Political Party Financing in Mongolia: A Road to Grand Corruption?

October 18, 2017

By Bayanmunkh Ariunbold

While true that Mongolia’s economy is heavily dependent on fluctuating coal and copper prices, it is also true that the country’s political parties increasingly influence economic outcomes.

According to The Asia Foundation’s annual survey on perceptions of corruption in Mongolia, in 2010, political parties ranked fifth on a list of the 16 most corrupt entities. By 2017, political parties had reached second place, just behind the Land Affairs Authority. The findings point to a worrying trend: as the amount of money needed to win an election increases, political parties are looking to “secret, private” donors, giving rise to questions of transparency and fairness in the electoral process. Economists argue that if this pattern continues, it will negatively affect Mongolia’s investment patterns and economic performance.

On September 21, Mr. Jargalsaikhan, a renowned TV host, economist, and good governance activist, popularly known as “Jargal Defacto,” explored The Asia Foundation’s latest corruption perception survey findings in the country’s first-ever public debate on corruption before a live television audience.

On September 21, Mr. Jargalsaikhan, a renowned TV host, economist, and good governance activist, hosted the country’s first-ever public debate on corruption before a live television audience.

The two debaters, both well-known professors at local universities, argued about the best way to prevent corruption in politics through reforming political party financing. Mr. Munkhbat, from the National University of Mongolia, said that political parties should be partly financed from the public budget. He argued that this is the most realistic and reliable way to keep political party financing transparent and that citizens would be encouraged to provide oversight because the parties would be using their tax dollars. In this regard, he referenced positive public financing examples from Germany and Sweden, noting that party financing should take place on two levels: day-to-day operational funding and campaign financing. Among other things, public financing enables smaller political parties without seats in the parliament to have access to some funds from the public budget, thus helping to level the playing field.

On the other side of this argument was Ms. Erdenedalai, who teaches at the University of Finance and Economics. She argued that financing political parties from the state budget is unfair, and that it is doubtful that doing so enhances oversight. She elaborated by saying that tighter oversight will make the true sources of financing even more hidden. Furthermore, she said that she believes the public lack the platform needed to demand transparency and hold political parties accountable for their actions. She noted that if only parties holding parliamentary seats are publicly financed, then smaller parties would be at a disadvantage and that democratic pluralism would suffer. Another risk, she argued, is that the larger political parties with seats in parliament would become disconnected from society because, at present, they need to listen to people and work with them to build trust when they later need to seek donations from them. Finally, she noted that political parties do receive small amounts of funding from the national budget but that this is not disclosed to the public. While the existing law on Political Parties requires that political parties report on their finances, but no parties publish these reports.

The debate stirred a great deal of interest on one of Mongolia’s most critical issues today, and raised a number of new questions, including how the country can follow international best practices in light of the economic slump. Mongolia’s current economic crisis and growing foreign debt will preclude it from providing full government financing to political parties at this juncture. But there may be ways to open up the system and provide some level of public financing while better regulating and limiting private donations. For example, the public budget could cover some of the costs associated with radio and television coverage of party candidates. Other measures could include allowing political parties to use billboards free of charge and offering reduced taxes to those who make donations. But most importantly, the public needs to truly know who they are voting for and how their campaign is being financed.

The Asia Foundation’s Survey on Perception and Knowledge of Corruption (SPEAK) is conducted in partnership with Sant Maral Foundation. The survey, which uses random sampling methodology, has been conducted for the last 10 years.

Bayanmunkh Ariunbold is a governance project manager for The Asia Foundation in Mongolia. The views and opinions expressed here are those of the author and not those of The Asia Foundation or its funders.

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