Mongolia embroiled in a major corruption scandal over the allocation of educational loans

Mongolia embroiled in a major corruption scandal over the allocation of educational loans

29 May 2023 ( GlobalVoice )

After facing the nation’s biggest corruption scandal in January 2023, the Mongolian government has its hands full with another major corruption case. The country’s media space blew up on May 16 with the report on systemic corruption surrounding the State Educational Loan Fund. Based on the audit data in the report, the fund has been ridden with violations and corruption since 1997, when it started issuing loans to students pursuing higher education abroad. The list of all loan recipients, including their names and remaining loan amounts, was published on May 22, further exposing the scale of corruption and mounting pressure to pay back the loans.

Independent investigation illustrates lack of transparency and competition in the allocation of loans. Global Voices spoke to Batnairambal Otgonshar, who was the first one to bring this case to the public’s attention, to learn about the State Educational Loan Fund and the corruption surrounding it. Batnairamdal is a former Deputy Minister of Mining and Heavy Industry of Mongolia and the International Secretary of the ruling Mongolian People’s Party. The interview has been edited for clarity.

Nurbek Bekmurzaev (NB): What is the main goal of the fund? What are the criteria for receiving a loan and what conditions do recipients have to fulfill after graduating?

Batnairamdal Otgonshar (BO): Regarding the fund, it is not a scholarship fund, it is a loan fund. It was established in 1993 to provide financial support to students who lacked funds to cover their higher education costs at local universities. In 1997, the fund expanded to students who wanted to study abroad.

It is still a mystery what are the criteria for receiving loans. The easiest criteria is for a bachelor’s degree. Students have to enroll into a top 100 global university. However, more than one third of all recipients got loans despite their universities not being in the top 100. Also, there are preferred majors as a criteria. If students got into a top 20 university it did not matter what major they pursued. If they got into universities ranked between 20 and 100, there were some preferred majors defined by the government, such as mining and engineering.

Up until 2012, student loans were written off under the condition that recipients returned to Mongolia and worked for five years here. In 2012, the government issued a decree, which changed this term. Everyone who received a loan after 2012 has to pay back their loan in full.

NB: Why did you decide to bring this case to the public’s attention?

BO: The reason I brought up this issue to the public’s attention is because I applied for a loan myself and did not get it. In 2013, I got accepted into an MBA program at the Harvard Business School. I got a scholarship, but I still needed USD 100,000. I decided to apply for a loan from the state fund. I had my interview, which consisted of three simple and technical questions: What school did you enroll into? How are you going to pay back the loan? Are you going to come back or not? Two days ago I found out that there was a ministerial decree issued under my name: I was included into the list of students who got a loan, but I never received it. Somebody else used my opportunity.

I started raising this issue in 2019 when I returned to Mongolia. The reason for me coming back to Mongolia was to change the current situation and provide equal educational opportunities. It is personal to me. I am not trying to get a political score.

NB: What did your investigation reveal about corruption surrounding the fund? 

BO: My investigation is related to loans, which were allocated to students who received their degrees abroad. It is 30 percent of the total amount issued for higher education. According to the current exchange rate, it is MNT 363 billion (around USD 103 million). This amount was issued to 2,368 students, pursuing undergraduate and graduate degrees from foreign universities.

In 2021, the government adopted the Public Information Transparency Law as part of the initiative to fight corruption. This law allowed access to information, previously not available to the public. I used publicly available information and analyzed it to understand what has happened in the last 30 years and how the fund has been abused.

The main finding of the two-month long investigation is that 90 percent of the loans were issued to high level officials, their children, and those who had access to closed information. There was no transparency or fair competition.

The second finding is that the payback ratio is less than one percent. People always get confused and think that it is a scholarship fund. The 2011 Law on Higher Education and Social Security of Students states that it is an educational loan. People wrongly assume it is a scholarship. That is something I debunked in my report.

The third finding is that 41 percent of the funds allocated to students pursuing master’s and doctoral degrees have been unlawfully written off by ministerial decrees since 2012. It is unlawful because article 8.8 of the law on higher education specifies that anything related to writing off loans issued through a specific fund can be regulated only by the parliament. All the ministerial decrees that wrote off loans are unlawful. It is not my personal conclusion, that is what the audit report by the state audit committee specified in their report.

Lavsunnyam Gantumur, a former minister of education, initiated the process of writing off student loans in 2012. In order to write off loans, he brought up the issue to the cabinet of ministers, which instructed him to sort out his matter in accordance with relevant laws. He used this note as a reason to write off loans using his own ministerial decrees. All the ministers who came after him, including the current one, wrote off loans based on their decrees.

NB: What do you think should change as the outcome of this corruption scandal?

BO: It is not the first time there is a massive corruption scandal in Mongolia. There was a coal case at the beginning of the year. Corruption is a systemic issue. It is not about one person, one ministry, one cabinet. In order to fix this systemic issue, everyone has to understand and agree that it is a systemic issue. We need to disclose it and bring it to the public’s attention. The problem has to be resolved with the public pressure. That is the whole reason why I brought it to the public’s attention.

Providing equal educational opportunities should be the main pillar for any country’s development. If you want to change the country, you have to invest in the youth. And the mechanism for doing that is this educational loan fund. The first goal is the public understanding of the problem. The second goal is full payback. Everyone has to pay their loans back in order for us to educate the next generation of children abroad. The third goal is fixing the regulation and making sure that the selection process is actually transparent and competitive, and with proper monitoring.