ADB $420 Million Program to Improve Conditions and Opportunities along IMAR Border, PRC

The Asian Development Bank (ADB) has approved up to $420 million for a multitranche financing facility (MFF) to improve economic opportunities and living conditions among communities along the border between the Inner Mongolia Autonomous Region (IMAR) in the People’s Republic of China (PRC) and Mongolia.

“The IMAR-Mongolia border is one of the world’s longest and the setting for a remote and often hostile environment for the communities at border crossings,” said ADB Senior Financial Sector Specialist Seung Min Lee. “The ADB program will upgrade and modernize facilities at five border communities to ensure that the benefits of growing bilateral and regional trade can be shared by both sides of the border. The program’s technical design, environmental improvements, and robust economic and financial returns will ensure its long-term sustainability and benefits.”

Although the border communities serve as the main cross-border focal points for the rapidly expanding trade between the PRC and Mongolia, they lack access to basic infrastructure and services, including medical facilities, as well as job opportunities.

The poor infrastructure and inefficient processes at the IMAR border crossings stifle the potential for development and international trade on both sides of the border. Storage and quarantine facilities are lacking, a deficiency compounded by outdated and inefficient management systems, customs procedures, and standards. A one-stop customs process has not been established, and goods clearance is not yet automated or integrated with sanitary and phytosanitary measures.

Trade doubled between the PRC and Mongolia from $4 billion in 2010 to $8 billion in 2018, and about $5 billion of this total was between Mongolia and the IMAR alone. Greater efficiency at the IMAR border crossing points could further accelerate this trade growth. Trade by the PRC and Mongolia with third party countries, including those in Europe, would also grow.

The program will enhance living conditions and sustainability of target border regions by supporting the use of such advanced technologies as smart drip irrigation with reclaimed water for forestation, smart port management based on information and communication technology, and smart waste collection and transfer.

Expanded financial and business support to small and medium-sized enterprises (SMEs) will spur local income growth. International best practices in gender equity will be applied through targeted support for women-led SMEs, the gender-sensitive design of border town facilities, and poverty alleviation program support for low-income households headed by women.

The program will also address the climate change and adaptation challenges that confront both the IMAR and Mongolia. This will include support for carbon pollution reduction by building protective forest strips and the use of renewable and clean energy for heating supply. The establishment of an agricultural value chain will enhance livelihoods on both sides of the frontier.

Three tranches are envisaged for the MFF. The first of $196.3 million will help finance the delivery of a smart port management system in the Erenhot–Zamyn-Uud economic cooperation zone (ECZ), a service area and customs supervision center at the Mandula port, and upgrade of equipment at the international hospital in Erenhot. Ecological restoration will be carried out in the ECZ, and a smart waste collection system established in Erenhot. SME financing support, the construction of a quarantine station at the Mandula port, and the establishment of a product tracing and management system and Poverty Alleviation Program (PAP) will contribute to expanding income-generating opportunities.

These first tranche activities will benefit 2.95 million people in Erenhot and Baotou municipalities by providing greater livelihood opportunities for the poor and the overall population. The program will have strong regional spillover benefits for Mongolia, with expanded trade creating about 3,300 direct and indirect jobs in Mongolia. Health and other services will benefit disadvantaged communities on both sides of the border.

The project also closely complements other ADB projects in Mongolia, including an Economic Cooperation Zone project at Zamyn-Uud free zone approved in June 2020 that will create jobs and serve as a catalyst for diversifying Mongolia’s economy and additional financing for Regional Improvement of Border Services approved in 2019.

The total cost of the investment program is $888.35 million, of which the government will provide $351.42 million, and $116.93 million will come from other sources. The closing date for the third tranche is the end of September 2031.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.