After decades of conflict, Afghanistan has no industrial-scale mining; minerals make up less than one percent of exports. However, in 2010 the U.S. Geological Survey announced large discoveries of iron, copper, and lithium with estimated values ranging from $1 trillion to $3 trillion. If used effectively, mining revenues could play an important role in Afghanistan’s economic development, especially as international aid is likely to diminish as U.S.-led forces prepare to withdraw from the country in 2014.
Afghanistan’s Performance on the Resource Governance Index
Afghanistan received a “failing” grade of 33, ranking 49th out of 58 countries. While it scored relatively well on the Institutional and Legal Setting component, Afghanistan has an extremely low Enabling Environment score.
(out of 58)
(out of 100)
|26||Institutional & Legal Setting||63|
|45||Safeguards & Quality Controls||38|
Institutional & Legal Setting Rank: 26th/58, Score: 63/100 learn moreWith comprehensive mining legislation and an independent licensing process, Afghanistan received a “partial” score, its highest on any component.
The Ministry of Mines regulates the sector, while the Finance Ministry is the primary agency that collects payments from resource companies. Mining revenues are transferred to the treasury.
Environmental and social impact assessments are required before mining can begin, but no assessments have yet been completed or released. The government publishes relevant laws and regulations, which include some disclosure requirements, but there is no freedom of information law. Afghanistan has been an Extractive Industries Transparency Initiative (EITI) candidate country since 2010 and produced its first reports in 2012.
Reporting Practices Rank: 49th/58, Score: 29/100 learn more
Afghanistan’s “failing” score is largely the product of a lack of government data on the tiny mining sector. However, since the RGI was completed, the Ministry of Mines has published more than 200 contracts on its website, a major step toward improved transparency.
The Finance Ministry publishes revenue totals by source, but the contribution of extractive industries remains small. The Ministry of Mines is required to compile statistics for its sector, but does not publish periodical reports. Afghanistan’s EITI reports cover 2008–2010. The most recent includes the names of some mining companies and disaggregated revenue streams including royalties, fees, and taxes.
Safeguards & Quality Controls Rank: 45th/58, Score: 38/100 learn more
With little oversight of the licensing process or state-owned companies, Afghanistan received a “failing” score.
Lawmakers do not receive regular reports on licensing and they are denied access to certain major mining contracts deemed “confidential.” Licensing decisions cannot be appealed. The Audit and Control Office collects information from state agencies and prepares a report for the legislature, but the report is not published and it does not conduct a specific review of resource revenues.
The government recently created a Monitoring and Evaluation Committee to fight corruption. Despite rules designed to prevent government officials from receiving mineral licenses, there have been allegations that members of the executive and legislative branches benefit indirectly from contracts won by relatives.
Enabling Environment Rank: 52nd/58, Score: 8/100 learn more
Afghanistan’s scores are among the lowest in the world on corruption control, democracy, accountability, and the rule of law.
State-Owned Companies Rank: 43rd/45, Score: 4/100 learn more
Some state-owned extractive companies established under the Communist regime in the 1980s still exist with limited operations; the government is preparing to privatize some of them. In the coal sector, the Northern Coal Enterprise is functional and is a major contribution to the government's revenue. These companies are not required to publish financial reports and do not follow internationally recognized accounting standards.
However, the Finance Ministry does report these companies’ financial balances to the legislature. It categorizes their revenues within the public sector budget and includes a three-year projection of revenues. The Ministry of Mines produces some reports on the companies’ operations, but does not make them public. Internal audits are conducted but not published.