Afghanistan’s Mineral Wealth: A Blessing in Disguise?
Ever since the Pentagon announced that it estimated Afghanistan to sit on around $1 trillion of minerals, including iron ore, copper, cobalt, gold, silver and aluminium, and additional reserves of lithium not included in this value estimate, commentators have analysed the situation-and been far from optimistic about what this means for a country plagues by war for decades.
In the Guardian, Michael Williams suggested on 16 June that such wealth could lead to further endemic conflict-pointing to countries like India, Nigeria, and Congo, among others, to highlight the potential for Afghanistan to become plagued by the mineral equivalent of “blood diamonds”. This point was also made by David Reske in National Geographic News. The same day, Kathleen Parker in the Washington Post observed that mineral wealth alone is unlikely to give Afghanistan a peaceful future and suggested that efforts should be directed to the education of an overwhelmingly young population.
These and other articles, including in the Times by David Robertson and the New York Times by James Risen, also point out that it will take years, if not decades, for Afghanistan to develop a viable mining industry and the necessary infrastructure around it.
So, the road to prosperity will be a long one, and it will be mired not only by the ongoing conflict but also by the country’s weak (and corrupt) state institutions and its lack of home-grown expertise. An obvious corollary to this is that the country’s dependency on the outside world will increase, not decrease: Afghanistan will need markets for its raw material (as it does not have any industrial capacity at this time or in the foreseeable future to do anything with its new-found mineral wealth than to extract and export it), and it will need foreign investors and foreign experts to develop its mining industry.
If one were a real pessimist, one could say that all Afghanistan is likely to get is manual labour jobs and some income from concessions and taxes. An even bleaker view than this can be found in the pages of the Christian Science Monitor where Ben Arnoldy reported that the Pentagon’s findings had further entrenched Afghans’ believe that the whole US-led war was nothing but a ploy to occupy and exploit their country.
Be all of that as it may, one key challenge for Afghanistan and the international community committed to rebuilding the country is how to manage the country’s mineral wealth. On the one hand, there are regulatory issues that pertain to the mining industry-from foreign investment, to environmental protection and health and safety standards. There is a wealth of experience on these issues, and setting up a proper regulatory framework should not pose an insurmountable challenge.
A far more difficult issue, and one where knowledge and understanding is less well developed, is the question of what to do with the revenues that will potentially be generated from exploiting Afghanistan’s mineral resources. This is the issue that is perhaps most closely linked with the country’s ongoing conflict and its resolution. Who will bear the costs of mining, and who will reap the benefits? This is a deeply divisive and conflict-prone question. More often related to oil and gas, as in Nigeria, Iraq, or Sudan, the issue is about revenue sharing between the central government and the regions, or, put differently, how the areas in which the minerals (in Afghanistan’s case) are found can get a fair share of the income for their own development while the nation as a whole can also benefit. In a country in which individual provinces are essentially run by warlords-allied or opposed to the government and rarely under its control-this is a complex issue, and one that needs to be addressed urgently. Otherwise, there is a real danger of either no exploitation at all or of exploitation that will fuel rather than dampen ongoing conflicts (and possibly spark new ones) as some commentators have suggested.
Some examples of how to manage resources exist. They are far from perfect blueprints, but offer some starting point, both in their successes and failures. In Sudan, the first protocol that North and South signed in the run-up to the Comprehensive Peace Agreement of 2005 was on wealth sharing. In Iraq, various drafts of a federal hydrocarbons (i.e., oil and gas) law exist, and that they have not been passed by the Council of Representatives yet has more to do with the general deadlock in Iraqi politics than the law itself. Other useful examples include revenue sharing practices in Australia, Brazil, India and the United States where different models operate to apportion revenue between the central government and the territory from whose resources the revenue is generated.
Despite all the uncertainty around Afghanistan’s future and the role of its newly found mineral wealth in it and despite all the other pressing problems that the country has, future resource management is too potentially conflict-prone a problem to be neglected for long. What is needed is a process of consultation with all relevant stakeholders to map out the issues, consider the different options of dealing with them and adopting a revenue-sharing framework that is fair and sustainable. Together with a proper regulatory framework, this will give foreign investors a sense of security and Afghanistan’s people a chance of reaping real benefits from their country’s mineral wealth.
18 June 2010