Decentralization, Local Governance, and Local Economic Development in Mongolia

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• Publisher: Asian Development Bank
• Year: 2021
• Print ISBN: 9789292690151
• eBook ISBN: 9789292690168
• Topic: Law
• Subtopic: Public Law
• Index: Law

This publication presents an empirical assessment of Mongolia's system of decentralized governance and the extent to which it translates into the actual and practical working environment for subnational and local governments. It focuses on the roles of subnational and local governments in providing public services and promoting local economic development.

SUBNATIONAL GOVERNANCE AND SERVICE DELIVERY IN PRACTICE

This section explores how SNGs manage their primary levers of local public action, the delivery of the range of socioeconomic infrastructure and services for which they are responsible, and the constraints and issues that surround this.

A. Service Delivery Spending Responsibilities

1. Legal Mandates

Since 2012, there has been a degree of expenditure responsibility assigned to SNGs under the Budget Law (2012):

(i)Under Article 58, there is a set of modest, devolved service delivery functions of aimags and soums.

(ii)Under Articles 39.1 and 61.1, there is delegation of responsibilities for basic education, primary health care, social welfare, physical fitness, and culture to SNGs. These are funded through special-purpose fiscal transfers. In the most recent Budget Law revision, from 2019 some minor spending functions related to physical fitness, culture, and parts of school and clinic operating budgets will no longer be transferred to SNGs as devolved functions and funded from the base expenditure budget (Table 4).

Table 4: Functions Decentralized under the Budget Law

Sector	Aimags and Capital City	Soums and Districts
Main Functions Devolved (Budget Law, Article 58)
Social Welfare	• Social care and welfare (upon a decision of SNG governors) • Playgrounds	• Social care and welfare (upon a decision of SNG governors) • Playgrounds
Transport, Roads	• Public transport • Aimag and Inter-soum roads • Street lighting	• Street lighting maintenance
Water and Sanitation	• Water supply • Sewerage, drainage • Waste removal • Public hygiene	• Public hygiene, street cleaning, waste removal
Agriculture and Livestock	• Livestock restocking • Pasture management • Pest control	• Livestock restocking • Pasture management
Economic Development	• O&M electric distribution network • Development of small and medium-sized enterprises
Environment	• Environmental protection and rehabilitation • Flood protection	• Environmental protection
Capital Infrastructure	• Urban planning, construction of new infrastructure • Maintenance of locally owned buildings
Main functions delegated (Budget Law, Articles 39.1 and 61.1)
Education	• Preschool, general education, fitness, and culture	• Preschool, general education, fitness, and culture
Health	• Primary health care	• Primary health care
Social Welfare	• Child protection and development	• Child protection and development

O&M = operation and maintenance, SNG = subnational government.

Source: Asian Development Bank (compiled from the Budget Law of Mongolia, 2010).

However, these are recurrent budget responsibilities for which all local spending is subject to rigid central budget norms, greatly limiting any local choice.

Despite the provisions noted in Table 4, in practice, capital budget spending is still controlled by the central sector ministries. The main resource for local capital budget spending is the LDF transfer and for which there are menus for aimags and soums, although these are not always clear. For example, it is not clear if these menus are exclusive mandates for spending only to be undertaken by SNGs or permissive lists of allowable spending that the central government may decide to spend.

A review process of SNG functional assignments has been launched by the Cabinet Secretariat under the SDC-supported Decentralisation Policy Support Program. A methodology has been developed with initial piloting undertaken in the Ministry of Environment, which is now being extended to the Ministry of Construction and Urban Development and the Ministry of Labour. The next step will be to assess SNG capacity to adopt new functions.

The Cabinet Secretariat officially endorsed this methodology in a January 2018 circular to all ministries. The recent Budget Law revision included a provision under Article 58 that each ministry should review SNG assignments every 3 to 5 years. However, based on international experience, it remains to be seen how enthusiastically line ministries will move to cede to SNGs any control over their responsibilities and the associated budgetary and staff resources.

The Budget Law is not the only statute mandating functions to SNGs. Functions are scattered throughout other laws and regulations and not always aligned or updated and constitute a source of some confusion (Box 10).

Box 10: Unclear Mandates to Subnational Governments

In 2014, Ulaanbaatar City authorities undertook an extensive review of service delivery functions, roles, and procedures as laid down under the law. The findings were revealing.

(i)A large number of legal and regulatory instruments (137) in one way or another dictate service responsibilities to city authorities at one level or another.

(ii)A large number of service delivery responsibilities (536) are mandated to city, district, and khoroo (urban ward) authorities. For example:

• roads and related infrastructure maintenance: 34 responsibilities

• social policy: 75 responsibilities

• social protection and welfare: 122 responsibilities

• public order: 23 responsibilities

• environment: 29 responsibilities

(iii)A large degree of confusion existed across this range of responsibilities. Among the 536 distinct service responsibilities, there were 147 overlaps or conflicts in mandated responsibilities between city and districts, or districts and khoroos.

A similar review conducted by another aimag (province) counted 80 sector-specific laws or regulations that in different ways specify subnational government service delivery responsibilities.

Source: Consultations with Ulaanbaatar City officials.

2. Spending Patterns in Practice

Overall, subnational spending in 2017 constituted 26% of all national government spending, down from 29% in 2014 (Figure 3).

Figure 3: Expenditure Breakdown for Bayantal Soum (Govisumber), 2018
(MNT’000)

LDF = Local Development Fund.

Source: Data provided by Bayantal Soum officials.

No national budget data on SNG spending by sector were available other than for Ulaanbaatar (Appendix 1). Based on field visits, it appears that the bulk of this spending is on the functions delegated to SNGs under Articles 39 and 61 (education, health, and social welfare), accounting for 60% of the budget. Most SNG revenues compri...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Tables, Figures, and Boxes
• Acknowledgments
• Abbreviations
• Glossary
• Synopsis
• Subnational Governance in Mongolia: Institutional and Policy Context
• Subnational Governance and Service Delivery in Practice
• Broader Subnational Government Roles in Local Development
• Conclusions and Future Directions
• Appendixes
• Footnotes
• Back Cover