Ministry of Mines – A Good Steward of the Nation’s Minerals

Afghanistan is endowed with immense mineral wealth and this sector is poised to be the prime driver for economic growth in the country. As part of the National Development Strategy, Ministry of Mines is working towards the goal of financial independence through developing a private investment business climate, extractive industries to be the engine of formal economic growth in the country, ancillary economic growth to take place along extractive industry corridors and to implement National priority programs to harness the full potential of natural resources in a sustainable manner. Ministry of Mines is striving hard to achieve these goals in a manner that minerals sector growth leads to all round infrastructure development, large scale employment generation along with environmental protection and social development through active involvement of the communities.

Ministry is implementing two National priority programs, Extractive Industries Excellence Program through the transparent and efficient management of vast mineral resources in a sustainable manner and National and Regional Resource Corridors Program which involves linking major infrastructure projects such as railroads, highways, power and trading & industrial centers with the country’s mineral deposits. At the same time, Ministry is deeply committed to an atmosphere of complete transparency in all matters including competitive bidding processes in line with international best practices. All contracts of the Ministry signed in the last year are available on the website of the Ministry.

The Afghan Government officially proclaimed it's commitment regarding Extractive industries Transparency initiative (EITI) at the end of 2009, and a special EITI secretariat has been set up in Ministry of Finance to provide technical support.  This initiative is jointly directed by the Minister of Finance and the Minister of Mines and ensures that the process of bidding and revenue generation from all mines in Afghanistan is transparent in line with the internationally accepted norms. The amount of revenue and the process of collection are to be audited by an accredited accounting organization and the audited results will be published in the media to insure transparency to the government, people, civil society, media, parliament and international organizations. 

In addition to the above mentioned initiatives, Ministry has implemented a series of reforms including amendments to the Minerals Law, and Hydrocarbons Law for the purpose of encouraging private sector investment in the mining sector. For the first time, the Ministry is developing not only the Minerals Policy but sectoral policy frameworks for each of the main minerals including gems and stones, copper, iron ore, marble and granite, construction materials, hydrocarbons, among others, for sustainable development of these mineral resources.

In addition, Ministry of Mines has approved its 5 year business plan and is progressively working towards restructuring and modernization enhancing technical and administrative capacity of the Ministry personnel to successfully implement its role as a modern economic entity with a special focus on regulatory, policy making and facilitating roles through the private sector investment. This will create an environment for foreign investment as well as domestic private sector investment in the mining sector.

Further, Ministry of Mines is taking a number of measures for the protection and preservation of cultural antiquities and heritage found at Aynak copper mines. It is spearheading a program along with Ministry of Information & Culture for the safe excavation and preservation of the Buddhist antiquities recovered from Aynak and the building of a Museum to display the artifacts.

At Aynak, the Ministry is actively engaged with the local communities for taking up  community development programs like building of roads, schools, clinics, community centers, drinking water facilities etc at the resettlement site for the villagers affected by mining at Aynak. Ministry of Mines has also just completed a protracted consultation with the communities on land acquisition and compensation for resettlement. Ministry of Mines is making all efforts to provide more than just compensation to the communities. Communities will be effectively rehabilitated and provided with employment opportunities at Aynak mines.

The Ministry of Mines strongly condemns the release of a recent Briefing Paper from  Integrity Watch Afghanistan (IWA), titled Hajigak, The Jewel of Afghan Mines. It typically depicts the work of ill informed media which can severely misguide the public through baseless reports. These populist reports maliciously intended to catch quick attention and publicity cause a lot of damage to the investment opportunities which might be coming by the way of Afghanistan and noble efforts of the Ministry and its positive minded internal and external stakeholders. It also raises questions about the credibility of some civil society organizations in the country. Some of the comments of the Ministry with regard to contents of the Integrity Watch Afghanistan (IWA) report are as enumerated below:

• In various sections of this Briefing Paper, the content does not focus on Hajigak but generally large issues of mining or the overall Afghan economy and it makes sweeping but very damaging statements which are not backed by facts. Further a large amount of information in this Briefing Paper is credited to “anonymous” sources which is a very unhealthy practice to follow for these kinds of reports.

• There is mention of Afghan citizens not viewing the Constitution as a credible document. This is again a highly derogatory statement for the Constitution of the country and not at all relevant to the subject of the report.

• The Briefing Paper in a number of places is highly subjective and presents unsubstantiated views that are biased. It fails to consider actual on-the-ground realities of the Afghan mining sector as well as the various measures being taken by Government toward ensuring transparency in mining sector operations particularly in the last one year.

• There are many general references to geopolitical influences and regional powers which are also not very relevant to the topic or supported by facts.

• The briefing report talks negatively about the Ministry outsourcing the tender process. However this initiative actually indicates Ministry’s a commitment to transparency, accountability and market expertise. Never in the history of Afghanistan had mining got market-based international tenders of the size and scope which are now being supported by Government. Ministry staff are rapidly acquiring the technical, financial and legal skills required to ensure that mine tenders are implemented in a transparent, timely and technically sufficient manner.

• It is unclear what is actually meant by “Political Unity”. It is reiterated that the Government is committed to its sovereignty, safeguarding citizens and resources and job creation through sound development of the Afghan mining sector.

• The report also mentions that development of Hajigak be suspended until government has sufficient capacity to “carry out regulatory obligations mandated by law”. There are presently large number of mine contracts and few regulations and Ministry staff have significantly improved capacity to monitor mine activities. For large scale operations such as Hajigak, a special contract monitoring team is in place (as is the case with Aynak). To wait until full capacity is developed must be weighed against opportunity cost toward the timely development of this reserve. The Ministry’s capacity is raised with each mine development; investors are ready to invest.  In addition, the Ministry has established the Aynak office to support better contract management and facilitate liaison with a host of stakeholders. Ministry of Mines will use the same approach with all other projects of national importance, including Hajigak.

• It may be further mentioned that Qara Zaghan Gold mine was tendered in 2008 and it took two years for the government to award the contract after conducting a series of reviews both by the Inter-Ministerial Committee and the Cabinet. So there is not even a small element of rapidity in awarding this contract which is another reflection of the author’s total lack of information on this issue. Ministry is proud of publishing the summary of the Qara Zaghan contract the day after awarding the contract in both English and national language newspapers and the detailed contract was published both in English and national languages on the website of the Ministry. Moreover the royalty rate of Qara Zaghan is 26% which is the highest royalty rate in the world. More importantly the deal was facilitated by JP Morgan which is one of the largest global investment banks in the world and comprises of Afghan Gold & Minerals Co and a group of prominent investors from United States, Britain, Turkey, South Africa and Indonesia.

• Through statements like “There have been flagrant violations of Afghan sovereignty by many foreign entities that have established contacts to get regional warlords and powerful men…”, the author is trying to get publicity by using highly sensational words.

• The issue of getting scholarships from Australia (or any other country with huge mining experience like Canada, Brazil, South Africa, India, etc) is another significant achievement for the Ministry because Australia is one of the largest mining countries in the world with successful experience of over a century. This initiative will boost the capacity of the Ministry in managing country’s mineral resources more effectively. Unfortunately the author is so ill informed and not aware of the fact that currently Afghanistan is the largest recipient of international aid in the world and there are several mechanisms for delivery of funds such as ARTF, LOTFA and through the international financial institutions like World Bank, Asian Development Bank, among others, and no Ministry receives any direct funding from any country.

• With respect to references to Turkey, the author has again tried to get publicity while not knowing that Afghanistan has had historical relations with Turkey throughout the period of history and surprisingly the last time a Turkish Minister visited Afghanistan it was Turkey’s Foreign Minister who came to attend the Kabul Conference on 20th July 2010 along with the ministers and delegations of 64 countries and international organizations.

• We reiterate the absolute lack of knowledge of the author who is unaware that Afghanistan has very traditional and strategic relationships with India which go back to eleven centuries. In the last 10 years, Government of India has altogether committed and spent 2 billion USD for Afghanistan’s reconstruction and development and this has nothing to do with minerals. However, if Indian or Turkish (or from any other friendly country) companies come and invest in the development of minerals in Afghanistan through the standard procedures, then this is to the great benefit of Afghanistan and its people. The author has also not noted that both India and Turkey are members of G-20 (India is the 4th largest economy and Turkey is 17th in terms of the size of GDP in the world).

The above mentioned are only a few observations of the ministry and there are many other issues raised in the report where the Ministry of Mines has strong objections. The Ministry expects that the entire civil society should take a cue from this incident and ensure that they publish only the facts and do not mislead as they have the prime responsibility of safeguarding the interests of citizens of this country. In this case, IWA also by and large ignored substantive corrections to its briefing paper that had been provided by the Ministry.