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Yemen - Corruption

The culture of corruption was pervasive, and observers reported petty corruption in nearly every government office. Job candidates often expected to purchase their positions. Observers believed tax inspectors undervalued assessments and pocketed the difference. Many government officials and civil service employees received salaries for jobs they did not perform or multiple salaries for the same job. Corruption also regularly affected government procurement.

Recent analyses by impartial international and local observers, including Transparency International, agreed that corruption was a serious problem in every branch and level of government, and especially in the security sector. International observers presumed government officials and parliamentarians benefited from insider arrangements, embezzlement, and bribes. Political leaders and most government agencies took negligible action to combat corruption.

The combination of the absence of strong state institutions and the presence of a fragmented elite in Yemen have given rise to a bandit state in which predatory elites were encouraged to appropriate state resources for private gain. Vast patronage payouts to participating elites were implemented through government mechanisms that were either directly corrupt or have little accountability and oversight attached to them. Grand corruption was not a tangential problem in Yemen. Rather, it was the glue that keeps things in place. Fragmented elites were "paid off" in various ways in exchange for their political support. Yemen's state structures were so weak that patronage payoffs to disparate elites were a more effective means of social control than institutional measures.

Yemen ranked 131st out of 179 countries and territories on Transparency International's latest available corruption perception index (2007). One of the poorest countries in the world with a hugely overstaffed and underpaid civil service, Yemen has a significant and widely acknowledged corruption problem. Illicit activities include soliciting and paying bribes to facilitating or obstructing projects, leveraging dispute settlements, skewing taxation and customs tariff augmentations, and engaging in family or tribal nepotism. The government recognizes that it must enact civil service and administrative reforms to create new disincentives to corruption, but progress has been slow.

A precarious balance between tribe and state has existed in Yemen ever since the creation of a modern state after the 1962 revolution. Tribes have been and continue to be predominant political players in the country. The state's military and security apparatuses have come to reflect tribal interests, and a tribal parasitic bourgeoisie reliant on state contracts has emerged and further captured state resources for private gain. Unification in 1990, and more important, the north's clear victory over the south in the 1994 civil war, have further consolidated the hold of Yemen's predominantly northern tribes over state resources.

A system of grand corruption has emerged over the last several decades thriving on the combination of weak state institutions and a fragmented elite structure. In the absence of strong state institutions, informal patronage networks have proliferated. Indeed, patronage networks cripple what little capacity state institutions have. Allies were rewarded and other elites pacified by grand patronage payoffs in exchange for political quiescence. Yemen's recent oil wealth was the main source of state patronage. The fact that Yemen's oil was projected to run out in about a decade's time suggests that the current structure of corruption was not sustainable. Economic growth, not compatible with grand corruption, was needed for basic needs and services to be met and for the state to be sustainable in the near term.

There were five main elite groups that profit from the structure of corruption in Yemen. The two most important were also the two with the most overlap: tribes and the military-security establishment. Leaders of key tribes constitute the lion's share of top military and security officers. A similar pattern was found in the security forces. Yemen's military controls an extensive array of commercial activities, some legal and some extra-legal.

A third powerful elite group was the business community. The traditional business elite were non-tribal, and they have remained important players in this new political economy. However, their relative decline and their generally pessimistic view of Yemen's future have prompted some businesses to leave the country. In addition, a parasitic bourgeoisie of tribal businesses has grown in recent years and derives virtually all of its income from state contracts, often awarded under corrupt circumstances.

"Dispensable" elites consist of the technocratic class that remains essential to run the state in a relatively modern way, and regional elites that enjoy high status within important local constituencies. The state has far more ability to promote and demote individuals within these elite groups than it does with tribal, military and business elites. Unlike the more important elite groups, these two groups have little aggregate power to act collectively and, therefore, they reflect neither a significant political threat nor significant political promise at this point.

There were four primary mechanisms by which grand patronage was distributed in Yemen. One mechanism was through the national budget. The national budget contains some discrete payoffs to favored groups, such as tribes, and allocates vast resources to the military-reportedly through a single line item in the budget. There was no meaningful oversight of the budget provided by Parliament, which, in any case, was only allowed an up or down vote on the budget. The power of the purse rests with the executive branch, and was exercised primarily through the Ministry of Finance. Because of the way the Republic of Yemen Government (RoYG) forecasts oil revenues, end of the fiscal year supplemental budgets were substantial and entirely discretionary.

The other three principal mechanisms to distribute patronage were the procurement system, the military-commercial complex, and the General People's Congress (GPC) party machine. While reform was starting to occur in the procurement process, in recent history procurements were very often done without open and competitive bidding, and with little transparency or accountability. The tendering process could easily become a means to reward favored allies with lucrative contracts. In addition to the budget process, military elites were rewarded financially through their control of extensive commercial enterprises. Other resources allocated to military elites via the phenomenon of 'ghost soldiers' were reportedly resold on the open market for profit. The GPC distributes resources to regional and other elites in order to keep them in the political fold.

The cost of the political economy of corruption in Yemen was becoming prohibitive. A number of signs point in this direction. First, donors have backed away from supporting Yemen due to corruption. The World Bank dramatically cut back its assistance program to Yemen for this reason. The loss of investor confidence in Yemen due primarily to corruption was exemplified by the decisions of major international investors, such as Singapore Port Authority, Proctor & Gamble and Cable and Wireless to leave Yemen.

Yemens's participation as a UN Millennium Project (MP) pilot country contributed to putting the Millennium Development Goals (MDGs) at the core of the Governmentss development planning. As part of the MP exercise, a comprehensive national MDG needs assessment and costing was conducted with the support of the UN system. Consequently, the MDG needs assessment, along with the MDG, served as key instruments for the UN to draw upon. These reports complement the objectives of the CCA,and together inform the ongoing efforts of the country to forge a medium-term path for long-term equitablegrowth and human development.

The candid assessments of progress to date inmoving towards MDGs and the objectives of the Poverty Reduction Strategy, contained in the progress report issued in 2003 and 2005, indicated that the country was not on track to reach most MDGs by 2015 without substantial redirection of policies, in-jection of additional funds and institutional andhuman capacity building. In November 2005 Yemen's Millennium Challenge Account (MCA) Threshold Country Program (TCP) bid by the Millennium Challenge Corporation (MCC) was suspended because of recent backsliding in a number of the 16 indicators used by the MCC to determine continuing MCA eligibility. The worst regression occurred in the area of "ruling justly," specifically the controlling corruption indicator. The nation's Millennium Challenge Corporation status was reinstated in 2007, allowing the flow of millions in development aid.

By 2006 capital flight out of Yemen exceeded foreign direct investment in Yemen.

The issue of corruption played a role in the diesel price riots of 2005, in part because of the loss of public confidence in the government to act in a fair and honest manner untainted by corruption. Massive corruption, abetted by oil income, has also generated a significant and expanding polarization of wealth in Yemen, often a precursor to social and political instability.

Oil plays a key role in both the capacity of elites to engage in corrupt behavior and in the inability for the political economy of corruption in Yemen to continue indefinitely. Oil accounts for between 80 and 90% of all government revenues in Yemen, depending on the market price. The high price of oil over the past two years has meant the availability of a significant state treasury for elites to plunder. However, oil in Yemen was limited and reserves scarce; Yemen was estimated to deplete its oil reserves in about 10 years time. Political friction over declining oil revenues in the years prior to actual depletion should intensify as elites compete for shares of a shrinking pie.

In addition to the more important grand corruption, petty corruption was rampant in Yemen, and has been on the increase in recent decades (if anecdotal evidence was accepted). Petty corruption has become so ingrained in popular culture that it was no longer shameful for individuals to prosper as a result of corrupt practices. Indeed, it has become "cool" in some quarters to have gamed the system for private gain and have, for example, a new car or other consumer product to show for it.

The most common form of administrative corruption in Yemen was the taking of a bribe by a government employee. Such a bribe may be offered in advance by an applicant or may be demanded by the employee as a cost of processing an application. The logic of the deal was typically a payment in exchange for immediate processing of an application ("speed money"). Paying the bribe often makes fiscal sense. For example, a customs officer at a port has legal means to drag out the clearance process if a bribe was not tendered, making goods sit at the port for weeks. A small bribe can clear the good immediately.

In August 2014, to combat fraud and corruption in the government payroll system, the government implemented a plan to collect biometric information on all government employees, including soldiers and security forces, and to create a central registry designed to eliminate tens of thousands of fraudulent names and double dippers from the payroll. By the end of 2014, this registry included nearly half a million civil servants. It had reportedly identified 5,000 workers who illegally received more than one paycheck. The government suspended implementation following the armed Houthi takeover in February. The government also suspended implementation of a payment system for soldiers and security forces via bank or post office accounts. Prior to the outbreak of conflict, that system bypassed paymasters who had previously paid soldiers in cash, to provide for only the intended individuals collecting salaries.

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Page last modified: 09-02-2017 19:34:20 ZULU