Afghanistan shakes up mining sector for transparency

KABUL Sun Dec 5, 2010 11:24am EST

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KABUL (Reuters) - Afghanistan's mining minister says he has shaken up a "Soviet-era" mentality of compulsive secrecy, shed some of his staff and drawn up the ministry's first business plan in a bid to create a more accountable industry.

Washington and its allies believe that Afghanistan developing its vast untapped mineral wealth is its surest path to economic self-reliance, but projects have been held up in the past by corruption and red tape. Cleaning out the mining ministry has been a priority for international donors.

Wahidullah Shahrani, who took over the ministry around a year ago, said the country has joined the Extractive Industries Transparency Initiative (EITI) as a candidate country and hopes to get full compliant status in little over a year.

"You cannot imagine the progress that we have made in the last nine months, transforming the ministry from an old Soviet-style entity where there was a mentality to hide all the information, not to share any information even with the Ministry of Finance or the parliament," he told Reuters.

He said when he arrived at the ministry, which has around 8,000 employees, he found no business plan or strategic goals.

"After five years we are expecting that the contribution of the ministry to the revenue of the government would be at least $1.2 billion," he said on the sidelines of a conference to report Afghanistan's progress with EITI.

"After 15 years its contribution to the revenue will increase up to $3.5 billion in a year," he added. At present most of Afghanistan's budget comes from foreign donors.

The government said on Sunday its biggest planned mining project so far, the Aynak copper mine run by Metallurgical Corp of China Ltd (MCC), would be delayed to safeguard ancient Buddhist relics found there.

In many developing nations the discovery of valuable oil or minerals has brought civil strife and corruption. Shahrani says he is aware of the dangers of the "resource curse" and confident he can steer his country along a path like Botswana's -- where diamond mines brought improvements in national living standards.

Finance minister Omar Zakhilwal praised Shahrani's work.

"In the past one year, the amount of reform that has taken place in the ministry of mines would not have happened in other countries in five years," he told the news conference.

He highlighted a decision last year to take the massive Hajigak iron ore deposit off the market, saying that was driven by fears the bidding process could invite corruption.

The deposit is now up for tender again. At the time the tender was scrapped, Shahrani said the main reasons were economic and included the global recession.

STRICT CONTROLS

EITI, based in Oslo, Norway, describes itself as a coalition of civil society groups, companies, governments, international organizations and investors focused on good governance in resource-rich countries.

So far there are only five compliant countries including Ghana and Mongolia, while the list of candidate nations includes many known for corruption in their natural resources industry.

The organization chief acknowledged that EITI's rules would not be able to ward off all corruption but defended them as an important first step.

"There will always be ways in which corruption can take place, but the key thing is to make sure that you minimize those possibilities," said EITI secretariat head Jonas Moberg. "EITI reports are based on audited data so that is properly verified."

Changes introduced in Afghanistan include a stakeholder group giving civil society a say in how mining should work, and publication on the ministry website of all contracts awarded.

Shahrani hopes to complete the requirements for becoming a compliant country by February 2012.

(Reporting by Emma Graham-Harrison; Editing by Peter Graff)

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