SANAA, Sept 2 (Reuters) - A Yemeni tank unit fighting rebels is said to have run out of ammunition after its commander stole his men's wages, telling them to make money selling spent shell casings instead -- so they blasted away at anything that moved.
True or not, Yemenis readily believe the tale.
Corruption is rampant in Yemen, whether defined as the abuse of public office for private gain, or in the form of patronage, the diversion of state resources to seek political quiescence.
Its tentacles stretch from top to bottom of the government, with powerful tribes and the military-security establishment among the main beneficiaries, according to a 94-page assessment by the U.S. Agency for International Development (USAID).
Efforts to fight the scourge, notably the creation of a Supreme National Authority for Combating Corruption (SNACC) in 2007, have made little headway, Yemeni and foreign experts say.
Apart from causing economic distortions, corruption is feeding into fury and frustration across Yemen, where a Shi'ite tribal revolt is raging in the north, southern leaders are calling for secession and al Qaeda militants are taking root.
"Underlying and overlying all this is corruption, everyone's biggest gripe," a Western diplomat said of Yemen, a small oil producer with a nascent gas industry bordering Saudi Arabia.
"That real sense of anger and grievance and injustice and inequity -- some people are doing very nicely out of oil wealth through smuggling and sharp practice -- is increasingly strong. For the last two years it has been set against a real loss of momentum within the government to do anything to address it."
Abdul-Ghani al-Iryani, a Yemeni co-author of the 2006 USAID assessment, says corruption remains "as bad as could be".
If its true extent were known, Yemen's lowly ranking at 141 out of 180 countries on Transparency International's 2008 corruption perception index would be far lower, he argued.
"The smuggling of diesel costs the national budget as much as the total budgets for health and education combined, which is more than $1 billion," Iryani told Reuters.
"I'd say 60 percent or so of our national budget feeds the network of patronage by way of corruption, one way or another. That creates discontent, which forces the government to extend its patronage network, which requires even more corruption.
"So it is driving the country into a spiral that will lead to total destruction. Unfortunately there seems no way out."
Yemen, under severe pressure for reform from foreign donors, signed the U.N. Convention Against Corruption in 2005, obliging it to set up an independent anti-corruption agency.
That body, SNACC, began work last year, but is still finding its feet and grappling with obstacles in the legal framework, its vice-chairwoman, Bilqis Abou Osba'a, told Reuters.
She listed the cancellation of a dubious contract for nuclear power production and crackdowns on polluted petrol and harmful bitumen imports among SNACC's successes so far. "SNACC should not be judged right now," said Arun Arya, a World Bank expert who provides technical support and advice. "It's a new institution still trying to establish itself."
He praised some reform measures, but said a big gap remained between the legal framework and actual implementation.
"Corruption is intrinsic at all levels," he added, attributing petty bribery partly to meagre salaries of low-level officials, who extract payments to speed up routine services.
"There is also systematic corruption in procurements. Kickbacks go to the higher officials," he said. "There is a lot of corruption in the distribution of oil via middlemen."
While some bureaucrats are honest, and opportunities for corruption vary from ministry to ministry, it is a fact of life for most Yemenis, whether they are seeking licences, government jobs, scholarships, contracts or customs clearances.
CULTURE OF IMPUNITY
Arya said a survey showed 425 officials had been charged with corruption from 2005 to 2007, of whom 44 were acquitted and 73 received suspended sentences. Only nine were sentenced to more than two years in jail, let alone the maximum 10 years. Many suspects avoided charges by bribing police or judicial officials. Even those convicted were rarely fired. "There is no risk to civil servants who engage in corrupt acts," he said.
The USAID report said the Civil Service Ministry had launched reforms after discovering that up to 30,000 of its 473,000 employees were "ghost workers", who never showed up for work, or "double dippers" on more than one payroll.
At the upper level, a High Tender Board has been set up to try to curb kickbacks in major procurement contracts.
But legally it is hard to make officials accountable.
Only civil servants between the level of director and deputy minister are required to declare their assets -- a vital way to crosscheck if their wealth is disproportionate to their salary.
No one at or above the rank of deputy minister can be charged unless a two-thirds majority of parliament votes to form an investigating committee -- which has never happened.
SNACC is itself appointed by a parliament dominated by the ruling party and its powers of investigation are limited.
Arya argued for a phased approach to fighting corruption, focused on cleaning up areas where the largest number of people are affected and improving service delivery in the process.
"Corruption is an outcome of poor governance," he said. "Improve governance and corruption will be reduced."
Iryani, however, questioned the government's commitment.
"Corruption is so central, so integral to the structure of the regime that they cannot live without it." (Editing by Robin Pomeroy)
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