ArrayAfghanistan

EITI Status Inadequate progress / suspended
Joined EITI in 2010
Latest Data From 2017
Latest Validation 2018
Last updated 15 June 2020

Overview

The mining sector in Afghanistan has the potential to generate large government revenues, with potential to support economic development. The security background means that central government is hampered in its ability to manage and enforce revenue collection in accordance with laws and regulations. Building on earlier efforts, President Ashraf Ghani announced reforms specific to the extractive sector as part of a wider anti-corruption package in May 2016. These included tangible commitments to the EITI, including in areas of systematic disclosures of extractives data and beneficial ownership.

Afghanistan's latest EITI Report published in June 2019 covered the fiscal years 1395-1396 (2016-2017). An addendum published in May 2020 maps government systematic disclosures of extractive industries data. The publication of Afghan Gas Enterprise and North Coal Enterprise' audited 1395-1396 financial statements in January 2020 has opened up the financial management of the two state-owned enterprises, which together account for two thirds of the USD 48m in government extractives revenues in 1396 (2017). Implementation of EITI recommendations has led to concrete improvements in government systems, including the launch of a cadastral and non-tax revenue transparency portal.  

Beneficial ownership disclosure

Afghanistan asked companies to report their legal and beneficial owners in the most recent EITI Report, listing individually any person or entity holding 10% or more of the shares. The Afghanistan Central Business Regstry & IP operates a portal ('online verification' section) where the legal ownership of all companies incorporated in Afghanistan is disclosed. 

We will give the EITI beneficial ownership requirements high priority.
President Ashraf Ghani.

Production

Production in Afghanistan is severely constrained due to the security situation and other limitations. Although there is much potential, for example for copper production in the Aynak copper project, most production is limited to coal. The 2016-2017 EITI Report shows that total coal production disclosed by the government for the year 2017 amounted to 1.8 million tonnes, alongside gold, cement, marble, talc and stone.

Afghanistan has extensive mineral deposits and potential for oil and gas production. Due to conflict, political instability and inadequate infrastructure, the extractive industries are relatively underdeveloped.

The Afghanistan Geological Survey identified six major metals and minerals opportunities in the country – copper, iron-ore, rare-earth metals, gold, gemstones and marble. Deposits have been estimated to be worth over USD 1 trillion.

Most gemstone mining is artisanal. Operations are small-scale and output is supplied mainly to local and regional markets. Afghanistan is thought to be the world’s largest exporter of lapis lazuli, but all production is currently unregistered and untaxed.

Globally significant deposits include the copper deposit in Aynak, Logar province and iron-ore in Hajigak, Bamyam province. Consortiums of Chinese and Indian companies have signed contracts to develop these mines.

Developing transport infrastructure that would link deposits to global markets remains a challenge. Governance challenges, as well as the security situation, pose additional hindrance to the development of the sector.

Oil and Gas Production (Sm3 o.e)

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Coal Production (Tonnes)

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Natural resources 

CommodityReservesUnitSignificance
CopperSoviet surveys in the 1970s and 1980s indicated resources of 240 Mt at 2.3 % CuMt There are around 300 documented copper deposits, occurrences and showings in Afghanistan
Rare Earths1.4MtOre grading 2.77% light rare-earth elements

Revenue collection

EITI Reports show that the largest source of government revenue from the extractive industries in Afghanistan are bonus payments (signature bonus) from the Aynak Copper Project. Aside from these exceptional payments, the two state-owned enterprises (North Coal Enterprise and Afghan Gas Enterprise) account for around two-thirds of government extractives revenues. The security background means that central government is hampered in its ability to manage and enforce revenue collection in accordance with its laws. 

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Reconciled revenues by company

Revenue allocation

EITI Reports show discrepancies and some uncertainty about whether companies make payments to municipalities and whether these flows are material. A priori, the Ministry of Finance is the only entity that receives tax payments and the Ministry of Mines and Petroleum receives royalty payments. EITI Reports include recommendations on further work to clarify the actual situation of how revenues are collected and distributed.

Innovations

The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful. Afghanistan has used the EITI to:

  • Present previously unpublished studies on artisanal and small-scale mining.
  • Lead work on beneficial ownership of extractives companies.
  • Publish the 2016-2017 financial statements of the two extractives state-owned enterprises (Afghan Gas and North Coal), audited for the first time.

Implementation

Afghanistan was accepted as an EITI implementing country in February 2010. The current objectives for its EITI implementation (in the 2020 AEITI work plan) include improving the transparency and accountability of the extractive regulatory framework and empowering public debate on the management of the country's natural resources. EITI reporting in Afghanistan is serving as a diagnostic tool and leading to numerous recommendations for how to improve the governance of the sector. Data from the EITI has generated some public debate, particulalry in the capital Kabul, but has yet to support evidence-based public debate on the management of the extractives more broadly. 

Previous attempts at achieving compliance under the EITI Rules in 2013 and in 2014 were unsuccessful. The Board decided at its meeting in Brazzaville in 2015 that Afghanistan would remain a candidate and be tested on meeting the EITI Standard. The Board decided in Astana in October 2016 that Afghanistan’s Validation would begin in April 2017, which was then again delayed to November 2017. Afghanistan's second Validation is scheduled to start in July 2020.

Governance

The multi-stakeholder group is chaired by the Minister of Mines and Petroleum and includes representatives from the Ministry of Finance, civil society and the private sector. The Champion is Mr. Mohammad Haroon Chakhansuri, Acting Minister of Mines and Petroleum.

Timeline

 

Validation

Afghanistan's Validation against the Standard commenced on 1 November 2017. In January 2019, the country was found to have made inadequate progress in implementing the EITI Standard. The second Validation will commence on 18 July 2020.

Afghanistan's progress by requirement

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