The ongoing security transition in Afghanistan to be completed in 2014 has dominated discussions about the country’s future, but the economic transition will also be a challenge. With so much at stake, many are looking at the country’s abundant natural resources as an “economic life raft.”

An outpost is constructed on the Hajigak concession in Bamian, Afghanistan,
Photo courtesy of the New York Times/Mauricio Lima

The ongoing security transition in Afghanistan to be completed in 2014 has dominated discussions about the country’s future, but the economic transition will also be a challenge. As billions of dollars in international aid decrease, the country will have to do more to sustain its own economic future than at any time in the last decade.

With so much at stake, many are looking at the country’s abundant natural resources as an “economic life raft” that could catapult the war-torn and impoverished country into greater prosperity. However, there are numerous hurdles to overcome. Accountability, in a country known for the debilitating effects of corruption, is one of the big ones.

Afghanistan’s extractive industries – minerals, oil, and natural gas – have the potential to generate billions of dollars in the next decade. These funds could support long-term economic development, which will be essential to Afghanistan’s stability, and also help promote security in the region and beyond.

But if extractive industries are developed in the absence of effective governance, then instability, corruption, violence and increased funding of armed illegal groups would likely result. This phenomenon, known as the resource curse, has been associated with underground resource exploitation around the world. The resource curse occurs specifically in countries without strong institutions and effective rule of law to oversee the exploitation of natural wealth. Indeed, corruption associated with natural resource extraction can reinforce the corrupt elite. This risk can be aggravated by an environment in which the unempowered are weakened by poverty and myriad conflict-related challenges that make it even more difficult for citizens to prevent the “looting” of national resources by elites.

“The equitable allocation of concessions is an essential component for the development of a state which functions in the interests of its citizens,” according to Global Witness, an international nongovernmental organization (NGO) that has researched the issue for years, in a report published in 2011.

As the international community withdraws military forces and diminishes development aid to Afghanistan after 2014, helping the Afghan government create a state that functions effectively on behalf of its people is paramount. The alternative – that the Afghan government fails to regulate the mining industry and allows the new riches to be diverted and dissipated – could be disastrous, inflicting the worst symptoms of the resource curse on the country.

This curse has affected countries ranging from the Democratic Republic of Congo to Ecuador and Papua New Guinea. In many places, including the U.S. at the turn of the century, mining issues have sparked or prolonged violence. One country that today shares some characteristics of Afghanistan is Nigeria. Like Afghanistan, Nigeria ranks among the most corrupt countries in the world, according to Transparency International’s Corruption Perceptions Index. Also like Afghanistan, Nigeria is known for large gaps in the central government’s reach to its population, high levels of youth unemployment, and armed ethnic militias. In Nigeria, the theft of oil funds an array of armed groups, kidnapping of oil workers, and attacks on oil facilities.

Of course, Afghanistan is a unique place at a unique time. The international community has put tens of billions of dollars in aid into the country, and plans to continue providing aid, albeit at a diminished level, over the next decade. Afghanistan’s natural resources, if properly managed, provide an opportunity for Afghanistan to write its own story of economic success.

Afghan President Hamid Karzai attempted to address some of the challenges of the sector through his July presidential decree No. 45, in which he called for all contracts from the past three years to be published, and instructed the Ministry of Mines to produce a “specific plan to provide for transparency regarding mining contracts.” One outcome has been that the Ministry of Mines published more than 200 oil, gas and mineral contracts this October (all current contracts except for the 30-year Aynak contract with the Metallurgical Corporation of China (MCC). Posting of this contract has been delayed due to a signed agreement the Afghan government previously made with MCC not to disclose the contract, under the former leadership of the Ministry of Mines in 2008. The decree also ordered development of a revised Minerals and Hydrocarbon Law and other government deliverables that may still come. However, in order for governance to be effective, local groups need to have tools to hold the right people accountable. Government efforts are essential to regulate the sector. Just as important will be civil society’s role in constructively engaging on the challenging issues that result from resource extraction. It will be important for the government to engage civil society in a way that allows the people most affected by mining projects to have a voice.

Given the great potential rewards for Afghanistan and its people from its mineral resources, the United States Institute of Peace (USIP) is working to help prevent the effects of a resource curse that would prevent these rewards from helping the country. USIP is partnering with an Afghan nongovernmental organization, Integrity Watch Afghanistan (IWA), to help reduce the risk of at least one type of violent conflict related to extractive industries. At the core of the project are two main goals.

One is to empower communities in mining areas by helping them monitor, record, share and analyze the socioeconomic impacts of mining operations. USIP, in collaboration with Afghan community leaders, developed the project framework and methodology between March and October 2012. The following month, a survey team -- trained and supervised by USIP’s implementing partner, IWA -- completed the baseline survey in the Hajigak mine area. Information from the baseline survey will be used to create a database that can be used by mining stakeholders over time. This will allow communities to track changes connected to mining activities, such as employment and environmental conditions. The idea is to help provide communities with the information they need to solve problems related to the mining sector before difficulties escalate into violence.

The second, and no less important, objective of the USIP-IWA project is to strengthen governance at all levels by creating a forum for meaningful, evidence-based exchanges between mine-affected communities, the Afghan government and the mining companies. The goal is to help all three parties to develop constructive relationships and practical solutions to the challenges that arise from mining.

“It will help the communities to understand where they can work with the government,” said Najib Ziar, a former manager of the project with IWA. Violence tends to occur in communities where extractive firms operate – the company-community nexus is often a flash point for violence. The communities often experience the negative impacts of mining in the form of pollution, displacement of villagers, and other changes caused by an influx of foreign contractors required to conduct the mining and other personnel brought in to protect or otherwise operate the mines.

But many experts believe that it won’t take a lot for the villagers around the mines to feel as if they are sharing enough of the wealth. Many villagers near the mines have little personal wealth as it is. If they are given a fair deal, then it is less likely they will incite violence or otherwise cause problems for the mining firms. In turn, mining firms can reap positive returns on their investment faster.

“If enough people will benefit, then I think you won’t see a lot of people complaining about [mining],” said Renard Sexton, who conducted research in Kabul on Afghanistan’s natural resources and conflict for IWA. “However, if these communities do not see themselves as proportionately benefitting from mining or if their grievances are not met when expressed peacefully, this can motivate locals to interfere with mining operations or worse, to use violence.”

The Hajigak iron ore mine area in Bamyan Province is the first pilot site for the USIP-IWA project, with potential for this model to be applied at a larger scale across Afghanistan or in other conflict-affected countries.

Rebecca Kullman is a program specialist with USIP's Center for Sustainable Economies. Gordon Lubold is a national security reporter for Foreign Policy. He was formerly a senior writer at USIP.

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