Mongolia has yet to pay off even a third of the loan that built Chinggis Khaan International Airport, but that has not stopped officials from already sizing up a second concessional loan from Japan, worth a further 65 billion JPY, to expand and modernise the facility.

The original airport was financed with a 65.6 billion JPY concessional loan from the Japan International Cooperation Agency (JICA), worth an estimated 570 million to 600 million USD at the time it was disbursed. Built by a consortium of Mitsubishi and Chiyoda in Khushig Valley, some 52 kilometers south of Ulaanbaatar, the airport opened its doors in July 2021 and replaced the ageing Buyant-Ukhaa International Airport, whose mountain-ringed runway had long been a headache for pilots and a bottleneck for the country’s growing air traffic. Five years on, the new airport has more than lived up to its billing as a gateway to the world, but it is also, quite literally, living on borrowed time and borrowed money.

Designed to handle 2.3 million passengers a year, the airport is now bursting at the seams. Passenger numbers rose to 2.17 million in 2024, a 25 percent jump from 1.73 million the year before, and traffic on routes to Seoul, Beijing and Istanbul in particular has climbed steadily as Mongolians travel abroad in greater numbers and the country pushes to draw in more visitors from the Middle East and Central Asia. With the terminal already pushing up against its ceiling, expansion has stopped being a nice-to-have and become, in the government’s own words, an urgent priority. However, for all the urgency, the state has been dragging its feet on paper trail. Officials at the Ministry of Road and Transportation have so far given little more than the standard runaround, saying only that the expansion loan is being “studied, calculated and discussed”, without putting a single detailed plan, cost estimate or repayment schedule on the table. Reading between the lines, however, it looks very much as though the ink is all but dry.

That impression was reinforced during an official visit to Mongolia by Japanese Foreign Minister Motegi Toshimitsu, held from August 29 to September 4 as part of a wider four-nation tour through Central Asia and Europe. Motegi held talks with President U.Khurelsukh before sitting down with his Mongolian counterpart, B.Battsetseg, on September 3 in Ulaanbaatar. Reporting on the meeting, Japan’s Ministry of Foreign Affairs said the two sides welcomed progress on Japan’s assistance with the expansion of the airport, describing the project as important for improving the landlocked country’s connectivity. According to one Japanese news outlet, the two ministers “ratified major advancements” on the expansion during that meeting, a sign that Tokyo, at least, considers the matter all but settled. 

The groundwork for that moment had been laid over several months. As far back as June, at the sidelines of the Nikkei Forum in Tokyo, Motegi had already signalled Japan’s intention to cooperate on the airport’s expansion, and Minister B.Battsetseg had welcomed the commitment on the spot. The two countries, who officially style themselves “Special Strategic Partners for Peace and Prosperity,” have also been coordinating at the technical level: the Ministry of Road and Transportation confirmed in late June that both sides were discussing an exchange of notes and a loan agreement with JICA, and then Prime Minister L.Oyun-Erdene had earlier met with Japanese Ambassador Igawahara Masaru to discuss how the new loan would be used. Finance Minister Z.Mendsaikhan later held his own meeting with Igawahara on the same subject, underlining just how many hands have already touched this file before a single MNT, or JPY, has changed hands. 

Media in both countries have reported that Tokyo has agreed in principle to extend a concessional loan worth roughly 1.5 trillion MNT for the expansion, on terms that would make most borrowers green with envy: an interest rate of just 0.1 to 0.2 percent, spread over a 40-year repayment period. It is a similar playbook to the one Japan used in 2020, when it extended a 25 billion JPY, or roughly 230 million USD, emergency loan to Mongolia for COVID-19 response at an even lower rate of 0.01 percent, underscoring how Tokyo’s soft-loan diplomacy in Mongolia tends to come with strings so loose they are barely felt at signing, even if they still have to be paid back to the last tugrik decades down the line.

Asked directly about the state of negotiations, officials at the Ministry of Road and Transportation Development did not mince their words on where things stand, even if they have been tight-lipped on the specifics. “The two sides have reached an agreement, and the government has approved the draft loan agreement,” the ministry said. “Once Parliament ratifies it, the preparatory work will be finalized. We plan to begin the expansion work by 2027.” In other words, the deal has already cleared the executive branch and is now simply waiting for Parliament to rubber-stamp it, a formality that in Mongolia’s political climate rarely proves much of an obstacle once the government has thrown its full weight behind a project.

What remains conspicuously absent from the public record is any serious accounting of what the first loan actually cost, and costs still, the country’s finances. With barely a third of the original 65.6 billion JPY repaid, the nation is poised to double down on its debt to Japan for the very same asset, banking on rising passenger numbers and tourism revenue to eventually make the arithmetic work. Whether that bet pays off will depend less on the generous terms Tokyo is offering than on Ulaanbaatar’s discipline in spending, and repaying, what it borrows. For now, though, with the government’s mind seemingly made up and Parliament’s approval looking like a foregone conclusion, the debate over the airport’s expansion appears to be less about whether it will happen than about who, eventually, will be left holding the bill.

The idea of enlarging Chinggis Khaan Airport is not, in truth, a new one. The ministry first floated the idea of commissioning a study into expanding and upgrading the airport’s capacity two years ago, and later confirmed that the research and planning work was being carried out jointly with JICA and New Ulaanbaatar International Airport LLC, the company that operates, manages and organizes the facility. After roughly three years of studies and back-and-forth negotiation, a solution now appears to have been reached, one that will require funding on a par with the cost of building the airport in the first place. The need behind the expansion is real enough, but the decision also lays bare the government’s want of strategic foresight and its habit of skimping on preliminary analysis. It is, in short, a textbook case of the old saying that haste makes waste, or that the person who cuts corners ends up doing the job twice.

The whole rationale for building a new airport in Khushig Valley, after all, was to escape the cramped, substandard conditions of Buyant-Ukhaa Airport and bring Mongolia’s main gateway up to international standards. It is more than a little galling, then, that the country appears to have built a smaller, more constrained version of the very problem it set out to solve, and is now footing the bill twice over, first for construction, and now for studies and expansion works to fix what should have been got right the first time. Complaints about the new airport have piled up steadily since it opened: poor ventilation, slow baggage handling, an inability to cope when several flights land in quick succession, brusque and poorly trained staff, and unreliable transport links to and from the city. Most of these grievances trace back to one root cause, namely the airport’s limited capacity and its struggle to absorb passenger volumes, with reports suggesting the facility buckles under the strain of as few as three or four overlapping flights. The post-pandemic rebound in both international and domestic flight frequency, spurred on by the liberalization of the air transport sector, has only piled further pressure onto a facility that was already too small for its own good.

When Chinggis Khaan Airport opened for business, the country’s social and economic footing was still shaky from the pandemic, and officials from the head of state on down were quick to tout it as a lifeline for a tourism sector and an economy that had ground to a near-total halt. At the time, though, experts and industry observers were not shy about pouring cold water on the fanfare, pointing out that a change of name and location did not, by itself, amount to a change in standards, and that despite its polished exterior, the airport’s internal layout and spatial planning fell well short of what a genuine international hub ought to offer. Those criticisms were largely brushed aside by officials at the time. It is telling, then, that the same ministry now openly admits the airport was built to handle just 1.5 million passengers a year, a figure that looks almost quaint given how quickly tourist and passenger numbers have climbed since. To hear officials now argue that expansion has become unavoidable because the airport is creaking under peak summer loads is, frankly, more than a little embarrassing, given that the writing had been on the wall for years. After roughly a decade of dithering, false starts and second thoughts before ground was even broken in Khushig Valley, the failure to plan for exactly this kind of growth points to a project that was, from the outset, handled with a distinctly lackadaisical air.

Whose fault is it, really?

It would be too easy, and not entirely fair, to lay the blame solely at the contractor’s door. The new airport was indeed built by Japanese firms and specialists under a concessional loan from the Japanese government, but Mongolia was never a passive bystander in the process. As the client, the Mongolian side oversaw and took part in every stage of the project, from approving the design to signing off on the plans, and today the airport’s management still rests with that same Japan-Mongolia joint venture. If the whole undertaking was launched without proper costing or forward-looking study, then that failure belongs as much to the client as it does to the builder. In a country with a stronger culture of accountability, tighter oversight and laws that are actually enforced, a shortfall of this scale might well have prompted some very pointed questions about who was responsible. Instead, our own officials have carried on as though they had pulled off some great feat, pretending as if they were building the airport out of their own pockets, which is a distortion of the facts if ever there was one.

A concessional loan, however easy its terms, is not a gift. It is a life debt, one that the country, and by extension every taxpayer, will eventually have to repay with interest. It should be treated accordingly, not as free money that fell out of the sky, but as capital that ought to be steered towards whichever sector of the economy will yield the greatest return. Pouring this much money into expanding and upgrading an airport that is not even 10 years old is, in practical terms, a poor use of resources, an “investment” that looks rather too wasteful under any honest scrutiny. Channelled instead into diversifying the economy over the long run, whether through domestic manufacturing, broader infrastructure, or export channels capable of generating a direct return, the same sum could have made a far more tangible contribution to the country’s development.

That said, with the loan agreement now on the cusp of ratification and both sides having reached terms, the only road left open is to carry the project through with real accountability and rigorous oversight, following the old carpenter’s rule of measuring seven times and cutting once. If the government wants to avoid finding itself, a few years down the line, once again crying that “capacity has run out,” it needs to expand the airport with genuine foresight this time, building in enough headroom to absorb 20 to 30 years of growth rather than just enough to get through the next peak season. Simply making the terminal bigger will not be enough. Service quality, accessibility and cargo logistics all need to be brought up to genuine international standards, and just as importantly, the airport itself needs to be put in a position to generate enough revenue of its own to service the debt it is about to take on, rather than leaving that burden to fall, yet again, on the state.

Published Date:2026-09-14