Who Really Owns The State?

Strong Institutions, Prosperous Mongolia | Article 2

Who pays for election campaigns, and who benefits after the votes are counted? Does someone who makes a substantial donation to a political party gain preferential access to a ministerial position, the leadership of a state-owned enterprise, or a lucrative government contract? Who investigates these connections, and who holds those involved accountable?

Mongolia’s Constitution declares that all state power belongs to the people. But how can citizens know whose interests that power serves once an election is over?

Following the Election Money

In Mongolia’s 2024 parliamentary election, the spending ceiling was MNT 6.4 billion for a political party or coalition and between MNT 900 million and MNT 1.5 billion for an individual candidate, depending on the constituency. These were legal spending limits, not actual expenditures.

According to the OSCE/ODIHR final election observation report, five political parties failed to submit their interim campaign finance reports. Another 113 candidates provided no income or expenditure information, while 50 reported only one side of their finances. International observers also noted that the State Audit Office, despite having the authority to oversee campaign financing, did not conduct substantive monitoring or investigations during the campaign.

This is not simply a matter of incomplete paperwork. It concerns the public’s ability to establish who donated how much, where the money originated, and how it was spent.

Was there money that never appeared in the financial reports? If so, who provided it? Did those financiers subsequently receive preferential treatment?

Incomplete reporting does not itself prove hidden financing or corruption. But without meaningful scrutiny of financial flows, even determining whether the law was violated becomes difficult.

What Is the Price of Public Office?

Mongolians have confronted this question before. The so-called “MNT 60 Billion Scandal,” which emerged around the 2016 parliamentary election, brought the possible connection between political fundraising and public appointments into national debate.

Media reports described a leaked audio recording in which participants allegedly discussed raising political funds through the allocation of government positions. The controversy raised a fundamental question: could public office become a means of financing political power?

In October 2019, a court of first instance sentenced Ts. Sandui and A. Ganbaatar to four years in prison in connection with the case. An appellate court subsequently overturned the ruling and returned the case to prosecutors. The original conviction, therefore, should not be presented as a final determination of guilt.

Nevertheless, the underlying question remains relevant: can government appointments become instruments of political fundraising?

Who Benefits from Public Money?

In 2018, controversy erupted over preferential loans issued by Mongolia’s Small and Medium Enterprise Development Fund (SMEDF).

The news outlet iKon.mn examined the fund’s financial transactions, public officials’ asset declarations, and corporate registration records.

According to its investigation published in April 2019, companies connected to 16 members of parliament, three ministers, and one deputy minister had received loans from the fund.

The investigation reported that companies associated with then Minister of Food, Agriculture and Light Industry B. Batzorig had received a total of MNT 3 billion, while companies linked to then Minister of Road and Transport Development Ya. Sodbaatar had received MNT 2 billion.

These figures come from journalistic investigations and do not mean that every person mentioned was found guilty of wrongdoing by a court. They nevertheless illustrate the risks that arise when public financing and the business interests of political officeholders overlap.

The MNT 60 Billion Scandal raised questions about the potential relationship between political fundraising and government appointments. The SME loan controversy exposed a different concern: the intersection of political influence and access to public financial resources.

The mechanisms differ, but both lead to the same question: Who gains access to the wealth and opportunities distributed through government decisions, and according to what criteria?

The same question should be asked about public procurement, land allocation, mining and import licenses, supply contracts for fuel and other strategic goods, and major contracts awarded by state-owned enterprises.

Why Does Political Power Become Wealth?

Institutional economist Douglass North argued that formal and informal rules shape human behavior and incentives.

When institutions cannot independently scrutinize government decisions and their implementation, cultivating political connections may become more profitable than competing fairly in the marketplace. Some businesses may consequently seek privileges from the state rather than create new wealth.

Economists call this rent-seeking: pursuing income through special privileges rather than productive economic activity. An exclusive license to import an essential commodity, granted without fair competition, can be a classic example.

Daron Acemoglu and James Robinson describe extractive institutions as systems in which political power and economic opportunities become concentrated in the hands of a limited group.

For example, a company that donates to a political party, borrows from a state fund, or receives a valuable license may be controlled through relatives, intermediaries, or offshore holding companies. Unless its ultimate beneficial owners are identified and verified, the investigation into potential conflicts of interest remains incomplete.

The essential question is whether government decisions promote fair competition or grant preferential advantages to selected interests.

Establish an Independent Electoral Commission

Mongolia revised its Law on Political Parties in 2023. The legal framework provides for the submission, auditing, and public disclosure of political parties’ financial reports. But receiving financial statements and independently verifying their accuracy are two very different things.

I propose transforming the existing General Election Commission into a genuinely independent Electoral Commission, institutionally insulated from political parties and equipped with the professional capacity to oversee political financing.

The United Kingdom offers one model. Its independent Electoral Commission receives and publishes quarterly reports on political donations and loans, investigates potential violations, and exercises statutory enforcement powers. In 2026, donations and loans from a single source exceeding £11,180 in aggregate must be reported by a party’s central organization.

Germany follows a different institutional model. Political parties submit financial reports to the President of the Bundestag. Individual donations exceeding €35,000 must be promptly disclosed, together with information identifying the donor. Although Germany does not have an equivalent independent electoral commission for this purpose, it provides another example of financial reporting and transparency mechanisms.

Mongolia could adapt these experiences to its own institutional circumstances.

First, commission members should be selected through an open, merit-based process rather than political bargaining. They should include respected, nonpartisan individuals with expertise in auditing, law, and finance.

Second, I propose requiring additional verification of the source of funds whenever cumulative donations from a single source reach the equivalent of US$5,000. This must not weaken existing disclosure requirements for smaller donations. Safeguards should also prevent donors from circumventing the rules by splitting contributions, using intermediaries, or donating under other people’s names.

Third, the commission should have legal authority to cross-check financial reports against relevant banking records and donor information, and to initiate enforcement action when violations are identified. Its responsibilities must be clearly coordinated with audit and investigative agencies, while protecting lawful privacy and individual rights.

Fourth, legally accessible databases should make it possible to examine connections between major political donors and subsequent government appointments, procurement awards, land allocations, and licensing decisions.

Political financing must be subject to meaningful scrutiny throughout the year, not merely during the few weeks of an election campaign.

Who Really Owns the State?

A political party that wins an election does not become the de jure owner of state property. But does it become the de facto owner, exercising control over public assets as though they were its own?

Who investigates whether individuals who openly or secretly finance political parties subsequently obtain senior government positions, public contracts, land, licenses, or other preferential treatment?

Transparency is not merely the publication of financial reports. It requires independent verification and meaningful consequences when violations are established.

The quality of democracy should be measured not only by election results, but also by how state power is exercised between elections.

De jure, the Mongolian people own the state. But de facto, who does?

DeFacto — Think Deeper. See Further.