Mineral & Resource Development Program
The mining sector has a crucial role in achieving economic growth for the country. However, lack of government prioritization to the sector, along with corruption, led to illicit practices such as smuggling, illegal mining, and slow investment approvals. The Afghanistan National Peace and Development Framework (ANPDF) estimates that “illicit mining is resulting in losses of about $300 million annually, fueling the insurgency, and driving criminality.” In order to realize the mining sector’s full potential in a sustainable and beneficial way, the government is implementing rigorous reforms at the Ministry of Mining, and has charted its plans for the sector’s sustainable development in the newly developed Mining Sector Roadmap. Since 2015, the Ministry of Mines and Petroleum (MoMP) has tackled some fundamental internal reforms to fulfill the many of the above goals and priorities, under the leadership of Acting Minister of Mines and Petroleum Nargis Nehan.
Achieved (2/9): 22.0 Achieved (2/9): 22.0 %Partially achievedand ongoing (6/9):67.0 %Partially achievedand ongoing (6/9):67.0 %In process (1/9): 11.0 %In process (1/9): 11.0 %Partially achieved and ongoing (6/9)Percentage: 67.0
– Maximizing revenue from mineral exploitation PROGRESS: – Partially achieved and on-going.
- For the year 2017, the sector’s total revenue increased by 70% compared to 2016, reaching over 7 billion Afghanis (AFN). The main contributors to the increased revenue were State Owned Enterprises (4.5 billion AFN), Ministry of Mines and Petroleum (MoPH) revenue (2.2 billion AFN), and provincial revenue (460 million AFN). In 2017, the Ministry was allocated over 2,300 million Afghanis (AFG) in the national budget and spent 57 % of it, a 12 per cent increase compared to 2016.
– Increasing the sustainability and predictability of mining revenues PROGRESS: – Partially achieved and on-going.
- For years revenues were not being collected via proper processes. Under the current reformed process, revenue collection processes are monitored. The positive effects of reforms are illustrated in the revenue collection increases for the state-owned Fuel and Liquid Gas Enterprise (FLGE), which has previously been poorly collected due to corruption and incompetence— in 2017, the FGLE revenue collection surpassed targets, and showed an increase of 162% since 2015. Further reforms and improvements are on-going.
– Expanding oil and gas exploration PROGRESS: –Achieved.
- The new Oil and Gas Law was published in early 2018, as well as the new national oil and gas policy, paving the way for further reform and expansion of this sector.
- The Afghanistan Oil & Gas Regulatory Authority was established in September 2018, headed by Abdul Walid Tamim. The Authority was originally created through the amended Hydrocarbons Law that was passed in March 2018. The Authority is responsible for the negotiation of oil and gas contracts in Afghanistan. The General Directorate of Oil and Gas Enterprise of the Ministry of Industry and Commerce and the Afghanistan Oil and Gas Regulatory Authority will now be integrated.
- Key achievements in the sector for 2017 included filling essential positions in the Directorate of Petroleum, as well as reviewing and de-conflicting a number of important contracts that had been poorly executed and stalled due to corruption and mismanagement, including the following:
- After the completing the assessment of the Amu Darya oil contract to resolve conflicts, the project contributed over 13 million USD revenue.
- The Afghan Tajik oil project contributed over 3 million USD in revenue in 2017. It was re-assessed and restarted in 2018.
- The Sheberghan Gas Fields Rehabilitation Project, funded by Asian Development Bank, has granted a contract to Xinjiang Zhengtong Oil & Gas Co., Ltd. for rehabilitation, re-entry, deepening, testing and completion services of two existing gas wells, numbers 31 and 37, in the Yatimtaq Gas Field. The expected output for this ongoing project is an increased gas supply from Yatimtaq Gas Field at a rate of 300,000 cubic meters of gas per day.
- The Ministry tendered the construction of a 94.5 kilometer gas pipeline connecting Sheberghan to Mazar-e-Sharif. Four contracts for this project have been issued and two contracts are in the procurement phase.
- During 2017, the construction of the pipeline connecting Khwaja Gogerdak to the Mazar-e-Sharif Fertilizer and Power Plant Enterprise was made steady progress.
- As the Ministry is anticipating a surge in demand for gas to feed private sector investment, it is working closely with the National Procurement Authority and other government institutions to prepare to prioritize the development of further gas and energy mines in the country.
– Addressing illegal mining PROGRESS: – Partially achieved and on-going.
- Illegal mining has been a persistent problem that has resulted in a tremendous loss for both the industry and the economy. It was never earnestly addressed in the past, but now a central goal and a priority of the MoMP is to address illegal contracts, monitor mining operations and address complaints. The MoMP has now developed and launched its anti-corruption strategy work plan to help guide anti-corruption reforms, which are in large part focused on illegal mining.
- Many actions were taken to fulfill this goal, including the following:
- The Mining Inspection Directorate (MID) monitored and evaluated over 1,200 cases at 300 mining sites in 2017, with 33 illegal mining operations formally systematized across the country as a result of the assessment.
- Last year, the Ministry also established a complaints committee to field and address complaints regarding institutional corruption and illegal mining, and then refer them to the Internal Audit Directorate for investigation.
- The committee also has an online platform in which a complaint form is published in three languages (Pashto, Dari, and English.) In compliance with the the Access to Information Act, the MoMP established a committee to facilitate the publics’ access to requesting government documents from the MoMP.
– Reforming contracting and professionalizing internal governance PROGRESS: – Partially achieved and on-going.
- In 2017, the Ministry, with stakeholder input, developed two main instructive documents to guide the sector’s reforms, including the following:
- The Mining Roadmap, adopted by the High Economic Council, which essentially serves as the government’s Mining National Priority Program. It priorities five main areas: (i) prioritizing interventions for minerals and areas of interest, (ii) implementing institutional reform at the Ministry, (iii) improvement of the tendering process, (iv) ensuring service delivery for communities, and (v) ensuring mining revenues contribute to macro-fiscal sustainability.
- The second document is the Reform Strategy, which details the Ministry’s plan to achieve its reform agenda.
- Another mechanism developed for increased efficiency, transparency, and accountability of the Ministry and its employees was transitioning to to e-governance for financial, administrative and managerial functions. The first step was to advance the already existing Information Communication Technology systems and later add on further systems such as revenue collection.
- In 2017, the Ministry developed its Mining Cadastre Administration System (MCAS) to manage block tenders, contract terms, and invoicing, as well as the Non-Tax Revenue System (NTRS) to process payments, and issue receipts and reports to the Ministry of Finance. The MCAS and NTRS feed information to the Ministry’s online transparency portal which is accessible to the public and investors to view license registry. It fulfills the Extractive Industries Transparency Initiative standards of transparency.
- While the Ministry is completing its beneficial ownership register, which is part of its commitment under the EITI agreement, it has published an interim company profiling database in which names of the owners and the registered qualified companies for contracts and projects in the mining sector are presented to the public. The publication includes 946 MoMP contracts, and 12 eligible companies have submitted their information.
- The following policies have been developed and implemented over the past two years to further improve internal governance: National Oil and Gas Policy, the National and Financial Draft Policy, and the Technical Regulations for Mining.
- In 2018 the MoMP also became a members of the Intergovernmental Forum (IGF) on Mining the only international policy-making organization in the natural resource sector.
– Establishing full government control over mining areas PROGRESS: – Partially achieved and on-going.
- In 2017, the Ministry’s geological prospecting and mapping activities ramped up. In total, the Ministry was able to prospect, trench, pit and scrap 630 cubic meters in 10 different areas of interest. The Ministry collected 1,230 mineral and rock samples comprising a wide variety of commodities in 12 regions of interest. This work resulted in the geological mapping of 174.5 square kilometers across 12 areas of interest.
- In 2017, the Ministry managed 176 active contracts around the country. The Ministry ensured compliance with the terms of contracts was monitored through regular inspection of mining operations for each project.
- The Ministry also undertook an analysis of its large-scale and pending contracts to determine whether contracts should be renegotiated, terminated, or suspended.
- The Ministry is also working closely with the security sector to ensure government mines are physically secured. The Mines Protection Committee was established to increase coordination and implement the Ministry’s Security Coordination Strategy Implementation Plan.
– Making the mining law EITI compliant PROGRESS: – Achieved.
- The nation’s first mining law was developed and approved by the Cabinet on September 5, 2018. The Ministry leadership worked carefully to ensure it is compliant with the Extractive Industries Transparency Initiative (EITI). The Mining Law includes multiple new accountability and transparency provisions, including publication as a condition of validity, publication of revenues and production, disclosure of beneficial ownership, and increased funding for local communities, and more. It creates a two-tier licensing systems for small and large scale projects.
- On EITI compliancy: An EITI validation mission visited Kabul in early 2018 to follow up on the progress. One step in achieving EITI compliancy is the approval of the definition of beneficial ownership and the publication of a company profiling database online-so far, 12 companies have submitted their data to be registered in the database.
– Inviting international partnerships to develop large mines; PROGRESS: – Partially achieved and on-going.
- In September 2018, contracts to develop the Badakhshan Gold Mine and the Balkhab Copper Mine projects were approved in-principle during a National Procurement Council meeting chaired by President Ashraf Ghani.
- The first step has been to clean house before inviting new bids.In 2017, the Ministry struggled to wade through several poorly contracted projects with international partners to exploit large mines. The contracts were stalled due to corruption, conflicts of interests, and poor contract negotiation. The MoMP undertook a close review of all contracts for large mining projects, including the following: the Afghan Tajik oil contract, Amu Darya oil contract, Mes Aynak copper mine, Badakhshan gold mine, Balkhab copper mine, Hakigak ore contract, and Ghori cement contract.
- The Ministry launched new large-scale project such as the two Independent Power Plants (IPP) with private investors Bayat and Ghazanfar. The Ghazanfar IPP has been facing obstacles such as complying with industry standards in the construction of the gas pipeline, completion of the Gas Sales and Purchase Agreement, site security, repair of an ultrasonic device to assess the integrity of welded sections of the pipeline, and the hiring a supervisory company. The issues are being addressed. Following the signing of the Gas Purchase Agreement for the Bayat IPP project, gas is scheduled to be delivered to the power plant within six months and implementation is progressing.
- On February 23, 2018, the long-pending Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project finally reached the Afghan border and construction is on-going.
– Building new freight rail links to regional networks in Turkmenistan and Iran. PROGRESS: – In process.
- Establishing regional rail links is an important aspect of connecting Afghanistan to regional markets for its energy and natural resources. In February 2018, the government established a technical working group to review, commission required studies, and assess options, including financing approaches, for proposed large national level rail investments. The Afghanistan Railway Authority has prepared a commercial freight and mineral-focused development masterplan for establishing a northern link to Central Asia, a southwestern link to Iran, and six logistics hubs to provide export access to each of Afghanistan’s major regions, of which approximately 350 kilometers are in the advanced design stage.
- MOVING FORWARD
- The focus for the past two years has been cleaning house and institutionalizing internal reforms at the MoMP, to ensure that the Ministry serves as a stable foundation for proper and clean exploitation of natural recourses. Moving forward into the next year, the following will be priorities:
- Completing value chain assessments of priority minerals, including talc, marble, cement, and coal
- Resolve disputed contracts
- Finish implementing e-governence systems
- Continue to build capacity within the MoMP and continue implementing reforms the work on value chain study of priority minerals highlighted in roadmap has commenced and the value chain studies of Talc and Marble have been completed.