| AFGHANISTAN'S BURIED WEALTH |
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Afghanistan's economy remains hostage to the country's politics and security after more than a dozen years of American intervention. Even after a decade, the country's infrastructure is still so lacking that only 47 miles of railways exist, making it impossible to transport billions of dollars in natural resource wealth. |
Afghan Mineral Treasures Stay Buried, Hostages To Uncertainty
For years, reports have suggested that Afghanistan is sitting on massive deposits of copper, gold, iron and rare earth minerals valued up to $3 trillion. This provides hope for a future economy that would not have to rely so heavily on foreign donations.
But with an uncertain political, regulatory and security environment, international investors are hesitant. And it could be many years before Afghanistan begins extracting its mineral wealth.
The Afghan Geological Survey office in Kabul is one of the few agencies in the country that measure up to international standards. Here, a U.S. government task force is helping train and advise Afghan geologists in processing samples from potential mining sites.
On a recent day, technicians are busy cataloging core samples from North Aynak in Logar province, about 30 miles south of Kabul. Afghan and U.S. geologists are evaluating the site's potential as a copper mine.
Long thin cylinders of greenish rock from the site are lined up in cases.
After they are cataloged and photographed, they go to the cutting room, says geologist Mohammed Idrees Ahmadi.
"We cut them, we can see the mineralizations, the structures and the textures of minerals or rocks that are in the sample," he explains.
Then, men sitting on the floor break pieces of the core samples into smaller chunks and send them to the crushing room.
The crushed samples are shipped to a more sophisticated lab in neighboring Kyrgyzstan for analysis. Ideally, the samples will show copper concentrations that warrant establishing a mine. But, it's a long, slow process.
"Even in the most stable countries in the world, usually it takes four to five years for these types of deposits to begin their production," Ahmadi says.
Wahid Shahrani, the Afghan minister of mines, says it could take up to a decade for Afghanistan to see significant income from its mineral wealth.
Many Obstacles
But investors and analysts think that's an overly optimistic assessment, given the way things have gone so far. In 2008, Afghanistan issued its first mining concession to the Metallurgical Corporation of China for a giant copper mine in Mes Aynak near the site currently being evaluated. But the metal in Mes Aynak is still sitting in the ground.
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Tamim Asey, an economist and former director in the Afghan Ministry of Mines, says ministry officials did not foresee the many obstacles to developing the mine.
Soviet-era landmines, the discovery of ancient Buddhist relics, and the landlocked country's poor infrastructure have all slowed efforts at Mes Aynak. Asey says these are just a few of the reasons investors are hesitant to sign mining deals in Afghanistan, but not the main one.
"When you go to a conference, the No. 1 question is not security for investors, it's the political and legal stability of the country," he says.
And there is plenty of uncertainty in that regard. The Afghan parliament continues to debate a new minerals law that will meet international standards of transparency and accountability.
Asey says the government has negotiated a number of contracts with foreign mining companies — but companies haven't yet signed the contracts.
"They have not signed it because the mineral law has not been approved," he says. "If investors don't see the law is passed within another six months to a year, those contracts will fall apart."
And, Asey cautions, Afghanistan doesn't yet have safeguards and policies to avoid the resource curse — in which the buried treasure promotes the wealth of warlords and corrupt officials, instead of promoting the wealth of the nation.
Afghanistan’s Economy Hostage to Aftermath of U.S. Combat
Afghanistan’s economy remains hostage to the country’s politics and security after more than a dozen years of American intervention.
Mahmood Hanifi sees it every day in his tile shop in Kandahar city. Sales, he said, have fallen by half in two years because customers are postponing home remodeling projects until after Afghanistan’s April 5 presidential election and the departure of most international troops by the end of next year.
“People are waiting because they don’t know what will happen after the elections,” Hanifi said through an interpreter, looking out from a glass-enclosed cubicle onto his showroom of marble and ceramic tiles decorated with designs and Islamic inscriptions. “They’re keeping the money. Even if some projects are completed 50 percent, they’ve stopped work.”
The World Bank predicts that Afghanistan’s economic growth will decline to 3.1 percent this year from 14 percent last year as consumers, entrepreneurs and investors can only guess what’s ahead for a nation long dependent on foreign troops and aid, with mineral resources that have never been tapped and agriculture still dominated by opium exports.
“The upside in Afghanistan is very unclear, but the downside is very clear,” said Ahmad Bassam, managing director of Kabul-based Afghan Holdings Ltd., an investment advisory firm. “If the Taliban take over, we’ll all leave,” he said of Afghan investors, many of whom already have second homes in Dubai and regularly move much of their money there.
The outflow of capital from Afghanistan since 2009, including the proceeds of illegal drug trafficking, has roughly equaled American financial assistance in the same period, according to two U.S. officials who asked not to be identified discussing a classified estimate.
Karzai Balking
Afghan President Hamid Karzai’s refusal so far to sign a security agreement that would permit some U.S. and coalition forces to remain in his country beyond 2014 is exacerbating the economic anxiety.
For the fiscal year that ended in March, 78 percent of Afghanistan’s development budget and 44 percent of its security budget came from international aid and donor agencies, according to the Ministry of Finance. Failure to reach a security agreement would jeopardize pledges of as much as $10 billion a year in economic and military assistance through 2017.
Without a security agreement in place, “we’ve seen capital flight,” Marine Corps General Joseph Dunford, the top commander of U.S. and allied forces in Afghanistan, told reporters in Kabul this month. “We’ve seen real estate prices go down.”
Juice Factory
Registrations of new companies declined 43 percent in the first seven months of this year, to 2,000 from 3,500 in the same period a year earlier, according to the World Bank, citing data from Afghanistan’s Investment Support Agency.
For Afghan entrepreneurs such as Mustafa Sadiq, business decisions are a daily exercise in country risk assessment. They must weigh the approaching departure of U.S. and allied combat forces after 12 years, the threat of attacks by resurgent terrorist groups, persistent corruption and uncertainty over who will succeed Karzai, who’s ruled for 10 years.
In 2009, Sadiq said, he invested $25 million from his family’s century-old imports business to startOmaid Bahar Fruits Processing Ltd., which makes concentrates and juices from pomegranates, apples and other fruits in an industrial park in Kabul. This year, Sadiq said sales have dropped as much as 40 percent.
“Business is declining rapidly because of uncertainty after 2014, as Afghan buyers do not earn as they used to, and that’s why they spend less,” he said in a phone interview.
Under Capacity
The plant, which employs 450 workers, was damaged in a December 2012 suicide car-bomb attack, forcing him to spend $7 million to rebuild, Sadiq said. While the project was completed two months ago, the factory still runs at only 40 percent of capacity, he said.
Sadiq said he’s put on hold a planned $70 million expansion to produce yogurt and fruit-flavored milk products because of the attack, falling demand and a lack of official support. He said the government canceled plans to give him a three-year tax break for the plant’s losses in the bombing.
Afghanistan’s unemployment rate reached an estimated 40 percent in 2012, Abdul Hadi Arghandiwal, the country’s economy minister, said in a phone interview. He said the jobless rate may climb to 50 percent with the loss of work for Afghans as international forces and their contractors depart.
Creating jobs through private investment will be a “mammoth, mammoth task” for the Afghan government, said Ken Yamashita, the Kabul-based coordinating director for the U.S. Agency for International Development, which has spent about $17 billion on development programs in Afghanistan since 2002.
Mineral Riches
“If you think about the employment that needs to be generated, it’s about 150,000 to 200,000 jobs needed per year,” Yamashita said in a phone interview.
Big enterprises -- including exploring and extracting Afghanistan’s mineral riches, valued by the Pentagon and the U.S. Geological Survey at about $1 trillion -- will require a substantial investment in infrastructure that will take years to build, according to Vahid Alaghband, founder and chairman of London-based Balli Group Plc, which has about four decades of experience in mining projects in central and eastern Europe and South America.
Alaghband was among a group of international investors who visited Afghanistan in June on a trip arranged by McKinsey & Co., the New York-based consulting firm, and the Pentagon’s Task Force for Business and Stability Operations.
Starting Small
After examining the prospects for mining, Alaghband said he decided to start small with an investment in the “millions, not hundreds of millions” of dollars to create a network of print and publishing shops in Afghanistan, as well as a chain of auto dealerships.
Beginning in 2014, executives from the Balli Group’s operations in Dubai will “roll out the two sets of businesses into Afghanistan to see how it goes and learn about the place,” Alaghband said.
In meetings with investors, Afghan officials talked about “export of agricultural products and other agricommodities,” Alaghband said. “Those things may generate about $1 billion of exports each year, but won’t fill the massive gap that military spending will leave” when international troops depart the country.
Opium remains Afghanistan’s most lucrative agricultural export, and U.S. officials have acknowledged that the effort to eradicate it has failed. Opium production “remains a substantial portion of overall agricultural output and will continue to fuel corruption and fund the insurgency,” the Pentagon said in a report to Congress last month.
Clinics, Grants
In addition to fighting insurgents, U.S. and coalition forces ran development projects and health-care clinics, provided grants and brought in agricultural experts, said Barna Karimi, a former Afghan ambassador to Canada who’s now managing director of Capitalize LLC, a Washington-based consulting and investment advisory firm.
“What is the substitute for all that?” Karimi said in an interview. “For Afghanistan, it’s not clear who will fill the gap. Although the government of Afghanistan should fill the gap, does it have the resources, the ability and capacity?”
Hanifi, the tile merchant, said the lack of reliable power hobbles business in his shop near Highway 1, which connects Kandahar to Kabul about 313 miles (504 kilometers) to the north.
He said he lacks a dependable source of power for machinery to cut the tiles he imports from Iran, Pakistan and China for his customers’ kitchens and stairs. “If we don’t have enough petrol or diesel, then we won’t be able to have electricity from generators,” he said.
Power Failure
A power failure in the wealthy Wazir Akbar Khan neighborhood of Kabul left the home of Afghan Finance Minister Omar Zakhilwal without electricity when he received a visiting reporter on a weekday morning. That didn’t daunt Zakhilwal as he dismissed the grim prognosis others see for Afghanistan.
Exports of fresh and dried fruits, trade and transit, and service industries will help keep the economy going until the mineral and mining industries take off in the next decade, Zakhilwal said over a breakfast of eggs, fried potatoes, pomegranates and Afghan bread.
“Unfortunately, there’s a doomsday analysis for Afghanistan which is not based on facts or reality on the ground,” Zakhilwal said. “They compare Afghanistan of today with Afghanistan of 1992 -- the post-Soviet period. The international forces here are not the same as Soviet forces, and the people of Afghanistan are not the same people.”
Armed Guards
Zakhilwal’s optimism is shared by Ismail Ghazanfar, chief executive officer of the Ghazanfar Group. He said his family business that began selling televisions in Afghanistan 40 years ago now employs more than 3,000 people at its refinery in Hairatan, near the border with Uzbekistan. The group also owns banks, mining and construction companies.
A group including Ghazanfar, the state-owned Turkish Petroleum Corp. and Dubai-based Dragon Oil Plc (DGO) won a $150 million bid in October to explore for gas in the Afghan-Tajikistan basin.
“It’s completely risk capital,” Ghazanfar said in an interview, referring to his company’s 20 percent stake in the project. “If we discover gas, then we have to invest $1 billion.”
The personal safety of investors is at greater risk than their investments are, said Ghazanfar, whose family lives most of the time in Dubai.
Security measures such as armed guards to protect against kidnappings and attacks add to the cost of doing business, Ghazanfar said, “but it’s not so much that you can’t accept it.”
To contact the reporter on this story: Gopal Ratnam in Kabul, Afghanistan atgratnam1@bloomberg.net
To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
Now, however, thanks to delays in construction of the massive mine and a hefty influx of cash from the World Bank, the 1.5-square-mile Mes Aynak complex is an archaeological triumph — though bittersweet.
Read more at http://www.ryot.org/afghanistan-moves-to-salvage-ancient-buddhist-city-mes-aynak-and-its-economy/103141#9gQ8ALt2Cuz2vHfW.99
AFGHANISTAN MOVES TO SALVAGE ANCIENT BUDDHIST CITY MES AYNAK — AND ITS ECONOMY
March 18, 2013 at 10:28 am
MES AYNAK, Afghanistan — It had the potential to be another Afghanistan Buddha disaster, recalling the Taliban’s destruction of two ancient statues that had stood for centuries in this country’s west: A buried Buddhist city lost to time was about to be obliterated by what promised to be one of the largest copper mines in the world.
Now, however, thanks to delays in construction of the massive mine and a hefty influx of cash from the World Bank, the 1.5-square-mile Mes Aynak complex is an archaeological triumph — though bittersweet.
An international team of archaeologists and more than 550 local laborers are now frantically excavating what turns out to be a unique window into Afghanistan’s role on the ancient Silk Road connecting China and India with the Mediterranean.
With its Buddhist city, a ring of perhaps a half-dozen monasteries and a striking complex of workshops and mine shafts built into a high mountain ridgeline at an altitude of 8,200 feet, the site shows the interplay of Buddhism, mining and trade during the years it was in operation, now thought to be from the fifth to the late eighth centuries.
It underscores the conflict between cultural preservation and Afghanistan’s desperate need to find a way to survive as the international community winds down its involvement in the country. The copper here may be worth $100 billion by some estimates, five times the estimated value of Afghanistan’s entire economy, in which the government and military are funded mainly by foreign countries. The best private-sector jobs are with foreign relief groups.
At the National Museum of Afghanistan in Kabul, statues can be seen from the Mes Aynak archaeology site. Aghan officials hope to build a museum just north of Mes Aynak. (Jay Price/MCT)
A Chinese consortium agreed in 2007 to pay $3 billion for a 30-year lease on the mine. It was the largest private investment in Afghan history, and Afghan officials hailed it as a key component in building an economy that one day won’t rely almost solely on donor nations and the opium trade. They said it would generate hundreds of millions of dollars a year for the government eventually and would provide thousands of jobs.
The massive open pit mine, though, would destroy most or all of the ruins, which were larded with well-preserved frescoes and more than 1,000 statues, including hundreds of Buddhas.
The specter of Buddhas being dynamited or bulldozed immediately sparked comparison with one of the greatest cultural disasters in Afghan history: the Taliban’s destruction in 2001 of the giant Buddhas set into cliff walls in Bamiyan province. But a small group of French and Afghan archaeologists cut an informal deal with the Ministry of Mines in 2009 for time to perform a “rescue excavation,” to recover as many key artifacts and document the site to whatever degree possible before the mining begins.
When that will be, they don’t know. A December deadline came and went. Now they have until June to finish work on the primary sites, said Mossadiq Khalili, the Afghan deputy minister of cultural affairs. Work on some of the monasteries on the edge of the mine area could continue for several years, he said.
This is the courtyard in one of several Buddhist monastaries at the Mes Aynak site in Afghanistan. The two box-like structures (center) were built by laborers on the site to protect a stupa and a fallen statue from the weather until they can be removed. (Matthew C. Rains/MCT)
The archaeologists feel almost certain that they have until at least 2016, because so little progress has been made on the mine. There seem to be no firm plans yet for the necessary power plant, smelter and rail line, or for the mining operation itself.
“So, if that’s correct, it means that there is, I won’t say plenty of time, but a reasonable, good amount of time to work on this site,” said Philippe Marquis, the director of the French Archaeological Delegation in Afghanistan, which has been operating in the country since 1922 and acts as an adviser to the Afghan government.
What makes the prospect of success even greater, Marquis said, is the international interest in getting the mine up and running. Afghanistan has long been desperately poor, but it’s thought to have untapped oil, gas and mineral reserves worth perhaps more than $1 trillion. The World Bank, keen to see the mine project succeed, committed $8 million last year to the archaeological project.
Without the copper mine, Mes Aynak and its artifacts very likely would have been destroyed anyway, Marquis and others think, looted by dealers in stolen antiquities, the fate of many Afghan archaeological sites. But with hopes for an economic boon, there’s a strong chance that the site will be documented and its artifacts preserved.
Many of the site’s statues and paintings have been removed, and the rest will soon follow, said Nicolas Engel, an assistant director of the French Archaeological Delegation in Afghanistan.
Archaeologists and local laborers excavate the main part of the ancient city at Mes Aynak in Afghanistan, which sits on the old Silk Road trading route connecting China and India with the Mediterranean. (Matthew C. Rains/MCT)
It’s an adventure just to visit the site, in Logar province about 25 miles south of Kabul. Al-Qaida trained here before the Sept. 11, 2001, terrorist attacks and the highway is still subject to occasional Taliban assaults. The massive copper mine site is fenced and heavily guarded. One tunnel, apparently dug by the Russians when they occupied Afghanistan in the 1980s, is thought to be booby-trapped, and land mines left from their presence are still a major hazard. One laborer was wounded last year when he struck a mine while digging, Engel said.
Everywhere are the telltale signs of copper mining going back centuries. Blankets of fused slag — the byproduct of the old copper-smelting operations — tint the mountainside black. In one place the slag was piled nearly 40 feet high, evidence of thousands of years of production.
Shovels and picks ring out against rock as local laborers dig. Large sections of the city have emerged, as have roads and alleys that cut across several neighborhoods. Several monasteries, each on a hill or mountain above the main city, have been excavated, and more than 1,000 sculptures have been found, including Buddhas more than twice life-sized. Ancient manuscripts and decorative woodwork also have been uncovered.
At the National Museum of Afghanistan in Kabul, a Buddha head can be seen from the Mes Aynak archaeology site. Aghan officials hope to build a museum just north of Mes Aynak. (Jay Price/MCT)
On a recent sunny day, British archaeologist Thomas Eley sat on a wall sketching the layout of a small building and pondering a small indentation beside a heavily scorched depression in the floor. More than 700 coins had been found in the building, and he said it appeared to be a place where coins had been made from the copper smelted atop the mountain.
Across an ancient street and several buildings away, another archaeologist was sketching the unusually thick walls and small, extra-secure doorways of what may have been a bank where copper and coins were stored. All around them, laborers were uncovering more buildings, more pieces of the puzzle of Mes Aynak.
“I’m an archaeologist, so of course I’m sad about what will happen here, but it’s also life, and life has to go on,” said Usman Ishanzada, who’s from Tajikistan. “If this mine can bring some life and jobs for local people, why not?”
The site poses intriguing questions about the era when Buddhism was the dominant religion in Afghanistan, Marquis said.
“The odd thing is all these Buddhist monasteries,” he said. “Monks are not supposed to be miners, because Buddhist monks are not supposed to be working.”
The way monasteries are arrayed around the city and mine creates almost a wall around the site, which almost suggests a type of military activity, too, which would be a previously unknown role for monks.
The success of the project from a scientific and economic standpoint is becoming a positive lesson for the Afghan population and once-skeptical officials in the government, who thought the archaeological efforts would slow the mine and cause problems. Instead they’ve pumped money into the local economy, improved security and made it clear that such work can coexist well with economic development projects.
It’s also showing that even projects unrelated to mines may have big benefits for local communities, Marquis said.
Archaeologists and local laborers excavate the main part of the ancient city at Mes Aynak in Afghanistan, which sits on the old Silk Road trading route connecting China and India with the Mediterranean. (Matthew C. Rains/MCT)
It seems unlikely, he said, that the Afghan government will stop work on the excavation without any mining. That not only would trigger an international uproar but also would make hundreds of workers jobless, a major security issue. Many workers here already acknowledge that they were part of a rocket attack last August that was staged to protest the destruction of villages that sat atop the mine, Marquis said. Their hostility, however, has turned into enthusiasm now that they’ve been hired on.
The plan is to remove all the artifacts, even the largest statues and the domed shrines called stupas. For now, some statues are being stored in shipping containers at the site, and some have been sent to the national museum in Kabul. Afghan officials hope to build a museum just north of Mes Aynak.
Marquis said it was possible that time wasn’t the major challenge now.
“Our biggest problem has become the long-term conservation of all these things that are being saved,” he said. “We need to work on a plan for what to do with them.”
RYOT NOTE: This is a double-edged sword for Afghanistan. On the one hand, they need the money from the mine to jump start their economy. On the other, these artifacts are so beautiful. We’re hoping that at the very least, the teams working in Afghanistan can excavate these treasures before it’s too late. And speaking of Afghanistan’s economy, did you know that Mercy Corps provides training and work opportunities in everything from poultry farming to road building? They’re working hard to bring opportunity to this war-torn country, and you can help by donating, or by sharing this story.
Read more at http://www.ryot.org/afghanistan-moves-to-salvage-ancient-buddhist-city-mes-aynak-and-its-economy/103141#9gQ8ALt2Cuz2vHfW.99
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