The lines will increase the number of connections to neighbouring railways and facilitate the exploitation of minerals.

The first phase, costing around $US 2bn, will be about 1400km long and will connect the South Gobi region with Mongolia's eastern border. The second phase will add another 2300km to the network. Two weeks ago the government approved a third phase totalling 1700km. This will consist of a north-south corridor serving the western side of the country and creating a second link across Mongolia between China and Russia.

The government plans to implement the projects as BOT schemes, but intends to retain a controlling 51% stake.

Mongolia is one of the fastest growing economies in the world registering a 17.4% increase in GDP in 2011, while GDP is forecast to grow by a further 11% this year. Mongolian Railways (UBTZ) carried 18.4 million tonnes of freight in 2011 and expects traffic to exceed 19 million tonnes this year. By 2020 the railway forecasts that railfreight will reach 50 million tonnes.