The potential for major government revenue from the Afghan mining sector is significant. Whilst it will not alone revive Afghanistan’s economic prospects, it will need to be part of the solution. According to some royalty revenue to the government from mineral production is expected to be around US $1.2 billion per year within the next five years, and increase to US $3.5 billion per year after 15 years. Ghani himself says that Afghanistan will be the biggest producer of copper and iron in the world within 20 years. Yet, as the EITI reports reveal, government revenues from the sector have only been between US $10 million and US $100 million per year for the past few years.
President Ghani set out his three aims from the sector:
- Avoid doing harm. In order not to squander the wealth as so many other resource-rich countries had done, he was keen that the focus be on cautious growth of the sector: firstly, ensuring that the licences are allocated fairly and openly; secondly, focusing on building the institutions and human capacity; thirdly, working with the 34 provinces to work out their rights and status in relation to the mines. “Mining can come later” he said.
- Build the infrastructure and invest, so that the revenue creates jobs beyond the sector and builds a lasting legacy.
- Collect basic information, as through the EITI, so that better assessments can be made of the potential and risks of the minerals and spending can be directed where it is most needed.
Clare Short said after the meeting: “President Ghani has thought carefully about the future of the mining sector and is establishing a clear reform path. Of course he faces enormous challenges and the EITI process in Afghanistan cannot address all of these challenges, but it is good that the President sees EITI as a useful process to help drive improved government systems. The EITI Board and Secretariat will do whatever it can to support Afghanistan as it drives through these changes.”
Afghanistan is one of the 48 countries implementing the EITI. Whilst it has made progress in a challenging environment, Afghanistan is facing potential suspension from the EITI, having not been able to provide reliable information across the whole sector. With the accession of the new Afghan Government, the country has a major opportunity to reform the governance of its mining sector.
The London Conference provides a platform for the government of Afghanistan to set out its vision for reform, and for the international community to demonstrate its support for Afghanistan.