The Nonprofit Sector: Funds, Taxes, and Civil Society

Let me introduce myself briefly. One thing worth saying at the outset is that we are talking here about the laws that govern the underlying institutions of business — the relations among business associations and organizations. The laws connected to business organizations are, of course, the Company Law, then the package of tax laws, the law on the central bank, the laws on commercial banks and the banking sector, the laws on cooperatives and partnerships, and so on. With those laws in place, the business sector is essentially settled.

One of the three great institutions that play a crucial role today is the non-governmental sector. All the problems that exist between our state and our private sector arise precisely because only those two pillars are standing. Because there are no NGOs — because there are no strong NGOs — the corruption that binds the state and the private sector together, and the cliques that straddle business and politics, have a cause: we do not have powerful civil society organizations.

Our Law on Non-Governmental Organizations was in fact adopted in 1997. Naturally, working within our continental legal system, the German law was taken over almost word for word as our NGO law. Our law divides NGOs in two: public-benefit organizations, and organizations that serve their own members. An NGO that serves its members represents the interests of a particular group in society, which makes it, in terms of governance, quite a different kind of body. I am not going to say much about that type today.

What I mainly want to talk about is the other kind — the public-benefit organizations, which in our law are given a particular name: they are called "funds." Under the law as written, an NGO that serves society at large is what we call a fund, and organizations of that sort have been established here.

If we look at the largest and most visible organizations that have operated in this field in recent years, there is, for instance, the Ongi River Movement. Roughly nine thousand organizations set up along these lines are registered with the State Registration Office. What other organizations working in this area come to mind? The Zorig Foundation, for one. So let us all take a look at what that "nonprofit activity" behind these organizations actually consists of.

In terms of the activity it carries out, such an organization is almost indistinguishable from a business. Take it purely from the accounting side. A business produces and sells a certain volume of goods over a year, earns revenue, incurs certain costs, and ends up with a profit. That is what we understand as accounting profit. It is profitable — fine, it is profitable.

Now, how does a business differ from this other kind of organization? A nonprofit also carries out concrete activity. Take a care center as an example. Suppose a care center looking after a hundred children manages to raise 250 million tögrög in donations in a year. Out of that 250 million it spends, say, 180 million on the children — covering the full costs of the children, paying its staff's salaries, paying the rent. Let us say 70 million tögrög is left over at the end. And now the question arises: is that not a profit?

For a nonprofit organization, in accounting terms, this is indeed a profit. Because it earned income in excess of its costs, that amount appears as profit on the organization's financial statements. And it is precisely here that the two great differences between a nonprofit and a business arise. A business will distribute that 70 million to its owners, in the form of dividends, to the shareholders of the company.

For a nonprofit, there is no such distribution. That is why, under the law as written, a nonprofit organization does not distribute dividends. And if it does not, the question becomes: what happens to the income that exceeds that year's costs? It is devoted to the purposes of that organization.

Which raises two further questions: what is the purpose of a business, and what is the purpose of a nonprofit? In truth, the purpose of a business is not so very different from the purpose of a nonprofit. A company, too, may decide not to distribute dividends in a given year, and then the surplus of income over cost is once again spent on the company's purposes. We see this very clearly with joint-stock companies: every year the board decides whether or not to distribute dividends.

So when a nonprofit decides not to distribute dividends, the difference in purpose is not some enormous, frightening gap. When a company's shareholders decide against dividends, what happens is that the value of the shares sitting in the shareholder's pocket rises. Take another example: suppose I hold shares worth 100 tögrög, and our company earns a 20% profit. Had it distributed dividends, 20 tögrög should have come to me, since the profit was 20%. But if the shareholders meet and decide not to distribute dividends, fine — the money is invested back into the company's operations and spent on its purposes, and meanwhile the shares in my pocket are now worth 120 tögrög. If I sell them back, I sell at 120.

By simple logic, then. In a nonprofit, the legal arrangement is that the members of its governing board have no right to draw a salary. A nonprofit has no shareholders. Only its board exists, setting the policy for its work, and the board members themselves may not be paid. So regardless of whether the organization shows an accounting profit in a given year, a nonprofit constantly directs any surplus money back toward its purpose — it is permanently working for its purpose.

So when we ask whether a nonprofit is doing well, the accounting profit of a nonprofit should be seen as its capacity to expand its work in the following year, in the future — not as something anyone is taking a share of. That is exactly why we call it a nonprofit.

That, broadly, is how the nonprofit institution differs from a business. The next question we have to address is: what is nonprofit activity in the first place? Is there even such a thing? Is the Ongi River Movement, for example, an organization engaged in nonprofit activity?

There are also plenty of organizations with a political content. Take the environment: we have a fairly wide range of organizations registered in this field — environmental organizations that monitor mine rehabilitation from the outside, checking whether rehabilitation is actually being carried out, whether activity is being conducted with or without permits. There are many organizations along those lines. Second, there is a small number — not many at all — of social welfare organizations: ones that care for children, that feed people. There are a fair few of those. And a certain number of research organizations have also been set up in nonprofit form.

So the questions are, first, whether these organizations are genuinely performing the role that nonprofits perform in societies where democracy has developed; and second, where our nonprofit sector is actually drifting. Let me say something about both.

Take the West as an example. Plenty of our young people win good scholarships and go abroad to study. Some receive them from scholarship funds established under intergovernmental agreements; some are simply given a scholarship by a fund attached to the university itself; and there are students studying on scholarships from independent foundations. This is one very large form of nonprofit activity.

Now compare that with Mongolia. Here, tuition is paid on students' behalf from only two large sources: one is the state, the other is the parents. So consider who a student actually is — look at the education sector. A student is someone who cannot take a critical view of the curriculum the university is offering. I would rather not name particular universities, but we say we have more than a hundred higher education institutions, and they offer all sorts of programs.

And how do we judge whether those programs are any good? At the Ministry of Education someone gets a piece of paper approved saying the program is adequate, the university is put through accreditation, and then it is laid out on the table and sold to people like bread. With bread, we can take a piece, taste it, and decide, "this isn't good, I won't eat it." A student has no such ability — and their parents have even less.

We have no organization that evaluates those programs, no body producing ratings for our education sector. There is nobody who compares curricula at the National University of Mongolia or the University of Science and Technology and announces that this is the best program in its field. On top of that, roughly a hundred and fifty thousand children finish secondary school each year and more than thirty thousand of them enter higher education. For a market of thirty thousand people, there is no institution other than the Ministry of Education to say anything about the quality of the product being offered.

Second, what problem does every person face when they set out to study? The question of how to find the tuition. Everyone faces it even now. So the parents pay out of their own pockets.

Now look at the scholarship funds in countries where nonprofit activity is developed. Those funds raise money; they collect donations here and there. Then they announce to students: if you meet the requirements of these programs at these universities and are admitted to this class, we will pay your tuition for you. But to receive that tuition from me, you must express what your hopes and dreams are. Perhaps you write an essay. Or you obtain a reference from someone and also describe yourself — and on that basis I pay that child's tuition on their behalf.

Underneath this lies a very powerful mechanism of income redistribution. Because if there is a child with the capacity to learn, with hopes and dreams, planning their own future, then regardless of their family circumstances the opportunity to study is created for them. Seen this way, it is a very good redistribution mechanism.

And on the other side, the people funding those scholarships end up evaluating the universities' curricula. Suppose I decide to give scholarships to one class at the geology school of the University of Science and Technology — a field that is growing fast here — say, to ten students. If that class has thirty students and I am paying tuition for ten of them, then naturally, since I am giving scholarships in that field because I believe our mining sector ought to develop in a certain way, I am helping to prepare the next generation of specialists. And as such, I am in a position to insist that the curriculum must contain certain things, that your teaching staff must meet certain standards, and so on.

So even confined to the education sector, nonprofit activity turns out to be the kind of activity that plays a crucial role in changing an entire system. In health, it is used very widely in two directions. One is that the government does not need to be involved at all. In fact, I should probably say something about the deeper foundation of this first. What is nonprofit activity? It is something that does not work if the state keeps interfering — because it is activity that takes money arising from human goodwill and redistributes it back to people without government involvement.

Most people do have that inner wish to help someone in need. But the way we handle it is this: the moment we have paid our taxes, we consider the matter settled. In other countries the state takes much less part in this, and the possibility of helping those people directly is, first of all, left open.

Second, another feature of nonprofit activity is that it demands a permanent, sustainable financing mechanism. You will have seen it yourselves: a young man from television, Boldkhuu, and a comic actress, Undarmaa, have been running a charity campaign. As nonprofit activity goes, that is an excellent initiative. People trust them and give them money, and they use that money to do things and genuinely help others. Society calls people like this the champions of the nonprofit sector — they are its leaders, the ones who can gather money from people on one side and distribute it on the other. There are people who give the money, too, and kindergartens are being refurbished, hospitals equipped, all sorts of apparatus bought for hospitals; entire kindergarten buildings have even been built. So if we simply built the system for it, this activity is already ready to work in our society.

To keep this short, I will not go through every part of nonprofit activity. But consider this: you all know that in New York, right beside Manhattan, right next to the glass building of the United Nations, there is a park called Central Park. Solid green — while the land beside it costs tens of millions of dollars per hundred square meters. So how do these places work? Why, when a building goes up on the land of our children's park here, is there green space there on land that expensive?

That is one of the things nonprofit funds sustain. Take green space inside a city, or, in the same way, the question of rehabilitation after mining, which is connected to the surrounding environment. It makes no difference. Someone tends that green space, finances it, owns it — a permanent, nonprofit operation. And it has nothing to do with the state, and nothing to do with powerful business: around Manhattan there is Wall Street, the world's largest financial center; around Broadway there is the media industry and fashion. The reason green space sits right alongside some of the most valuable business in the world is that nonprofit funds raise money on one side and are able to spend it on that purpose on the other. It is not as though the government runs that green space and carries the benches in and sets them down. Behind it, large funds are at work.

Several people close to me have died of liver cancer. At our National Cancer Center there is one palliative care ward. It can take only ten-odd patients at a time. The government cannot finance it — it is fairly expensive, and it is a service that cannot reach everyone. People who have fallen ill with cancer go through an extremely hard period before they die. Cancer lasting several months means deep pain, with no way to endure it. And so a service that spares them that pain is something we ought to provide. Here, that service does not exist. Why not? Because if the state cannot do it, someone must help those people — and yet we have no mechanism to finance such work, and no organization to do it.

Take the media sector you all work in. To this day the question of what we mean by independent media has been with us. The media is one of the largest and most powerful civil society institutions, exercising outside oversight of the state's activity and of business activity alike. I would call it the largest of civil society's institutions — one of the most consequential sectors. The health sector I just described concerns relatively few people; the education sector concerns a particular part of society; but the independence of the media concerns all three million. Because the decisions being made behind it affect three million people, and the ability to look at those decisions from outside rests with you.

A friend of mine, A. Erdenebüren, took a master's degree at New York University; I was also in England during the time he was studying. The two of us would meet and sit there marveling. One of the first things we talked about was this: you sit in a garden that is solid green, and the bench you are sitting on was installed in 1958. A small plaque has been fixed to it, dedicating that bench to the memory of a particular person. The Edinburgh city administration gives that garden no money at all. And yet the bench installed back in '58 is still exactly as it was, the garden is permanently tended and solid green, and you are sitting on that bench. Where did the money come from? From a nonprofit fund that manages the garden, tending and caring for it continuously; the bench was brought and installed by someone's children in memory of that person, and the fund maintains it.

The second thing the two of us discussed was the independence of media organizations. In England, for instance, there is no state-owned media. There is the BBC, of course — and the BBC has an enormous research fund attached to it. You know the quality of BBC reporting, the methodology of its analysis, that formidable independence. Recently the BBC put up its own money to have research done on how Britain's social classes have changed over the past hundred years. And behind that, once again, is a fund.

What did we do over the past years? The Law on Freedom of the Press was passed, and we decided that the state simply must not own media outlets, and handed them all over to the private sector. From Ardyn Erkh onward, from Ünen onward, every newspaper became a private outlet. But to this day there is a question we still have to ask ourselves: yes, they have moved away from the state — but are they now dependent on their owners? An independent editorial policy cannot be dependent on the outlet's owner. The media is a powerful instrument that ought to stand on the side of the public truth.

On top of that, when I look at the economic reporting that runs in Mongolian media — take the Erdenet question — people take all sorts of positions. And yet our media sector has no strong position of its own. That, of course, is tied to financing mechanisms; and second, the means to fund genuinely powerful, research-based analysis is simply not there either. So what we have to do is build these funds in the media sector as well. If we can, the conditions will exist to finance the people who do real analysis and to have that work done. Those are the characteristic features of nonprofit activity.

Let me name a few more sectors: education, health, social welfare. Within social welfare, if we let the state take everything on and treat it as funding a handful of children's care homes, our view is extremely one-sided. Consider that our population is aging very fast. For the moment we are at the most favorable point of our economic life — the demographic window has opened, and the working-age population is at its largest. Thirty years from now that will be gone.

This is what happened in European countries in the 1960s and 1970s: their population profile then was much like ours. Their problem in those years was divorce. Again and again they built legal frameworks and took all sorts of measures to reduce divorce. Today, looking back, Europe has a great many old people, and a great many of them are living alone. The question becomes: when these people grow old, what happens to them? Japan has exactly the same problem with people living alone. Japan is highly developed, with excellent public services. And yet there are people who died at home and were not found for three months. They are not found. Because they live alone. Some people develop the illness we call dementia, wander out of the house, get lost, and live on the street for months before anyone finds them.

So this is coming to our society whether we want it or not. It will become our social burden. And if we expect the state to stand against it, the state cannot. Those people need something entirely different. We really do have to think again about this stage of life. We have to think about social care. Whether we are able to protect and carry people through the final period of a human life — a very large part of the humane society we keep talking about rests on that. So here too, in what is called hospice and social care, there is an enormous field, and it is one in which nonprofits and civil society organizations take part.

Beyond that there is another field: policy research. If society has no institutions with the capacity to appraise the government's work from the outside — and I am someone who works in policy research — then here is something quite interesting for you. What does a political person do? They think positively at all times. They see the upside of things, and with that they can win people over: they have that kind of leadership. When policy comes out of such people, it is policy aimed at a single goal.

But what is genuinely evidence-based decision-making? It means decisions made after comparing two, or more than two, possible alternatives. And those alternatives are, by their nature, not part of a politician's leadership skill set. This is not a bad thing. Politicians set distant goals and, by winning over and directing very large numbers of people behind them, they are indeed the key force that moves society forward. But to say that policy should be run purely on politicians' wishes and aspirations makes it far too unstable a thing. The great flaw in our policymaking today is that policies are built on politicians' own aspirations and ambitions, and get made without considering the other possible alternatives or seeing their own weaknesses.

Now let me turn to today's subject. A few days ago, a bill amending the Law on Corporate Income Tax was submitted. Have you seen it? Businesses with annual sales revenue below 1.5 billion tögrög would have their income tax set at 1% — nine percentage points refunded. Sitting here and looking at it purely as economics, one can say it is a wrong diagnosis of the situation. I think a great many economists would agree with that.

Why do I say so? Look at Mongolia's competitiveness index, or the business environment indices. Do companies include tax among their concerns? Yes, they do. But Mongolia is not identified as a country where business fails to grow because of high taxes. What most affects our business environment is named as corruption, bureaucracy, and the instability of the legal framework. And yet we make the wrong diagnosis and imagine that cutting the tax will set business free. Behind that, in policy terms, it is connected to the absence of a sound macroeconomic policy. The economy swings; wrong political decisions are made; there is corruption; government bodies are bureaucratic — those are the reasons our business environment is poor. So it is hard to call this an amendment to the tax law that was urgently necessary.

Second, think about what this does to the tax environment. We have two brackets, 25 and 10 — and now another change arrives on top, a 1% rate. This breaks the system. It breaks the tax system, it reduces the government's ability to build a budget, and it creates an attitude of disrespect for the law among taxpayers. And I am not saying this only about this one case. I say it because laws like the Tax Amnesty Law and the Law on Economic Transparency were passed before, which is why the willingness of people in business to pay tax has been falling. Because the acts our government passes through parliament tend not to be responsible: broadly, the approach whenever a problem arises is to say, "fine, we will stop taking your money."

A one-percent tax is a dangerous thing. Why? Because nobody chases after one percent. Think about it: we are talking about businesses with sales up to 1.5 billion tögrög — and there are plenty of businesses with annual sales of 100 million. Taking one percent from a business with 100 million in sales means one million tögrög, and the tax system will not chase one million tögrög. The inspector who goes after it, the returns and balance sheets, all of that costs far more than the tax itself. A simplified tax system for businesses with small revenue is perfectly possible. But saying we will take 1% from organizations with sales up to 1.5 billion means the tax authority stops going after them at all.

Look at it through the businesses of two friends of mine. They are two companies that import floor panels. One sells 700 million tögrög worth, the other 3 billion, and both used to pay 10%. Now the question is how that changes from next year once this law passes. It means we are starting to discriminate between businesses. And behind that there is a further wish to differentiate by sector of activity. That is discrimination again — by sector.

On top of that there is another danger. By the Ministry of Finance's own calculation, somewhere between 27 and 30 billion tögrög of tax a year would be refunded, and they say this has no great effect on our budget. But look at it in practice. Suppose I have two companies, one with annual sales of 850 million and the other with sales of a billion, and one of them holds shares in the other. The Ministry of Finance says: these two companies of yours are related parties, since one holds shares in the other, so your taxable income will be counted as one. Because my income comes to around 2 billion, they want to tax me on 2 billion. Now consider: I have a company with a billion in revenue here and a company with 800 million there. I own 100% of one and 50% of the other. If I am to be taxed on 2 billion of taxable income, the person who owns the other 50% of my company will not accept it. Their company has revenue of only eight hundred million. They will refuse, saying, "because of you I'm being made to pay 10% tax."

So I have no choice: I stop having one company hold shares in the other, I take the company's shares into my own name, and I start holding that company as an individual. Which means that the Ministry of Finance's current assumption of consolidating all the income of related parties and taxing it as one is simply false. Companies will make themselves smaller and smaller, and I will end up as an individual who owns ten companies. Because "related parties" refers to companies that hold shares in one another, and a company is an entity whose liability is limited to the capital put into it. So I simply end up with lots of tiny companies and create the possibility of not paying tax. This is not, in itself, an enormous matter. But I think the 30 billion the Ministry of Finance is projecting will very likely grow three- or fourfold. In my own estimation — because this is a system heading toward not collecting tax at all.

Two years ago, in 2014, a friend of mine, A. Dölgöön, who is now studying at Harvard, and I carried out a piece of research, commissioned by the Mongolian National Chamber of Commerce and Industry with funding from World Vision, on using tax and financial mechanisms to encourage corporate social responsibility initiatives. I will send you all a copy of that research by email. It is in English.

How do other countries handle this? For the most part they use mechanisms that subsidize the kind of nonprofit activity I have described through tax incentives — for example, if you donate money to a nonprofit fund, that amount is deducted from your taxable income and not taxed. We compared the tax relief mechanisms of a number of countries, and at the time we put that proposal to the government on behalf of the Chamber of Commerce and Industry. It was not taken up, of course. Because our politicians, our business community, and our civil society organizations do not particularly care. I am someone with a partial involvement in politics myself, and when you talk with people in political circles, NGOs simply do not sound like something of any great importance.

And what happens today? Look at the various grants, awards, and cooperation agreements that ministries and government special funds announce among non-governmental organizations — and what you find, again and again, are fake NGOs. Why? Because under our procurement law, if the government is to carry out work through a company, it has to run a tender. Whereas the way to get money out without running a tender is to say you are cooperating with a non-governmental organization, and hand the money over. Quite possibly nothing is delivered in return. Most of it is work done on paper — that is the form it takes.

If you look carefully, among the organizations that work with various government bodies there are plenty that carry the name of an NGO with companies standing behind them. This produces two things. First, it becomes a channel for getting money out of the government under an NGO's name. What activity actually takes place I do not really know; some of them, of course, must be doing good work. Second, by virtue of the NGO law itself, it is a mechanism for not paying tax. And meanwhile, on the other side, we keep demanding tax from ordinary companies.

Which brings me to the key point I want to make here. If we are already not going to collect tax from companies, then give it to nonprofit activity — not to nonprofit organizations as such, but create the possibility of financing nonprofit activity with that money. And who should make that decision? Not the state, but the taxpayer who is paying the tax. That is what I would urge companies to do: pay your 10%, pay it as you always did. But if the government is not going to take this money, then fine — thank you; the non-governmental organizations, the media, all of us together. Thank you, government. Only, if I am the taxpayer, let me decide myself who receives that 9%, and transfer the tax I paid to the account of the organization I have chosen. If we can build that mechanism, then, working from the Ministry of Finance's own calculations: the draft law on this corporate income tax relief was submitted to run for four years, from 1 January 2017 to 1 January 2021. Over those four years, we have the chance to raise 120 billion tögrög into the civil society sector.

How much money is 120 billion tögrög, in practice? For domestic education alone, we could build a fund of 30 billion tögrög — at a minimum. For developing free, independent media alone, we would have the means to spend at least 5 billion tögrög every year — five billion tögrög, which means we would no longer have to follow the interests of some politician or some business. And we would have the means to put 20 billion tögrög into the health sector over four years.

Of course, I understand that none of this is as easy as it sounds sitting here. The very first problem is that the money cannot be given directly to a nonprofit organization — a business cannot hand it straight to a nonprofit. Why? Because we now have to treat two things separately: nonprofit activity itself, and the fund that finances that activity. On that, there is a man named Mashbat who used to work at the Ministry of Foreign Affairs. It might be very interesting for you to meet him later. Because we have no legal act at all governing the operation of an endowment fund.

Consider the Zorig Foundation, which I know quite well. It holds very valuable land — prime land just south of the square. You could put up a twenty-storey building there; you would simply talk to a construction company and say, let us build a twenty-storey building here, you take 60% and I will take 40%. That would be no different from owning 40% of Central Tower — an excellent location, superb land. And it is registered to the NGO, registered to the foundation itself. So why do you think it cannot put up a building? Because under our law it would count as having made a profit. There was another case — I cannot recall the fund's exact name — that a person from the Ministry of Finance described, a fund in the health sector: the commercial bank where it had placed its reserve balance paid interest on that balance, and receiving that money was treated as carrying out profit-making activity.

So let us think it all through again from the beginning. There is a university in the United States called Harvard. The fund attached to Harvard stands at 32 billion dollars. A teaching and research endowment of 32 billion dollars — several times larger than our entire economy. Nearly three times larger. A fund almost three times the size of our whole economy, supporting education; and it is the fund of a single university. Likewise, there are enormous funds attached to the other big universities, funds in health, funds that handle hospice care. So how does the money in these funds keep growing? It keeps growing. They keep giving money for teaching, they keep giving money for research. And yet the size of the fund keeps increasing.

As for the history of it, when we look at the history of nonprofit activity — the history of social work — it looks very familiar. From the dark, rough centuries of the Middle Ages onward, something was born in people: the attempt to build a system for helping others. Humanity, especially in Europe, kept moving in that direction, and it came out in all sorts of forms. Some went to people and simply gave them money; others said they should be given work to do; in the end there were even workhouses that people were sent round to — all kinds of measures were tried. And the upshot was a recognition that there is such a thing as nonprofit activity.

Passing through the Renaissance, this became something settled in humanity: the view that I bear a responsibility toward the society in front of me. At the very least, when you see a child begging in the street, you look and think, this child is cold. That much does arise in people. You look and you also think: this child will one day live alongside my own child. In one and the same time, in one and the same space. So on the one hand, the nonprofit impulse — that nonprofit something — exists in everyone.

On the other hand, what shaped the financing mechanism? After republican government came into being, there were countries that, unlike our socialist system, had not swept up people's property wholesale. In those countries there were people who owned land, who owned very large buildings, who had accumulated a great deal of capital — and they became interested in avoiding tax. As parliamentary government developed, taxes were introduced on this and on that: real estate tax, and so on. England is even more striking — at one point they considered taxing windows. And as more and more taxes came in, people looking for ways not to pay them arrived at a decision: turn it into a nonprofit fund.

The very first justification offered to the public was this: why do I not pay tax? Because I do good things for society with this money. Then, as parliamentary government developed further, the requirement eventually became: fine — but more than half of what you additionally earn in a year must be spent.

That is exactly what an endowment is. Suppose I set up a fund. I gather money from people until I have 10 billion tögrög. Having raised 10 billion this year, I am required to spend 50% plus one, so I have no choice but to spend 5 billion of it in line with my purpose. Five billion tögrög remains with me. Then I go and ask people for money again and raise another 10 billion. Now I have 15 billion. But I do not spend 50% of the 15 billion — I spend only 50% of the newly added ten. So again I spend 5 billion of that 10 billion, and again 5 billion stays with me. In this way the size of the fund keeps increasing. And as the fund grows, first of all the amount of money going out grows with it.

I have just used dramatically round numbers, of course. In reality these funds grow by some 5 or 6% a year, and they are obliged to spend 50% of that growth. They may spend more in line with their purpose, but the legal floor is that they must spend more than half. So on one side I am discharging my duty to society, and on the other side, behind it, my fund keeps growing.

In European countries these funds are also an excellent system of inheritance. An excellent system for passing things on — to one's children. The children have no right to dispose of the fund's assets as they please, or to use them in their private lives; they administer them in accordance with the fund's rules and the law. Which means modern accumulation of wealth has turned into something rather different. The heir becomes a person who lives on what genuinely matters. If we build the system for inheriting a seat on the board, then inheritance is working.

And on the other side, as these funds grow larger, they become major funds investing back into the capital markets. They take the returns from business and use them to increase the size of the fund, and businesses rise up beneath them. So there is the possibility of creating funds that play an enormous role in society — and here, that possibility is easily overlooked. I will send you the file, the materials, by email. Looking at it, you will see that some 140 funds could be established in education alone.

What I am pressing parliament on is this: if that pool of money can be allocated into these nonprofit funds, then four years from now the legal framework for funds will exist. Build the legal framework for nonprofit activity — that is the call. I think it is possible to make it.

If we can do this, then the people who carry out this work are society's key leaders. If we create the space for the people we call public figures to work properly, society will be humanized at its very foundation. That is something the media sector can do together with civil society organizations: work out what funds might exist in the health sector, what funds might exist in education, and so on. I think there is very wide scope here for you.

That is why the first people I wanted to meet were you. You know all the issues, and you know the routes to getting them resolved. Use everything journalism gives you — use the openings. Because in the end, what happens here will be a political decision. For our part, within this process of a four-year parliament, then another four years, then another, we will hardly be able to secure any lasting gains. And with that, what I wanted to say comes to an end. Thank you.

There is one more key point I forgot to mention. Once a law on funds is passed and money like this becomes available, 30 billion tögrög a year is not a small sum. Funds will spring up like mushrooms after rain. And we cannot restrict that. What I do welcome is this: businesses with revenue up to 1.5 billion will not be setting up their own NGO for their own benefit. When it comes to exempting large businesses, from the work I did two years ago, this is how it is done elsewhere: if you make a donation, it counts for up to 4% of the tax you owe — 4%, or, say, 200,000 dollars a year. That is the kind of ceiling they set. Because channeling very large sums into a single organization is something that has to be acknowledged as a risk. Society holds a great many initiatives, and funds will be set up with all sorts of different purposes.