Accounting Scandal

1. A scandal in Mongolia, heads roll in government after US$1.3 million SME fund
embezzlement in 2018.
This vote comes on the heels of a scandal involving 14 parliamentarians, two cabinet
members, and other high-ranking officials who channeled more than US$1 million in
government funds to their family and friends. The money was intended for the development of
small- and medium-sized enterprises (SMEs) that are crucial to the country’s development, as it
tries to move away from its reliance on mineral resource exports.
The Khurelsukh vote followed 10 hours of intense debate, where the 27 MPP members
who revolted against their party demanded the Prime Minister step down for failing to provide
repercussions for implicated politicians.
In a fierce defence, Khurelsukh declared the vote a ploy by MANAN – the Mongolian
word for “fog”, which is also an acronym combining the Mongolian abbreviations for the MPP
and the DP. MANAN refers to what Khurelsukh and others have described as Mongolia’s “30
families”, an elite group he claims controls both parties.
He alleged that this group, led by current Speaker and former prime minister
Miyegombyn Enkhbold, is attempting to topple the government because it is interfering with
their business interests. Echoing the populist rhetoric that was effectively used by current
President Khaltmaagiin Battulga’s 2017 election campaign, the Prime Minister depicted himself
as a champion of the people intent on fighting elitism and grand corruption in Mongolia’s
government.
Mongolians generally perceive their government as having high levels of corruption and
ranked political parties as the country’s second most corrupt institution in a recent Asia
Foundation survey. The SME scandal has given the public a focal point for their mistrust, and on
November 14, protesters braved frigid temperatures to gather in front of parliament to
demand accountability for the missing funds.
The Mongolian National Chamber of Commerce and Industry has called on its 3,500
member companies to boycott tax payments until the scandal has been resolved and is
demanding a constitutional amendment to increase public oversight of government finances.
To date, the head of the fund, the state auditor, and the minister overseeing the fund
have been dismissed, while others are under investigation. In his comments on Friday,
Khurelsukh vowed to audit Mongolia’s 20 other state funds to root out corruption.
While Prime Minister Khurelsukh retained power with promises to address grand
corruption, the politicking necessary to save himself in the vote of no confidence may tie his
hands. Of the 14 parliamentarians implicated in the SME scandal, eight voted to retain
Khurelsukh as Prime Minister.
This instability and predictability have compromised foreign investment to some extent
– one example is how mining giant Rio Tinto’s copper and gold project has been delayed by
disputes over profit sharing and nationalist rhetoric by some politicians.