Afghan Cabinet Raises Concern About Mining Legislation, to West’s Unease

For Afghan mining officials and their Western advisers, revamping the Afghan laws that cover mining and oil drilling looked like an easy sell with a big payoff: new rules would give foreign investors certainty and, in the process, begin transforming Afghanistan from a ward of the international community into a state that could better pay its own way. Instead, the new laws are now in limbo after a group of Afghan cabinet ministers and senior officials last week objected to the draft legislation as kowtowing to foreign mining interests eager to hijack Afghanistan’s natural resources. “A balance has to be struck so we can make sure that our patrimony does not become a pot of porridge for others,” said Ashraf Ghani, a senior adviser to President Hamid Karzai. With the end of the NATO military mission in Afghanistan looming in 2014, the dispute over the legislation reflects growing Afghan unease over how steep a price their country — among the world’s poorest and most corrupt — may have to pay for outside help in the future. Exploiting Afghanistan’s potentially rich deposits of iron, oil, gold, copper and other minerals and gemstones is seen as crucial to the country’s economic prospects, and, by extension, the West’s ability to cut back over the next decade the billions of dollars spent each year on the government, the army, the police and myriad development projects. Afghanistan’s big international backers — the United States, Germany, Japan, among others — were so certain the laws would soon be in place that this month they made $16 billion in aid commitments for the coming four years based in part on projections of future mining revenues the Afghan government could expect. The cabinet’s rejection of the draft legislation in a special session on Wednesday caught Western diplomats in Kabul off guard. “We did not know it was going to cabinet last week,” Ryan C. Crocker, the American ambassador in Kabul, said in an interview. “We’re still playing catch-up.” But he added that the Afghans were worried about being taken advantage of and wary of suffering the fate of other states where mining has fueled instability. “There has to be enough of an incentive to bring in the companies and yet enough assurance that they won’t be taken for a ride,” he said. Mr. Karzai affirmed the cabinet’s decision, saying in a statement on Monday that the Justice Ministry and other departments would review the laws to ensure they better protect “the national interests of Afghanistan.” That could delay new legislation by months, at least, sending Western officials scrambling to help Afghanistan’s Ministry of Mines get the legislation back on track. The immediate concern is that at least five open tenders — four gold and copper concessions and one significant oil and gas project — could attract far less lucrative bids than expected if Afghanistan’s laws are not soon brought in line with global norms, Afghan mining officials and Western officials said. Bidding on those concessions is expected to be completed before the end of the year. Among the companies expressing interest is ExxonMobil, by far the largest to seriously explore investing in Afghanistan. If the expected revenue streams from mining are delayed or diminished, Afghanistan is “going to need a lot more funding,” said a Western diplomat in Kabul, who spoke on condition of anonymity. “Are the publics in Europe and the United States going to have the interest in Afghanistan to make current aid levels feasible?” the official continued. “I don’t think so.” No one on either side of the disagreement over the new legislation disputes that Afghanistan needs the money mining could bring in. But “we’re being inundated by people who have a conflict of interest advising us,” said Mr. Ghani, a former finance minister and World Bank official who is now overseeing the transition from a Western-led rebuilding effort to one run largely by the Afghan government. “Will the advisers end up working for the very same companies that are investing?” he said in a telephone interview. “These are questions we need to ask in particular given the revolving-door culture in the United States and other international organizations.” Mr. Ghani, who also taught at Johns Hopkins University, was careful to present his opposition to the draft legislation as a matter of getting Afghanistan the best deal from the foreign companies, whose money and expertise he acknowledged Afghanistan did need. He also said care had to be taken to ensure mining and oil concessions did not become a source of conflict, as has happened in many countries, especially in Africa. Mining, he said, could turn Afghanistan “into Chile, or it could turn us into Congo.” The draft legislation is intended to update earlier laws written with World Bank assistance and passed in 2009. Those laws are seen by the mining industry as highly problematic — they, for instance, give no guarantee that a company that conducts exploration would get to exploit what it found. Afghanistan’s commerce minister, Anwar-ul-Haq Ahady, said he understood the concerns, but was not comfortable being rushed into making a decision or with the level of foreign involvement in drafting the new laws. “The previous law was written by experts from the World Bank, and they were all highly paid consultants. And now we have more highly paid consultants telling us we need new laws,” he said. “We just need to know why it needs to change.” But other senior officials present at the cabinet meeting, most of them far less knowledgeable about finance and international development, were openly hostile to the idea that foreign companies would profit from Afghan mines or oil fields, according to Afghan and Western officials briefed on the discussions. Why, asked a few of the ministers, should foreigners grow rich off Afghanistan’s minerals, oil and gemstones? Couldn’t Afghans do it themselves? The short answer, according to Afghan mining officials and foreign experts: No. It has neither the money nor the expertise. Attracting companies that can provide the needed capital and expertise, however, takes an open, transparent and predictable investing landscape, American and European officials said. They insisted that their main goal was bringing Afghan laws and regulations up to international standards, not the mere pursuit of national self-interest. “Obviously, we have U.S. companies that could be qualified bidders and we would obviously be really happy if they did bid,” one American diplomat said. “But you’ve got to have an environment in place where they want to bid — our companies, other countries’ companies, all companies.”