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Friday, October 14, 2011

Time Magazine; Mining for Silver Bullets: Why Afghan Minerals Won't Save the Country

Posted by ARYN BAKER Friday, October 14, 2011 at 4:41 am

The future of Afghanistan can be seen in a lump of lustrous black rock showcased on Wahidullah Shahrani's bookshelf. Or so he would have me believe. The energetic minister of mines has spent the past half hour elucidating the potentials of the rich iron deposit in the mountainous province of Bamiyan from which that rock comes. He speaks of hundreds of thousands of jobs, a doubling of government revenue, and a windfall that could add upwards of $20 billion a year to GDP. If Shahrani, whose rapid-fire patter and white suit bear all the hallmarks of a Las Vegas croupier, speaks with the forced optimism of someone whose very existence depends on selling Afghanistan's future to the highest bidder, it's because his does. After twenty years of war and another decade of ever more violent peace, Afghans have come to the belated realization that when foreign forces leave as planned in 2014, they will no longer have the funds to live in the way in which they've become accustomed. So they are betting the house. And the international coalition of nations that has underwritten Afghanistan's military, its development projects, its electrical plants, its roads and even its government salaries, is backing them in hopes that a withdrawal cushioned by a resource jackpot won't lead to an insurgent takeover or civil war.

Afghanistan is a land rich in mineral deposits. But its remote location and insecurity rendered the cost of extraction too high. Until recently. Global demand has driven prices upwards, and what was untouchable even a decade ago now has the lure of a central-Asian El Dorado. “Mining has the potential to save Afghanistan,” says Shahrani. “By 2024 it will be the largest driver of economic growth, and it will help smooth the transition from a country heavily dependent on international aid to a country that can stand on its own feet.”

New revelations about Afghanistan's vast, untapped mineral wealth have diplomatic and military officials crowing that soon the country will be able to pick up its own tab. But skeptics raise an eyebrow over the “sudden” discovery – even the Soviets enthused about the country's mining potential back in the 80s. To many, mining, like progress in training the Afghan army and military gains in the south, are false indicators of success, designed to pave the way for a quick and dignified exit from the country. “Suddenly, out of nowhere Afghanistan has big mineral reserves,” says Martine van Bijlert of the Afghan Analysts Network. “Of course it has the minerals, but it conveniently completes the narrative that says actually, once we transition, we are leaving Afghanistan in a situation where pretty soon it will be able to look after itself.”

If only it were that easy.

Shahrani's rock collection and the riches it represents—chalky green copper, gold, raw rubies, coal and unidentifiable lumps veined with rare earths, the minerals that power modern technological devices like the Blackberry and the Prius—is expected to fill the void of the American departure. But even his most outlandish assessments are dwarfed by the funds that the U.S. alone spends on development, reconstruction and humanitarian aid in Afghanistan. His projections for government revenue from mining in 2016, when all seven of Afghanistan's major sites are expected to be fully functioning, only amount to $1.5 billion, less than half the projected cost of running an Afghan army essential for keeping the insurgency at bay.

And that's only if everything goes exactly to plan. Shahrani admits that his estimates are based on the assumption that the security situation will not deteriorate further, an unlikely scenario given the recent spate of violence in the capital and elsewhere. Once tranquil Bamiyan, where the Hajigak iron mine – the source for Shahrani's lump of iron – is located, has seen an uptick in violence. And access to the mine goes through Wardak province, an as-of-yet untamed hotbed of insurgent activity. And the greater the insecurity, the less likely investors will be willing to risk lives, cash and equipment.

Unlike gemstones, which in Afghanistan have been historically mined in small-scale operations, iron and copper ore require massive amounts of infrastructure. There needs to be a reliable sources of power and water, along with a good network of roads to get the materials out. And there needs to be a government capable of managing the sudden influx of revenue in a transparent and efficient manner. “None of that is in Afghanistan,” says Van Bijlert. “It takes good legislation, it takes a more capable and a cleaner government to manage that properly. So it's a very shaky premise to say that because we have all these minerals in the ground Afghanistan is going to be alright very soon.”

Maybe not soon, but, if the right policies and changes are instituted now, Afghan mining could continue to deliver long after the last lumps of ore have been dug from the ground. The World Bank's Michael Stanley, who oversees the oil, gas and mining departments, says that looking at Afghan mining purely through a revenue lens gives short shrift to the other potential benefits. International mining consortiums bidding for rights in Afghanistan will need to build their own power plants, roads and wells in order to extract those minerals. The key to sustainable success for Afghanistan, says Stanley, is a government that can ensure those infrastructure projects benefit the local populace as much as the mining companies. “It's clear that Afghanistan has something within its borders that can bring multi billion dollar foreign direct investment, but whether or not that is catalytic for growth depends on how the government can leverage that private sector development towards the broader public good.”

When the Hajigak iron mine went up for tender, only six countries put in bids. It was disappointing, but expected. Not only are the infrastructure hurdles high, but growing insecurity makes developing the mine even more difficult. The biggest drawback, however, is a lack of rule of law. Afghanistan recently tied for second place in Transparency International's Corruption Perception Index. And while Shahrani has made a firm commitment to transparency and clean management within his ministry, his anti-corruption successes must be replicated across government as a whole.

International mining companies want to know that their investments will be protected through rigorous implementation of the law. “At a minimum, they want to know that if they put their equipment and investment into the country, it is still theirs at the end of the lease,” says Mary Louise Vitelli, an American legal advisor to the mining ministry who is currently helping to draft new mining laws. “They want to know that the operation will not be nationalized,” That doesn't mean just having laws in place, but faith that the government can enforce them.

Even if the funds necessary to keep the country running could be coaxed from rich terrain, they would do little to bridge the gaping divide between the government and its people, one that fuels the insurgency as much as it threatens to obliterate the fragile gains of our decade-long investment in Afghanistan. A government mired in corruption and incompetence could easily turn Afghanistan's mineral resources into a curse. So instead of setting mining up to be the silver bullet solution to Afghanistan's ills, it's better to think of it as a reward for when everything else goes right.

Time Magazine

1 comment:

  1. I don't know, what should be the proper response but it is funny that Afghans want to save themselves by mineral resources of Hazarajat (Hajjgak), whose people were massacred, looted, burnt for more than a century and have been ignored for last decade :(

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