Yemen Corruption Report

Corruption is pervasive among police. Abuse of office and impunity within the country’s security apparatus is widespread, and the government does not have effective mechanisms in place to investigate offenses (HRR 2015). The ongoing civil conflict in Yemen has had damaging ramifications for security as a whole in the country. Security institutions in rebel-occupied areas operated with impunity, and civilian oversight on these agencies deteriorated as the conflict grew (HRR 2015). Companies do not find the police to be reliable in enforcing the law or in protecting them from crime (GCR 2014-2015).

Public services in Yemen, in general, have collapsed with the development of the conflict (Public Finance International, Nov. 2015). Corruption is widespread in public services and, consequently, is a very high risk. Petty corruption is present in every government office in Yemen (HRR 2015). Almost two-thirds of businesses expect to induce officials to issue operating licenses through offering them gifts, and most companies expect to give gifts to officials just to “get things done” (ES 2013). Acquiring public utilities is also problematic for businesses as bribes and irregular payments are regularly exchanged (ES 2013).

Corruption is a major constraint for businesses dealing with the land authorities. More than two-thirds of companies expect to give gifts to officials in return for a construction permit, and property rights are poorly protected, a direct result of corruption in the judiciary (ES 2013; GCR 2014-2015; BTI 2016). On average, it takes 6 procedures and 19 days to register property in Yemen (DB 2016).

The tax administration carries a high corruption risk: Bribes and irregular payments are very often exchanged when meeting with tax officials (GCR 2014-2015). There are widespread reports of tax officials extorting bribes through intimidation (Know Your Country, 2016). Tax officials extract bribes from companies by under-evaluating assessments and then pocketing the difference (ICS 2014). In addition, two-thirds of businesses expect to give gifts to tax officials during meetings (ES 2013). No internal mechanisms exist to investigate corruption in the tax administration (Know Your Country, 2016). Tax laws are applied inconsistently, posing a competitive disadvantage for Yemen (ICS 2014). Likewise, tax liability is unclear and is thus arbitrarily assigned and then negotiated (Know Your Country, 2016). On average, paying taxes in Yemen requires 44 procedures (DB 2016).

The customs sector carries a high risk of corruption. Levels of transparency at the borders are very low, and irregular payments and bribes are regularly exchanged when dealing with customs officials, although, corruption is more widespread when importing than when exporting (GETR 2014). The major challenges the customs administration contends with are the lack of a clear system of valuation, incomplete implementation of the UN’s Automated System for Customs Data (ASYCUDA), and the absence of corruption investigation mechanisms (Know Your Country, Feb. 2016). Businesses should also beware of rising security risks at ports as many have been gripped by violence since the outbreak of the war in 2011 (Reuters, Mar. 2016).

Companies operating in Yemen’s public procurement sector face a very high risk of corruption. Bribes and irregular payments are often involved in the process of awarding contracts and licenses (GCR 2014-2015). Officials view foreign investment in Yemen as a means for personal enrichment, so companies should be extremely diligent when investing (ICS 2014). Favoritism is another widespread problem among government officials, who often allocate contracts to well-connected companies; the government has a long history of awarding large public contracts to companies owned by persons close to the ruling elite (GCR 2014-2015; ICS 2014). Public contracts are seldom tendered, and when they are, processes are opaque (ICS 2014). Reportedly, government ministries employ reasons such as “time constraints” to justify uncompetitive bidding or sole sourcing contracts (Know Your Country, Feb. 2016).

Companies are recommended to use a specialized public procurement tool to mitigate the corruption risks associated with public procurement in Yemen.

Corruption is pervasive in Yemen’s natural resources sector. Environmental protection regulations are implemented in an inadequate and non-transparent manner (ICS 2014). Exploitation of oil resources has also been a source of rising conflict among political elites (BTI 2016). Foreign investors face unfair competition in the resource sector from state-owned enterprises; fuel imports, for instance, are monopolized by the Yemen Petroleum Company, while other state-owned oil companies compete with the private sector over oil resources (ICS 2014). The ongoing conflict has also added another dimension to corruption risks in the extractive industries, as rebel groups make USD millions by extorting the national oil company and imposing taxes on goods passing through the ports under their control (Breitbart News, Mar. 2016).

According to a UN Security Council Report, former president Saleh and his family, friends, and associates siphoned USD 60 billion from state funds, mostly from fuel subsidy programs (Middle East Monitor, Feb. 2015).