Thursday, May 3, 2012

Mining contracts might lead to “resource curse”

Afghanistan has issued four more mine tenders to private investors so far this year. The nine blocks that are offered for sale include rich gold and copper deposits in north and west of the country. However, state institutions require deep knowledge and capacity to handle all aspects of the mining operations of such scale. Developing necessary capacity to dealing with social, environmental, economic, cultural and political impacts of extractive industry takes many years. In addition, a profound understanding of demography will make it easy for the government to negotiate deals that would spin out positive externalities for greater number of Afghans.
The Ministry of Mines which is the custodian of the natural resources of Afghanistan still has to develop the needed capacity to regulate and inspect current mining projects in an effective manner. The new contracts that will be inked by the end of 2012 will put additional strain on the existing capacity. The views about the critical gap in capacity of Ministry of Mines, despite positive developments in the recent years, are shared by many including some donor agencies.

Afghanistan certainly needs revenue and investment in the mining sector to cover its expenses and to develop a self-sustaining economy. However, the pace of investment in the mining sector must match the capacity of the regulatory bodies in order to support the economy and to benefit the citizens. Due to low capacity, the Afghan Government will certainly face serious challenges to re-invest the revenue from the mining sector in a sustainable manner. There is a risk that this lack of capacity may accentuate once the international support dwindles further.

The rush in opening up the mining sector in such a manner is subjugated to serious risks. The Afghan Government needs to exercise caution not to stretch the existing regulatory and oversight capacity beyond its limits. Otherwise, quality control will be compromised that would lead to disastrous situations with social, environmental, economic, cultural and political repercussions. The decision makers need to realize that stationary minerals are better and safer underground rather over ground that would leave the Afghan citizens worse off.

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