Afghanistan’s new mining law risks failure in the fight against corruption

September 05, 2018- The Afghan government’s revision of the Minerals Law is missing critical protections to reduce the threat of corruption and abuses and allow the country’s huge mineral wealth to benefit its people, Afghan and international civil society organisations (CSOs) have warned.

“The new Minerals Law is supposed to provide a foundation to escape the widespread corruption and conflict which have made Afghanistan’s huge mineral wealth a source of harm, not development,” said Ikram Afzali, Executive Director of Integrity Watch Afghanistan.

“With the end of the revision process closing in, some anti-corruption measures are actually getting weaker. Important government commitments are missing, and the rights of local communities are not being adequately protected. There is a real danger the law will end up with fundamental flaws – and given the stakes involved, that would be a disaster for Afghanistan” Said Javed Noorani, a leading civil society expert on extractives and member of ENRMN.

Among the major concerns the CSOs raised were:

This law should predict the creation of an independent regulatory Authority for mineral’s governance. In this draft, great power over contracts is given to the High Economic Council, which currently has no legal status and could be changed at will. Overall the law reduces the role of the Ministry of Mines, which normally would be the main institution for mining governance, in favour of Presidentially-appointed bodies.

  • There is no requirement for the publication of the Central Bank sub-accounts used for mining revenues – although this strong transparency measure was set out in the government’s own anti-corruption strategy.
  • Some good provisions of the law specifically regarding the beneficial ownership has been weakened given the defects it has. One the items allow politicians and officials to have control over five percent of the contract.
  • There is no credible mechanism for resolving disputes between communities and mining companies – a proposed ombudsman would not be independent or have adequate powers. In general community rights mentioned are very weak.
  • Royalty rates are fixed in the law (rather than the regulations) without any possibility to adjust them for changing market conditions. They are narrowly tailored for metals mining, rather than the many other minerals Afghanistan possesses.
  • No specific provisions predicted for artisanal mining, which is a vital issue for the mining. Low-level artisanal mining carried out by local community members is effectively banned.
  • 5% of revenues are supposed to go to the provinces where mining takes place, but there is no guarantee that any of those funds would reach local communities. Therefore, preference should be given to the nearby mine site communities instead of province.
  • Institutionalization is a major concern at this law. Local and International Civil Society Organizations have recommended at multiple times “the creation of an independent regulatory Authority for minerals governance instead of creating a Mineral Advisory or Technical Committee by new Mineral Law. By creating Afghanistan Minerals Regulatory Authority (AMRA), the proper institutionalization will take place that cannot be changed by change in leaderships.
  • The government commitments and Mining sector membership are not supported by new mineral law draft e.g. EITI and Inter-Governmental Forum Mining Policy Framework (IGF-MPF). Therefore, we recommend that both the EITI and IGF rules should be mentioned by new Mineral Law[1].

The weaknesses in the law means it would quickly face pressure for changes if the current draft was adopted – undermining hopes of ending the years of uncertainty which have been seen as a significant obstacle to Afghan and international investment. Ibrahim Jafari, a mining expert and member of civil society, Environmental and Natural Resources Monitoring Group said, “Civil society organizations emphasize that only four years have been passed from the current law and has not been implemented completely. There is room for reforms instead of making a whole new law.” On the other hand, Muhammad Shafaq, head of ENRMN Secretariat warned: “The government needs to get a better grip on this process, or this will be just another round in the cycle of revision and failure.”

The CSOs welcome some parts of the draft Law, notably requirements that contracts must be published before becoming valid, that the real, ‘beneficial’ owners of mines must publicly declare themselves, and the government must publish mining production and payment data. But even these are at risk of being watered down. For example, the second-degree relatives of PEPs, beneficial owners and government employees. President Ghani originally suggested contracts be published before they were signed,

The CSOs urged the government to look again at the law and follow through on its welcome commitments to transparency. “President Ghani has acknowledged the deadly threat from corruption and conflict around Afghan mining,” said Stephen Carter, Afghanistan Campaign Leader at Global Witness, an international CSO. “But despite some areas of progress, in its current form this law is a missed opportunity to address those dangers.”

Mujib Azizi, another member of the ENRMN said: “Government should not award any contract till new law has not been prepared on afghan context and passed adequately. Otherwise, we will assume it plundering afghan minerals. It’s not the question of ticking boxes but it’s the danger of mineral curse. We are keen and supporting new mining contracts but it should be transparently in line with rules and regulations and should not be against the laws”.

Afghanistan’s international partners should also be concerned, Carter said: “Donors should also understand how badly Afghanistan’s stability and future prospects are being undermined both by the massive loss of revenue from the sector, and by the way it drives conflict and funds armed groups. This law is the first line of defence against that threat. We won’t get another opportunity to get it right.”

ENDS.

Contacts:

Integrity Watch Afghanistan: Wahidulla Azizi, Communications Officer /  wahidullah.azizi@iwaweb.org / +93 (0)705666962

Global Witness: media@globalwitness.org / + 44 (0) 7912 517 127(English)

Notes to editors:

  • The new Minerals Law is currently on its Last draft. The latest version has major changes from the previous draft, and is expected to be the last one put out for comments from stakeholders. CSOs have provided inputs on all previous versions of the law.
  • The Afghan government has made major commitments to full transparency in mining governance, including through its membership of the Extractive Industries Transparency Initiative (https://eiti.org/afghanistan) and the Intergovernmental Forum (http://igfmining.org/wp-content/uploads/2017/02/MPF-English-Oct-2013.pdf).
  • The Afghan government’s 2017 Extractive Sector Roadmap also stated that “The first principle is transparency. The lack of transparency often invites actors to develop contracts to benefit individuals rather than to benefit the entire citizenry.” The 2017 Anti-Corruption Strategy made various strong commitments including contract publication as a condition of validity, beneficial ownership publication, the creation of a single transparent account for mining revenues, and a community benefit from mining (http://mof.gov.af/Content/files/AFG_AntiCorruptionStrategy_Eng_.pdf). A full list of commitments can be requested through the contacts above.
  • The Afghan government’s lost revenue from mining is roughly estimated at around $300m a year. See https://www.globalwitness.org/en/campaigns/afghanistan/extractives-policy-briefing-avoiding-resource-curse-afghanistan/ for more details

 

 

[1] https://www.igfmining.org/announcement/afghanistans-becomes-igfs-65th-member-commits-accountable-open-governance/