Abid Amiri

21 DECEMBER 2011

Published in the Diplomatic Courier Magazine

 

 

Last year in June, the United States discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond what was previously estimated. The mineral wealth of Afghanistan was no secret for Afghans. They knew Afghanistan was an intact mineral reservoir, and for centuries they used crude tactics to extract accessible resources. This recent discovery indicates that Afghanistan has a rich prospect ahead, and the country could be raised by its own bootstraps with the revenue from the mining industry. However, the real question is if the Afghan government is ready – and has the tools – to responsibly develop these deposits.

 

In 2007, the Afghan government auctioned off the largest copper deposit in Aynak, and the winning bidder was the China Metallurgical Group Corporation (MCC). Aynak holds the second largest known unexploited copper deposit in the world. This contract represents the largest foreign investment in the history of Afghanistan. The signing bonus was the biggest, and offered the highest royalties to the Afghan government, as well as building infrastructure, such as establishing an extensive railroad from Uzbekistan in the north to Pakistan in the south to carry copper ore back to China. Most importantly, MCC said they would be hiring and training Afghans locally, and had a timetable for when Afghans would be in technical, and management positions. However, MCC have brought in their own people, and they buy their own goods from China, and have them shipped in. The large capital investments by MCC are not benefiting the Afghan people like they should. Now the question is whether MCC will deliver on their other promises.

 

The fact of the matter is that mining companies like MCC will not deliver on all their promises, because the Afghan government doesn’t have the capacity to implement such large contracts effectively, as of yet. First, the Ministry of Mines is lacking the expertise in carrying out the development process of the deposits. It should slow down, accumulating more experience in contract negotiation and bidding procedures first. Worst still, the Ministry does not have the experience of regulating the mining industry. While there are laws in place, they have not been implemented effectively. Clearly, the Ministry should reach out to the international community for training its personnel, and gaining some expertise before developing other deposits.

 

The second biggest challenge is the lack of transparency and corruption in the Afghan government. The ex-minister of Mines Ibrahim Adil was arrested by Afghan authorities on accusations that he took 30 million dollars bribe from MCC. The Ministry of Mines should apply for membership to the Extractive Industries Transparency Initiative, which will hold the Ministry responsible to the development of natural resources. In effect, it will essentially require the Ministry to hold the mining companies such as MCC to the contract.

 

All in all, if the Afghan government continues to develop the deposits in the current situation of insecurity, lack of experience, and corruption, of course, they will earn hundreds of millions of dollars from these mines. But if they develop the deposits in the near future when they have the capacity to do so, the earnings will be much greater, and will benefit the people of Afghanistan as it should.