The Geo-Economic Significance of India-Mongolia Engagements

Focus

First and foremost, we understand that the idea of an Asian century is not merely defined by what bigger economies do and how their geopolitical assertiveness shape up

In 1965, Indira Gandhi visited Mongolia as India’s information and broadcasting minister, and later, during her tenure as the prime minister, received Mongolia’s support to the 1972 UN resolution for the recognition of Bangladesh. But these are not isolated events of cooperation between the two countries since they first agreed to establish bilateral relations in 1955. In fact, the shared history goes far beyond the diplomatic and political ties of the post World War II days. From the days of Ashoka in the third century B.C. when Buddhism spread to Mongolia to the early thirteenth century when Genghis Khan founded the Mongol Empire, the shared history of the two countries reveals them all.

We would definitely appreciate that a historical-connect like this is leveraged for mutual benefits of the people of the two countries today. This is what attaches significance to Prime Minister Narendra Modi’s recent visit to Mongolia and his “Act East” policy as well. Several cooperation agreements—ranging from policing and surveillance to traditional medicines and homeopathy and from transfer of sentenced persons to the establishment of India-Mongolia friendship school in Mongolia—were signed between the two countries. Mongolia has declared India as its “third neighbour” and a “spiritual neighbour”; while India decides to upgrade the “comprehensive partnership” to the level of “strategic partnership”, as it sees Mongolia as an integral part of India’s Act East Policy. Therefore, it is important for us to understand the geo-economic implications of this relationship and to decipher as to how it could bring mutual benefits.

The Asian Identity

First and foremost, we understand that the idea of an Asian century is not merely defined by what bigger economies do and how their geopolitical assertiveness shape up. Rather, it is also about an Asian identity that is culturally cohesive, politically participative, economically vibrant and socially inclusive. India today, is eager to provide this multi-dimensional flavour to the “identity” which is so highly solicited by the people of Asia.

India has given due impetus to its relationship with smaller and neighbourhood economies and their regional participation, thereby signalling that we want an Asia where every economy grows through mutual socio-economic interdependence and not through assertion of political power. This is also how our foreign policy has evolved over the years into becoming a proactive reflection of our national interests coupled with an urge for universal brotherhood.

Minerals and Resources

Secondly, the presence of mineral resources in Mongolia provide opportunities for cooperation, just like the one that we have in the Hajigak mineral fields in Afghanistan with an estimated $1.3 trillion untapped resources. Mongolia hosts nearly three million people and is an $11.52 billion economy with immense potential. This is evident from the fact that, unlike Afghanistan and Nepal which are also land-locked countries with relatively larger economic sizes i.e. $20.31 billion and $19.29 billion respectively, Mongolia is not classified in the United Nations list of least developed countries.

Mongolia’s import from India accounts for around $13 million; whereas from China, its import stands significantly high at around $1700 million, which is almost 33 percent of Mongolia’s total global imports. Owing to its mineral rich economy, Mongolia maintains a positive global trade balance of more than $600 million. Its major export commodity is copper ores and concentrates (which is close to 50 percent of its total global exports) followed by coal, crude oil, iron ore, gold, zinc and rare earths, among others. During the PM’s visit, India also called for exploring the future opportunities for expediting the civilian nuclear deal for uranium supplies, an agreement signed in 2009 but not yet implemented.

Since the time it became a democratic country in 1990, it has moved on the trajectory of growth. In 2013, its growth rate was 11.7 percent. It has continuously been undertaking initiatives to improve its business environment and to make it more investor friendly. It took reforms like eliminating the requirement for registering a new company with local tax office in order to make starting a business easier. As per ‘Doing Business Report 2015’ published by the World Bank and International Finance Corporation, on the parameter of ‘starting a business’, Mongolia ranks 42nd, much above the regional average of the East Asia and Pacific regions. Even on the ease of doing business, its overall rank is 72nd, which is again above the regional average. But how such rankings could possibly translate into grassroots development is another concern.

Development Cooperation

So, finally it is the issue of development cooperation that is crucial when we look at India-Mongolia engagements. Mongolia is an aid dependent economy and receives development assistance from India as well, besides those from the development assistance committee (DAC) of the Organisation for Economic Cooperation and Development (OECD). Besides technical assistance from the Indian Technical and Economic Cooperation (ITEC) programme, India also provides a line of credit (LoC) to Mongolia. In his recent visit, the prime minister announced a $1 billion LoC to Mongolia for its projects focusing on infrastructural development.

Moreover, given the fact that the nomadic herders constitute a sizeable chunk of the population in the country, it continues to face some of the most rudimentary development challenges in its rural settlements. These challenges are largely related to scattered settlements, lack of basic education and health infrastructure, and a vulnerable climate characterized by Dzud, the cold winters of Mongolia as they call it. Being among the world’s least densely populated countries, the cost of developing a sound rural infrastructure continues to be a major concern. Indian private investments in Mongolia could well be made in the development of such infrastructures as well as in setting up ancillary industrial units there. This could help generate employment and consequently create newer opportunities for Indian migrants.

The $11.85 million World Bank and International Development Association (IDA) supported Information Communication Infrastructure Development Project which was completed in 2013 has already helped Mongolia improve tele-density in rural areas through phones and internet services. Moreover, the third phase of Sustainable Livelihoods Project (2014-18) worth $36.2 million, supported by the World Bank, is aimed at improving rural governance through capacity building and community participation. In such a scenario, India can also undertake capacity building and technical assistance programmes to help rural governance machineries in managing their development fund initiatives. Micro-finance, self help groups and educational exchanges could be useful instruments for enhancing welfare and community-based partnerships between India and Mongolia.

Conclusion

This visit by an Indian prime minister should therefore not be seen only through a political lens, but also as a ‘geo-economic leap’ capable of contributing to India’s region-building efforts in Asia. The music of morin khuur, a traditional Mongolian instrument reflects that enthusiasm.

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Author

Dr. Faisal Ahmed

Dr. Faisal Ahmed is Associate Professor of International Business at FORE School of Management, New Delhi.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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