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Mongolia views the Canadian economy as a model to follow, nestled as it is next to a world superpower and relying on mining to expand its largely agricultural economy.

On Tuesday, Prime Minister Stephen Harper hosted Mongolian Prime Minister Sükhbaatar Batbold for a bilateral meeting in Ottawa, where they launched the early stages of free trade talks.

Once a communist land of shepherds and farmers, Mongolia now attracts foreign investors - including Canadian mining firms - that are keenly interested in the copper, gold, uranium and other mineral deposits buried deep in the landlocked Asian country.

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A rare example of stable democracy in Asia, Mongolia sent troops to Western military missions in Iraq and Afghanistan.

And Mongolians know what it's like to be a small country living next to a major economy - they've got it on both sides. At just over three million people, the population is dwarfed by China, its southern neighbour, and Russia to the north.

Then there's the scenery. "You get off the plane and you think you're in the Prairies," said UBC professor Julian Dierkes, an expert in Canada-Mongolia relations and a member of the university's Institute for Asian Research.

Economic Clout: Mongolia's GDP was just $9.4-billion (U.S.) in 2009, placing its economy 150th in the world.

Shared history: Canada's diplomatic relations with Mongolia started in 1973. In 2008, the Harper government opened a Canadian embassy and appointed Canada's first resident ambassador to Mongolia.

Shared expertise: Canada and Mongolia signed a memorandum of understanding Tuesday that commits the two countries to share expertise on agriculture technology, standardization and running a non-partisan public service. Mongolia's public service would likely seek Canada's Public Service Commission's advice on avoiding corruption, recruiting and training, and government regulation of industry.

Trade: Canada is the second-largest overall foreign investor in Mongolia - after China - with $600-million in direct investment. China, Russia and India all have interests in the uranium being mined in Mongolia - sometimes leaving Canadian mining firms caught in the middle. Earlier this year, Canadian-owned Khan Resources took legal action against the government after a mining licence was revoked.

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Geopolitics: Mongolia has a parliamentary system of government and is of strategic importance as a democracy with powerful allies and neighbours. "Mongolia is sitting there between China and Russia and is therefore, in global terms, an important place for strategic, security and stability reasons," said Prof. Dierkes, who notes Mongolia also sends troops to Canada for training.

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