Can fighting corruption help Arab states sell painful economic reforms?

Across the Arab world, cash-strapped governments are flying the anti-corruption flag.

Tunisia, in the midst of year-long anti-corruption campaign, passed a law in July requiring officials and members of Parliament to declare their assets.

That same month, authorities in Egypt arrested the head of the country’s customs authority for taking bribes.

And in Jordan, the government seized on the production and smuggling of counterfeit name-brand cigarettes to launch its own anti-corruption campaign. King Abdullah even issued a rare address to the Jordanian cabinet declaring “we will break the back of corruption.”

“No-one is above the law, no matter who he or she is,” the king told the ministers, adding, “The message to all is that this is a red line.”

So what is going on?

Ask Jordanian Mohammed Hussein, owner of an Amman sweets shop who is $5,000 in debt and unable to meet this month’s rent.

Mr. Hussein sees one reason for his and his country’s economic ills: the “untouchables.”

“The big officials, mafia bosses, corrupt businessmen,” Hussein says. “They steal millions from the treasury to build villas, and we are forced to live on a few dollars.”

Hussein has lived his entire life in Amman, but his travails and his views could fit easily in any Arab capital.

On the streets of Amman, Tunis, Cairo, even Riyadh, citizens are angered by the widening gap between haves and have-nots. And they are challenging the economic and political elites who they say have enriched themselves off of the state yet are now expecting tax-payers to foot the bill for economic reforms.

Today several Arab states are enacting International Monetary Fund- and World Bank-recommended economic reforms to cut back bloated public sectors, reduce subsidies, and raise taxes. But they realize that in order to renegotiate a social contract with citizens used to government handouts, ending corruption – real or perceived – is vital.

Governments have every reason to take the issue seriously: Corruption was one of the top issues that drove protesters to the streets during the Arab Spring in Egypt, Tunisia, Jordan, Yemen, and Oman.

In January, fighting corruption became the slogan of Tunisians protesting and rioting over austerity measures; in June, nationwide protests in Jordan that erupted over an income tax law began to demand that specific officials be jailed for alleged graft.

“Whenever the government raises taxes, cuts back salaries, reduces the public sector, the answer that comes back from citizens is that the government is corrupt,” says Youssef Cherif, a Tunis-based political analyst.

“It provides an obstacle to any reform.”

Perceptions matter

In a 2016 report by Transparency International in nine Arab states, 61 percent of citizens polled said they believed corruption was on the rise in their countries, and 68 percent said their government was “doing badly” in fighting corruption.

In Jordan, 75 percent of respondents said they believe corruption had increased, while an Arab Barometer survey in 2016 indicated that 79 percent believed state institutions were corrupt. 

In an August 2017 poll by the International Republican Institute Center for Insights in Survey Research, 87 percent of Tunisian respondents stated that the economy is somewhat or very bad, while 72 percent said fighting corruption was the best way to improve the economy.

For many citizens, corruption is not only the cause of economic ills, but ending it is a cure-all. Jail the corrupt officials and return the stolen funds to the treasury and budget deficits will be closed, investment projects funded, prosperity achieved.

Arab citizens often view corruption in terms of shady mega-projects or the siphoning off of government funds, yet experts say that the vast majority of corruption that takes place in the Arab world is much more subtle and small-scale.

It could be as simple as a customs official looking the other way when a shipment comes in, a government clerk awarding licenses without following proper regulations or paperwork, or hiring an unqualified friend or family member to a government post.

Rather than a massive cash drain from a major theft, it is the slow drip of corruption, nepotism, and mismanagement that, when taken as a whole, costs countries tens if not hundreds of millions of dollars each year.

“People aren’t aware that there are other types of corruption,” says Rania Bader, board member and spokesperson for Rasheed (Transparency International-Jordan). “And that administrative corruption is much more commonplace than financial corruption.”

According to the World Bank, the indirect cost of corruption, although hard to quantify, is also very real: poor infrastructure, poor access to services, inefficient tax exemptions, loss of foreign investment, and disincentives for local entrepreneurs to open businesses.

Lack of trust

Yet even if governments have the political will and ability to go after graft and corruption, they must first address the huge lack of public trust.

“Part of the problem is that in many situations, the government does not seem to be transparent in its policies and decision-making,” says Musa Shteiwi, director of the Center for Strategic Studies at the University of Jordan. “People see that the government says something, and does something else.”

That lack of transparency has hit Arab governments’ credibility when it comes to economic policy.

In Jordan, Tunisia, and now Egypt, despite embarking on austerity reforms billed as vital to saving the economy – raising taxes and cutting back on hiring to control debt – inflation, unemployment, and the cost of living are still on the rise.

“The logical conclusion to the people is that these policies are serving the interests of the political-economic elite of the country in a non-legal and legal way,” Mr. Shteiwi says.

A vacuum of facts has been filled instead with rumors: tales of princes who have bought up entire European towns, and government ministers readying private jets loaded with stolen antiquities to escape to London homes should the police come with a warrant.

In Jordan, citizens swear that police squad cars – three in the front and three in the back – escorted trucks carrying smuggled counterfeit cigarettes form the port of Aqaba all the way to Amman to make sure they were not stopped by customs.

Offering little evidence, citizens are openly condemning businesspeople, ministers, tribal leaders, members of Parliament, royal advisers, royalty, and heads of state.

“I wouldn’t be surprised if [President] Trump was somehow involved,” Hussein says while unloading a carton of heavily taxed Kit Kats in his Amman sweets shop, two customers nodding in agreement. “Anything’s possible.”

'Selective' approach

But if Arab governments are hoping that anti-corruption measures will soften opposition to their painful reforms, Arab publics have become suspicious of the campaigns, seeing them not as a crusade to drain the swamp, but a political weapon wielded by regimes to settle old scores. 

Even in Tunisia, which has built democratic institutions and passed strong anti-corruption legislation in the seven years after its revolution, corruption cases have only been brought against former government officials who have recently fallen out with the ruling coalition.

In Jordan, citizens see the government focusing on “small-fries” – middle-men who run the fronts for illicit businesses – rather than the powers behind them.

Many are quick to point out that while Jordan chases a little-known distributor of fake brand cigarettes, a much bigger fish, Walid Kurdi, husband to the king’s paternal aunt and former chief executive officer of the Jordan Phosphates Mine Co., remains at large in Britain five years after being sentenced to 37 years in prison for embezzling millions.

The most extreme example is in Saudi Arabia, where Crown Prince Mohammed bin Salman led a corruption campaign that saw the imprisonment of 300 rival princes and businessmen in the Ritz-Carlton Hotel in what many described as a “purge.”

Weak institutions

Weak institutions are also hurting public trust in Arab states’ ability to tackle corruption: Egypt, say experts and reports, lacks independent judiciaries, while Tunisia’s progressive laws are not applied evenly.

For Jordan, it is the lack of a strong and independent parliament that undermines anti-corruption efforts.

“Our role as MPs is to monitor, uncover corruption and hold the government and institutions to account,” says Saddah Habashneh, a member of Parliament from the southern Jordanian town of Karak.  “When we remain silent about corruption that we know is occurring – which we all are – we are accomplices in corruption.”

The World Bank and Transparency International have suggested several reforms to couple with Arab states’ anti-corruption campaigns, such as proper legislative oversight, external auditing, transparency in government and business regulations, and required assets declaration for officials and politicians.

Perhaps the most crucial steps proposed by Transparency International are raising salaries for civil servants, procurement reform, and free access to information. The aim is to transparently show how the government awards contracts, and to reduce incentives for bureaucrats and civil servants to abuse their positions.

A few big names behind bars wouldn’t hurt either.

“Once we see the powerful held to account, then we will know the rule of law is enforced,” says Hussein.