Thursday, September 5, 2013
Aynak: Renegotiation or pawn of the next generations
By Javed Noorani
Tolo News reported:“Wahidullah Shahrani, the Afghan Minister of Mines, said that China Metallurgical Group Corporation (CMGCC) requested a review of its contract with the Afghan government for the Aynak Copper Mine project in Logar province”[i]. In the light of the statements made by Minister Shahrani during the multi-stakeholders meeting for EITI on April 17th this year, the ministry’s stand seems to be misleading.
The Aynak Copper Contract signed with the CMGCC obligates the company to pay US$ 808 million dollars in three installments as bonus n advance to the Afghan government as cost recoverable in the run up to the commercial production of copper at Ayank According to the contract, the company also commits to building a railway line linking the northern border of Afghanistan to the eastern border. Moreover, the company is obligated to 400 MW electricity generation, production of pure copper and paying 19.5% royalty when the price of copper is very high internationally.
In the presence of more than 13 members of multi-stakeholders group MSG which works for the implementation of Extractive Industry Transparency Initiative, the Minister of Mines on 17th April 2013 shared the terms of the contract for review. The CMGCC had requested for re-negotiation in five areas: reduction of royalty to 10%, no more bonus payment (US$ 808 million) to the government as previously promised, no production of copper in Afghanistan, therefore negating the need for producing 400 MW. Moreover, the company seems to think that the construction of a railway is not feasible and requested five more years before it starts producing. There venue from the project during its production stage was estimated to be US$ 300 million. The company was to start producing in 2013 and within the parlance of rational thinking the government may have already allocated the money; this could already constrain the national budget.
Despite being stopped to access Aynak Copper site by design of some officials in the Ministry of Mines, Integrity Watch Afghanistan managed to follow the activities of the company on the ground. Integrity Watch researcher observed that the Aynak Copper Project was neither progressing well nor effectively, and it was a deliberate decision to do so. The progress in the implementation of Aynak Copper Project was not shared with civil society in a timely manner and what was shared was often embellished. The commitment to transparency followed an ebb and flow trajectory, perhaps indicating that some individuals were calling the shots rather than a mechanism for transparency being institutionalized.
Yes, we want money post-2014 when donor money dries up. But what is the cost we have to incur to finance our budget? Afghan citizens would want the CMGCC to implement the contract as it was signed.
Minister Shahrani’s planned visit in China to renegotiate the contract puzzles us and defies rationality. We may need money and they need copper, but we have other potential buyers interested in copper and they would be ready to pay a lot of money. Minister Shahrani thinks he can convince Afghans with the conditionality clause for railway and royalty already included in the contract to pave the ground for renegotiation in favor of the company and not of Afghanistan. We underline that the request for re-negotiation is unfair. No one should forget that the contract signed for copper extraction with the MCC has been read word by word and the government bears responsibility to implement it. Otherwise the Afghan government owes it to its people to tell them why it is going for renegotiation rather than retendering it. It was a strategic contract and the decision to send the Minister of Mines to China is already a gesture of appeasement which may seal our fate for the next generations. We would really look forward to a sensible decision on Aynak to protect Afghanistan’s interests.
[i]Tolo News, 2013 , Chinese Company Seeks Amendment to Ainak Copper Mining Contract, August 22nd 2013 (accessed on August 22nd, 2013 http://tolonews.com/en/business/11650-chinese-company-seeks-amendments-to-ainak-copper-mine-contract)