KABUL: The mining industry in Afghanistan holds the potential to completely revolutionise the country’s domestic economy. Afghanistan has around 1400 deposit sites of minerals worth between USD 1 and 3 trillion – according to the 2010 US Geological Survey, confirming previous Soviet reports which discovered that Afghanistan holds some of the largest reserves of iron, copper, cobalt, lapis lazuli and lithium. These resources provide a ready opportunity to set up an industry that can be licensed and taxed, and can provide significant revenue to the Afghan government. Today the mining industry is the most promising driver of growth and industrialisation in Afghanistan.
Despite initial enthusiasm after the announcements of the development of the Mes Aynak deposits by China in 2008 and the Hajigak deposits by India in 2011, both projects failed to take off amidst security concerns and the discovery of ancient Buddhist monuments at Mes Aynak. The episode also brought into focus the lack of transparency and corruption in government, in the mining rights allocation process and in the overall economy – factors that discourage high-value, long-term investments by foreign investors. Afghanistan’s unique situation of an economy failing to attract investment despite the vast quantity of existing opportunities requires a unique solution.
Mining in Afghanistan is a high-risk and capital-intensive industry. Kabul has repeatedly invited large government-backed consortia that promise billions of dollars purchasing the rights to mine fields while also promising to set up power plants and highway projects. Although this style of mega-projects promises to bring in the much-needed funds to a cash-starved Afghan government, the security threats in the country make investors jittery. Instead, the government should focus on attracting private mid-level investors looking to invest millions rather than billions for medium terms. Interestingly, small to mid-level sized mining operations have been undertaken in Afghanistan by the Taliban, who mined rubies and emeralds, and earned around USD 120 million in 2015.
The case of mining in Laos, for instance, shows how mid-level investments can be used to develop a mining industry where none existed. Sepon, a medium-sized copper mine was developed by an Australian company, Oxiana Limited. It produced USD 100 million worth of copper a year with an initial capital investment of USD 240 million. The mine also generated USD 15 million in taxes and created 2800 jobs. By 2008, there were roughly 127 mining companies established in Laos.
