Crucial Afghan mining laws up for review within a fortnight

Reuters News
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Posted: Sep 20, 2012 8:30 AM
Crucial Afghan mining laws up for review within a fortnight

By Jessica Donati

KABUL (Reuters) - Redrafted mining laws that Afghan officials and Western donors hope will persuade foreign firms to invest in the country's resource wealth will be submitted to the government for review within a fortnight, a government spokesman said on Thursday.

Afghanistan's untapped natural resources were estimated by the U.S. government at over $1 trillion, but decades of war and political instability have kept the country off the radar.

Proposals to draft new legislation have been backed by Western donors and the World Bank who hope revenue from oil and mining will help Afghanistan support itself once international aid eventually runs out.

But to the surprise of diplomats and mining companies, some cabinet members blocked proposed legislation in July, saying it failed to protect national interests from foreign exploitation.

Adding to complaints about proposed royalties, some fear mining and drilling could hurt communities and the environment.

The process is being watched by energy companies which are drawn to Afghanistan's potential, but fear it is still too dangerous. New legislation is urgently needed to bring Afghanistan's legal framework into line with international norms if tenders now being considered are to attract viable bids.

"If the law isn't passed, no one will come to Afghanistan," Atiq Sediqi, a senior adviser to the Ministry of Mines, told Reuters.

Ehsanullah Tahiri, a government spokesman, said the legislative process could be completed rapidly.

"It will not take any more than two weeks for the draft to be submitted to the Council of Ministers," he told Reuters by telephone.

The council, which approves legislation before it goes to parliament, had overseen the redrafting and was likely to submit it for urgent debate, he said. Approval could take as little as three to four weeks, if objections are overcome.

U.S. energy giant ExxonMobil raised hopes of a breakthrough in perception in Afghanistan after it expressed interest in oil blocks offered in the northern Tajik basin. The bid deadline is October, and the blocks are among around half a dozen tenders in progress.

THE CLAUSES

The new draft includes directives for enforcement -- for instance, ensuring that reported production matches actual output -- along with regulation for employment, infrastructure and environment protection, according to an expert working on the draft who asked not to be identified.

Among the clauses are that 100 percent of unskilled staff must be Afghan, along with a proportion of semi-skilled workers.

Western donors see mining revenues as key to Afghanistan's survival, with more than $50 billion pumped into the aid-reliant economy over the past decade.

Pledges of around $4 a year by donors at a conference in July fell short of $6 billion a year the Afghan central bank said was needed to promote growth on top of a $4.1 billion bill for security after foreign troops leave in 2014.

With oil hovering above $100 a barrel, revenues from crude alone could generate around half the country's gross domestic product of $20 billion in 2011.

But security concerns have hampered several projects, including the $3 billion Ainak copper mine in eastern Logar province, operated by China Metallurgical Group.

And governance watchdog Integrity Watch Afghanistan said in a recent interview that mining activities have already hit water supply in some regions and sharpened tribal rivalries.

A briefing paper released by the Pentagon in 2010 said the main resources were iron ore with an estimated value of nearly $421 billion and copper deposits valued at $273 billion.

(Reporting by Jessica Donati; Editing by Rob Taylor and Ron Popeski)