Ulaanbaatar, September 17, 2015—Rural residents in Mongolia will benefit from a $34.1 million program funded by World Bank and Swiss Agency for Development and Cooperation (SDC) that aims to make the government funding process more transparent and more responsive to community needs.

The program, the third phase of the Sustainable Livelihoods Project, was officially launched today in Ulaanbaatar with a workshop organized by the Ministry of Finance and the World Bank. The three-year program aims to help Mongolia implement the 2011 budget law, which gives rural communities a greater role in the government funding process.

“The project will empower rural communities by providing a transparent mechanism for funding to be transferred to support local development initiatives,” said James Anderson, World Bank Country Manager for Mongolia.

The program will build on the success of the first two phases of the project, which have helped set up community development funds financing more than 6,000 projects, mostly investing in education and health. It will build local government’s capacity for financing investments in infrastructure and services. Based on the budget law, funding allocations are decided each year through robust community participation.

“The Sustainable Livelihood Project has played an important role in developing rural areas in Mongolia through community participation. The Government of Mongolia and World Bank have worked together since 2002 to implement the project and increase the flow of public and private investment to herders’ communities,” said Kh. Gantsogt, State Secretary of the Ministry of Finance.

The project will also support local economic development by promoting investments for private sector growth in the more than 300 soums – or local administrative districts – throughout the country.

It will focus on financing based on governance performance, which awards additional funding for local development investments to local government entities that adopt participatory processes to reflect local needs and priorities in their planning, budgeting, implementation, monitoring and evaluation processes.

“The new phase of the project will ensure that the budget available at local level, especially Local Development Funds, will be managed and used effectively and efficiently, responding to the needs of local people. Strengthening capacities of local governments in rural areas will be key to achieving this goal,” said Markus Waldvogel, Director of Cooperation of Swiss Agency for Development and Cooperation.

The program is funded with a $22.7 million credit from the International Development Association (IDA), the Bank’s fund for the low-income countries and a $11.4 million grant from the Swiss Agency for Development and Cooperation.

One of these advancements has been the introduction of the Local Development Fund (LDF) - a pool of state funds that enables Mongolian citizens to participate in identifying priorities for public investment. People are more aware of, and are largely satisfied with, the LDF and its investment in priority areas that have been identified by local communities.

“When we speak to local people, we are repeatedly told that an official sitting in Ulaanbaatar doesn’t know as well as the local population what is needed in local areas, for example for a school or a hospital”, said Diepak Elmer, SDC in Mongolia Deputy Director of Cooperation.

The Office of the President, a pioneer in the implementation of direct democracy in Mongolia, together with Mongolian civil society organisations, is willing to go beyond consultation and establish citizen participation as a right of citizens and a duty of local governments. The model of the 200-year-old popular referendum in Switzerland is being used as a point of reference.

Two Swiss experts from the Centre for Democracy Studies in Aarau travelled to Mongolia in January on a week-long advisory mission. Together with Mongolian legal experts and civil society democratic leaders, they analysed how to legally formulate a referendum mechanism that would work for both citizens and local governments. They also explored its inclusion in a draft of the Law on Public Participation.

At a public discussion in January focused on how direct democracy can be incorporated into a representative democracy, Professor Auer from the Institute of Democracy Studies in Switzerland shared the Swiss experience and examples of how representative and direct democracies can complement one another.

Professor Auer highlighted that direct democracy was not unknown to the Mongolians, referring to the Article 3 of the Constitution of Mongolia. He said the direct participation of citizens in state affairs as a way of exercising state power was mentioned before the representative system.

SDC’s Governance and Decentralisation Programme is supporting the drafting of the Law on Public Participation, which it is hoped will be passed by the Parliament in 2015.

On request from Mongolian authorities, SDC funded a documentary film that captured Mongolia’s direct democracy practices and experiences. Directed by internationally awarded film director S. Byamba, the film focused on the introduction of decentralisation and citizen participation in decision-making in Mongolia.