Thursday, 2019.05.16 №5 (94)A GLOBAL LOCAL, INDEPENDENT, ANALYTICAL NEWSPAPER COVERING THE POLITICS AND ECONOMICS OF MONGOLIA

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W E E K L Y

Jargalsaikhan Dambadarjaa,Mongolian political and

economic observer, columnist

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REVIEWDeFacto

WHAT CAN WE EXPECT FROM THE IAAC ON THE SME DEVELOPMENT FUND SCANDAL?

POLLUTION AND HEALTH IMPLICATIONS

ARTICLEDeFacto

MONGOLIA’S INTEGRATED TAX MANAGEMENT SYSTEM

EDUCATION IS NOT A PRIVILEGE, BUT A RIGHT

EDUCATION IS NOT A PRIVILEGE, BUT A RIGHT

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ARTICLEDeFacto

JARGALSAIKHAN Dambadarjaa For weekly articles,

visit http://jargaldefacto.com/category/23

It has been 25 years since the first ever private high school was founded in Mongolia. Currently, 7 per cent of pupils and 46 per

cent of students go to private schools. If you look at the schools, 160 out of 803 high schools are private institutions, and so are 20 of 34 universities and 44 of 48 colleges. Education has become a significant business in Mongolia, and our education sector

today cannot be fathomed without the role the private sector plays.

It is high time we – as a society – reflected on the consequences brought on by private education institutions, the future policy to pursue on education, and the overall understanding of why education matters and what it is for.

The increasing number of private schools has meant a fiercer competition in the market, resulting in a wide variety of choices for customers. When picking a school, people have nearly as many choices as they would have when buying a consumer good. This is true anywhere in the country, especially in the capital city where one half of our population reside in.

The price of goods depends on their quality. Better schools mean dearer tuition fees. As of 2019, the annual tuition fees of private high schools range from 1 to 58 million MNT, with an average of 8 million MNT. In addition to high schools, we’re seeing an increasing number of private pre-schools and kindergartens.

Compared to public schools, the private schools have 2-3 times fewer students in one classroom, offer 2-10 times higher salary to teachers, have a native speaker give foreign language lessons, and have created an internationally competitive learning environment. As a result, they offer higher quality education, which allows graduates to be

able to continue their learning journey in globally recognized higher education institutions.

However, there are only a few families who can afford to send their kids to these expensive private schools. Because of this, good quality education has become a privilege in Mongolia. At the same time, the public schools where most kids (~93 per cent) go to haven’t seen sufficient funding that could improve the quality of education. Despite the fact that Mongolia spends 12.4 per cent of its public budget (as of 2015), which is equivalent to 4.2 per cent of GDP, we’ve been unable to build enough schools, which is forcing schools to run three shifts in a day and accommodate 50 kids in one classroom.

This raises the question why private schools are allocated funding (variable costs) from the public budget, when the investment in public schools is clearly insufficient. In other countries, if private schools are provided funding from the public budget, they are given a tuition fee cap and are required to admit students as per specific residential constituencies. In Mongolia, there is a completely

PUBLIC IMPLICATIONS FROM PRIVATE SCHOOLS

EDUCATION IS NOT A PRIVILEGE, BUT A RIGHT

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Currently, we are still under the impression that better marks mean greater return on education investment. However, it isn’t working the way this model suggests – if you learn everything as the program says, you will be able to improve your livelihood and get out of poverty. Private schools haven’t been reducing the poverty levels, but have been widening the inequality gap.

There are many different policies in other parts of the world. For example, Finland views that the purpose of education lies in reducing the inequality in society rather than producing star students and geniuses. In the 1980s, their education reform focused on ensuring a safe and healthy learning environment for kids. This meant providing free

lunch for all student, helping kids keep healthy and fit, and enabling psychological advice and individual training sessions. It has helped Finland become a global leader in the PISA survey that comparatively measures the reading, mathematics, and natural sciences performance of 15-year-old students. South Korea and Singapore are also among the top performers in this survey. You can read more about why Finland has such strong education system in the article titled “Teacher development is National development” dedicated to the 7th conference of Mongolian teachers.

The purpose of education is to ensure social equality.

2019.05.09

POLICY ON EDUCATION

different scene. All higher-ranking government officials send their own kids and their grandchildren to private schools, and many of them have their own school or kindergarten. As a consequence of this influence and interest, a part of the already limited funding allocated on education has always gone to private schools.

It has even made its way into the law. Clause 41.1 of the Law on Education states that the source of funding for non-public education institutions will be made up of funding from owners, funding from the public budget as per the normative costs per student, tuition fees, donations, soft loans, and revenue from operations. The amount of public budget funding (variable costs) to be allocated to private schools must be renewed every year. However, it isn’t getting done properly. This begs the question who’s lobbying to keep it this way? Instead of aiming to provide education equally, the Ministry of Education, Culture, and Science is pursuing a policy that allows for different schemes, such as the Cambridge program and the laboratory school, which come with a higher pay for teachers and a different cost structure.

Private schools have been luring in the best teachers from public schools by offering higher

salaries, either part time or full time. They are also admitting kids not only when their family can afford to pay the tuition fee, but also based on their talent. When going through the admission process, private schools don’t need to worry about residential constituencies as public schools do.

As an overall consequence, the difference between social classes is growing larger in Mongolia. Education has been turned into a profit seeking business and is driving the gap between the rich and the poor even wider and faster. Education can create a lasting difference between students, and more children have been observed discriminating each other based on what they can afford or not.

Also, having been given government subsidies based on their number of students, some private colleges and universities have been pushing their numbers too hard without focusing on the quality of education. As a result, many of their graduates are unable to find a job, and, even when they do, their competency level is proven insufficient. The number of unemployed people who hold a university diploma continues to grow, while we increasingly see more jobs that don’t require tertiary education as a qualification.

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MONGOLIA’S INTEGRATED TAX MANAGEMENT SYSTEM

A recent change in the tax system of Mongolia allows residents to scan QR codes on their receipts to receive their value-added return. The system brings us a step closer to e-governance. Prior to the integrated tax system, tax collectors in each province collected and administered taxes independently of each other. At the end of the month, it would take significant effort to consolidate all the information into a single account. With this digitalized province, administrators in Uvs province and Ulaanbaatar are working with the same information and any issues that arise may be resolved by the General Office.

The Tax authority adopted the system a little later than other organizations. I recall the General Customs Office adopting an integrated management system 12 – 13 years ago. The General Authority of Social Insurance was to follow suit and now the Mongolian institutions that deal with big data on a regular basis all operate under and integrated management system and there is also information sharing between them. This also brings the entities closer to policymakers and in due time, the system shall be integrated with the “Khur” public generated data system.

I think the program will also be beneficial for foreign investors because the system will have an English version so they can manage their accounts not only from Mongolia but other countries. The ability to send requests and complaints about the system will make it efficient and it also allows for people to divert their time and resources away from physically presenting their papers to the Tax authority. It will therefore connect taxpayers to administrators in a more efficient manner.

In developing the integrated tax management system, I believe that the tax authority is also trying to integrate tax revenues. Bringing tax revenues held in 20 – 45 commercial bank accounts into one fund makes taxes easier to control and manage. This will however ‘crowd out’ commercial banks as the state bank will continue to grow and commercial banks will need to develop mechanisms through which to compete.

Like any other country, there are still a multitude of issues that plague our tax system. In an expanding economy, issues with taxes are also bound to expand. For example, there are 23 types of taxes that needs to be collected but this does not come to fruition. 98% of our tax revenue is generated by 4,000 large and medium enterprises while over 51,000 small and medium sized enterprises generate only 2% of tax revenue. This demonstrates that we have a very narrow tax base, expanding our tax problems. The government needs to collect on taxes from any entity generating funds. For example, herders don’t pay taxes, but they are willing to do so given that they also receive

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POLLUTION AND HEALTH IMPLICATIONS

The 13th Through women’s eyes conference held in Ulaanbaatar was dedicated towards the health impact of air pollution on mothers and babies. More than half of Mongolia’s population lives in cities and there are increasing instances of sickness among children and young mothers due to pollution. We are also seeing increasing numbers of stillbirths, delayed pregnancy and respiratory illness among children. Mongolia’s infant mortality rate, the most basic indicator of how a society deals with an infant’s health is on a downward spiral because of air pollution.

It is not only women and children that are affected by the issue but everyone. For example, if you have a two-year-old child who is in hospital due to sickness, they have to stay there for up to ten days. During this time the father or mother can’t work, lowering the income level of the family. Therefore, air pollution contributes to intergenerational poverty. The first generation does lives in poverty and does not have the ability to provide education and healthcare, human capital to their offspring. The second generation will not be in a position to break the cycle of poverty.

Officials indicated that the government has short, medium and long term goals on reducing air pollution. The short-term goal is the provision of

smokeless stoves to families in the ger district. As for long term goals, is attempting to borrow from international organizations and to devote taxes to relocate ger district families into apartments. This is the only solution to the issue in my eyes.

The fact that air pollution has not gone away despite a 550 billion MNT investment meaning that cost-effective measures were not pursued. The majority of the money was also a loan from the World Bank, Asian Development Bank quite possibly meaning that the next generation will continue to repay the loans. While some have called on some to return to the countryside, the lack of economic opportunities makes this an unviable proposition. A more sustainable, inclusive economy that facilitates universal employment is a better solution.

government services.

There is little tax revenue that is generated from property sales. This is due to the fact that sales of apartments between individuals are declared as gifts. These forms of indiscretions need to be addressed and a more comprehensive tax collection approach needs to be implemented. Another issue is that every 5-6 years, the government allows certain companies to backpay their taxes,

sometimes even a small percentage of what is owed, absolving the company of any tax infractions. We are not privy to which companies receive this treatment. I believe that these instances and the corruption that it brings with it will be minimized by the integrated tax system. We will hopefully begin to see the benefits of the system in the next two or three years.

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WHAT CAN WE EXPECT FROM THE IAAC ON THE SME DEVELOPMENT FUND SCANDAL?

I hope that the new leadership of the Independent Authority Against Corruption (IAAC) will initiate enquiries into the misappropriation of funds that took place last Parliament session. Ordinary people are eagerly awaiting a resolution to the corruption cases. The members of parliament that misuse the Small and Medium Enterprise fund should be held accountable for their indiscretions. Members of Parliament claim that those are loans but as an economist, I believe it equates to a crime.

We hope that the new leadership of the IAAC will continue the fight against corruption and restore the people’s confidence in the justice system. In order to accomplish this, he first needs to follow the regulations and laws. Individuals who have violated the law need to be held accountable. Therefore, the new leadership of the IAAC should bring those who misuse our funds to court. Prior to this, he must remove the immunity of parliament members. This action by the IAAC and other agencies will restore the people’s trust in government, judiciary, and anti-corruption practice in the country.

There is a question of whether the leadership of the IAAC will serve the people, a political party or the president. It is our hope however that he will serve the ordinary people. We are still waiting for him to take some action but it has only two weeks since his appointment. However, we are well aware of what took place in January under the previous leadership of the IAAC and the responsible perpetrators need to be held accountable.

If I may make an observation as a researcher, Members of Parliament are very keen to silence the SME scandal and would prefer for the cases to go

unsolved. If the IAAC, General Prosecutor’s Office and the Parliament don’t work in conjunction with each other to hold the perpetrators accountable, ordinary citizens will hold them accountable in next year’s general elections. The confidence of the public is nothing to gloss over and there is every likelihood that the governing party will lose power next year with the president also losing power the following year should significant steps not be taken. Should the party lose power, it is my hope that the IAAC will still prosecute the perpetrators of the SME case. The IAAC leadership should be operating under the same calculations.

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EDITORIAL BOARDJargalsaikhan Dambadarjaa Christopher Melville

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This review has been edited here for space and clarity. You can watch the full 30-minute review on the Defacto website [HERE].