October 21, 2011 / 7:10 AM / 8 years ago

China confident in Afghanistan, to keep investing

* China business counsellor says to keep boosting trade, investment

* Says confident in Afghan government, future of the country

* Says vast Aynak copper mine project will benefit both sides

By Zhou Xin

KABUL, Oct 21 (Reuters) - China won’t discourage its investors from putting money into Afghanistan’s war-torn economy, even as Western troops prepare to head home and violence worsens, the Chinese economic and commercial counsellor in Kabul told Reuters.

Diplomat Wu Gangcheng, who has spent almost two years working in Afghanistan, said businesses from the world’s No.2 economy — which is hungry for Afghanistan’s mineral deposits — will not be deterred by the current grim security situation.

“One thing is absolutely certain in Afghanistan, and that’s development,” Wu said, the same week state oil giant China National Petroleum Corp finalised terms for the country’s first crude oil production deal in decades.

“People have to eat, the government has to function, and trade has to happen, and all these require development,” he said, in a vote of confidence in Afghanistan’s longer-term prospects for building a stable state.

The Afghan economy has been ravaged by more than three decades of war, and many investors are looking elsewhere as the insurgency spreads to once peaceful areas and claims record number of civilian lives nationwide.

But although foreign combat troops are set to leave by the end of 2014, the West has promised to continue military and financial support, and Wu said China did not expect the insurgency to over-run the country.

“Despite all the current difficulties, we have full confidence in the Afghanistan government and its people, as well as the future of the country.”

Chinese firms already operate profitably in challenging places from Sudan and Democratic Republic of Congo to closer-by Myanmar, and Wu played down the risks in Afghanistan.

As in most war economies, there are potentially huge amounts of money to be made. Chinese entrepreneurs are already hoping to cash in with businesses ranging from restaurants to factories in Kabul and other parts of the country.

“A gold mine in one person’s eyes may be a pile of dirt for another,” Wu said in Kabul’s well-fortified diplomatic quarter.

“You have to take risks in running a business anywhere. Even if you are running a business selling French fries, you take the risk of being burned by the hot oil.”

HUNGER FOR AFGHAN MINERALS

Afghanistan is hoping that Chinese firms will help make the aid-reliant government independently solvent for the first time in modern history, with the exploitation of the Aynak copper mine by a consortium led by the Metallurgical Corp of China (MCC).

For resource-hungry China, neighbouring Afghanistan is a treasure-trove of unexploited minerals, from the Aynak copper to iron and lithium. There is also some energy, including the oilfield CNPC will manage in northern Sar-e Pul province.

Overall the untapped mineral resources are estimated to be worth up to $3 trillion, although analysts argue that it could take years, if not decades, for the mines to be properly developed, because of security and infrastructure problems.

“Afghanistan is rich in resources and eager to grow its economy, so its arms are open to foreign investors. So if Chinese companies see opportunities there and conditions are right, then they can make their own decisions,” Wu added.

Wu praised the $4.4 billion Aynak copper mine, the largest foreign investment project in Afghanistan, saying it will increase government revenues and create jobs for Afghans.

“What I heard is that both the Afghanistan government and people are looking forward to the official start of mining, as quickly as possible,” Wu said.

MCC won the contract to develop the Aynak mine in 2008 and it was originally scheduled to begin production in 2013, but the discovery of a huge and significant archeological site where the mouth of the open-cast mine should be has delayed that.

Wu said the project had run into some “technical problems” on the ground, but added that it was nothing that would have a significant impact on the mine longer term.

“There are always gaps between plans and reality, that’s the case in every big project,” he said. (Additional reporting by Emma Graham-Harrison; Editing by Sanjeev Miglani)

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