October 7, 2019

Defeat of the Nation’s Real Small & Medium Enterprises

Highlights of the week:

1. Opening of Parliament’s autumn session and the President’s veto

The regular session of Parliament began on Tuesday with the constitutional amendments on the top of the agenda. While the Legislative Standing Committee did not approve the President’s veto of the referendum, the government standing committee and 64% of the Parliament members present agreed with the veto. Autumn sessions of the Parliament usually discuss the budget for next year but this session shall also involve discussions on the amendments to the constitution along with the Law on Elections. The Law on Elections is interesting in that it is changed by the Parliament prior to every election. It is a peculiar situation where the law can be changed even a day before the election should it be deemed necessary.

2. What is a “Trust Loan”?

Last Wednesday, Members of Parliament submitted a Trust Loan or Credit of Trust legislation on the provision of loans of up to 20 million MNT with low interest or collateral. Proposers of the legislation noted that 90% of people with loans take up to 20 million MNT and that a total of 3 million people (overlapping) will be able to take the loan. The proposal was put forward by 12 members many of whom were involved with SME fund embezzlement. By their estimate, this new fund would require 200-300 billion MNT. This would mean significant reductions in the social infrastructure budget or other areas.

3. Defeat of the Nationa’s Real Small & Medium Enterprises

The court case lodged by qualified individuals and organizations who failed to secure SME funding began last week. However, the Supreme Court overruled the decisions of the administrative court in favor of the plaintiffs. If we look at the issue from the beginning, Members of Parliament embezzled significant funds from the SME fund in 2018. In 2019, the process was changed so that all SME applications that meet the criteria for funding were placed on a roster. Funding for SME’s would be appropriated according to the roster with the understanding that companies that failed to procure funding would move to the top of the roster for the next funding opportunity. 54 companies were placed in this bracket and while they failed to receive their funding, two well-known Members of Parliament procured funding from the SME fund. The ensuing court case was adjudicated in favor of the SME plaintiffs but the regulation on companies who failed to procure funding receiving priority for funding once new funds become available was removed during this judicial process. Therefore, the Supreme Court decided that the SME plaintiffs did not have sufficient legal standing for the case to proceed. This decision was clearly a politically motivated one given that the state would have to compensate the plaintiffs should the court adjudicate in their favor. Mindful of this, the government ensured that the change in regulation would remove the plaintiffs of any legal standing.