Regions and Countries

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p. 5 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Subregional Economic Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Mongolia : I. Country Performance Assessment

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D. Governance

24. The process of establishment of a functioning parliamentary democracy has been a key feature of Mongolia’s transition. The Parliament has played a major role in developing economic policy and guiding the reform process. While the development of the parliamentary system has on occasion resulted in political uncertainties which have impacted on the economy, significant benefits are evident in terms of improved accountability and transparency in public policy making.

25. The transition from central planning to a market-based economy has reduced the size and role of the public sector and increased competition and the use of market forces for allocation of resources. Reducing and changing the role of the state to one more consonant with a market economy has been a cornerstone of Government policy since 1996 when the Government embarked on a path to restructure the public sector by reducing the number of ministries from 16 to 9 with the objective of improving coordination of plans and projects. However, while ministry mergers and restructuring appear to have improved coordination, they also enlarged the ministries. The distinction between core and noncore activities within ministries is now unclear, and in turn, public service delivery is less efficient and effective. There has been minimal attention to performance at the organizational or individual levels, and, as a consequence, there has been less or no strategic focus at the agency level. The result has been poor delivery of public services both in terms of the quality of services, and their cost-effectiveness.

26. Fiscal and administrative relations between central and local governments remain problematic. Most of the taxes are collected at the provincial level, and most of the revenues collected are sent to the central Government. But the central Government allocates transfers to the provinces in an ad hoc way, thereby obviating the advantages of having a centralized collection system for most of the revenues in order to allocate transfers to foster greater equity across subnational governments. In terms of administration, serious problems remain in identifying clear lines of accountability.

27. Several measures have been taken by the Government to address these issues and to increase accountability through civil service reform. The Government initiated civil service reform includes the reorganization of the government system and operation, staff rationalization, and improvement of public financial management. Local governments have slowly been given greater authority and autonomy, although their fiscal and staff resources are limited. The Government has launched a far-reaching program of privatization of state assets. It is also making efforts to broaden the tax base, strengthen revenue collection, and control expenditures. The Government is committed to the principles of access to information and transparency in the decision-making processes. There are, nevertheless, institutional and administrative constraints to achieving these goals which are gradually being addressed.

28. The speed of implementation of the needed reforms in the public sector is constrained by several factors. First, the capacity of the public sector is limited and extensive training and reorientation is needed to get both management and the rank and file moving in the desired direction. Second, social costs of too rapid a disruption to the Government machinery are deemed very high.

29. The high and unsustainable level of fiscal deficit also acts as a constraint on reforms. In an environment where Ministry of Finance is forced to make short-term decisions on cash rationing due to the unavailability of funds, a proper system of public expenditure management cannot be implemented.

30. Corruption has emerged as an important issue during the transition. The Parliament has established an anticorruption working group with the objective of strengthening legislation in this area.

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