Afghanistan’s Vast Mineral Deposits Could Lift it Out of Poverty

Wednesday, October 12, 2011

For all the column inches and hours of negotiations spent discussing Afghanistan’s recent past, present and future, one of the most pressing parts of the puzzle remains largely overlooked and poorly understood. The country sits on top of vast mineral deposits, which, if properly managed, offer the best chance of lifting a generation out of poverty and weaning the country off international aid.

Afghanistan houses rich seams of copper, iron, gold, lithium and rare earth deposits worth up to $3 trillion, according to the Afghan government. Unsurprisingly, the government and international community are eager to see these resources exploited. The plan is to sell off rights to access many of the country’s mineral deposits over the next three years in the runup to transition in 2014 – potentially releasing a vast amount of revenue for the Afghan economy.

What happens to that money will largely depend on the decisions taken by the Afghan government, its international allies and investing companies over the next three years. With the right systems in place to govern a fast-emerging extractive sector, these revenue streams could bridge the funding gap left by a cash-strapped OECD community that is looking to reduce Afghan dependence on its money post-2014.

But it could just as easily go the other way. The billions of aid dollars invested over the past 10 years have not produced the intended results. As of this January, an estimated $286.4bn had been invested in Afghanistan since the invasion – that’s $9,426 per head of population. Despite this spending, the country remains hugely dependent on aid, with many Afghans living on less than $1 a day. Meanwhile, allegations of massive diversion of funds and grand corruption abound. There is very little in place to stop the benefits of the extractive sector following suit. This would not only let a priceless opportunity for much-needed development pass; it could turn the mining sector into a fresh axis of conflict and instability.

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