Mongolia will establish a free economic zone in border areas with China. It will exempt income taxes for foreign companies to boost trade and economic cooperation with its southern neighbor.

L. Amarsanaa, Mongolia's ambassador to China, made the remarks when briefing Chinese companies on the investment conditions of Mongolia in a meeting held in the Mongolian embassy here on November 15.

D. Galsandorj, director general of the Trade Policy and Cooperation Department of Mongolia said the free economic zone will be located near Erenhot in north China's Inner Mongolia Autonomous Region, and will cover an area of about nine hundred hectares. The bid for building the infrastructure of the zone is finished, he said.

The free economic zone will be separated into three parts, for trading companies, processing companies and tourism companies, he said.

To attract foreign investment, the Mongolian government will exempt income taxes for foreign companies that invest in such fields as electricity generating, road building, oil exploitation and processing, and chemical industry in the first five to ten years, he said, adding that the government will also reduce necessary licenses and set up "one-stop" service centers to reduce the time for customs procedures to three days.

China, Mongolia's biggest trade partner, will enjoy these favorable policies in projects such as road building, mining cooperation, and husbandry processing, Amarsanaa said.

An employee of the Shenhua Group Corp. Ltd., which plans to invest in Mongolia, said Mongolia's abundant coking coal resources are complementary with China's coal resources and are very attractive.

Hu Bin, vice chairman of the China Shougang International Trade and Engineering Corp. said they are considering cooperating with Mongolia in iron mining because of its comparatively high grade, short transportation distance and good investment policy.

Trade between China and Mongolia in 2003 amounted to 4.6 billion US dollars, about 33.4 percent of the total volume of Mongolia. China is also one of the biggest investors in Mongolia, with more than 1, 300 Chinese companies of over 4 billion US dollars investing in fields such as textile, service, trading, and mining. Investments in such areas as mining and infrastructure construction increased sharply in recent years.

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