4.2.1 Evaluation by Population Size of Cites

Administrative status

Evaluation results by administrative status is shown in Figure 4.2.2. Score is 10 for Capital city and 5 for Aimag centers.


Figure 4.2.2 Evaluation by Administrative Status



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Distance to Ulaanbaatar

Evaluation by distance to Ulaanbaatar is shown below (Figure 4.2.3).

Score = 1,000

𝑇𝑇𝑈𝑈𝑈𝑈𝑇𝑇𝑝𝑝𝑃𝑃 𝐷𝐷𝑃𝑃𝐷𝐷𝑃𝑃𝑈𝑈𝑈𝑈𝐷𝐷𝑝𝑝 𝑃𝑃𝑃𝑃 𝑈𝑈𝑃𝑃𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑈𝑃𝑃𝑈𝑈𝑈𝑈[𝑘𝑘𝑘𝑘]

Results:

Maximum score is set to 5 for 200km or shorter that can be covered by one day trip.


Figure 4.2.3 Evaluation by Distance to Ulaanbaatar

GRDP

Evaluation by GRDP is summarized below and shown in Figure 4.3.4.

Score = 𝐴𝐴𝑃𝑃𝑘𝑘𝑈𝑈𝐴𝐴 𝐺𝐺𝐺𝐺𝐷𝐷𝑃𝑃[𝑀𝑀𝑀𝑀𝑇𝑇]∗ 𝐶𝐶𝐶𝐶𝐶𝐶𝑦𝑦′𝑠𝑠 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 𝑝𝑝𝑝𝑝𝑝𝑝𝑢𝑢𝑝𝑝𝑢𝑢𝐶𝐶𝐶𝐶𝑝𝑝𝑢𝑢

𝐴𝐴𝐶𝐶𝐴𝐴𝑢𝑢𝑔𝑔′𝑠𝑠 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 𝑝𝑝𝑝𝑝𝑝𝑝𝑢𝑢𝑝𝑝𝑢𝑢𝐶𝐶𝐶𝐶𝑝𝑝𝑢𝑢

100,000,000,000

Results:

Cities’ GRDP of Ulaanbaatar and Darkhan are overwhelmingly large.

012345

0 500 1000 1500 2000

Scor

e

Distance [km]

0123456789

10

0 100 200 300 400 500 600 700 800

Scor

e

GRDP [billion MNT]



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Figure 4.3.4 Evaluation of GRDP

Access to international trading port

Evaluation by access to trading port is summarized below and shown in Figure 4.2.5.

Score = 500

𝑇𝑇𝑈𝑈𝑈𝑈𝑇𝑇𝑝𝑝𝑃𝑃 𝐷𝐷𝑃𝑃𝐷𝐷𝑃𝑃𝑈𝑈𝑈𝑈𝐷𝐷𝑝𝑝 𝑃𝑃𝑃𝑃 𝑃𝑃𝑈𝑈𝑃𝑃𝑝𝑝𝑈𝑈𝑈𝑈𝑈𝑈𝑃𝑃𝑃𝑃𝑃𝑃𝑈𝑈𝑈𝑈𝑃𝑃 𝑃𝑃𝑃𝑃𝑈𝑈𝑃𝑃[𝑘𝑘𝑘𝑘]

Maximum score is set to 5. International trading ports are Altanbulag, Zamyn-Uud, Ereentsav and Bulan-Yarant which are opened every day. Bulan-Yarant is far from major cities.


Figure 4.2.5 Evaluation by Access to International Trading Port

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0 200 400 600 800 1000

Scor

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Distance [m]



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Airport access

Score is 5 for a city with an international airport, 4 for a city with a domestic airport paved by asphalt, and 1 for a city with a domestic airport without asphalt pavement. Results are shown in Figure 4.2.6.


Figure 4.2.6 Evaluation Airport Access

Traffic volume on artery roads

Evaluation by traffic on artery roads is summarized below and shown in Figure 4.2.7.

Score = 𝑇𝑇𝑈𝑈𝑈𝑈𝑇𝑇𝑃𝑃𝐷𝐷 𝑉𝑉𝑃𝑃𝑃𝑃𝑃𝑃𝑘𝑘𝑝𝑝[𝑇𝑇𝑝𝑝ℎ𝑃𝑃𝐷𝐷𝑃𝑃𝑝𝑝𝐷𝐷/𝑑𝑑𝑈𝑈𝑑𝑑]1000

Maximum score is set to 5. Traffic volume is based on the survey by JICA Project Team in 2019

All Aimag centers connect to artery road.


Figure 4.2.7 Evaluation by Traffic Volume on Artery Roads

012345

0 200 400 600 800 1000

Scor

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Vehicles/day



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Railway services

Score is 5 for city with railway services with capacity 16 to 30 million ton per annual (Mtpa), and 4 for railway services with capacity 0 to15 Mtpa city. Results of evaluation are shown in Figure 4.2.8.


Figure 4.2.8 Evaluation by Railway Services

(4) Existing urban hierarchy

Eight indicators in six categories presented above are categorized into primary and secondary factor. Population, administrative status and GRDP are primary factors directly related to functions of cities. Distance to Ulaanbaatar, access to international trading port, airport, traffic volume on artery road and railway are categorized as secondary factors which show development potentials of cities, which shall be evaluated lower than primary factors. Evaluation of development potentials are summarized to analyze existing urban hierarchy as shown in Table 4.2.2 and Figure 4.2.9.

Table 4.2.2 Summary of Existing Urban Hierarchy Analysis

City Rank Class Total score

of which Social1) Economic2) Infrastructure3)

Subtotal

Population

Adm

inistrative status

Distance to

Ulaanbaatar

Subtotal

GR

DP

Access to internat-

ional trading port

Subtotal

Airport access

Traffic volume on

artery roads

Railw

ay services

Ulaanbaatar+Nalailkh 1 1st 55.0 25.0 141.1 10.0 5.0 15.0 183.9 1.4 15.0 5.0 5.0 5.0 Erdenet 2 2nd 41.9 17.9 9.9 5.0 3.0 15.0 19.3 1.7 9.0 - 5.0 4.0 Darkhan 3 2nd 35.7 18.0 8.7 5.0 4.3 7.7 3.7 4.0 10.0 - 5.0 5.0 Choibalsan 4 2nd 29.8 11.2 4.7 5.0 1.5 8.6 6.5 2.1 10.0 4.0 2.0 4.0 Sukhbaatar 6 2nd 27.0 10.3 2.3 5.0 3.0 6.7 1.7 5.0 10.0 - 5.0 5.0 Zuunmod 5 2nd 27.9 11.7 1.7 5.0 5.0 6.2 4.9 1.3 10.0 - 5.0 5.0 Sainshand 7 3rd 23.4 9.7 2.5 5.0 2.2 3.7 1.4 2.3 10.0 - 5.0 5.0 Baganuur 8 3rd 22.8 9.0 3.0 1.0 5.0 4.8 3.8 1.0 9.0 - 5.0 4.0 Choir 9 3rd 22.5 10.7 1.3 5.0 4.4 1.8 0.7 1.1 10.0 - 5.0 5.0 Zamyn-Uud 10 3rd 20.5 4.4 1.9 1.0 1.5 6.1 1.1 5.0 10.0 - 5.0 5.0 Murun 11 3rd 20.3 10.6 4.1 5.0 1.5 3.6 2.9 0.7 6.1 4.0 2.1 -



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City Rank Class Total score

of which Social1) Economic2) Infrastructure3)

Subtotal

Population

Adm

inistrative status

Distance to

Ulaanbaatar

Subtotal

GR

DP

Access to internat-

ional trading port

Subtotal

Airport access

Traffic volume on

artery roads

Railw

ay services

Dalanzadgad 12 3rd 19.9 9.3 2.6 5.0 1.7 3.4 2.8 0.6 7.2 4.0 3.2 - Bayankhongor 13 3rd 19.2 9.7 3.1 5.0 1.6 3.5 2.9 0.6 6.0 4.0 2.0 - Khovd 14 3rd 18.9 8.7 3.0 5.0 0.7 3.1 2.1 1.0 7.1 4.0 3.1 - Mandalgovi 15 4th 18.6 9.9 1.2 5.0 3.7 2.7 1.8 0.9 6.0 1.0 5.0 - Arvaikheer 17 4th 18.0 10.5 3.2 5.0 2.3 2.8 2.1 0.7 4.7 1.0 3.7 - Ulaangom 18 4th 17.7 8.8 3.1 5.0 0.7 2.8 2.1 0.7 6.1 4.0 2.1 - Ulgii 19 4th 17.1 9.2 3.6 5.0 0.6 2.7 2.0 0.7 5.2 4.0 1.2 - Tsetserleg 20 4th 16.8 9.3 2.2 5.0 2.1 3.0 2.3 0.7 4.5 1.0 3.5 - Undurkhaan 21 4th 15.7 10.2 2.2 5.0 3.0 2.6 1.7 0.9 2.9 1.0 1.9 - Baruun-Urt 22 4th 15.1 8.6 1.8 5.0 1.8 3.7 2.5 1.2 2.8 1.0 1.8 - Altai 23 4th 14.9 7.9 1.9 5.0 1.0 2.7 1.7 1.0 4.3 1.0 3.3 - Bulgan 16 4th 18.4 9.2 1.3 5.0 2.9 4.2 2.8 1.4 5.0 - 5.0 - Zuunkharaa 24 4th 11.8 8.0 2.0 1.0 5.0 3.8 1.5 2.3 0.0 - - - Uliastai 25 4th 11.4 7.7 1.7 5.0 1.0 2.4 1.7 0.7 1.3 - 1.3 - Kharkhorin 26 4th 11.0 4.6 0.9 1.0 2.7 1.4 0.6 0.8 5.0 - 5.0 - Bor-Undur 27 4th 10.5 4.9 0.9 1.0 3.0 1.6 0.7 0.9 4.0 - - 4.0 Tsogttsetsii 28 4th 5.0 3.5 0.7 1.0 1.8 1.5 0.7 0.8 0.0 - - - Khanbogd 29 4th 4.7 3.1 0.7 1.0 1.4 1.6 0.8 0.8 0.0 - - -

Note: 1) Sum of scores by urban population, administrative status and distance to Ulaanbaatar or 25 if the sum exceeds 25

2) Sum of scores by GRDP and access to international trading port or 15 if the sum exceeds 15 3) Sum of scores by airport, traffic volume on artery road and railway or 15 if the sum exceeds 15



Figure 4.2.9 Existing Urban Hierarchy



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(5) Analysis on discrepancies

Discrepancies between the existing urban hierarchy and legal status of each city are summarized in Table 4.2.3. At first, the gap between legal status and actual hierarchical structure itself is not a big problem because the legal status shall be determined with consideration of geographical conditions and special considerations related historical, political or national defense. A problem is that urban development documents required under current legal structure of urban development is defined by the legal structure, and legal status definitions are inconsistent among laws, resolutions and decrees. It is necessary to clarify city and settlement definition and to formulate necessary urban development documents according to roles and functions of each city.

Table 4.2.3 Discrepancies between Existing Urban Hierarchy and Legal Status

City Existing urban hierarchy

Legal status Rank Class

Ulaanbaatar+Nalailkh 1 1st Capital City Erdenet 2 2nd State rank Darkhan 3 2nd State rank Choibalsan 4 2nd Aimag rank and Regional pillar Sukhbaatar 5 2nd Aimag rank Zuunmod 6 2nd Aimag rank and Regional pillar Sainshand 7 3rd Aimag rank Baganuur 9 3rd Capital City Choir 8 3rd Aimag rank Zamyn-Uud 12 3rd Murun 10 3rd Aimag rank Dalanzadgad 11 3rd Aimag rank Bayankhongor 13 3rd Aimag rank Khovd 14 3rd Aimag rank and Regional pillar Mandalgovi 15 4th Aimag rank Arvaikheer 16 4th Aimag rank Ulaangom 17 4th Aimag rank Ulgii 18 4th Aimag rank Tsetserleg 19 4th Aimag rank Undurkhaan 20 4th Aimag rank and Regional pillar Baruun-Urt 21 4th Aimag rank Altai 22 4th Aimag rank Bulgan 23 4th Aimag rank Zuunkharaa 25 4th Uliastai 24 4th Aimag rank and Regional pillar Kharkhorin 26 4th Regional pillar Bor-Undur 27 4th Tsogttsetsii 28 4th Khanbogd 29 4th


4.2.2 Planned urbanization

(1) Compact urban structure

Land use in Mongolia comprises 74% agricultural land, 13% protected land and 13% others24. Of the

24 ULTF (2003)



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national population, 68%25 live in only 0.6% urbanized area. The rate of urban population increase is getting lower year by year in most recent years and it was 1.7% in 201726.

While the population is projected to increase, urban settlement expansion should be regulated by more effective land use within and around built-up areas for sustainable development. A land management plan generally defines areas within 2 km from existing urban settlements as desirable for residence and enterprises, areas between 2 to 5 km are for heavy industry and areas more than 5 km away are not desirable for build-up areas. This concept as compact urban settlements may be appropriate in consideration of small population in cities except for Ulaanbaatar.

Urbanization promotion zone and urbanization restriction zone will be designated in Aimag, Capital City, Soum and District Development Plans established in the Amended Law on Urban Development in 2019. These zones should be designated with consideration of compact urban structure.

Source: ULTF

Figure 4.2.10 Planned Land Use in Unified territory Foundation

(2) Preparation for urban growth

Vacant lands in Mongolian belong to the State and can be allocated to citizens without cost for purchase since 2002 when the Law on Allocation of Land to Mongolian Citizens was enacted. This land allocation was conducted without strategical implementation, and it caused adverse influence on urban environment by formulating Ger districts and uncontrolled population growth. In a recent decade, the Government has tried to improve land allocation system, but the land allocation shall be continued for providing new settlement or new residential areas because current urban population is rapidly increasing and urban areas of local cities are still small. In addition, there are needs to prepare large land of low-

25 Statistical database, World Bank (2017) 26 Statistical database, World Bank (2017)



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density for residential areas with Ger housing, which is most popular because of affordability of Ger housing as compared to apartments for the migrants to urban areas.

However, as Ulaanbaatar has experienced, a city shall be redeveloped and restructured according to urban growth in the future. Even if low-density residential area with Ger housing is desirable now, the area may be going to be densified. Currently, the Ulaanbaatar city makes effort to redevelop built-up areas and Ger districts by urban redevelopment scheme as a property right exchange typed development established by the Law on City and Village Redevelopment in 2015. In the urban redevelopment scheme, privately owned property shall be contributed for providing additional public lands (Figure 4.2.11). This property contribution is one of major factors causing disagreement by participants to project implementation or severe financial conditions. It can be said that the Government is suffering now from non-strategic land allocation in the past. Then, development of new settlements or residential areas should consider in advance the preparation for future redevelopment according to expected urban growth.

Source: Handbook on Urban Redevelopment

Figure 4.2.11 Scheme of Property Contribution in Sample of Land Reorganization

As one of government’s practices, ALAMGaC has developed technical guidelines for developing new settlements with sufficient infrastructure along with the National Land Management Plan. However, the new settlement areas have not been developed as defined in the guidelines due to problems of finance



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or poor capacity of planning and managing. In addition, vacant lands for urban expansion in the future are limited because some lands surrounding existing settlements had been already allocated to citizens. Then, improvement on a whole of process for new settlement development is required.

(3) Acceleration of General Development Plans formulation

Of the seven objectives for energy and infrastructure sector of the SDV2030, two objectives are directly related to urban planning and development:

Objective 5: Improve the legal environment for urban and land development based on the extant population settlements and residential systems; and

Objective 6: Provide greater independence to urban areas and settlements, build roads and transportation, and engineering infrastructure, create a healthy, safe and comfortable living environment for citizens, and improve urban planning in line with world-class green development model.

In phase II (2021-2025) of Objective 5, enforcement of Cities and Villages General Development Plans and Partial General Development Plans is targeted. Especially, General Development Plans are required to be formulated soon because they are basis of preparing Partial General Development Plans as detailed plans of public facilities. General Development Plans for at least three Aimag centers should be formulated or updated with consideration of the planning duration definition as 5-10 years in the Law on Urban Development as shown in Table 4.2.4.

Table 4.2.4 Current Status of General Development Plan Formulation No. Region Name of Aimags Year of latest General

Development Plan Status

1 Central region Govisumber 2014 Valid 2 Darkhan-Uul 2005 Need to be updated 3 Dornogovi 2013 Valid 4 Dundgovi 2017 Valid 5 Umnugovi 2015 Valid 6 Selenge 2013 Valid 7 Tuv 2014 Valid 8 Khangai region Arkhangai 2019 Valid 9 Bayankhongor 2017 Valid

10 Bulgan 2020 Valid 11 Orkhon

None

12 Uvurkhangai 2019 Valid 13 Khuvsgul 2030 Valid 14 West region Bayan-Ulgii 2014 Valid 15 Gobi-Altai 2016 Valid 16 Zavkhan 1983 Under updating 17 Uvs 2018 Valid 18 Khovd 2017 Valid 19 East region Dornod 1983 Need to be updated 20 Sukhbaatar 2016 Valid 21 Khentii 2016 Under updating 22 Ulaanbaatar 2013 Under updating

Source: MCUD

(4) Formulation of Aimag level urban development plans

Administrative units are basic planning units, and therefore urban planning should be coordinated between adjacent administrative bodies. It is a common practice to establish tree structure of plans with several levels from national to local. The tree structure for urban planning consisted of national, regional and city plans before establishing Aimag, Capital City, Soum and District Development Plans



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as an Aimag level urban development plan defined in the Amended Law on Urban Development in 2019.

In addition, the law defined the Urban Planning Institute to be assigned to formulate all of the Aimag level plans. It is expected that coordination will be improved and consistency among other administrative units ensured and therefore, formulation of Aimag, Capital City, Soum and District Development Plans should be accelerated. Especially in the case of Aimags which surround another Aimag, the inner Aimag locates the center of the outer Aimag so that both Aimag centers locate close to each other as in the cases of Tuv and Ulaanbaatar, and Selenge and Darkhan-Uul. In this case, urban planning of each Aimag is strongly required to be coordinated and be mutually consistent.

4.2.3 Redevelopment of Ger district

(1) Current issues of Ger district

Ger housing as a traditional housing style potentially provides good living environment because of its low population density. Low-rise buildings can provide fresh air and sunshine to streets and wide space per capita. However, current living environment of the Ger district does not satisfy these conditions due to lack of adequate infrastructure capacity. Just like Ulaanbaatar, other larger cities shall also suffer from unplanned urbanization caused by migration from rural areas. Currently in Darkhan, over 30% of population concentrates on 444 ha and 29% of population on 851 ha are living in the Ger district without adequate urban environment.27

As mentioned above, all new settlements including existing Ger district are formerly owned by the State and mostly allocated to citizens in recent two decades. Unfortunately, most of existing Ger districts had been formulated without adequate guidance or management by government and are settled informally without necessary infrastructure. Improvement of environment of these informal settlements is recognized as an important issue and urban development scheme has been utilized for the improvement since 2015.

(2) Ger district in Ulaanbaatar

1) Overview

In recent years, Mongolia has experienced increasing rates of internal migration from rural areas into urban centers. The volume and speed of internal migration into Ulaanbaatar and other major cities has outpaced the Government of Mongolia’s ability to provide basic services such as piped water, sanitation and sewerage, healthcare and education to new migrants.


Photo: Landscape of Ger Area (Left) and Redevelopment Site of Ger Area (Right)

The Ger district in Ulaanbaatar is divided into three sections: central, middle and peripheral in Ulaanbaatar. As indicated in Figure 4.2.12, middle and fringe districts of settlement cover vast areas

27 Mongolia City Development Strategies for Secondary Cities, World Bank (2005)



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in Ulaanbaatar. These districts are located in territories where connections to heating and waste disposal engineering schemes are not available. Central section of the Ger district are those located closer to apartment districts and are under an initial assessment for further infrastructural re-development.

Source: GIZ (2014), Ger district and its development potential in Mongolia

Figure 4.2.12 Ger District Map in Ulaanbaatar

2)Utilities and social infrastructure

Most households in the Ger district can enjoy electricity from the national grid. However, at present, other utilities and basic infrastructure are inadequate except for electricity supply. Especially, the penetration rate of central sewerage system for individual house connection is quite low compared to the city area in Ulaanbaatar. Most residents have no choice but to use a pit latrine with inadequate hygiene.

Water for domestic use is provided at kiosk which is the distribution center for water to residents. The residents have to purchase necessary amount of water at kiosk on a daily basis. Therefore, they can use only limited amount of water in 5~7 ℓ/day-person. Access to drinking water for residents of the Ger district is limited to public kiosks which are open only some hours per day and often run out of water. Most kiosks can gain water from wells, not centralized supply system.

Hospitals and kindergartens are not sufficient to provide basic social services to the residents as well.


Photo: Kiosk in Ger Districts (Left) and Septic Tank in Ger (Right)



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3)Housing situation There are several types of houses in the Ger district. Some of the residents are living in a Ger house which is a traditional tented dwelling. In such a dwelling, thermal insulation function is extremely low. Central heating is not prevailing in the Ger district. Therefore, they need to keep burning coal on the stove in cold season. As the result, a large amount of exhaust gas of coal has been generated during the cold season incessantly.

Most of the remaining residents live in prefabricated building or apartment. The newly built apartments mostly have electric heating system. Electric heating system and small boiler are utilized among a smaller number of residents compared to traditional coal stove users.


Photo: Ger House (Left) and Apartment under Construction (Right)

(3) Infrastructure center project

Construction of the first infrastructure center was implemented as an ideal solution to make engineering infrastructure accessible to households of the Ger district in Ulaanbaatar. The center covers about 200 households in the 7th khoroo (sub-district) of Chingeltei district and provides basic infrastructure such as water, sewerage, heating and electricity. The infrastructure of the Ger district so far has been dealt with by individual households, but the Ulaanbaatar municipal government is planning to shift to a centralized type by this center project.

As of October 2019, approval of construction at 16 locations, where the infrastructure center will be established, was being processed. Of these, only four locations would be established in 2020. In total, the project will provide the centers in 100 locations by 2020. As of 2018, the municipal government approved 50 locations where the infrastructure center will be established. Through the project implementation, it is expected that around 20,000~30,000 households will be entirely connected to the basic infrastructure. By proceeding with the project, soil pollutant sources for area of around 61 ha would be wiped out. It will also help to safeguard groundwater sources of Ulaanbaatar city, reduce risks of pollution and rehabilitate 439,200 m3 soil.



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Photo: Infrastructure Center Project (Left) and Sewage Plan (Right)

(4) Long-term development policy 2050

Mongolian long-term development policy 2050 (LTDP2050) notes the severe conditions in the Ger district. There are many issues to be addressed due to inadequate access to crucial infrastructure in the Ger district. The most severe challenge is environmental degradation, including severe soil erosion and groundwater pollution caused by improper drainage systems.

The LTDP2050 describes “Utilize national and regional budgets and other sources of funding to prioritize engineering infrastructure development in the inter- and end areas of the Ger district and to establish areas where infrastructure can be built based on citizens' wishes and suggestions”. It describes also to secure a site to provide future housing by replacing dilapidated houses built by the government or a private company.

Implementation of a pilot project should be promoted to treat wastewater and sludge in the facilities in the Ger district using environmentally friendly technology and disseminate good practices.

4.2.4 Urban and infrastructure development to enhance cities’ functions

Aimag centers and regional pillar cities are administrative cores of their respective Aimags and regions. Some of them have not been developed with regional core functions. Urban planning and infrastructure development shall be conducted to develop these functions in line with socio-economic development policy. For instance, Karakhorum in Uvurkhangai Aimag is an ancient capital of Chingis Khan’s Empire and one of the most important historical cities in Mongolia. Also, it is a popular destination of tourists attracted by the United Nations Educational, Scientific and Cultural Organization (UNESCO) World Heritage “Orkhon Valley Cultural Landscape". In the medium-term strategy for Mongolia's regional development, Karakorum is designated as one of regional pillar cities while Aimag center of Uvurkhangai is Arvaikheer.

4.2.5 Update of Ulaanbaatar master plan

Ulaanbaatar is the national capital with almost 1.5 million population and 4,700 km2 area. Its territory is covered 50% by agricultural land, 16% forest, 15% urbanized areas and 17% special purpose zone28.

The Ulaanbaatar 2020 Master Plan and Development Approaches for 2030 as a master plan of urban planning and development for the capital city was approved by the State Great Khural in 2013. A land use zoning classification is as shown in Table 4.2.5 and the land use map in Figure 4.2.13. Eight categories of land use zoning based on the Law on Urban Development are subdivided into 22 land use classes. Each zone has regulations specialized to urban development such as 1) permitted or prohibited land use types and forms, 2) development intensity and density, 3) height, size, and location of buildings,

28 Land Management Plan (2019)



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4) vehicle parking provision and design, and 5) other specific use and development issues, as required. As of November 2020, a new master plan is under updating targeting to 2040.

Table 4.2.5 Categories of Land Use Zoning in Ulaanbaatar

No Category in Law on Urban Development

Category in UB M/P Zone Sub-zone

1 Residential

Residential

Private houses with backyards (Single dwelling residential zone) Low rise apartments zone Mid rise apartments zone High rise apartment zone Ger areas zone

Commercial

Public commercial zone Public sub-commercial zone Neighborhood commercial zone Commercial service zone

2 Industrial Industrial Light industrial zone Special industrial zone Transport and wholesale center zone

3 Green open space, tourism Open space Open space Parks, gardens, open green space zone

4 Mixed Zone Mixed use Residential and commercial mixed zone Manufacturing and trade (sales) mixed zone Trade, industrial, and public mixed zone

5 Engineering infrastructure and road network Engineering infrastructure Engineering linear infrastructure zone

Engineering facilities zone 6 Special purpose Special purpose Special purpose zone 7 Camp ground N/A N/A 8 Agriculture and husbandry N/A N/A

Source: UB M/P

Source: ULTF

Figure 4.2.13 Land Use Plan in Ulaanbaatar Master Plan



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4.2.6 Countermeasures against over-concentration to Ulaanbaatar

Ulaanbaatar is one of the most population concentrated cities in the world with its population share to the total national population is approximately 46% at present. Due to the over concentration, many problems in urban development have occurred as follows.

Expansion of built-up areas Citizens in Ulaanbaatar had been allowed to own land privately since 2002, which had encouraged many people migrating from rural areas to Ulaanbaatar. Due to shortages of affordable housings for the migrants, they tend to live in traditional Ger housings.

Disorderly development on improper land Lands in Ulaanbaatar suitable for habitation are almost fully occupied. Then, some reserved lands or lands with disaster risks designated in Ulaanbaatar masterplan have been developed.

Environmental pollution Although more population needs more capacity of infrastructure such as water supply, sewerage and waste treatment system, these facilities cannot be developed to catch up with the rapid population growth and urban expansion. Consequently, urban pollution has been aggravating.

Also, many cities in the world were forced to be under lockdown due to the COVID-19 pandemic constraining urban activities, and consequently, recognition has been renewed for importance of urban resiliency. Over-concentration causes deterioration of living environment as above, and also may undermine stable national growth during disasters. However, control of urban expansion and concentration of urban functions are still required to maximize viability of urban spaces and sustainability of urban functions. Then, key issues and solutions to over-concentration in Mongolia remain to be the most important as before the COVID-10 pandemic.

Measures to solve these problems have been proposed with various methods in related policies or plans as shown in Table 4.2.6.

Table 4.2.6 Solutions to Over-Concentration to Ulaanbaatar No Policy or plan Issues

1 National security concept of Mongolia

- Distributing population to other cities - Reducing air, water and soil pollution

2 Ulaanbaatar M/P

- Developing satellite cities such as Nalaikh, Baganuur, Bagakhangai, Aero city, Emeelt-Argalant, Ulziit khoroo, Tuul village, Bio-Songin, Partizan-Jargalant

- Constructing transportation linkages between Ulaanbaatar, Nalaikh, Bagakhangai, Zuunmod and Aero city

- Regulating further urbanization by establishing a green belt - Reforming urban structure to multi-core structure


4.2.7 Housing provision with public utilities in Ulaanbaatar

As a result of the rapid migration, a large Ger district has been formed without adequate infrastructure. Ger housings without sufficient infrastructure spread in 30% of built-up area and 55% of residential area according to a research in 2010 causing the following problems.

Increase in household number without sufficient public utilities Of all households in Ulaanbaatar, 60% has limited public utilities. Most of them are in the Ger district.



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Low efficiency for infrastructure development Due to the expansion of the Ger district with low density land use, needs to develop infrastructure capacities have dramatically increased to cover all citizens, while it is desirable for efficient public services under limited budget to increase land use density.

Environmental pollution Most people living in traditional Ger housings are using coal stoves in winter which produce a lot of ashes to be emitted to air. As a result, Ulaanbaatar is suffering from heavy air pollution. National Geographics ranked Ulaanbaatar as having one of the Earth’s dirtiest air. In addition, lack of proper infrastructure causes soil and water pollution due to discharges of wastes and wastewater without collection and treatment.

As part of the Ulaanbaatar master plan revision, transfer to apartment complex from Ger housing should be promoted as well as the Ger district redeveloped.

4.2.8 Promotion of economic development and settlements in border areas

Although lands around border cities having international ports such as Zamyn-Uud and Altanbulag are urbanized, most of border areas remain as unurbanized land. However, border area development is encouraged by the Mongolian Government as part of national security by national policies and plans as follows.

ULTF The border area is defined as a special needs land by the State.

National security concept of Mongolia The development strategy and its relationships with foreign policy shall be regulated by the State.

4.3 Development Objectives and Strategy for Urban and Settlement Development

4.3.1 Development objectives of urban and settlement development

Based on the key issues identified above, objectives of the sector as part of the NCDP are defined as follows:

(a) To upgrade the urban functions of Ulaanbaatar as a global city; (b) To strengthen urban functions of regional core cities for economic diversification, and (c) To promote complementarity of urban centers for pleasant living environment including social

services delivery.

4.3.2 Development strategy for urban development

To support the attainment of the development objectives, strategy for urban development is established with the following components:

(a) Structural reform of Ulaanbaatar into multiple cores and city road system, (b) Development of satellite cities around Ulaanbaatar, (c) Improvement of residential environment especially in the Ger district through redevelopment

projects, (d) Improvement of urban planning and regulation tools, (e) Formulation of urban development master plans for local core cities,



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(f) Formulation of guidelines for housing planning and implementation in the Ger district, (g) Formulation/updating of urban development master plans for regional core cities and local

growth centers anticipating rapid population increase.

4.4 Recommended Measures in Urban Sector

Based on the analysis of existing conditions and discussions with the project working group (PWG) members, recommendation is made for urban and settlement development and management in Mongolia as follows.

4.4.1 Ulaanbaatar and Capital Region

With the new Ulaanbaatar international airport and satellite city development around the new airport, land use distribution and traffic flow in and around Ulaanbaatar will change in a significant way. It should be taken as the opportunity to upgrade urban functions of the capital city and its surrounding areas to make Ulaanbaatar a genuine global city linked to the rest of the world to support the self-reliant socioeconomic development of Mongolia. The ongoing revision of the Ulaanbaatar urban development master plan should reflect restructuring of land use and transport system with re-distribution and upgrading of urban functions of the capital city in the broader context of Capital Region as newly defined.

The following are recommended:

(a) Structural reform of Ulaanbaatar into multi-core urban areas through alleviation of over concentration of population and functions in the central area of Ulaanbaatar by dispersing functions into newly built-up areas;

(b) Development of satellite cities around Ulaanbaatar such as AeroCity and Maidar city to generate synergy effects with functional division between Ulaanbaatar and satellite cities through coordination among sector agencies for integrated infrastructure development; and

(c) Establishment of Capital Region Development Council or the like to prepare and implement the revised master plan coordinating the Ulaanbaatar municipality, Tuv Aimag administration, other municipalities and related urban institutions as well as ministries and agencies.

4.4.2 Ger district

There are a lot of issues on insufficient infrastructure development to be tackled in the Ger district. Depending on the seriousness, soil erosion and groundwater contamination would become irreversible and critical in natural environment due to insufficient sewerage system. At least wastewater treatment system such as septic tank, preferably combined type, should be introduced all over the district. However, at present the residents in the Ger district have no incentives to use environmental-friendly equipment and facility without the support by the Government. Such a structural problem should be improved by both awareness raising and facility development.

(1) Emergency measures

There are many living areas where kiosks and wells are far away, and it is seen that children carry water by cart every day in such households. Many families are forced to use outdoor communal toilets, and there is also a problem with waste disposal. In addition, there is few retail markets and supermarkets, and the living environment is not well established. This situation should be improved by private and governmental funds in combination. Also, institutional measure and deregulation should be led by the Government.



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There are households that are forced to live near flooded lands along rivers, but nevertheless there are no emergency measures such as emergency corridors or shelters. At first, as a soft measure, it would be necessary to provide emergency disaster information and to establish an evacuation system as a soft infrastructure.

(2) Specific infrastructure

As mentioned above, it would take an extraordinary long time to provide centralized utilities by construction of infrastructure centers. An infrastructure center can be a kind of solution for improving living condition in the Ger district, but it is not pragmatic to cover the entire area of the Ger district by the infrastructure centers in the near future. Therefore, it may be effective to introduce only specific infrastructure facilities such as septic tanks by individual households or kiosks with smart meters and so forth even where a comprehensive measure cannot be taken.


Photo: Kiosk with Smart Meter in Erdenet Ger District

(3) Participatory approach to community development

The experiences of the pilot projects implemented as part of the current JICA project would verify the effectiveness of the participatory approach. The participatory approach, however, is not a panacea for all kinds of problems. There are cases where participatory development is the best approach, whereas there are other cases where it plays only a supplementary role as in the case of large-scale infrastructure development and investments. For example, large-scale projects such as the infrastructure center should be realized by the governmental initiative. On the other hand, small-scale infrastructure such as individual sewage system (combined septic tank) or water supply well would be promoted by community-based fund or community initiative through participatory approach.

The participatory approach requires cooperation from the public and the local authority on an equal footing. It is not based on one-way communication either from the top or the bottom, but rather a two-way communication both from the top and from the bottom. While the public’s initiative is the driving force of activities, they need support from the government in various ways, such as in the form of technical support and administrative procedures. The government, on the other hand, will be able to achieve its goal of realizing economic development by paying close attention to the needs and potential of a region through the eyes of the people.

4.4.3 Urban and settlement planning

Planned urbanization should be promoted as described in Section 3.2 to realize compact urban structure and prepare for urban growth as well as to provide more effective supports for new economic activities



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and social services provision as dictated by the NCDP. Specifically, the following are recommended:

(a) Establishment of clear hierarchical structure of urban centers with functional division between urban centers at different tiers for more effective social services delivery and more efficient and mutually complementary provision of economic services to support industrial development;

(b) Improvement of urban planning tools such as urban redevelopment, regulation of floor area ratio and building cover ratio and other building code, and land taxation system which promotes or controls urbanization;

(c) Formulation of General Development Plans for local core cities in anticipation of rapid population increase and selective strengthening of urban functions in line with economic corridor development, urban hierarchy, and administrative development of Aimags;

(d) Formulation of guidelines for housing planning and implementation responding to changes in composition of residence types and urban functions in consideration also of Ger district planning allowing future flexibility for possible redevelopment; and

(e) Formulation of guidelines specifying requirements and components of plans at different administrative levels and at levels of details in any city for coordinated and consistent plans from top to bottom and across urban areas with the renewed HSP as a highest-level spatial plan to facilitate coordination with lower level plans.

Sector Report on Transport, Logistic and Other Infrastructure ...

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