tisdag, februari 22, 2011

Minerals in Afghanistan - Corruption prevents its benefits to the country

Found this article and would like to share it with you. The level of corruption in Afghanistan never stops to amaze me. As the Arab world is revolting against its totalitarian regimes in seek for democracy and putting an end to the corruption, Afghanistan is still in the claw of warlords sitting in the parliament and as ministers. Imagine their role if the newly confirmed found minerals will be extracted and the benefits of it will probably never find its way to the regular Afghans if the current regime is in power.

Mineral Wealth of Afghanistan, Military Occupation, Corruption and the Rights of the Afghan People
By: M. Siddieq Noorzoy, Professor of Economics, Emeritus - Director, Afghan Research Society International

The report in New York Times about the announcement of “Vast Mineral Deposits Found in Afghanistan”, on June 13, 2010 by James Risen is not a surprise to some of us who have been working on the Afghan economy for decades. What is not clear is the range and significance of any new discoveries that might have been made in the last nine years. In 1987 in an article entitled “ Soviet Economic Interests in Afghanistan”, Problems of Communism ( a US Government publication) May-June issue pages 43-54, I had summarized ( in table 3 ) of the publication the list and classifications of the mineral findings of a book De Afghanistan Kany Manabi, Ministry of Mines and Industries, Kabul. This book containing 420 pages and charts and maps on mineral resources of Afghanistan was originally published in Russian and then translated in English in 1977. The summary in the above article also contained the number of deposits of the minerals including what is mentioned in the New York Times report such as iron, copper, cobalt, gold, and lithium, etc. The Pentagon sources state that these minerals are all over Afghanistan including the south and the eastern areas of the country. That is what the original publication also showed. The New York Times article quoting US officials refers to Afghanistan as the “Saudi Arabia of lithium”. The 1977 book showed lithium deposits, a mineral used in laptops, to be present in 44 areas in Afghanistan. Laptops were not prevalent in 1977. Afghanistan indeed could be the largest source in the world for lithium mining. Further, many of the deposits such as large deposit of iron ore in the Hajigak area and copper in Aynak have been known to exist for decades since the 1960’s. Also, there were 4 areas of deposits of radio active materials sited such as uranium, thorium and rare earth ( the last of which is increasingly becoming important in many industries including defense, computers and auto for special batteries and magnets according to a report on PBS June 14, 2010) and 105 deposits of precious metals including gold and placer gold. All together more than 1,400 deposits, ‘occurrences and showings’ were reported in 1977. Then in 1983 one of the mujahideen commanders informed me that he had found a report of new mineral deposits by the Russians and was going to forwarded it, which did not take place as the commander was killed unfortunately. The article in Problems of Communism ( Table 2 ) also cited the large exports of Soviet machinery for mineral exploration and development to Afghanistan amounting for example to $192 million for 1979-1984. Yet, Afghan sales of gas to the Soviet Union were the only export of mineral resources officially reported. Neither Afghan exports nor Soviet imports showed any other mineral resources going from Afghanistan to the Soviet Union. The imports of large quantities of machinery to Afghanistan remained a mystery.

Mineral deposits in Afghanistan belong to the central treasury traditionally. Yet, illegal mining has taken place such as in Panjsher for emeralds and lapis lazuli. The New York Times article is referencing US officials unaware of the mining laws and traditions in Afghanistan. Foreign entities can only sign contracts with the government of Afghanistan, not with provinces. Several other issues also need explanation and some which are mentioned in the New York Times report are surprising. First, The US has been surveying Afghanistan shortly after the invasion. An article is on our web site www.afghanresearchsociety.org written on August 12, 2006 about the new findings on the oil and gas reserves in the northern areas of Afghanistan announced by the US Geological Survey team. What is surprising about the statement by the Pentagon is that the surveys carried out by the Afghan and Russian teams in the 1960’s and 1970’s the results of which were not known to US officials. Further, the New York Times reporter as usual in media reporting have to add sensationalism by the following statement, “during the chaos of the 1990s, when Afghanistan was mired in civil war and later ruled by the Taliban, a small group of Afghan geologists protected the charts by taking them home, and returned them to the Geological Survey’s library only after the American invasion and the ouster of the Taliban in 2001”. The fact was that the report of 1977 and the mineral charts were available in few places all along and they did not need to be hidden from the Taliban or any one else. Further, this also shows that the US military knew about the mineral resources of Afghanistan as early as 2001. Second, it has become clear why these mineral resources have not been commercially exploited. The reasons, are, of course, decades of wars including two invasions and civil wars.

In 1976 the First Seven Year Plan formulated by the government of Mohammad Doad laid the description for building a steel industry, chemicals and other heavy industries and railroad transportation in Afghanistan, all of which were thrown out following the communist coup de tat on April 27, 1978. But, equally important have been other factors in the lack of development all these years, viz., lack of infrastructure such as large supplies of power and transportation facilities especially in the rugged mountains of Afghanistan, and lack of capital to finance such large cost projects. The Chinese multi-billion dollar investment to extract copper at Aynak is the first major foreign contract since the Russian contracts in the 1960’s for the development of gas fields in Jagdalak and other areas in the north.

The Pentagon speaks of making arrangements for international bids in the Fall this year for the mineral exploitations. What is surprising about the role of the Pentagon is its involvement in the mineral resources of Afghanistan, and as the New York Times reported that already events have been into motion involving “international accounting firms that have expertise in mining contracts have been hired to consult with the Afghan Ministry of Mines, and technical data is being prepared to turn over to multinational mining companies and other potential foreign investors. The Pentagon is helping Afghan officials arrange to start seeking bids on mineral rights by next fall, officials said.” Further, “the Ministry of Mines is not ready to handle this,” quoting Mr. Brinkley. Yet, there are news reports that at a meeting this month in London international mining companies are invited to explore the development of the Hajigak iron ore deposits. In the same report two other significantly related issues are raised, i.e. the reported $30 million bribe that the former Minister of Mines was to have received from the Chinese for the Aynak copper contract, and that, “the vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists” and, “the Afghan government and President Hamid Karzai were recently briefed, American officials said”. Again this seems strange, who has discovered what exactly, if most of the information announced by the Pentagon officials existed decades ago. Then, it is not surprising that the officials of the Afghan regime would have no clue about the mining resources until it is pointed out to them. Lack of knowledge on the part of the individuals involved in the economic affairs of Afghanistan since 2001 is not surprising; none of them was known to have done extensive research or even having studied the works of others when they took over the affairs of Afghanistan. This is true of the members of Northern Alliance, whose names have appeared on the list of those guilty of crimes against humanity and other crimes, but, with one slight exception of an anthropologist who had done work on the Afghan economy, none of the others had a clue about what the prevailing conditions of the Afghan economy, or its past history of development and growth were. The result is that nearly all main indicators of the Afghan economy have become worse despite the claims made by the World Bank, the IMF and the regime in Kabul and despite some $300 billion that US alone has spent on Afghanistan as claimed by official sources. These sources including the World Bank et al., talk about double digit economic growth and yet ignore 70% plus unemployment, or the fact that poverty has increased and with it crime, drug production and its use, corruption and many other social ills since the US led invasion and re-instillation of warlords and criminals and former communists as rulers of Afghanistan.

So what is one to make of all this with respect to the announcement of the mineral riches at this time? Karzai did not know what the Pentagon officials were doing, and the Pentagon officials did not know that the mineral deposits they are talking about have been on the books for decades. Yet, the announcement about the “the vast finds” comes at the time that the US and NATO ( British and Canadians reportedly) are preparing to attack Kandahar, which we think is the wrong policy aggravating conditions in Afghanistan. This after the fiasco of Marja, where months after the attack on the township insecurity continues, a convict by the name of Abdul Zahir was brought from Germany to run the affairs of Marja ( latimes.com March 7, 2010; Christian Science Monitor, March 15, 2010 ) and where socially displaced Afghans have gone as far as Kabul as refugees, as well as the surrounding areas such as Lashgarga , without any assistance as shown by the Afghan media. The residents of Marja also fear the return of the former predatory leaders who had taken their lands. The Marja “model” was for further US-cum-NATO military operations in Afghanistan of the strategy of ‘clear, hold, and build’. What might happen in Kandahar will be ten times worse if only the sizes of the population are taken as a measure of what is to follow. The news about the “vast” mineral resources released by the Pentagon at this time and widely discussed is seen as a distraction in the ongoing discussions of the US policy toward Afghanistan. We hope that US policy makers will keep issues relating to the mineral resources transparent and treat the mineral resources of Afghanistan as solely belonging to the people of Afghanistan and above and beyond wrongful exploitation.

Given that Karzai did not know any thing about the mineral resources of his country he is leading and his regime’s officials are accused of rampant corruption as exemplified by the contract for copper, and the fact that many of his high officials are on the list of the Afghan Human Right Commission for crimes of various sorts, the relevant question here is “what about the rights of the Afghan people”? After all the claim by General Stanly McChrystal in the war he is shaping in Afghanistan is now “to protect” the Afghan people and presumably their interests. However, given the history of military occupations around the world, already questions are being asked among Afghan circles, who is going to protect the Afghan people from wrongful exploitation of their mineral resources under the present war conditions, especially when honest and dedicated Afghans are not in charge of the affairs of Afghanistan? This is a concern that Afghans have had following the Russian occupation of Afghanistan exemplified by exploitation of the gas fields of the country in the north which was shown to have been wrongfully exploited; discussed in the article in Problems of Communism.

The Pentagon has been in charge of US policy toward Afghanistan all the while since the invasion in 2001. The New York Times article relates this issue clearly in the case of the development of the mineral resources in Afghanistan. If the Afghan economy is run by oligarchs and warlords and corrupt officials having been enriched through foreign bribes and domestic seizures of private properties as is known by the Afghan people at large and discussed on the Afghan TV networks often, even if international contracts for mineral extraction are generated with good intentions by the US officials who is going to sign these contracts on behalf of the Afghan people?

Some may point to the investment law that was formulated after the invasion of Afghanistan in October 2001. The law is available on the web site of Afghan government and in other places. This law provides no protection for labor or the environment especially involving mineral exploitations. Historically mining has been notorious in many countries damaging the environment of the host countries. This is a critical issue in a distorted political and economic system such as exist in Afghanistan with ineffective government, rampant corruption, and lack of effective laws and their enforcement. Further, the investment law puts domestic investors at a distinct disadvantage and allows 100% foreign ownership with very generous no tax policy for years that can be extended and repatriation of capital and profits. Afghanistan had an investment law revised in 1974 which looked after these issues. That law was drawn up by the Afghan government. The post 2001 invasion investment law was drawn up with the help of the World Bank.
It is our view that no contracts should be signed under present conditions for the exploitation of any of the mineral resources until a new law is drawn up for mineral development reflecting the interests of the Afghan people and Afghanistan. At the same time we do not want to discourage international investment in Afghanistan. Most of all it is critical that the war is ended so that the Afghan people can start paying attention to the recovery and development of the economy.

Fundamentally there are two areas of the Afghan economy which can generate sufficient output and income to minimize the extreme unemployment of over 70% and extreme poverty. These areas are agriculture and the development of the mineral resources. Both require long term planning and much investment. Both have been neglected for years. The only path is one of peace going forward and to see a negotiated peace settlement to end the war and establish security throughout Afghanistan without which little progress can be seen. Full participation of all the Afghan people in their government is necessary, elimination of corruption by the removal of all corrupt elements of the regime, and formation of a new government in a post peace settlement working for the benefit of the Afghan people are all obvious requirements. The Afghan Diaspora is richly filled with highly qualified Afghans in different fields, only a new post war government working for the people can attract their services.

It is also better to see the US and European NATO countries, and others come back to Afghanistan not as occupiers, but, as investors in a new environment partly described above. Finally, in all likelihood no foreign investor from the countries fighting a war is likely to go to Afghanistan and expect to safely invest. China can safely invest in Afghanistan, because it is not at war with Afghanistan. Yet, the Chinese investment in the Aynak copper mines won over by the Chinese bid from Western companies is felt to be a threat to Western interests in Afghanistan, the New York Times article points out. This kind of competition is healthy for Afghanistan and reminds us of the competition between the US and the former Soviet Union of decades ago in several areas of the Afghan economy. At the same time the re-emergence of the issue of mineral resources of Afghanistan should encourage all warring parties to the peace table, and could be a starting point how mutually beneficial investments could be made in what is described a multi-trillion dollar sector.

If the development of the mineral resources is to bring peace and economic gains the full rights of the Afghan people must be respected. At the present the prevailing conditions do not reflect that, and we think it is premature to give out long term contracts to foreign multi-billion dollar companies and shut out the Afghan investors who have no comparable means to bid on these contracts.

We propose a consortium of Afghan public and private investors sharing 51% in the development of the mineral resources where ever possible. It is necessary to revisit the 1974 investment law, which opened the door for foreign investment and yet provided safeguards for Afghanistan. This law was analyzed in my article “ an analysis of foreign and domestic private investment law of 1974”, Afghanistan Journal, Jg.4, Heft 1, pp.29-31, 1977, Graz, Austria. Technical advice may be obtained from international mineral experts, but, the foreign investment law must be drawn by known and respected Afghan specialists for safeguarding the interests of Afghanistan.

 

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