Cement Ghori contract cancellation: too little, too late

  By Naser Temory, Advocacy Manager

On 12 December 2017, the Afghan Cabinet cancelled the contract of Ghori Cement Company as well as the nearby coal contract with Afghan Investment Company (AIC). According to the government, AIC had caused damage to the mining site and which in turn has reduced the amount of cement which can be extracted. The contract was declared null and void mainly due, however, to a “lack of royalty payment, rent, and fees”. The contract was signed in 2006 and was effective from 21 March 2007 for 40 years.

However, this single cancellation is too insignificant within the overall mining landscape to have much of an impact. This is due to several reasons: the lack of cancellation of several other major contract abuses, little attention to hundreds of illegal mining sites, decreasing support to the Afghanistan Extractive Industries Transparency Initiative (EITI), and the long delay in the appointment of a mining minister.

Integrity Watch conducted extensive field research in 2015 on five large mining contracts and the associated abuses by the respective contactors, including the Ghori cement and coal operation. Although this particular contract was cancelled, the government has done little on four other major contracts including Qarazaghan Gold, Kohi Safi Chromite, Nuraba Samti Gold and Western Garmak Coal. The abuses in these contracts are equally significant, extensive, and widespread.

 According to Plunderers of Hope, the research report by Integrity Watch, the five contacts were awarded to politically connected individuals, the tender documents were designed to provide an advantage to a particular winner, and the government information was leaked to the companies before tendering. Furthermore, some of the companies started exploitation of the mining sites during the formal exploration phase (as a means to avoid paying royalties or taxes on the mined product). Between 2007, when the first contract was awarded, and late 2014, the five companies are estimated to have warranted the payment of a combined royalties of more than USD 50 million.

In addition to the more than three hundred formally contracted mining sites, there are thousands of illegal mining sites under development or production across the country. Such illegal mining prevents revenue collection by the government and even worse it fuels (and funds) the insurgency. Under the National Unity Government, civil society organizations have seen little improvement in this regard.

The Afghan government joined AEITI seven years back (2010) and it still has not become a full member due to lack of high level political support. The fourth validation report identified around USD 37878 discrepancy between the revenue declared by the government and the companies’ reports. Although the AEITI Multi-Stakeholder Group continues to meet and its secretariat maintains its efforts, the lack of interest, especially from the Minister of Finance as the supposedly champion of the initiative, has drastically slowed the initiative’s momentum in the country.

Afghan civil society and the media have faced a serious information gap in regard to the resignation of the former Minister of Mines & Petroleum. The government has not explained or shared any information on the reasons for his resignation. This has caused rumors to proliferate and confuse the stakeholders in the sector. Worse even is that the government has not decided to introduce a new minister after 11 months although based on Afghan law, an acting minister can only serve for a maximum of two months.

The mining sector requires strategic vision and high level political support to become a source of national hope and needs fundamental mechanisms to prevent a resource curse. The government of Afghanistan should decide on the four other large contracts, appoint a competent minister known for his/her integrity, the Ministry of Finance should reinvigorate its high level support to AEITI, and there is a need for all stakeholders to join hands and stop illegal mining.