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Curse or blessing?

Afghanistan commands an enormous mineral wealth in its soil. But the fledgling government administration does not have the capacity to handle the complex regulation of the mining sector, critics say.
25.03.2012  |  Kabul
Waiting for a potent investor with modern technology: Workers at a gas field in Shiberghan. (Photos: Böge) 
Waiting for a potent investor with modern technology: Workers at a gas field in Shiberghan. (Photos: Böge) 

If things turn out well, Afghanistan's mineral wealth could eventually become a blessing for the poverty stricken country. If not, the natural resources could become a curse as in parts of Africa and Latin America, where their exploitation has fuelled violent conflict and corruption, and widened the gap between the rich and the poor. 

The Afghan Ministry of Mines hopes to boost its yearly income from the mines to 1.5 billion dollars in just four years time. But does the government, weak and corruption-prone as it is, have the capacity to manage the mineral wealth to the best effect for the country? Some critics have their doubts.      

Social and environmental concerns

"My major worry is about the inspections. Do you have the kind of inspectors or inspection department to record things properly?" asks Jawed Noorani, a researcher at the corruption watchdog Integrity Watch Afghanistan. He says that while a lot of attention has been focused on the two biggest mining projects, more than hundred smaller mines are run without proper government supervision.

Noorani concedes that years of capacity building and international support for the ministry have produced results. "When they signed the contract for Ainak (in 2007), they didn't have the capacities at all to monitor a contract of this size, but over a period of time, I have seen a lot of positive changes. The ministry is geared up to improve the capacity."

However, he warns that there is too much rush in contracting out mining rights to fill the empty state coffers and allow the international community to reduce its engagement in Afghanistan, which is deeply unpopular at home. “The ministry tries to contract out the mines of Afghanistan as soon as possible as if they were commodities in a store,” he says.

Engineers versus economists 

A Chinese engineer at the Ainak copper mine in Logar province. 

Some people inside the ministry share this view. “Many in (minister Wahidullah) Shahrani’s team just try to put the mines out for bidding but do not think about the preconditions that need to be in place before tendering a mine. We should not just consider whether it makes a profit or not," says a senior engineer from the ministry, who does not want to be named. Social and environment concerns also need to be taken into consideration, he says, adding: "Believe me, many of the department heads including the minister himself do not know many of the mine-related terms." 

What is going on here is to some extent a culture war inside the ministry. When Shahrani the former Minister of Commerce, was appointed Minister of Mines two years ago, he dismissed many high-ranking officials and replaced them with confidants. While this is not unusual in Afghan ministries, it has deepened the trenches between different factions in the ministry. Shahrani drew criticism from insiders because many of the newcomers were not engineers. 

“Shahrani has a team and takes it to any ministry he goes to. He brought all of his friends. It is not important for him whether his friends know anything about mines,” says the above-mentioned engineer. 

Controversial privatisation

According to a Western mining advisor, one of the reasons for the dismissals was ideological differences, as many of the mining engineers were Soviet trained and accustomed to a state-run mining sector. Some of them objected to the free-market principles promoted by the new minister, a Britain-trained economist and finance specialist who enjoys the trust of Western donors. He is credited with signing  Afghanistan up to the Extractive Industries Transparency Initiative (EITI) as a candidate country. But critics point to the disappointing experiences that Afghanistan so far had with the privatisation of state-run industries, as many investors failed to fulfil their promises. 

Buddhist treasures: Excavations at an archaeological site near the Ainak copper mine.    

Since Shahrani took over the ministry he has rushed from one investor conference to the next, trying to attract big international mining companies to invest in Afghanistan. The ministry has junked out impressive power point presentations listing the many potentials of the country's mineral wealth and linking mining to ambitious development aims such as building railways and power plants.

His efforts have born fruit, for instance in the case of the iron-ore mine in Hajigak, which in a previous tender only drew a single uncompetitive bid from the Saudi-Pakistani joint venture Tuwairqi Steel Mills. After repackaging, promoting and retendering the mine, the rights now went to a major Indian consortium and a Canadian company for a much higher price.       

The predecessor voices concerns

Perhaps unsurprisingly, one of Shahrani's harshest critics is his predecessor Ibrahim Adel, a Russian-trained, well-experienced mining engineer. “I am not talking about myself. Hundreds of engineers and experts like me have been fired and replaced by high school graduates," he says. Adel, who has been accused of accepting a huge bribe by Chinese contractor MCC which he denies, also complains that many of the Western advisors seconded to the ministry have no prior experience in Afghanistan. He says: "I am concerned that Afghanistan could experience similar problems like African and Latin American countries."

The ministry, a three-storey building located adjacent to the presidential palace in Kabul, rejects the criticism, describing recent changes in the ministry as one of the most important reforms in the government of Afghanistan. Jawad Omar, the ministry's spokesperson, points to Afghanistan's candidate status in the Extractive Industries Transparency Initiative as proof for the ministry's commitment to transparency.

“Closely supervising the exploitation of mines is one of our priorities. Should we have any shortcomings in this regard, we are trying to overcome them," he says. The ministry has contracted numerous Western consultants to make up for the lack of experience with major mining projects. It is also conducting training courses for many of its 700 employees, while World Bank officials are advising on the bidding of exploitation rights, according to the ministry.

But like other Afghan ministries, the ministry of mines has not been able to spend even half of its 2010 development budget of 35 million Afghanis that was provided by foreign donors, highlighting its lack of capacity. Afghanistan's fledgling government administration has been slowly built up over the past decade, but Kabul's influence does not reach far outside the capital. 

Illegal mining fueling warlordism

Another challenge faced by the ministry is security. In Afghanistan's many remote and mountainous regions, many natural resources have long been looted. Armed groups have fought one another over the exploitation of these mines. Most recently two armed groups fought each other over a lapis lazuli mine in Badakhshan province. As a result, two people were killed and three were injured.

Gas production in Shiberghan. 

The Ministry of Mines concedes that mines are illegally exploited in remotes areas of Afghanistan. Spokesman Omar said that the government has set up a special police battalion to safeguard mines. It has currently 1,600 men who are guarding the Ainak copper mine. The unit will later be increased to 7,000 men.

This will be crucial as just like the government, the Taliban have also realized the value of Afghanistan's mineral wealth. Their leader Mullah Mohammad Omar mentioned the issue of mining in his speech delivered on the verge of last year's Muslim holiday Eid, saying the group plans to capitalize more on mining and energy after the withdrawal of NATO troops in 2014.