Transit Mongolia 2019

1. Transit Mongolia 2019 Mongolia Transit Corridor at the Present Monlogistics Worldwide LLC (MLW)

2. MLW Transit Service Total Nov 2016 – Apr 2019: 47,107 TEU (189578TEU/UBRW)

3. MLW Transit Service Monlogistics is performing 32% of ALL transit containers through Mongolian corridor

4. MLW Transit Service Total payment to UBRW for transit service: MNT 35,630,142,955 (MNT 138,00 bill/UBRW)

5. MLW Transit Service Other benefits to UBRW Westbound & Eastbound Balance (2018) WB/EB Ratio = 0.8:1.0 WB/EB Ratio = 1.4:1.0 WB/EB Ratio = 1.0:1.0 Monlogistics transit operation has POSITIVE impact for UBRW’s Russian wagon efficiency

6. MLW Transit Service Summary MNT 35,630,142,955 Improved Efficiency Attracted money from abroad As a result of MLW transit containers • Good for Mongolia • Good for UBRW • Good for Monlogistics (..?) • Good for UBRW • Good for Mongolia Corridor

7. UBRW Support (2016-2017) • Clear and stable policy for Russian empty wagon detention at ZU for WB purposes • WB transit containers transshipment charge decreased equal to import shipments • No storage charge for transit containers • No question for China wagon detention

8. Transit Shipment Increase • Political factors and conditions (Policy & Legality): General policy and legality influence for transit developments of Mongolia Government and International Activities (Mongolia-Russia-China Economic Corridor Program, 7 railway countries co-operation agreement for transit developments, Belt & Road) • Internal factors and conditions: UBRW measurements for transit container shipment promotions for cost deductions and initial promises for service improvements via Mongolia corridor • External factors and conditions: Increased demand of transit container shipments between West and East and Economic stimulation policy effect under the Belt & Road Initiative. Similar starting conditions for transiting capacities of the neighboring corridors in terms of technical and operational facilities.

9. Issues & Concerns Stability Issues of UBRW Regulations/Orders (2018) • UBRW Capacity limits: WB and EB to be limited in accordance of UBRW present capacity. • Creating/Changing the Regulations/Orders of UBRW in the relations of transit container shipments via Mongolia and its’ timing. • Public announcement system: Most of the orders or changes are through the internal telegraph system of UBRW and client are able to know after some days of effectiveness. • Empty wagon ZU detention & return charges, China wagon detentions (Agent is enforced as UBRW just deduct from its’ account deposit). • Legal equality of the regulations and orders; Considered to be equal for everyone’s rights, duties and obligations, within the related legality of Mongolia and International Conventions (UN, WTO), regulations (SMGS) or Agreements.

10. Issues & Concerns Order & Regulations/Transit Container shipments Some examples

11. Consequences As a result of all the issues and UBRW policy stability questions: • Misunderstanding and questions of trustworthiness between the parties involved in operations, services and business partners • Inconvenience and difficulty for the transit organization partner (the party who is responsible for whole transportation from origin to destination) communications to its’ customers/client for explaining and persuading • Payment disputes between freight agents (China, Mongolia & Russia) and further between trading and logistics partners (non-expected or additional cost). International trading negotiation time (3-6 month in advance) • Instability of business co-operations and relations (no guarantee/reliability in the business co-operation), Loss of long-term clients and partners . • Bad experience and unstable business environment condition via Mongolia corridor reputation • Future consideration for the alternative options of the routing for the transit container shipments between East and West questions • Huge financial loss of national enterprisesor freight agent (MLW: - USD 500,000/about)

12. Mongolian corridor competitiveness Transit Time Since 2018, due to uncontrolled EB accepting and limited capacity of Erlian/China, Congestion start, prolonged transit time.

13. Mongolian corridor competitiveness Operations and Capacity • Congestion effects and capacity limit: Long transit time, slow operations, EB along UBRW, WB accepting capacity/ZU. • Border Exchange Erlian/Zamiin-Uud stations: Co-ordinations, customs formalities, docs processingand etc., • Erlian/China side: Less consider docs and SMGS. Enforcing way of border exchange operations, especially for WB. • Co-ordinations & Co-operations of Sukhbaatar/Naushki stations: Strong WB docs REQUIREMENT and different standard (Zabaikalsk), EB treatment (no checking & problems at Sukhbaatar). Adding other shipments (2-3 wagons) to EB BT to SB and UBRW blame to Mongolia agent, cut Bl.Train discount (Naushki/Sukhbaatar ?) Cost Unpredictable costs & additional charges: Empty return Russian wagon (3d in ZU), China wagon detention for WB, non-clear rules of transit container block train discount (EB). BUSINESS PLANNING QUESTIONS?. Future Trends • World environment concerning global policy may effect for some present EB transiting items and volume. • China government subsidiary policy limitations or decreasing availabilities for container block train support between East and West. • RW/Environment Friendly Transportation, Economic efficiency questions on the both routing combinations of EB and WB. • Investments and developments in the neighboring corridors for better competitiveness and services (Zabaikalsk/WB Sorting CY and Khorgos/Inland-dry port)  

14. Requests Business Environment Improvement of UBRW • Provide stable business environment, considering the international business ethics • Equal treatment of Co-operation agreement parties, following the international business relationship principles • Improve transport organization and operation management Capacity Increase • Investment to increase UBRW capacity • RW lines, parking, transshipment facility, etc. • Consider Mongolian corridor competitiveness with neighbours (Zabaikalsk, Dostik) • KJD – Dostik & Zabaikalsk(China) & RJD – Zabaikalsk(TC CY for WB sorting started). • Total cost (Origin-Dest.) comparing competition of Mongolia corridor (? Additional cost, Wagon efficiency )

15. Conclusion • To start acting as the modern business enterprise with its’ strategic development planning for the improvements of Mongolia corridor competitiveness. • As UBRW own wagons are not used for transit shipments, UBRW to build up an apparent and equal environment of fairly competition for each parties and wagon owners or transit operators, involved in the container transit shipment operations via Mongolia corridor. • UBRW as the only National railway carrier across the country connecting the 2 big neighbors, Russian Federation and P.R.of China along the Road & Belt, the transit operations to be considered for multi literal co-operation benefit principles. • To pay attention to the Transport organization management, operation duty discipline and professional skill for traffic and operation development. • Consider for the Investment opportunity for the ZU facility developments (RW lines, Exchange Stations & etc.,).

16. Thank you for your attention 2019.06.05