Reports vary as to the value of Afghanistan’s mineral wealth because most of the country’s mines have not been fully explored, resulting in valuations based almost solely on superficial “reconnaissance” studies that do not determine the size and composition of the mine. Figures provided by the U.S. Geological Survey in 2012 place the value at about $1 trillion,[i] while the Afghan government has cited the potentially much higher figure of $3 trillion.[ii] However, numerous CSOs active in the sector, such as the Natural Resources Monitoring Network (NRMN), discount the government’s figures, asserting that they are grossly over inflated and that, even if true, poor governance will prevent the people of Afghanistan from benefiting from this latent wealth.[iii]
Structure and Authorities
The Minerals Law establishes the Mining Commission, as the high authority to grant the minerals’ contracts. Its membership consists of the heads of the heads of eight ministries and governmental agencies which lacks the representatives of civil society and private sector.[iv] But there are concerns that members are so busy with other administrative tasks that they ignore their responsibilities as Commission members.
The role of MoMP has changed from a mining entity to a facilitator for providing opportunities for the private sector.[v] The centralization of authorities in the position of minister is considerable and reallocating some responsibilities to advisors and various directorates appears advisable, contingent on the somewhat dubious capacities of said subordinate entities. Furthermore, the structure of the MoMP is not aligned with its authorities, and that the minister has too much influence in awarding contracts. They advocate further decentralization to the technical departments and enhanced transparency[vi]
The MoMP has 3 deputy ministers and numerous departments, including legal, policy, inspections, surveying, cadaster, and small-scale mining. As for the distribution of responsibilities: The Policy Department coordinates foreign assistance and contracts; the Cadaster Department determines the volume of mines, processes the contracts, and collects revenue; the Inspection Department monitors and evaluates the implementation of contracts; the Legal Department develops the contracts and provides legal services; the Geology Survey Department conducts geological survey and collects mines’ information; and the Small-Scale Mining Department organizes the affairs of small mines.[vii]
Legislative and Policy Basis
The Mineral Law has been amended many times in recent years, and these successive amendments have destabilized the mining sector. The Minerals Law refers many key issues for resolution by other, largely undrafted regulations. which provides ample space for corrupt actors to abuse the system. The Income Tax Law, Environment Law, and Investment Law regulate different aspects of the manning sector as well. The MoMP website publishes the text of eighteen policies and guidelines, but contains no information about their implementation or any plans to formulate additional policies in the future.[viii]
Licenses and Contracts
There is confutation about the number of Afghanistan mines’ areas. The Ministry of Mines and Petroleum (MoMP) has signed around 350 mines’ contracts,[ix] but the Integrity Watch Afghanistan, a local civil society organization, reports that around 1400 mines are exploiting illegally in Afghanistan.[x]
The Minerals Law Article 19 provides for five types of mining licenses: the reconnaissance license, for assessment of mines; the exploration license, for digging and determining a mine’s volume; the exploitation license, for extraction (maximum of 30 years with the possibility of an extension) small-scale mining license; and the artisanal license. The last two types of licenses are issued specifically for unique classes of small mines.[xi]
Based on the Minerals Law, the exploitation stage follows the reconnaissance and exploration stages, and the owner of the exploration license is preferred for earning the subsequent exploitation license. If the owner of the exploration license does not compete to win the exploitation license, s/he is competent to earn back her/his exploration expenditures, plus 25% benefits. The owner of exploration license is responsible to share reports with MoMP and these documents play an important role in the determination of royalties and other types of mines revenues.[xii]
Environmental and Social Impact
Careless mining practices can damage the environment, but they can also adversely affect Afghanistan’s economic mainstay—agriculture. Some mines use large amounts of water, while many others place at risk for contamination the local water supply. The lack of adequate legislation regulating miners’ water use represents a significant risk to local populations. Moreover, the MoMP, and other relevant agencies, lack the capacity to monitor the mining sector’s water usage.[xiii]
The National Environment Protection Agency (NEPA) is authorized to evaluate the environmental aspects of mining contracts. If the environmental standards are not observed, NEPA has authority to reject the license and/or contract,[xiv] but NEPA usually does lacks the information needed to take such an action and furthermore is subject to pressure from powerful outside interests. But this agency does not conduct site visits and usually prepare its reports based on the information provided by MoMP and other relevant entities.[xv]
Publication of Contracts and Related Issues
The publication of contract paves the way for community-based monitoring, but most residents in affected communities lack internet access and lack the technical knowledge to conduct worthwhile assessments. The fact that a large number of mining deals involve cash transfers makes the publication of operators’ assets and profits of limited utility. Here, the development of a more mature banking system that is trusted by all parties to a transaction can help the mining sector become more transparent.
And while the publication of the identities of all parties to a contract can limit the involvement of individuals or firms with conflicts of interest because of their ties with the government, the use of shell corporations and “straw men” to shield the actual identity of the parties with interests in the contracts again operates to limit transparency. But that question is, for now, academic, as MoMP’s website does not contain detailed information about all parties involved in mining contracts.
Additionally, the Minerals Law allows for certain, ill-defined documents to be kept “confidential.”[xvi] This loophole effectively eviscerates any superficial efforts at transparency because the key terms of this provision are subject to broad interpretation and are easily exploited by malign actors.
Inspection and Illegal Mining
MoMP’s Inspection Department and Provincial Inspection Units are responsible for monitoring and inspecting the mining sector, including tracking compliance with contact terms and measuring the amount of minerals extracted.[xvii] CSOs and local residents can play a valuable watchdog role as well, but lack any official standing. In addition, Parliament’s oversight role is weak to nonexistent, further centralizing authority in the hands of the MoMP.
Illegal mining operations outnumber legal ones by a factor of six, with poor security and the Ministry’s lack of capacity to monitor remote locales two of the underlying factors behind this alarming statistic. Illegal mining operations are run by, inter alia, local residents, security agencies, and provincial officials. But most of the illegal mining is done by anti-government forces and local warlords.[xviii]
Based on EITI’s findings, there are 21 types of mining revenues: 9 paid to MoMP and 12 paid to MoF. The revenues that are paid into the MoF’s account all go into a single fund and no information is provided on which type of revenue stream they originated from.[xix] Further, the Minerals Law does not clearly delineate the amount of royalties to be paid, leaving this issue to be clarified in a subsequent regulation.
Not surprisingly, the government has yet to grapple with the reality that mining revenues are not a permanent source of funds and remain subject to the vicissitudes of the global marketplace. As such, overreliance on the mining sector as a source of financing is a questionable strategy that will likely prove unsustainable. Ultimately, it is a fiscal policy decision for the government to make as to whether it elects to invest mining proceeds along the lines of the trust-fund model employed by Norway, or spend them to support day-to-day operations.
There is insufficient information about the volume, value, and location of Afghanistan’s mines. This complicates the bidding process and makes royalty payments a matter of guesswork. The Ministry lacks the trained personnel to execute its mandate. The lack of a comprehensive regulatory scheme renders the sector vulnerable to corruption. The weak policies currently in place do little to shield communities from the adverse effects of mining. MoMP monitoring efforts to improve this situation are manifestly inadequate. Nor does MoMP have the capacity to shut down illegal operations in most parts of the country.
[i]. See: http://www.mining.com/1-trillion-motherlode-of-lithium-and-gold-discovered-in-afghanistan/, last visited: 04/04/2017
[ii]. See: http://www.telegraph.co.uk/news/worldnews/asia/afghanistan/7835657/Afghanistan-claims-mineral-wealth-is-worth-3trillion.html, last visited: 04/04/2017
[iii]. Interview with Mr. Ibrahim Jafari, Member of NRMN, 04/12/2017, 09:00 AM
[iv]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Article 9 (2014)
[v]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Articles 7 and 8 (2014)
[vi]. Interview with Mr. Ibrahim Jafari, Member of NRMN, 04/12/2017, 09:00 AM
[xi]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Article 19 (2014)
[xii] Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Chapter 4 (2014)
[xiii]. Interview with Mr. Samim Hoshmand, Member of the Environment Protection Netwrok, 04/10/2017, 10:00 AM
[xiv]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Article 89 (2014)
[xv]. Interview with Mr. Ibrahim Jafari, Member of NRMN, 04/12/2017, 09:00 AM
[xvi]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Article 41 (2014)
[xvii]. Ministry of Justice, Government of Islamic Republic of Afghanistan (2014), Mineral Law Article 8 (2014)
[xviii]. Interview with Mr. Ibrahim Jafari, Member of NRMN, 04/12/2017, 09:00 AM
[xix]. Afghanistan Extractive Industries Transparency Initiative, Reconciliation Report for Fiscal Year 2016, Pg 6, retrieved from: http://aeiti.af/Content/Media/Documents/REP_139021420157596663553325325.pdf