The news that Afghanistan has $1 trillion in unmined mineral deposits has been met with some pessimism. Now, it is said, the country will be transformed from its present condition into the next Congo, whose new wealth from gold, copper and other minerals has brought mainly corruption and violence.
Indeed, security in Afghanistan could easily deteriorate as a result of the discoveries, as it has not only in Congo but also in Nigeria (rich in oil) and Sierra Leone (diamonds). Afghanistan’s huge veins of iron, copper, cobalt, gold and lithium and other metals could end up financing more tribal and ideological warfare. Greed might stoke violence among the combatants, and attract more Afghans to fight. Consider how in Sierra Leone diamonds enabled the Revolutionary United Front to evolve from a protest movement into a lethal diamonds racket.
In eastern Congo, $1 billion in gold is being extracted and exported annually, yet because the government lacks control over the territory the revenues for the national Treasury last year were a mere $37,000. If the Afghan government ends up with the same proportion, that treasure of natural resources would finance only a handful of helicopters.
How can Afghanistan ensure that its people benefit from its mineral wealth, and avoid resource-induced violence? There is a chain of decisions to get right, from managing the prospecting to investing the revenues. Many other countries have failed to make them wisely. Afghanistan can buck the trend by learning from their mistakes, and from the success of the few countries that have managed their riches well.
Most important, Afghanistan must see that its citizens who live near the mineral deposits benefit — with jobs and spending on public works. Nigeria is a prime example of what happens when the local population pays the price for extraction without reaping the rewards. Oil drilling in the Niger Delta has created few jobs for local people but caused hundreds of spills, ruining their ability to make their traditional living from fishing or agriculture. Politicians have pocketed most of the oil revenues. As the residents of the delta realized that outsiders were profiting from the destruction of their land, gangs formed to kidnap oil workers and sabotage pipelines.
To avoid such fallout, Afghanistan should follow the example of Botswana, which has used diamond revenues to build roads, power lines and schools, raising the economic standard of the country from very poor to upper-middle income. Malaysia, likewise, has used revenues from tin and oil to diversify its economy and create jobs — building, for example, a manufactured exports zone in the impoverished region of Penang.
Such government largess will be impossible, of course, if Afghanistan fails to reap its fair share of the profits from mineral extraction. Here a cautionary example is Zambia, where a copper boom has been a bonanza for Chinese companies, but copper exports of around $3 billion a year generate a mere $100 million in tax revenue for Zambians. This is largely because the Chinese work out their extraction deals directly with the Zambian president, and the public never learns the details. Even the country’s Finance Ministry is kept in the dark.
To build trust, the Afghan government must be open about any deals it makes with foreign companies. It has already shown it has room for improvement in this regard: the country’s first extraction deal, for copper, was won by the Chinese in murky circumstances — the minister of mines was accused of taking a $30 million bribe. But now Kabul has signed on to the Extractive Industries Transparency Initiative, a set of disclosure standards created seven years ago by an international organization of governments, civil society and business.
Afghanistan should hold monitored auctions for extraction contracts and perhaps write some of them as Iraq has written its oil contracts: the government retains ownership and pays only a service fee for extraction.
If it can manage to reap all the potential revenues from mineral extraction, Afghanistan will need to spend the money in ways that genuinely benefit ordinary Afghans. Rather than funnel it all through the ministries — which have shown themselves to be corrupt and inefficient — some of the money should be sent directly to village councils. Afghanistan has already tried this approach with the National Solidarity Program, an effort to encourage local development that started in 2003; villages have spent the money on schools, health care or whatever they have considered most needed.
Afghanistan is part of the last frontier for resource discovery — one of the 60 most impoverished countries, which account for around a quarter of the earth’s land but which have barely been prospected. Over the next decade, given high world commodity prices, the last frontier will be explored, creating more opportunities like that in Afghanistan. All these countries will need to resist the kind of plunder that has characterized resource-rich countries with weak governance.
As America is learning in Afghanistan, it is difficult to effectively impose policies from outside, even if outsiders have troops on the ground. There is no substitute for local citizens who are involved in the decision-making, who can learn from other poor countries how to make the most of their own natural wealth.
Paul Collier, an economics professor at Oxford and the author, most recently, of The Plundered Planet: Why We Must — and How We Can — Manage Nature for Global Prosperity.