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Afghanistan’s Minerals: A Looted Economic Hope for Stability

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Afghanistan’s Minerals: A Looted Economic Hope for Stability

Instead of being looted, Afghanistan’s resources should be strategically exploited for the country’s benefit.

Afghanistan’s Minerals: A Looted Economic Hope for Stability

The insurgency in Afghanistan has gained strength and the government’s influence has shrunk despite significant international efforts since 2001 when the world intervened in Afghanistan. Various political, diplomatic, and military approaches have been tried and ample aid has been provided to stabilize the country. However, these efforts have produced few results while entangling the world in an open-ended conflict. To stabilize the country and weaken the insurgency, development partners must address the growing poverty and the government’s inability to financially sustain itself by assisting Afghanistan in managing its vast natural resources. Afghanistan’s resources have been poorly managed and left open for smugglers to loot the country’s wealth while poverty fuels the insurgency. If properly managed, Afghan mineral resources can not only be a stabilizing force but can provide the world with additional resources.

Over 50 percent of the Afghan population lives in extreme poverty, with an unemployment rate of over 45 percent. War-battered and poverty-stricken, unemployed Afghan youth join the insurgency not for ideological reasons, but for economic survival. Although the roots of the Afghan conflict lie across the region, with global linkages, a significant number of those recruited to militant groups come from within the country. Thousands of other young Afghans have left for Europe and other destinations in hope for a better life and employment opportunities.

There has been greater concentration on improving economic governance, fighting corruption, managing aid, increasing domestic production, and connecting Afghanistan with trading partners and markets internationally. It is essential that further efforts and more improvements are made in the above areas to provide a base for economic development. However, it is equally important to invest in sustainable livelihood projects that will touch the lives of ordinary Afghans currently vulnerable for recruitment by insurgents and other terrorist groups. Sustainable livelihood projects can be implemented in all sectors, but properly utilizing Afghanistan’s comparative advantage of abundant natural minerals resources could not only provide means for survival but trigger broader economic development leading to greater stability.

Afghanistan is sitting on vast mineral resources that are looted on a daily basis. According to several geological reports, Afghanistan has over 1,400 mineral fields containing coal, barite, chromite, petroleum, precious and semi-precious stones like emerald and lapis lazuli, salt, sulfur, talc, and zinc, copper, gold, and other minerals. The value of these natural resources is estimated to be over $1 trillion, possibly much higher, far exceeding the costs of developing the country. These resources, however, are being stolen and illegally extracted by smugglers and others in different parts of the country while the government heavily depends on international assistance to fund its national budget.   

Some claim that illegal mining is a major source of income for armed groups and insurgents, others say illegal mining is less critical to such groups. Armed groups and insurgents may benefit from only a tiny fraction of the wealth by taxing smugglers in the areas under their control. Much of the wealth goes into the pockets of strongmen and other influential locals who extract the minerals in their respective areas and smuggle them to neighboring countries and beyond.  In some cases, locals easily extract valuable stones and other minerals by using explosives in the mountains and sell the resources to smugglers. The smuggling and illegal extraction is reportedly encouraged and supported by some countries that benefit from the illegal trade of Afghanistan’s resources.

There have been several attempts by major international companies and consortiums to invest in the natural resource sector of Afghanistan but these efforts have failed due to a lack of clear policy, guidelines, and procedure for mineral resource extraction. If a firm would like to invest in the sector, it has to go through a lengthy and hectic bureaucratic process and eventually work with an interministerial committee that may approve or reject the contract. The committee does not have a set policy or standard but deals with contracts on a case-by-case basis, making it difficult for firms to plan. Sometimes, negotiations to agree upon the conditions of the contract drag on for several months, resulting in high costs for the investing firm. The current process paves the way for corruption and has resulted in dismay among international mining firms. Most have now shifted their focus to other parts of the world that have mineral resources and more secure and business friendly environments. It would take efforts above and beyond normal business for Afghanistan to attract back the lost interest of these firms.   

In order to benefit from Afghanistan’s abundant natural resources, the Afghan government needs to utilize its comparative economic advantage and develop a comprehensive mineral resource extraction policy and a clear strategy to carry it out. The policy should be marketed internationally and be accompanied by well-written transparent procedures and guidelines, eliminating ambiguities in the process. It is essential that the policy is investment friendly, with enough incentives for international firms to bring in their valuable equipment and personnel and put them to use in such insecure and difficult conditions. Mineral rights should be well-defined and a clear legal framework and all possible incentives for attracting foreign investment should be established.   

Furthermore, it is essential for the Afghan government to commit its resources and have the political will to fully implement the policy. Kabul must make sincere efforts to combat corruption and provide security to investing firms, particularly in areas where extraction takes place. The Afghan government, with support from development partners, should also ensure that revenues received are invested in livelihood projects that will benefit the population in the long term. Revenues from natural resource extraction must not be spent for government operation but invested in projects that will increase the country’s wealth and create perpetual economic opportunities for people. Such projects will provide employment and will generate taxes and fee revenues that will sufficiently fund the national budget.

Unless ordinary Afghans are provided with an economic hope, the conflict will continue indefinitely. While there are more than economic reasons underpinning the conflict, providing Afghans with economic hope will weaken the insurgency and could help kill the war. Afghanistan’s vast natural resources, currently being looted and smuggled out, could move the war-torn country toward stability and fulfill a global need for resources if an effective policy, coupled with a comprehensive, investment friendly, realistic, and long-term strategy, is adopted. Better management of mineral resources could trigger Afghanistan’s robust economic growth and fiscal sustainability.

Gul Maqsood Sabit teaches business at Ohlone College of Fremont, California. He is a former deputy minister of finance in the government of Afghanistan and former President and CEO of Pashtany Bank, a state-owned bank in Afghanistan.