Afghanistan's natural resources bring potential for risk and reward
A recent report reveals that Afghanistan sits atop a treasure trove of minerals. The proper management of this wealth could be the game-changer that many people have desperately been seeking. However, the discovery also has the potential for a number of pitfalls. These include increased corruption, perpetuating more violence, and becoming a source of new pollution. As Afghanistan contemplates how to move forward with these newly discovered natural resources, the experiences of African and South American nations can illustrate the dramatic consequences of mismanagement, and provide some policy ideas for maximizing the financial payout.
The scope of Afghanistan's mineral resources is huge. It includes metals and industrial minerals such as copper, iron ore, niobium, cobalt, gold, molybdenum, silver, aluminum, fluorspar, beryllium, and lithium. Descriptions of its shear size border on bombastic, a Pentagon report described Afghanistan as a future "Saudi Arabia of lithium." The original Pentagon briefing suggested that the find could be worth up to $1 trillion (not counting fossil fuels or lithium). Afghanistan's Minister of Mines, Wahidullah Shahrani believes the haul could be worth $3 trillion.
One thing that everyone agrees on is that the economic impact of these minerals could be huge. In 2009, the Gross Domestic Product (GDP) of Afghanistan was almost $13.5 billion. A report by Robert Grimes at the US Army War College, detailed how the country is caught in situation where poverty, illegal drugs, and the insurgency combine to perpetuate instability. These new natural resources have the potential to bring lucrative lease agreements and high paying jobs to the country. Many hope this these will combine to lift the country out of its conflict and poverty.
To rise to this future, Afghanistan's leaders must deal with both internal and external complicating factors. Mr. Brinkley, the United States deputy undersecretary of defense said, "The Ministry of Mines is not ready to handle this." The Pentagon wants to start hiring major accounting firms to design contracts and assemble technical data so the bidding process can begin next fall.
The extraction industry and many countries want to help Afghanistan administer its mineral resources. President Karzai said, "Afghanistan should give access as a priority to those countries that have helped Afghanistan massively in the past, through years". Many naturally associate this to mean the United States. But, President Karzai has also been looking towards Japan, the country's second largest aid donor. Regardless of whose private industry wins the contracts, it will create a major bidding war between many private companies. Even though these companies are established world leaders, it does not mean doing business with them is without considerable risk to Afghanistan.
The extraction industry can be a major cause of corruption, as Equatorial Guinea shows. Human Rights Watch reports that oil has increased the GDP 5,000 percent, but the standard of living is little improved and much of the money has entrenched the rule of President Teodoro Obiang Nguema Mbasogo. The Extractive Industries Transparency Initiative removed Equatorial Guinea from the group based on its rampant corruption. In Afghanistan, there have already been accusations that the previous Minister of Mines took huge bribes in exchange for contracts. It is essential that Afghanistan commit to fighting corruption, and maintaining a transparent process as it begins to develop these resources.
A more dramatic problem is the risk of human rights abuses exacerbated by the presence of mining. Many readers know about blood diamonds in the central African countries like the Democratic Republic of the Congo and Zimbabwe. The lure of these rich resources create a risk that insurgent groups will fight to get control over these resources and use them to finance their operations. There is also a risk that established human rights will be violated in remote mining areas, as was charged in Nigeria.
A final risk that Afghanistan faces is environmental degradation. Ecuador is a prime example of how many countries have pollution problems because of drilling and mining. In many of these countries, there are less protective environmental standards and poor enforcement. Sadly, many governments look the other way while companies pollute. Afghanistan should establish strong environmental standards before large-scale extraction begins, and rigorously enforce them.
Afghanistan can also learn from countries that are rewriting their domestic laws to improve control and revenue from the extraction industry. At the recent meeting of the Southern and Eastern Africa Mineral Center (SEAMC), Mr. Kabelo Tlhapi, the mining program officer at the Southern African Development Community, called for a "paradigm change" that would help countries to reap greater financial rewards from mining in their countries. An innovative example is in Tanzania where the Mining Act 2010 requires that all companies be listed on the Dar es Salaam Stock Exchange. This will enable more people in the country to buy their shares and reap the rewards of growing business.
Ultimately, Afghanistan will follow its own path dictated by its unique situation. However, it would do well to learn from the experiences of African and South American countries that have a long history with the extraction industry. By following some of the best practices already established, these new minerals can help Afghanistan turn the corner and bring a stable, secure, and prosperous future.
