WASHINGTON, DC, May 31, 2011 - The World Bank today approved a $52 million grant from the International Development Association (IDA) to help the government of Afghanistan manage the development of its natural resources in an effective and transparent manner.
The Second Sustainable Development of Natural Resources Project will assist Afghanistan’s Ministry of Mines (MoM) and the National Environmental Protection Agency (NEPA) to further improve their capacities to develop Afghanistan’s mineral and energy resources as international interest in Afghanistan’s rich mineral potential increases.
“The development of natural resources is the single most important lever to diversify Afghanistan’s economy, create growth and employment and raise government revenues,” said Nicholas Krafft, World Bank Country Director for Afghanistan. “Strengthening the Afghan government’s capacity to put in place a sound policy and institutional framework to manage the country’s natural resources is critically important to transform the nation’s mineral potential into lasting wealth for the country. The project responds to the Government’s request for ongoing technical assistance to help ensure that sector activities are pursued in a transparent and sustainable manner.”
Afghanistan has a rich endowment of mineral and energy resources. It possesses deposits of copper, gold, and iron ore, among other metals, as well as construction materials, dimensional stone and gemstones, coal, and hydrocarbons. However, much of that wealth is locked in the ground pending development of infrastructure that will link mines to global markets. Both the Aynak copper resource and the Hajigak iron ore resource are among the largest deposits being offered under competitive tender at this time in the region. The deposits offer enormous potential benefits to the country but these benefits will also depend on the transparent and effective management of new revenue streams.
The Second Sustainable Development of Natural Resources Project will mainly focus on three areas:
- Support the preparation of competitive and transparent procedures for the development of the country’s mineral resources, enabling the government to complete the process of international competitive bidding for the Hajigak tender.
- Support the development of comprehensive frameworks for regulating the complex activities in the mining and hydrocarbon sectors, and building the capacity of government entities to monitor compliance.
- Help to recover and preserve some of the artifacts and antiquities at the Mes Aynak archeological site by supporting the implementation of the Archaeological Recovery and Preservation Plan for the Aynak antiques.
The project follows on from the 2006 First Sustainable Development of Natural Resources Project which was supported by a World Bank grant of $30 million, to which an additional $10 million was added in 2010. Under this project, the Afghan government successfully completed the tender process for the Aynak copper deposit, the first international, transparent and competitive mineral bidding process to take place in Afghanistan. This resulted in a payment of US$80.8 million to the government as the first tranche against a total of US$808 million for the right to develop the deposit. During the life of the mining operation the government will receive royalties and net profits taxation. The project also supported the development of a new mining law and regulations for the sector. In addition, in 2009, the Afghan government endorsed the principles of the Extractive Industries Transparency Initiative (EITI), signaling its commitment to transparent and accountable sector governance.
Some of the expected results from the Second Sustainable Development of Natural Resources Project include:
- Increased capacity at the Ministry of Mines to administer and monitor ongoing sector activities, to license operations and ensure compliance, to manage future resource auctions, and to improve transport corridors to the resource.
- Increased capacity at the National Environmental Protection Agency to ensure appropriate environmental, social and cultural protection at the mining sites, along with strengthened mechanisms for monitoring and enforcement.
- Contribute to the prompt recovery and restoration of archeological artifacts from the Mes Aynak archeological site.
- Greater sustainability of small scale mining operations, including the establishment of a gemstone centre and providing training to women for gemstone-based entrepreneurial activities.
In addition to the IDA’s $52 million grant, the Government of Afghanistan will contribute $5 million from its own resources. The Ministry of Mines will continue to implement the project over a period of four years.