Will Afghanistan’s $1 Trillion of Minerals Secure Foreign Investment

In mid-June, an article in the New York Times revealed to the world something that many Afghans already knew: Afghanistan sits on about $1 trillion-worth of minerals.

Afghans are now hoping the news will help the government attract much-needed foreign investment.

On July 20, the Afghan government will host the first International Conference on Afghanistan in Kabul. At the conference, Afghan officials intend to outline a national development strategy to international participants, including regional and international bankers and private-sector representatives. The government's development strategy is organized around five clusters. Economic growth is one such cluster, focusing on poverty reduction, job creation, and sustainable development.

The key to achieving each of the above objectives is the extraction and export of Afghanistan's natural resources to global markets. This would be the fastest way to earn the revenue the country needs in order to fuel long-term economic growth. The list of known mineral deposits in Afghanistan is a long one, including copper, iron, chromium, magnesium, rubies, emeralds, lapis lazuli, nickel, mercury, gold, silver, lithium, and uranium

At the conference, Afghanistan's ministers of finance and mines are expected to outline their reform agendas, featuring measures to promote mutual accountability and transparency. The reforms will aim to enhance aid effectiveness and foster a friendly and safe environment for capital investment.

Afghanistan's Ministry of Mines and Industries hosted an exhibition in London on June 25 to promote investment opportunities, as well as answer questions about the country's legal framework covering the development of natural resources. Minister of Mines and Industries Wahidullah Shahrani noted that investment in Afghanistan's mineral sector would entail work in developing Afghanistan's transportation infrastructure. Such projects would be needed to get extracted minerals to international markets. But they would also serve as an important job-creation mechanism.

In a recent interview with the British Broadcasting Corp., Minister Shahrani sought to address concerns that a massive influx of investment in Afghan minerals could lead to increased corruption. "We have improved our legislation, the procedures have been upgraded and we have been getting a tremendous amount of support from our international partners," he said.

"Whatever contracts would be awarded, all the information will be published, to make sure that all the relevant stakeholders, civil society and media and parliament, will have access to the information; to make sure we will have sufficient amount of the safeguards; to make sure that we will achieve the high standards of transparency," Shahrani said.

Bureaucratic bottlenecks have been known to impede the conduct of business in Afghanistan. In addition, there are security issues related to the ongoing insurgency carried out by Islamic militants. Nevertheless, investors in Afghanistan enjoy some advantages not found elsewhere in the region. Domestic and foreign corporations, for example, do not have to compete with subsidized government-owned businesses. In addition, the Afghan Investment Support Agency (AISA) serves investors as a one-stop shop for licensing and corporate support.

Foreign investment that spurs job creation could prove a powerful weapon in the effort to defeat the radical Islamic insurgency. Under the existing conditions of economic stress and uncertainty, some Afghans have inevitably turned to the Taliban for wages and some have joined factional militias merely for food and shelter. Still others engage in opium poppy cultivation to ensure the survival of their families.

Those opting to become insurgents and poppy growers comprise less than 15 percent of the Afghan population.  It would be possible to win a significant percentage of these people over to the government side, if officials could offer them decent jobs. And for the roughly 85 percent of Afghans who already support the government, as well as approve of the international troop presence, foreign investment and job creation would go a long way toward reinforcing their faith in the reconstruction process.

Already, some countries have recognized the lucrative opportunities that are available in Afghanistan. For example, India has invested $1.3 billion in transportation, healthcare, education, hydro-electricity and electrical transmission. And China has won a $3.5-billion bid to develop Afghanistan's giant Aynak copper mine.

The government and people of Afghanistan see the country's abundant mineral wealth as a way to secure and rebuild their war-ravaged homeland. Afghans are proud of a historical tradition of commerce and cultural exchange that dates back to the era of the Silk Road. With each economic opportunity that is fulfilled, the people of Afghanistan could move one step closer to reconnecting with the global economy and securing a stable and prosperous future. Foreign investors can play a major role in helping us fulfill this national destiny.

By. Ashraf Haidari