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Print Version: Afghanistan copper deposits worth $88 billion attract Chinese investors « RAWA News


Times Online, May 15, 2008


Afghanistan copper deposits worth $88 billion attract Chinese investors

“They are sitting on treasure, but do they have a Finance Ministry that can handle it?” asks Lorenzo Delesgues, IWA’s director.

Jeremy Page

In a dusty, windswept valley 20 miles southwest of Kabul there stands a cluster of derelict buildings, littered with shrapnel, shell casings and unexploded ordnance.

It is an unremarkable scene by Afghan standards – at first sight, just another sad monument to three decades of war.

Yet this desolate, seemingly hopeless, place is the source of Afghanistan’s most recent chapter of violence – and possibly now of a brighter economic future.

Somewhere beneath the valley’s floor lies one of the world’s biggest untapped copper deposits, estimated to be worth up to $88_billion (£44 billion) – more than double Afghanistan’s entire gross domestic product (GDP) in 2007.
Times Online, May 15, 2008

It was here, in the Aynak valley, that al-Qaeda trained and planned for the 9/11 attacks that triggered the US-led invasion of Afghanistan in 2001. And it is here, seven years on, that Afghanistan – with the help of British geologists and a Chinese mining company – will lay the foundations of a new economy in the next few weeks.

Somewhere beneath the valley’s floor lies one of the world’s biggest untapped copper deposits, estimated to be worth up to $88_billion (£44 billion) – more than double Afghanistan’s entire gross domestic product (GDP) in 2007. In November, a 30-year lease was sold to the China Metallurgical Group for $3 billion, making it the biggest foreign investment and private business venture in Afghanistan’s history. Last week the Afghan Government approved the contract, clearing the way for the revival of an industry that dates back to Alexander the Great.

“After ten to 12 years, Afghanistan’s people will have fair living standards,” declares Ibrahim Adel, the Minister of Mines, and one of the few optimists left in Kabul. “Afghanistan will not need to borrow or ask for any money.”

To put it in perspective, Aynak’s price tag equalled 20 per cent of all foreign aid to the country since 2001, and the annual royalties of $400 million represent 45 per cent of its state budget.

The obstacles are still formidable: security is negligible here and it will take five years to build the mine, as well as a power station, railway, schools, hospitals and even mosques.

Detractors echo concerns about Chinese investment in Africa, saying that Afghanistan is ill-equipped to absorb such huge sums of money or to assess the social and environmental costs.

Nevertheless, Aynak is perceived as a test case for dozens more companies with an eye on Afghanistan’s rich mineral resources, including copper, iron, aluminium, oil, gas, marble and gemstones.

In addition, if it succeeds, experts say that it could help to wean the country off the opium that accounts for a quarter of its GDP, and helps to fund the Taliban insurgency.

“Afghanistan has abundant known mineral resources,” said Stephen Peters, of the US Geological Survey, which completed a two-year survey of the country last year. “All the ingredients are there to build a modern society."

Plans are already afoot to auction off further deposits of iron ore, oil and gas, which Mr Adel has marked out on an old Soviet geological map in his office in Kabul. He admits that security is a problem, but says that mining companies are used to working in unstable countries.

“If we can create jobs for the people, give them salaries, they will be satisfied with their lives,” he says.

“This is one way to control extremism.” Aynak and its 400 megawatt power plant will employ 5,000 people directly – 90 per cent of them Afghans, and another 15,000-20,000 indirectly. Up to 4,000 others will build a railway to the Pakistani border, and several thousand security guards will be recruited from surrounding villages.

“All of this is in the contract,” says Mr Adel. “The Chinese have to build mosques. They have to build schools. They have to build hospitals, markets and small bazaars.”

Aynak, he continues, is more than just a copper mine: it encapsulates Afghanistan’s modern history. The site was discovered in 1974 by the Soviets, who built the now derelict buildings, mapped the area and took thousands of rock samples.

Their plans were thwarted by Mujahidin rebels who surrounded Aynak and cut off all transport and telecommunications links. “We were ambushing them all the time,” recalls General Hatiqulluh Luddin, who led the rebels around Aynak and still commands 30,000 men in the area.

After the Soviet troops withdrew in 1989, the new Government tried to continue their work but was soon engulfed by civil war.

The Afghan Geological Survey, which contained the Soviet Aynak research, was then destroyed in a battle for Kabul in 1994.

When the Taliban took over in 1996 they showed no interest in Aynak and allowed al-Qaeda to turn it into its main training camp.

Only after the Taliban’s overthrow did Aynak rise back to the top of the economic agenda. In 2003 President Karzai asked Britain to help to rebuild the Afghan Geological Survey and prepare Aynak for an injection of foreign investment.

Soon afterwards a team from the British Geological Survey arrived in Kabul to start recovering and organising the 78 reports and 1,300 maps on Aynak, which were mostly in Russian and based on obsolete Soviet methodology.

That work helped to attract bids last year from 14 international mining companies, of which the Kabul Government shortlisted nine, from countries including Russia, the United States and India.

When the Government selected the Chinese company, some rivals grumbled that it should not benefit from the security and aid that Western countries were providing. Others accused the Chinese of paying kickbacks, as their offer was $1 billion higher than expected.

Integrity Watch Afghanistan, a non governmental organisation which published a report on Aynak, says that Afghanistan does not have the capacity to regulate the project or to assess the environmental costs, such as acid waste polluting water supplies.

“They are sitting on treasure, but do they have a Finance Ministry that can handle it?” asks Lorenzo Delesgues, IWA’s director.

Around Aynak, some people share the concerns, and local MPs have threatened to form a human chain around the mine if its revenues do not benefit the community.

For most, however, the mine has offered a glimmer of hope on an otherwise bleak horizon.

“This project will save us,” said Khalil Stanakzai, a 27-year-old doctor in Kandahari-Pul, the nearest town to Aynak.

“People need jobs and don’t mind who provides them – Americans, British or Chinese.”

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