Many construction companies are taking advantage of the taxpayer money entrusted to them through government tenders, failing to fulfill their obligations. There are instances where these companies have claimed that delays in completing projects were due to state pressure and financial burdens they faced, rather than their own mismanagement. The government’s inconsistent funding also leads to significant financial losses for these businesses, which often cannot deliver projects on time, despite having won tenders and received payments.
This situation has resulted in numerous government-funded construction projects being classified as “stalled”, leaving them uncompleted for months or years. The concern is the impact on vital public infrastructure such as schools and kindergartens, which are often the first projects to get “stuck”. This directly infringes on children’s rights to live and study in a safe and healthy educational environment, demonstrating the damaging effects of corruption in the tender process on future generations.
Approximately 620 construction projects stalled
The Independent Authority Against Corruption (IAAC) recently held a discussion on improving the planning and oversight of public construction projects that have been lagging for years. IAAC aims to identify and prevent the causes and conditions for corruption while also addressing its consequences. They reported that from 2009 to 2024, 502 projects have been delayed, with initial budget estimates increasing by two to five times.
As of this year, only 29 projects have been completed, while 422 are ongoing and 51 are stalled or problematic. 51 were initially budgeted for a total of 215 billion MNT, of which 88.2 billion MNT has already been allocated by the government. About 90 percent of these unfinished projects are schools, hospitals, dormitories, and sports facilities.
B.Terbish, a senior official at IAAC, highlighted that while there are 51 officially recognized stalled projects, the Ministry of Finance has indicated that there are around 620 projects that have faced delays. Investigations by IAAC further revealed that many of these projects lack the necessary preparatory work and detailed plans. There is a widespread lack of accountability at all levels of government.
During the parliamentary approval of the state budget, members often include projects without adequate plans or research, resulting in an estimation-based budgeting process. This lack of detailed planning means that the actual costs often far exceed initial projections. Furthermore, agencies responsible for overseeing construction plans, such as the Construction Development Center and the Energy Development Center, are criticized for their inadequate oversight.
Particularly in the fields of education and healthcare, it is crucial that the most capable companies with the best technology and financial resources are engaged in construction. However, the current reality illustrates that this is not the case. There is a pressing need for improvement in how construction projects are managed and monitored, ensuring that the facilities vital to the community are completed in a timely manner. This situation underscores the critical importance of transparency and accountability in public procurement processes. Without these, the dreams of a well-educated and healthy future generation remain at risk.
45 companies received a portion of their funding
Looking at the clients of the 51 stalled construction projects, 25 are funded by the Ministry of Education, nine by the Ministry of Construction and Urban Development, four by the Ministry of Health, five by the Ministry of Environment and Climate Change, three by the Ministry of Family, Labor, and Social Protection, two by the Committee of Mongolian National Sports, and one each from the Ministry of Culture, Sports, Tourism, and Youth, the Asian Development Bank, and the local authority of Umnugovi Province. Contracts for these projects were signed between 2010 and 2022, with implementation deadlines set from 2016 to 2025. Although the contracts stipulated that these buildings should be constructed within one to two years, delays have occurred due to issues related to the chief budget administrator, contractors, and project designers.
Moreover, 45 companies are construction projects. While many of them have received a portion of their funding, they have not completed the work within the specified timeframes. A notable example is the Mongolian National Center of Gerontology, commissioned by the Ministry of Health, which has been under construction for many years but has not yet been completed. The contract for this 60-bed hospital in the Khan-Uul District was signed on November 28, 2011. 13 years later, only 60 percent of the construction has been completed. Although it was supposed to be operational by 2020, it is not an exaggeration to say that both the client and the contractor have failed in their responsibilities.
The project was budgeted at 7.3 billion MNT, with 6.2 billion MNT allocated to the contractor, “Arvis International” LLC, led by director Yo.Purevdavaa. Additionally, a sports complex with a capacity for 1,000 people, also located in Khan-Uul District, is among the 51 stalled buildings. The complex, commissioned by the committee, is being built by “Uureg Trade” LLC for 7.2 billion MNT, of which 1.5 billion MNT has been allocated. This project, which was supposed to be completed in 2022, is currently only 40 percent finished.
There are plans to increase the funding for the construction and include it in next year’s budget, as well as to propose canceling the contract with the contractor to the relevant ministry. A significant portion of the stalled buildings are located in rural areas. For example, in the Tumurbulag soum of Khuvsgul Province, a contract was signed to build a 100-bed kindergarten for 1 billion MNT, with an expected completion date of December 31, 2021. However, the current progress is only 20 percent. It is reported that the contractor, “Shidet Gal” LLC, has received over 37 percent of the funding. It may be that the company lacks the necessary workforce and capacity, or is merely a “front” company, leading to their failure to complete the work without any clear justification. Thus, it would not be surprising if the client has no choice but to terminate the contract.
Stalling reasons for major infrastructure projects in UB
For years, there has been talk about transitioning Ulaanbaatar’s ger district into apartment housing to reduce air pollution and soil contamination. Within this framework, several infrastructure projects have been planned. One such project involves the residential development surrounding the MNB building in 11th khoroo of Bayangol District and seventh and eight khoroos of Chingeltei District. The contractor for this project is “Erel” LLC. As part of this initiative, six central facilities for water and heat distribution were to be constructed; however, work has been stalled on four of them due to a lack of architectural planning, leaving the land unallocated. Only the second water and heat distribution center has been accepted for operation. Meanwhile, the first center has yet to be approved by the national commission and remains stalled. Consequently, a significant project aimed at developing the capital's infrastructure and housing has come to a halt.
Furthermore, there have been cases of stalled work due to the negligence of the Capital City Land Management Department, including attempts to build on land owned by other organizations. For example, a sports complex with a capacity for 1,000 people in Sukhbaatar District, started by “Green Resource” LLC, has ceased progress for this reason. The contract for this project was signed in June 2015, with a budget of 7.2 billion MNT, but it is only 45 percent complete. The project has received 4.1 billion MNT in funding from the budget. However, a dispute arose over the land ownership, as it is claimed to belong to the National University of Mongolia (NUM), contributing to the halt in construction. From 2015 to 2018, land disputes persisted due to the Land Management Department issuing conflicting orders for building on school property. Ultimately, NUM and the Sukhbaatar District’s Department of Physical Education and Sports signed a cooperation agreement, but “Green Resource” LLC has still not been able to fulfill its obligations. This delay stems from disputes between the project’s designer, the Urban Planning Design Institute, and “Khangain Nar” LLC.
This is not the only instance where work has stalled due to issues with the designers. The Nairamdal International Children’s Center started construction of a water sports complex in 2014 by a company known as NR, but it has not yet been completed. Initially budgeted at 17.2 billion MNT, the project has received 15.6 billion MNT so far, with 85 percent of the work reportedly done. However, changes in sports hall standards have led the designer to withdraw, causing further delays in what was supposed to be an operational facility by 2022.
If we were to list all the stalled and abandoned buildings and projects, it would require more space than available in the newspaper. For example, replacing pit toilets in local schools, kindergartens, and dormitories with sanitary facilities, connecting newly built schools and kindergartens to engineering networks, and non-compliance with established regulations during construction would all contribute to an extensive list.
Citing the 2022 audit findings, it reported, “There are 59 projects and initiatives worth 184.1 billion MNT that have been started with state budget funds but remain unfinished. Of these abandoned projects, 32.2 percent is allocated for electrical and thermal engineering facilities.” This indicates that billions of tugrugs from taxpayers have been tied up in stalled buildings, with the timeline for their completion uncertain, suggesting that someone may be profiting from these funds without accountability.
