Friday, June 25, 2010

Afghan Mineral Resources For Regional Development.

There is nothing new about mineral deposits of Afghanistan, which have been quoted at valuing 1 trillion US dollars. A wide variety of mineral deposits have been earlier studied and explained by British geological Survey and later by the Soviet geologists in 1970s and onwards. The US Geological Survey published a report as recent as 2007. The recent announcements by US officials are not the result of any sudden discovery.
These resources can be a double-edged sword; it can cause further conflict, dissension, corruption and exploitation in Afghanistan or can be used for local development and employment generation. The track record of mining companies is not very good, as is exemplified by poor mineral producing countries in Africa, Asia and Latin America. Meager royalties, environmental degradation, forced ejection of local population etc has been a familiar story. A royalty of 20% on sales and that too bungled and under-declared would not fetch a lot of revenue to Afghanistan. However if the minerals are processed locally, there is a possibility of building and developing some level of industrializations and employment generation that could elevate the standard of living of the people of Afghanistan.
Pakistan and Afghanistan can jointly benefit from these resources as I have elaborated in my recent book Pakistan Development Challenges: federalism, security and governance. I reproduce the following excerpt from the book:

Afghan –Pakistan joint investments in mineral sector in bordering areas

The need for a harmonious relationship and economic cooperation between Afghanistan has perhaps been finally acknowledged, and talks are going on in this respect between the two countries with some sense of earnestness. While discussing such possibilities, there is a need to identify projects and investments for border areas between Afghanistan and Pakistan along FATA and NWFP.

Mineral resources are one area, where a joint approach can be adopted for Afghan-Pakistan border areas. Afghanistan is land locked; hence the mineral exports prospects are very limited, except to meet the Pakistan market demand. Afghanistan has significant mineral resources, while oil and gas resources are only at a speculative stage. There are large proven deposits of good quality ores of Iron, Copper etc. Rare earths (Lithium, Tantalum) have also been reported. Recently Chinese have won a contract worth more than 3 billion US$ for exploitation of Aynak copper deposits, which are reported larger than Rekodeq. Work is preceding ahead smoothly, under strong US support and encouragement, amusingly even security support also.

Soviet Union, UK and the US have provided considerable technical assistance, in their respective periods towards exploring and proving mineral deposits. Today the website of Afghan Geological Survey (AGS) is much more impressive, informative and purposeful than of our related institutions e.g. Geological Survey of Pakistan (GSP) and board of investment (BOI). The officials of these two Pakistani organizations are strongly urged to visit AGS sight and see for themselves. The policy framework in terms of a new mining law has also been reorganized on new footings. However, in our land of the pure (Pakistan) there is the familiar “One step forward and two backward “process goes on. The Rekodeq project involving Copper and Gold mining has reportedly run into snags again. Pakistan side wants to renegotiate it and has threatened to cancel the contract to protect National Interest. What is National Interest is usually a very vague and slippery, but convenient term. It may serve a variety of purposes and have all kinds of meanings and connotations attached to it.

Coming back to the joint development of Afghan-Pakistan border areas and the role of mineral industries there of, the possibilities of utilization of iron-ore deposits of Afghanistan should be explored. Afghanistan has a very large deposit of good quality iron (60% iron content and 1.8 billion tones) in its Bamiyan province (Hajigak) .There is a supply of coke-grade coal nearby. Both are essential inputs for producing pig / blast furnace iron. Pakistan does not have similar iron ore deposits of comparative quality and quantity. Pakistan currently imports iron –ore and coke-grade coal from Australia for Pakistan Steel Mills’ requirements in Karachi. Another Steel Mill is coming up in the vicinity of Pakistan Steel. Development of Pakistan’s iron and steel industry has suffered because of local availability of raw materials. A considerable portion of Pakistan’s steel demand is imported and the demand is growing. Steel industry is bound to expand due to persistent demand creating significant demand for iron ore and raw materials. Afghanistan can be a good source of import of this ore from the mines as mentioned earlier for iron and steel projects to be located in the joint border areas of Afghanistan-Pakistan. Such projects would create employment and economic activity. Iron and steel production and mining industry is quite compatible with the proposed rusty/ dusty region and would be compatible with the rough and tough workforce, as opposed to other industries that have been proposed now and then and have not reached the stage of materialization. USAID which is groping for the projects should pay attention to this. For Pakistan, it may also be useful from other perspectives as well. This should be a trilateral project between Pakistan- Afghanistan and United States. The proposed iron ore deposits of Afghanistan may invite quite some interest from India, which has the entire where withal to implement such a project. This would promote and expand Indian economic and other interests in Afghanistan requiring some input and initiative from our political apparatchik

Ironically, Chinese have chosen to acquiring mining interests in Copper deposits, while ignoring Pakistan’s large Rekodeq copper deposits, which has recently been taken away from the earlier lessee company Tethyan copper. Chinese are also handing over the Saindak Copper project to Pakistan. They had originally built that project. Rekodeq Copper project would now be developed with the assistance of Dr. Samar Mubarakmand, the renowned nuclear scientist who has also been entrusted with the responsibilities of Thar Coal gasification.
There is an apparent economic logic on the part of the Chinese to acquire Afghan Copper Deposit, as the transport logistics from Afghanistan to China is much shorter and simpler. However lack of interest in Thar coal and then in Rekodeq on the part of the Chinese should be taken seriously by the Pakistani authorities. I and many are concerned. It is only Chinese who can deliver and will transfer technology and work in trying conditions. Others will only postpone and contemplate and put one condition after the other. Let us assure China that we mean business. Perhaps Chinese are waiting for us to make up our mind in pursuing these projects and sort out our internal problems.

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