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Yemen Yemen Corruption Assessment YEMEN YEMEN CORRUPTION ASSESSMENT SEPTEMBER 25, 2006 This publication was produced for review by the United States Agency for International Development. It was prepared by ARD, Inc. ACKNOWLEDGMENTS Both the USAID Mission in Sana’a and the US Embassy were most supportive of the assessment team. Salwa Sarhi of the Mission displayed just the right balance between allowing the team maximum flexibility to do its job, and direct support for the team where needed. We are most appreciative of her efforts. We benefited from the insights provided by senior management and other staff of the Mission and Embassy, including Ambassador Thomas Krajeski; Dr. Nabeel Khoury, Deputy Chief of Mission; Dr. Mike Sarhan, Mission Representative; and Noah Siegel, Political/Economic Officer. The team would also like to acknowledge the input of Abdulkader Al-Saqqaf, Political Specialist; Susan Ayari, Senior Education Advisor; Ahmed Attieg, Senior Health Advisor; Dr. Iman Ali Awad, Health and Population Specialist; Dorvin Stockdale, Senior Agriculture and Economic Development Advisor; Wadea Sattar, Agriculture Specialist; and Joe Sokoloski, Public Diplomacy Officer. Abdul-Ghani Al-Iryani was an invaluable team member who arranged many interviews. In addition to his diverse contacts, Mr. Al-Iryani had an insightful analytic eye for the Yemeni scene. Stephen Carpenter’s selflessness and flexibility deserve special acknowledgment. Because of the last minute cancellation of a prospective team member, Stephen was asked by ARD to fill in. He did it with good grace, and his specific financial expertise added greatly to the caliber of the assessment. Oliver Wilcox combined an extensive knowledge of Yemen and a specialist’s expertise in USAID matters that were essential to our fieldwork and this report. Finally, as this report notes, there are indigenous reformers in Yemen who are serious about confronting corruption. We wish them well, for they have Yemen’s long-term interests at heart. Yemen Anticorruption Services Task Order USAID Contract No. DFD-I-00-03-00242-00 Authors: Glenn E. Robinson, Oliver Wilcox, Stephen Carpenter, Abdul Ghani Al-Iryani ARD Principal Contact: Barbara Leslie ARD Home Office Address: ARD, Inc. 159 Bank Street, Suite 300, Burlington, VT 05401 Tel: 802 658-3890, Fax 802 658-4247 www.ardinc.com COVER PHOTO: The city of Sana’a, courtesy of Jeff Gray, ARD, Inc. YEMEN CORRUPTION ASSESSMENT DISCLAIMER The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS Acronyms and Abbreviations..................................................................... iii Executive Summary......................................................................................v Research Methodology............................................................................. xiii 1.0 The Political Economy of Corruption in Yemen ...................................1 1.1 BACKGROUND DISCUSSION .................................................................... 2 1.2 FRAGMENTED ELITES ............................................................................... 3 1.3 GRAND CORRUPTION AND POLITICAL STABILITY........................................ 6 1.4 FORMS OF CORRUPTION IN YEMEN.......................................................... 7 1.5 ENABLING FACTORS THAT CREATE PERMISSIVE ENVIRONMENT FOR CORRUPTION......................................................................................... 8 1.6 MECHANISMS THAT IMPLEMENT GRAND CORRUPTION............................... 9 1.7 STRUCTURE VERSUS AGENCY: REFORMERS AND REFORM ......................... 10 2.0 Corruption in Government Sectors and Institutions...........................12 2.1 JUDICIARY AND LAW ENFORCEMENT ..................................................... 12 2.2 PARLIAMENT ........................................................................................ 17 2.3 CIVIL SERVICE REFORM ........................................................................ 20 2.4 SUPREME AUDIT INSTITUTION – COCA................................................... 22 2.5 ANTICORRUPTION AUTHORITIES.............................................................. 25 2.6 REGIONAL AND LOCAL GOVERNMENT .................................................. 26 2.7 ELECTIONS........................................................................................... 29 2.8 POLITICAL PARTIES ............................................................................... 33 2.9 TAXATION SYSTEM ................................................................................ 35 2.10 CUSTOMS............................................................................................ 37 2.11 HEALTH ............................................................................................... 40 2.12 EDUCATION......................................................................................... 42 2.13 PRIVATE SECTOR .................................................................................. 44 3.0 Corruption in Government Functions..................................................47 3.1 BUDGET AND FINANCIAL MANAGEMENT................................................ 47 3.2 PUBLIC PROCUREMENT ......................................................................... 48 3.3 PRIVATIZATION ..................................................................................... 51 4.0 Corruption, Anticorruption, and Non-State Actors ............................53 4.1 MEDIA ................................................................................................ 53 4.2 CIVIL SOCIETY ..................................................................................... 54 5.0 Prioritizing Recommendations and Programming Options ..............57 5.1 INTEGRATING ANTICORRUPTION ELEMENTS INTO EXISTING PROGRAMS ...... 57 YEMEN CORRUPTION ASSESSMENT i 5.2 CREATING A STANDALONE ANTICORRUPTION PROGRAM: STRENGTHENING PUBLIC FINANCIAL MANAGEMENT AND GOVERNMENT ACCOUNTABILITY .58 Appendix 1. Comments on the Draft USAID Methodology on Corruption. ............................................................................................63 Appendix 2. Complete Compilation of Recommendations...................66 Appendix 3. Scope of Work.......................................................................74 ii YEMEN CORRUPTION ASSESSMENT ACRONYMS AND ABBREVIATIONS ABA American Bar Association AG Attorney General APSA American Political Science Association ASYCUDA Automated System for Customs Data CID Criminal Investigative Department CIT Corporate Income Tax COCA Central Organization for Control and Audit CSF Civil Service Fund CSIS Center for Strategic and International Studies CSO Civil Society Organization CV Curriculum Vitae DFiD Department for International Development (UK) DG Democracy and Governance EQUIP-1 Educational Quality Improvement Program EU European Union FoIA Freedom of Information Act GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GFMIS Government Financial Management Information System GNI Gross National Income GPC General People’s Congress (ruling party in Yemen) GST General Sales Tax GWOT Global War on Terror HSC Homeland Security Council HTB High Tender Board IFC International Finance Corporation IFES International Foundation for Election Systems IMF International Monetary Fund IT Information Technology JMP Joint Meeting of Parties LTU Large Taxpayers Unit MCA Millennium Challenge Account MCC Millennium Challenge Corporation YEMEN CORRUPTION ASSESSMENT iii MECO Military Economic Corporation MEPI Middle East Partnership Initiative MIS Management Information System MoE Ministry of Environment MoF Ministry of Finance MoH Ministry of Health MoJ Ministry of Justice MoLA Ministry of Local Authorities MP Member of Parliament NAFC National Authority for Fighting Corruption NDI National Democratic Institute NGO Nongovernmental Organization NPM National Procurement Manual PDRY People’s Democratic Republic of Yemen (South Yemen) PFC Public Funds Court PFM Public Finance Management PFP Public Funds Prosecution PMIS Procurement Management Information System POGAR Program on Governance in the Arab Region (UNDP) PR Public Relations PSO Political Security Office PWC PriceWaterhouseCoopers RFP Request for Proposals RoYG Republic of Yemen Government SBD Standard Bidding Document SCER Supreme Council for Elections and Referendum SDF Social Democratic Forum SJC Supreme Judicial Council TCP Threshold Country Program UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Program USAID United States Agency for International Development USG United States Government WCO World Customs Organization WTO World Trade Organization YECO Yemen Economic Corporation YPAC Yemeni Chapter of the Parliamentarians Against Corruption YR Yemeni Rial YSP Yemeni Socialist Republic iv YEMEN CORRUPTION ASSESSMENT EXECUTIVE SUMMARY THE POLITICAL ECONOMY OF CORRUPTION IN YEMEN 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
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