Afghan Government Unveils First Tranche of Mining and Oil Contracts

Country: Afghanistan
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The Afghan government has made a landmark advance in mineral sector transparency, enabling the Afghan people to see and scrutinize the deals negotiated on their behalf. Over the last week, it has published in full the 2011 Amu Darya oil contract and more than 200 small mine contracts. The crucial question now is what the government’s next steps will be to fulfill and sustain its stated goal of transparency, accountability and international best practice in Afghanistan’s extractives sector.

So far, so good. Afghanistan is already a candidate member of the Extractives Industries Transparency Initiative (EITI) - a global industry standard which promotes transparency in the sector - and since August has released its first two EITI reports. Following on from international commitments to anti-corruption and economic reform made at the July 2012 Afghanistan Cooperation Conference in Tokyo, President Hamid Karzai issued presidential decree No. 45 requiring all contracts from the past three years to be published, and directing the Ministry of Mines to produce a “specific plan to provide for transparency regarding mining contracts”. The recent release of mineral contracts is a first step in realizing this requirement, which together with an increase in information on mining revenues through EITI reports, represents a new standard of transparency for Afghanistan.

What more would benefit the Afghan people? While the Ministry of Mines deserves much credit for the full disclosure of strategic agreements such as the Amu Darya oil, the Qara Zaghan gold and the West Garmak coal contracts, the majority of contracts released are for smaller, low-value operations like construction materials and salt.

The public in Afghanistan and abroad are still eagerly awaiting the full disclosure1 of the big mining contracts which have been capturing international headlines, such as the 30-year, $3 billion lease for the Aynak copper mine. Full disclosure of these contracts will set the tone for the five strategic concessions the government is due to conclude this year, including the massive Haiigak iron ore deal.

These major deals often include company commitments to building associated infrastructure such as roads, rail and even social investments like schools and hospitals. The details are usually laid out in ancillary agreements – the Aynak deal, for example, includes separate railway and water supply contracts. Making these contracts public, along with studies of how projects are expected to impact the community and environment is essential to good governance and to preventing local conflict, especially in Afghanistan where infrastructure and services are in short supply. The Afghan people also have the right to know the risks—including risks to their health, their livelihoods, their environment and their cultural resources—and the right to hold their leaders and the companies accountable for the deals they have made.

A fragile win? Contract disclosure is a very positive achievement for the government and for the civil society groups who advocated for it, but the true test lies in sustaining this initiative in the future. Can the Afghan government stand up to companies who do not believe in transparency?

Its next steps will be key - specifically, it can booster the sustainability of recent reforms by publishing a plan with requirements and deadlines for:

  • The full publication of all existing and future extractives contracts signed to date
  • The provision of all major contracts in both national languages
  • The release of associated agreements including infrastructure agreements and major sub-contracts
  • he publication of all studies and assessments of anticipated impacts of extractives projects
  • Publication of beneficial ownership of companies bidding for extractives concessions, and the reasons for concession award

At the Tokyo conference, the government and its international supporters committed to “sustained development, economic growth and fiscal sustainability” of Afghanistan. By implementing these transparency commitments, the government has taken a crucial step forward.

The international community and the private sector need to play their part to support transparency and embrace this bold, new direction for the extractive sector and the future of the country. In particular, the Extractive Industries Transparency Initiative must include contract disclosure, licensing transparency and project-level reporting as key requirements in a revised EITI standard which is expected to be adopted soon. This will ensure the EITI remains the relevant international standard for natural resource transparency and spur countries like Afghanistan on to creating a genuinely open extractive sector.

For more information, please contact:

Robert Ruby: +1-917-443-2392; or rruby@revenuewatch.org.

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