Perspectives on Afghanistan’s Mineral Wealth: Investing in Afghanistan’s Future Generations

ERI is pleased to present two guest perspectives on recent reports of mineral wealth in Afghanistan from our legal interns.  Both address how valuable minerals might affect the conflict in Afghanistan, and whether it might lead to the “resource curse” scenario seen in other resource-rich developing countries.

The post below is from Michelle Salomon, a second-year law student at the University of Maryland. The companion post is from DOng Keun Lee, a second-year law student at Washington University in St. Louis.

The article that appeared on the front page of last week’s New York Times could have caused any under-caffeinated commuter a couple blissful moments of hope: U.S. Identifies Vast Riches of Minerals in Afghanistan.  After a quick read, I oscillated between feelings of discomfort and relief over the prospect that $1 trillion in untapped minerals—iron, copper, cobalt, gold, and lithium to name a few—were discovered overnight in a country in dire need of an alternative to foreign aid and a means to rectify the impoverishing effects of protracted war.

My worries centered on the possibility of a “natural resource curse” scenario.  Richard Auty coined this term to refer to the paradox of the extreme poverty prevalent in so many countries with abundant natural resources.  Some empirical research on the phenomenon suggests that resource-wealthy countries are at a higher risk for civil war and slower growth than their resource-poor counterparts. Commenting on the recent news in Afghanistan, Keith Slack of Oxfam noted how mineral wealth often triggers a host of other devastating circumstances, such as corruption, human rights violations, worsened conditions of poverty, trauma, and conflict.

Therefore, the recent news that Afghanistan is planning to open the mineral reserves to international investors in an upcoming meeting raises serious questions.  Can Afghanistan avoid falling into one of the common traps facing the ‘bottom billion’?  What needs to be done to ensure that Afghanistan’s mineral wealth brings benefits to the Afghan people and, in particular, poor, rural communities?

All actors in the extractive sector have a role to play in helping Afghanistan to avoid the resource curse.  The Government of Afghanistan should develop a policy and regulatory framework with transparent procedures for enforcement of mining law and regulation, and incorporating environmental, labor, and health standards into the same documents.  Afghanistan has already agreed to implement the Extractive Industries Transparency Initiative (EITI), and recently passed the 2009 Hydrocarbons Law, which includes a model hydrocarbons contract and has transparency and environmental protections. 

Civil society needs to actively ensure the better management of natural resources.  For NGOs and local communities to be able to oversee such activities, they must have access to information and a seat at the table where policy decisions are made. Unfortunately, such information is rarely available from companies or host governments, but NGO reports like ERI’s Capitalizing on Conflict (2003) have documented how mining contributes to private gain, environmental damage, and extensive graft.  The disparity in knowledge between host communities and companies increases the likelihood of corruption and environmental and human rights abuses, particularly in a country like Afghanistan where people have little experience with extractive companies.  NGOs can start immediately to organize local community-based groups and educate communities about the safety and health dangers of mining, legal rights, and avenues for redress, to even the power imbalance and to enable community members to “speak the same language” as the companies and encourage responsible extractive activities.

Home governments and foreign investors, too, must commit to responsible investment policies, as Afghanistan becomes the next attractive destination for foreign direct investment.  Afghanistan has already signed Bilateral Investment Treaties (BITs) with Germany and Turkey; it has also ratified international conventions that oblige it to resolve investment disputes before international arbitration tribunals, instead of the Afghan domestic courts.  International arbitrators have proven depressingly receptive to investors’ claims against host states –usually, cash-strapped developing countries – based on a local regulatory decision, policy, or law that has allegedly devalued the investment.  To prevent this tendency from tying Afghanistan’s hands on legislating in the public interest, home governments should ensure that future BITs include human rights and environmental standards.  Foreign investors should commit to investment agreements that respect the rights of communities and guarantee a fair split of the proceeds for the people of Afghanistan.  And mining corporations must uphold their international human rights obligations and international standards for corporate social responsibility.

So whether the sudden discovery of minerals in Afghanistan will motivate conflict, finance disaster, social or economic growth is something yet to be seen, and perhaps not for several years.  What is clear is that mineral extraction will bring real benefits to the Afghan people only if the Government of Afghanistan, home governments, investors, and civil society can effectively collaborate to provide transparent, inclusive natural resource management.