OREANDA-NEWS. On May 14, 2009 The founding documents of a joint venture (JV) to develop railway infrastructure in Mongolia were signed in Ulan-Bator in the presence of the Russian and Mongolian Prime Ministers Vladimir Putin and Sanjaagiin Bayar, reported the press-centre of Russian Railways.

The document was signed on behalf of Russian Railways (RZD) by the company’s CEO Vladimir Yakunin, and on the Mongolian side by B.Enebish, Executive Director of Erdenes MGL, and A.Batbold, Executive Director of Mongolian Railways.

A limited liability company under the name "Infrastructure Development" is to be set up in Mongolia. Its founders will be Russian Railways (with a 50% share), state-owned Mongolian Railways (25%) and Erdenes MGL (25%). The JV will have an initial charter capital of 2.526 billion tugriks (around US1.8 million).

"The creation of the JV is Phase 1 of a project by the two countries to jointly develop the Ulan Bator Railway and build new rail infrastructure in Mongolia. The project will involve upgrading the existing network, expanding its throughout capacities, replacing the rolling stock, and laying new railway lines to promising mineral deposits," announced Yakunin.

According to Yakunin, the newly created Infrastructure Development company will produce a development framework for Mongolia’s railway system, including a feasibility evaluation of the investment required and a repayment mechanism. The investment in the railway infrastructure will be recouped via income from additional freight shipments and participation by the new JV in promising mining projects.

The creation of the JV has been endorsed by RZD’s Board of Directors and the Russian-Mongolian Inter-Governmental Commission on Trade-Economic and Scientific-Technical Cooperation, and has the support of both countries’ governments.

Yakunin also announced that as part of RZD’s cooperation agreement with UBR (signed on 19 March 2009) RZD Trading House has already exported 1000 open box cars of freight worth around US7 mln to Mongolia.
 
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Rail is the main form of transport in Mongolia, which gives the Ulan Bator Railway a leading role in the country’s economy. UBR handles around 80% of domestic freight shipments and up to 100% of export-import deliveries. Freight volumes in 2008 were up 6.68% on 2007 at 14.6 million tons. This is predicted to rise to 20.1 mt in 2010, with an average annual growth rate of around 8-12%.

The territorial proximity of Mongolia and Russia and their common railway gauge create a good platform for further growth in freight turnover.

However, as it was built in the early 1950s the Ulan Bator Railway has long since fallen behind modern technical standards. The railway’s design restricts the use of heavy freight trains and the rolling stock currently in use needs to be replaced urgently. Sections of the line built to now-obsolete standards make it impossible to increase travelling speeds and use the latest generation of locomotives. The system is also generally unreliable, with 50% of the main line in need of immediate repair.

To speed up the development of UBR and modernization of Mongolia’s existing infrastructure two RZD representatives joined UBR’s Management Board in 2009, and the process of placing the Russian state shareholding in UBR in RZD trust management is nearing completion.

UBR is currently equally owned by the Russian Federation (via the Federal Rail Transport Agency) and Mongolia (via the Mongolian Ministry of Roads, Transportation, Construction and Urban Development).