Afghanistan is endowed with a wealth of natural resources and has extensive deposits of natural gas, petroleum, coal, marble, gold, copper, chromite, talc, barites, sulphur, lead, zinc, iron ore, salt and precious and semi-precious stones. The extractive sector has the potential to be a significant source of government revenues and economic development.
However, Afghanistan’s fragile political context has hampered the government’s ability to manage and enforce revenue collection in accordance with laws and regulations. Building on earlier efforts, former 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 former government implemented the EITI with the objective of improving the transparency and accountability of the extractive regulatory framework and empowering public debate on the management of the country's natural resources.
Implementation of EITI recommendations has led to concrete improvements in Afghanistan’s government systems, including the launch of a cadastral and non-tax revenue transparency portal. The government also used the EITI platform to shed light on the management of state-owned enterprises, beneficial ownership and small-scale mining.
Afghanistan’s former government strengthened systematic disclosures on its dedicated Transparency Portal, which was first launched in 2018 to disclose data on licenses, fiscal terms and non-tax revenues. Since then, the portal was expanded to include production volumes, contracts, and company and license ownership. The country began publishing ownership data on its Transparency Portal in 2020.
In early 2020, the two state-owned enterprises, Afghan Gas and North Coal Enterprises, published their financial statements that had been audited for the first time.
Afghanistan participated in the EITI's global pilot on alternative approaches to EITI reporting. Its 2018-2019 EITI Report analyses 12 years of AEITI data (2008-2019) and addresses key issues such as the correlation of production and royalty payments, of SOE profits with their payments to government, and comparisons of projected and actual extractive revenues over time.
The 2019 Mineral Law and implementing regulations were designed to improve the governance of the sector, secure optimal resources for the state, improve the confidence of potential investors and facilitate local community participation in mining. It prohibits elected politicians and senior government officials from acquiring mining contracts.
The 2017 Hydrocarbons Law requires contracts to be awarded subject to the completion of a public, transparent and competitive tender process managed by the Ministry of Mines and Petroleum. In the event of a tie between two bidding companies, the law favours the bidder with an Afghan partner.
The Ministry of Finance was formerly the sole public authority with jurisdiction to collect taxes and custom duties, and the Ministry of Mines and Petroleum (MoMP) collected non-tax revenues such as royalties.
Licenses and contracts
The licensing regime moved from a contract-based system under the 2014 Mining Law (in which the MoMP negotiated the terms of each mining contract separately) to a concession-based licensing system under the 2018 Minerals Law (in which standard model agreements reduce the need for lengthy negotiations).
Mining regulations stipulate that bidding announcements be published on the government website, national and international press and media in Dari, Pashto and English. In 2018, the MoMP launched the Afghanistan Transparency Portal, which includes an online cadastral system and disclosure of non-tax payments on a per-license basis.
All contracts should by law be published and be made available online. Mining, oil and gas contracts have been published on the MoMP website. Some contracts are also published on the Resource Contracts portal.
Afghanistan does not have a legal framework mandating the disclosure of beneficial ownership information. Afghanistan EITI requested companies to report their legal and beneficial owners, listing individually any person or entity holding 10% or more of the shares. The MoMP Transparency Portal discloses legal and beneficial ownership information of companies holding mining, oil and gas contracts.
The 2014 Mining Law and 2018 Minerals Law establish provisions on subnational transfers of a share of mining revenues to provinces hosting extractive activities, however these were not yet implemented as of March 2021. No provisions exist for subnational revenue-sharing in the oil and gas sector.
The 2014 Mining Law (Article 84) mandated that the Ministry of Finance allocate, in addition to its national budget allocation, 5% of the overall revenue from a mine (including royalties, surface rents, fees and penalties) to a Provincial Development Fund (PDFs) where the mine is located. However, this provision was never implemented due to concerns around weak capacity of provincial authorities and difficulties in determining overall revenue.
Afghanistan EITI (AEITI) was formerly administered by the Afghanistan Multi-Stakeholder Group (MSG). The MSG was hosted by the Ministry of Mines and Petroleum and chaired by the former Minister of Mines and Petroleum.
In 2021, Afghanistan was suspended from the EITI due to political instability.
Afghanistan was found to have made meaningful progress implementing the 2019 EITI Standard, following its second Validation in October 2020. The country had fully addressed 14 of the 19 corrective actions identified in its previous Validation.