Coping with corruption in Yemen [Archives:2008/1137/Business & Economy]

March 13 2008

By: Yemen Times Staff
Dealing within the rampant culture of corruption in Yemen is an influential element of the business environment and the government, and involvement in corruption has become seen as a means for realizing huge profits without having to compete or be transparent in their business dealings. Such dealings has raised many exclamation and question marks by international investors who wanted to expand their operations to Yemen, however, the challenge of working within a highly corrupt business culture substantially increased the risk of doing business in Yemen, and in turn offset any interest in the local economy in addition to marginalizing open competition towards the interest of an economic minority, who benefit from fueling corruption in the business environment.

Such is an example of the cost of corruption, which have raised the voices of reformers within the government, civil society organizations, the privet sector, and the international donor community in Yemen. These voices have motivated the parliament, Central Organization for Control and Audit (COCA) and several reform-oriented officials in order to intensify efforts towards combating corruption in their own government agencies and offices. However, the 'corrupting' end of the cycle has not been dealt with, until recently.

Government as a stakeholder

Through looking at the other side of the corruption cycle, the different levels of governance have varying degrees of involvement in corruption, ranging from the baselines to middle and high-level officials. However, the recent formation of the Supreme National Authority for Combating Corruption has raised hopes in the sincerity of government's efforts towards enhancing transparency and battling corruption.

However, spectators indicate that the anti-corruption commission will have limited success in any anti-corruption reforms, quoting that the commission has distributed over 3000 applications for the disclosure of net wealth to high ranking government officials, while less than 300 officials cooperated with the commission and disclosed their net worth. Challengingly, a source who requested to remain anonymous indicated that the president himself refused a request from the commission to take the lead and disclose his own net worth in order to influence other officials, but the presidential office turned that request down.

It is obvious that the anti-corruption commission will be facing a serious challenge if it is to succeed in its anti-corruption mission; however, the hope relies within the support of the international community and donor organizations such as the World Bank and USAID.

Privet Sector as a stakeholder

The first response for corrupting pressures was voiced by the Association of Yemeni Auditors' director Mr. Ramzy Al-Ariqi, who stated that there are no government-enforced regulations that enforce transparency and privet sector disclosure. He stated that even in auditing for tax purposes, the tax authority does not have the qualifications that will enable it to identify organizations that are systematically involved in corruption and payment of bribes as evidenced in their own accounting books.

Indeed, quantifying how much companies pay in bribes will help in advocating for the size of the problem and blacklisting companies which are directly involved in spreading corruption, and for that purposes, the level of transparency in business enterprising in Yemen is very low.

Another effort was initiated by the Yemeni Businessmen Club, who has held several conferences in order to promote the concepts of corporate governance and transparency while focusing on the direct benefits on these businesses. The conferences were successful in raising awareness, but from the responses of most participants, it was evident that much more is needed in order to influence the adoption of transparent corporate governance techniques in Yemen.

Chairman of the businessmen club Mr. Ahmed Bazaraa has indicated that the Yemeni business environment needs more transparency in order to be able to grow, he mentioned that at this time of globalization Yemeni businesses must be transparent in order to be able to partner with regional and international players, and to also push forward with plans to establish a stock market in Yemen, a venture which requires a great amount of transparency in disclosure on the part of possible partners.

Identifying corruption:

Corruption, although hardly quantifiable, has many direct and indirect costs over both the immediate and the long term. From a survey with several businessmen and managers within the privet sector, we have made an attempt in order to list the corruption-related activities which the privet sector finds itself having to be involved in corruption as a coping mechanism.


Perhaps the most evident pattern of corruption that is most widespread in Yemen is bribes. Bribes can be classified into two segments, facilitation money, and greasing costs. Facilitation money is bribes that are paid to lower or middle management officials within government circles or other privet sector organizations in order to speed up any – otherwise stagnating – process, examples of those include speeding up a required process or removing bureaucratic delay in any transaction, such as license renewal, processing of payment, opening of tender bids, etc. The other type, greasing costs, are costs incurred to guarantee a selected business or government transaction, or avoid any mishaps that will otherwise happen, for example bribing customs officials in order to look the other way while several goods are imported, or to overlook violation of a signed agreement or unfitness of any good or service sold for the government. Examples of such in the privet sector are more limited, and usually includes procurement of goods and services.

Profit-sharing partnerships:

In such cases, a high-ranking official or an influential person offers to facilitate the business activities of a particular business enterprise or business, on the bases that he receives a profit margin of any activity which they have facilitated. Usually involving the government through signing unjustifiable business agreements forcing the government to buy or contract for services for a price at least double the normal costs, and then either the transaction takes place, or the business sues the government and receives sizable compensation. There are also cases where such powers are exerted on the privet sector, in such cases, coercion is usually used to force business transactions to take place, through the robbery of vehicles and personal property, kidnapping of persons, but most prominently raiding land and real estate. This coercion is lifted following the demand for the purchase or forced sale of a selected property at a nominal price.

Gifts and discounts:

These are occasions where gifts and discounts are given to decision makers in government and in the privet sector where luxurious and often expensive gifts are given in order to improve the mutual relationship between an official or a privet sector employee and a supplier in order to continue the on-going business relationship or start a new one, this is done in order to result in a favorable business decision in order to maintain the flow of gifts to the official. Such gifts can also include selling a vehicle to the official for a very nominal cost or providing other perks at very low prices as a result of the business relationship. It is worth noting that many officials do not recognize this as corruption but believe it to be a right for a discount if the business relationship is to continue.