Why is Afghanistan unable to extract its vast mineral wealth?

Poor security, weak legislation and corruption plague mining in Afghanistan, investors and experts tell Al Jazeera.

by
    Poor security, the lack of proper legal framework and organisational capacity, as well as corruption, have prevented the mining sector's development [Agnieszka Pikulicka-Wilczewska/Al Jazeera]
    Poor security, the lack of proper legal framework and organisational capacity, as well as corruption, have prevented the mining sector's development [Agnieszka Pikulicka-Wilczewska/Al Jazeera]

    Kabul, Afghanistan - The early afternoon sun falls on the tall walls of black marble, turning them grey and revealing a palette of shades, from silver to salmon pink and orange.

    The sand-dry mountainous landscape surrounding the quarry, on the outskirts of Kabul, magnifies its unexpected beauty. 

    Marble is one of Afghanistan's many natural resources, which - with investment in the mining sector - could help to put the foreign aid-dependent country on the path to economic independence in the face of US withdrawal.

    Rich in copper, lithium, talc, marble, gold, uranium and others, Afghanistan's vast mineral wealth is estimated to exceed one trillion dollars. But according to data, every year the government loses around $300m in revenue from mining.

    Poor security, the lack of proper legal framework and organisational capacity, as well as corruption, have prevented the development of the sector. 

    Deficient infrastructure makes transport and export difficult, while high royalties and taxes imposed by the Afghan government have discouraged potential investors. 

    As a result, the mining sector currently contributes only between seven and 10 percent of Afghanistan's GDP. 

    Nematullah Sediqi, the owner of a black marble extracting company, proudly walks around his quarry, patiently explaining the extraction process.

    Over the past 20 years, he has invested $205m in his business, which employs 100 people. He also owns two processing factories in Kabul; the material is sold on the local market. 

    Mining in Afghanistan [Agnieszka Pikulicka-Wilczewska/Al Jazeera]
    Afghanistan has nearly one trillion dollars in untapped mineral deposits [Agnieszka Pikulicka-Wilczewska/Al Jazeera]

    While his business is doing relatively well, Sediqi complains that for the past four and a half years, he has been unable to expand his operations. 

    In 2014, the government began developing a new mining law to increase transparency in the sector and review past contracts. But until April, the Ministry of Mines and Petroleum had not signed any new contracts nor had it extended any expiring ones.

    Weak regulation has exposed Sediqi's company - he is unable to invest in new mines or export products. 

    "We lost lots of time, about four years. It doesn't make a difference for us whether the old or the new law is in place, but we've lost time," Sediqi told Al Jazeera. "In these four years, we would have created lots of jobs for Afghan people. Currently, joblessness is a huge problem in Afghanistan."

    While last month the Ministry of Mining and Petroleum announced 43 new tenders for natural resources projects across 16 provinces, including 29 for local companies, analysts have said it will take time to build trust between the government and investors. 

    According to Integrity Watch, an Afghan transparency watchdog, the new legal framework leaves a lot to be desired and is unlikely to improve the situation in the industry. 

    "The initial intention was to review legislation, cancel bad contracts and build institutional capacity during one-year time and then do new contracts," Naser Timory, head of advocacy and communications, told Al Jazeera. 

    "However, it took the government four years to complete the mentioned tasks and therefore the majority of business was halted during this time. It affected legitimate business and probably fuelled illegal mining."

    He argued that the government's policy should not favour large contracts, which are difficult to oversee due to security and the political situation in the country, and rather focus on small and medium tenders for local contractors. 

    Large foreign investments, such as the proposed Chinese copper contract in Mes Aynak, have largely failed.

    Timory also criticised what he described as the overly politicised nature of decision making in the mining sector, as he warned of further corruption.

    In late 2018, Afghanistan's membership in Extractive Industries Transparency Initiative (EITI), which the country joined in 2010, was suspended.

    Mining in Afghanistan [Agnieszka Pikulicka-Wilczewska/Al Jazeera]
    Groups such as the Taliban have amassed vast sums from illegal mining [Agnieszka Pikulicka-Wilczewska/Al Jazeera]

    On the 2018 Transparency International Corruption Perception Index, Afghanistan ranked 172nd out of 180.

    Some are that poor management of the country's wealth, coupled with poverty, have enabled armed groups and local strongmen to illegally extract resources and sell them on the black market to neighbouring countries and beyond. 

    According to the investigation by Global Witness, both the Taliban and the Islamic State of Iraq and the Levant group (ISIL or ISIS) have benefited. 

    The watchdog group estimated that the Taliban earn between $2.5m and $10m a year from mining talc alone, which has become, next to opium, their main source of revenue.

    Illegal mining thus helps to prolong the ongoing conflict, especially in the northern and eastern provinces where warring groups compete for the mineral wealth. 

    Shoaib Alami, a mining expert and former investor, has personal experience in dealing with local strongmen.

    "I had to pay double taxes and royalties for mining operations. Twice. To two groups; first the central government of Afghanistan as per legal contract with the Ministry of Mines and second to the local 'authorities' or militias," Alami claimed in an interview with Al Jazeera. "It is not always the warlords. Today they are called the anti-government establishment, the Taliban, previously there were some other names. They are in control."

    For six months, Alami refused to pay local strongmen royalties and taxes. 

    In retaliation, he claims they took his workers hostage and eventually extorted payments from his company's drivers. 

    "They couldn't put any other pressure on me, so they put taxes on the drivers and the costs of transport increased," he said. 

    In 2016, he sold his shares to his partners and quit the sector. 

    "I would assure you and bet my past experience on it that this anti-government establishment, the so-called Taliban, they would be nothing if the government was serious," Alami said. "Those who allow these individuals to have this much power and put pressure on business people and miners are the ones sitting in Kabul."

    When asked about illegal mining, Abdul Qadeer Mutfi, spokesperson for the Ministry of Mines and Petroleum, said the government is actively trying to tackle the problem.

    "We are working together with national security forces to address illegal mining, we already stopped 580 areas where illegal mining was run by groups and militants," he told Al Jazeera. 

    "We are trying to promote legal mining, give contracts to the local people and include the local people in the mining contracts. We already started a specific evaluation where we could hire more people to solve community problems and we provide them with jobs."

    Mining in Afghanistan [Agnieszka Pikulicka-Wilczewska/Al Jazeera]
    According to a new mining law, five percent of revenues should be returned to locals [Agnieszka Pikulicka-Wilczewska/Al Jazeera]

    According to the new mining law, five percent of revenues should be invested in local communities.

    Oidesimkhon is a 50-year-old miner who has spent the last six years working in a coal mine in Samangan. 

    He does not complain about the working conditions, as his employer, a government contractor, has treated him fairly. But the lack of oversight at the mine has caused problems.

    "According to the law, the state should provide wood to the mines. They should send here engineers every day, but this is not happening," Oidesimkhon told Al Jazeera. "State engineers come here once or twice a month even though controls should take place regularly. And even if they send us wood, it is usually grabbed by local warlords."

    Workers in other government-controlled mines have cited poor conditions, saying they are often expected to work between 10 and 12 hours without proper equipment and training. Child labour is also a recurring problem. 

    "The government does not intervene because the mines are located far away. It rents them out, but is unable to control them and hence miners' rights are often disregarded," said Maroof Qaderi, president of the National Union of Afghanistan's Workers and Employees.

    "We have travelled to mines and seen what the problems are. We informed the government, the leaseholders, we went to court, protested - so that people's salaries are paid and their working times are respected." 

    "For the revival of this country, for sustaining this country and taking it out of the dependency mindset that we have developed, the way is to invest in the mining sector," said Alami, the mining expert and former investor. "There is a Persian saying which says that if you want to get something done, you have to do it yourself rather than waiting for others. It is the same with Afghanistan's economy, if we want to do something, we have to take the initiative."

    Mining in Afghanistan [Agnieszka Pikulicka-Wilczewska/Al Jazeera]
    Afghanistan is rich in copper, lithium, talc, marble, gold and uranium [Agnieszka Pikulicka-Wilczewska/Al Jazeera]

    SOURCE: Al Jazeera News


    ABOUT THE AUTHOR



    YOU MIGHT ALSO LIKE

    Interactive: How does your country vote at the UN?

    Interactive: How does your country vote at the UN?

    We visualised 1.2 million votes at the UN since 1946. What do you think are the biggest issues facing the world today?

    'We were forced out by the government soldiers'

    'We were forced out by the government soldiers'

    We dialled more than 35,000 random phone numbers to paint an accurate picture of displacement across South Sudan.

    Interactive: Plundering Cambodia's forests

    Interactive: Plundering Cambodia's forests

    Meet the man on a mission to take down Cambodia's timber tycoons and expose a rampant illegal cross-border trade.