Korea and Mongolia have established a foundational agreement for securing a stable supply of key minerals such as copper, molybdenum, and rare earth elements through a Comprehensive Economic Partnership Agreement (CEPA). However, challenges remain due to Mongolia's geographical characteristics and its high dependence on China, which may hinder actual supply chain diversification.
According to the Ministry of Trade, Industry and Energy, the CEPA will eliminate the 2-5% import tariffs imposed by Korea on key minerals from Mongolia immediately upon its enactment. The two countries have agreed to include energy and mineral cooperation in the agreement, which will support the exploration, development, and supply chain integration of key minerals.
Korea aims to diversify its sources for key minerals used in secondary batteries, semiconductors, and defense industries. Conversely, Mongolia can leverage its abundant mineral resources to foster resource development and processing industries, aligning the interests of both nations.
Supply chain cooperation is already becoming evident. The Ministry reported that 27 tons of tungsten concentrate produced in Mongolia were supplied to Korea for the first time last month, with plans for increased supply. This follows a 2023 memorandum of understanding (MOU) on cooperation in rare metals supply chains between the two countries.
The government plans to expand the scope of mineral cooperation from simple imports to local development and processing, using the CEPA as a catalyst. Kim Jeong-kwan, Minister of Trade, Industry and Energy, and Ganbaatar Damdinnyam, Mongolia's Minister of Mining and Heavy Industry, met in Ulaanbaatar to agree on elevating the existing rare metals cooperation committee from a vice-ministerial to a ministerial level.
The two nations plan to convene a ministerial cooperation committee in the second half of this year to revise the existing MOU to include local primary processing, separation and refining, stable supply, and investment cooperation. A separate working group at the director level will be established to continuously address issues faced by businesses on the ground.
However, simply eliminating tariffs may not be sufficient to stabilize the supply chain for key minerals. While Mongolia has rich mineral deposits, it lacks the technology and funding necessary for resource development, and its transportation infrastructure, including railways and roads, is inadequate. The logistics structure, which relies on transit through China, is also a variable that needs to be addressed in the supply chain development process.
Domestic companies and institutions attending a mineral industry meeting on the same day identified logistics and local regulatory issues as major challenges. The government plans to address these concerns through ministerial meetings and aims to transition the public development assistance (ODA) project of the rare metals cooperation center, set to conclude next year, into a sustainable cooperation platform.
Building a supply chain for key minerals will take considerable time, so the short-term effects of the CEPA are expected to first manifest in consumer goods sectors such as cosmetics and processed foods. Tariffs on cosmetics will be eliminated immediately upon the agreement's enactment, while tariffs on ramen and seasoned seaweed will be phased out over five years.
Notably, major Korean retail companies such as E-Mart, GS Retail, and BGF Retail have already established a strong presence in Mongolia, creating a local sales network for Korean products. The newly opened No Brand store in Mongolia features approximately 2,100 out of 4,900 products sourced from Korea, expected to serve as an export channel for domestic small and medium-sized enterprises.
The government plans to leverage the tariff reduction effects of the CEPA and the local networks of domestic retail companies to establish a 'Mongolia K-Retail and Consumer Goods Carrier.' Retail companies will act as export agents for small and medium-sized enterprises, while organizations like KOTRA and the Korea Trade Insurance Corporation will provide comprehensive support in logistics, certification, finance, and intellectual property protection.
* This article has been translated by AI.
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