**Table 13. Rail transport costs**

||**Kazakhstan**<br>Almaty|**Uzbekistan**<br>Tashkent|**Tajikistan**<br>Dushanbe|**Kyrgyz**<br>**Rep.**<br>Bishkek|**Mon**<br>Ulaan|**golia**<br>Baator|
|---|---|---|---|---|---|---|
||Trade|Trade|Trade|Trade|Exports|Imports|
|Distance to nearest port* (km)|3380|2720|2040|3100|1700|1700|
|Cost($/TEU/km)|0.37|0.35|0.59|0.34|0.61|0.87|

_Source: staff estimates based on data for Kazakhstan, Uzbekistan, Tajikistan, Kyrgyz Republic from Chapter 5 in Broadman (2005) and data on Mongolia from World Bank (2006b)._ _*Karachi for Kazakhstan, Uzbekistan, Tajikistan, Kyrgyz Republic; Tianjin for Mongolia._ Although it is possible to transport goods from China to the border with Mongolia by road and then to the capital city by rail, the transfer extends the time and adds to the total transport cost. In fact, it costs more to transport goods from China to Mongolia by roadrail, then only by rail. While air transport accounted for only 0.02 percent of all freight movement in 2000, and has been used to transport mostly livestock-based products, international air services have been a binding constraint to growth of Mongolia’s tourism industry as they are unreliable and lack peak period capacity. During the short summer months, when most tourists would like to visit the country, there are one or two daily services from a few destinations and tour operators indicate short supply of seats and unreliable advance reservation system (World Bank 2006b).

In Mongolia transport costs for imports are much higher than transport cost for exports. The transport costs from the port of Tianjin to Ulan Bator, for instance, are 42 percent higher than the already high transport costs for exports (Table 13).<sup>44</sup> In addition, transit times by rail are long and uncertain<sup>45</sup> as a result of complex transit procedures, including customs and trade rules. Whereas the border crossing time for the other landlocked countries in East Asia is under 6 hours on average, with a maximum of 25 hours, the border crossing time for Mongolia is 25 hours on average, with the maximum extending to 75 hours.<sup>46</sup> The uncertainty about the hours spent at the border implies that exporters find it difficult to meet the delivery requirements of overseas buyers or must incur additional storage costs if they deliver the goods early.

High trade costs due to costly and unreliable transportation services, lengthy and complex transit procedures, including customs and trade rules (Table 18), impede access of Mongolian firms to foreign markets and potentially cost Mongolian firms market opportunities. Access to foreign markets is critical to a small, open economy like Mongolia because it allows domestic producers to realize economies of scale and take part in global production sharing. Moreover, the high cost of transport services will prove to be a much bigger problem for Mongolia’s economy in an environment of weak prices

> 44 Since the export volume is only 10 percent of the import volume transported in containers along the Ulan Bator-Tianjin corridor, this imbalance raises the transport cost for imports because a fee for an empty container adds to the transport cost $436 per TEU by rail-rail and $514 per TEU by road-rail.

> 45 Source: Mongolia’s Ministry of Infrastructure (2002).

> 46 Source: Application of UNESCAP Time/Cost-Distance Model and Route Analysis, presentation by Geetha Karandawala, Chief, Transport Facilitation Section, Transport and Tourism Division, UNESCAP at the National Workshop and Advisory Services on Trade and Transport Facilitation Ulaanbaatar, Mongolia, 17-19 April 2006. See also Table 18.

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