jeudi 9 juin 2011

Will Afghanistan face the commodity curse ?

Afghan miners work in a coal mine 100 km east of the western city of Herat on June 26, 2010 in Afghanistan (Credits: Majid Saeedi/Getty Images)

Afghanistan contains about $1 trillion in mineral resources, according to American government officials’ declaration in june 2010 and quoted by the New York Times. What should we think about it ?

Back in 2004, American geologists from the USGS (US Geological Survey), jointly with the DoD Reconstruction Office and the US Navy NRL (Naval Research Laboratory) were sent in Afghanistan and found series of geological charts and data established by the Soviets. Based on these documents, they realize their own mineral resources survey starting in 2006, flying over the country in an old Navy Orion P-3 aircraft modified by Lockheed Martin (NP-3D). Encouraged by satisfying results, a second survey began in 2007, providing the most complete assessment ever led in the Afghan territory. Large quantities of minerals, among which Copper, Iron, niobium (used in producing superconducting steel), and gold, are mentioned in the 2007 report. These data have been gathering dust for years, until a Pentagon task force came upon the results in 2009. Recent surveys led in June by another team of American geologist localized as well one of the world’s largest known lithium reserves.

(Credits: US Geological Survey)





Then, there is no “discovery” at all, since these data were known since the soviets invaded the country in 1979. However, it is certain that the NY Times article triggered the interest of many investors. Afghanistan is already considered as a strategic location due to its geopolitical situation, but the country is going to lure other nations and private investors for its huge minéral resources. So, asset or liability?
If those resources succeed in bringing financing through the national economy channels, Karzai’s central power could be strengthened and could be more efficient in providing the country with security, prosperity, education… But such a scenario sounds definitely like Alice in Wonderland….

It is more likely that structural factors won’t enable the country to take advantage of such resources.
New national revenue sources may enhance corruption, which already gangrenes economic and politic relations in the country. In addition to American investors, Chinese, Indian and Japanese companies invading the country may participate in raising the stakes between clans warlords and well-connected oligarchs to take control of the resources. Last year, American officials already accused China of bribing the Afghan Minister of mines with $30Bn to develop a copper mine in Mes Ainak, in the middle of a Taliban-controlled area.

Besides, the argument on so-called “peaceful” effects brought by such discovery may not be neither very realistic. Fights between the central government, provincial and tribal leaders could be intensified to take or keep control over mineral-rich districts.

Last but not least, there is no history of mining in Afghanistan, neither real industrial infrastructure basis, and that could delay the possibility for investors of making profit by decades. The development of natural resources requires a great logistic system. It means railroads, railroad fueling, repair, and maintenance services, roads, vehicles, vehicle fueling and repair stations, etc. It also needs huge quantities of flowing or pumpable water and systems to clean it, and large quantities of reliable electricity. When Mining ventures in remote places usually fail, it’s not a question of resource quality, but it is to the lack of infrastructure to developp such logistic. 20

Us investors beef up more than never their position in the “afghan mining market”, since an internal Pentagon memo states that the country could become the “Saudi Arabia of Lithium”. The Pentagon already starts to help the Afghan central government to create bases to deal with a potential mining industry.
After war, terrorism, foreign power invasions, Afghanistan may suffer from a new plague: the commodity curse.

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