Government of Afghanistan Signs $52 million Grant with the World Bank Aimed at Transparently and Effectively Managing its Untapped Natural Resources

July 16, 2011

KABUL, July 16, 2011 ─ Afghanistan’s Ministry of Finance and the World Bank today signed a $52 million grant from the World Bank’s International Development Association (IDA) to support the government’s efforts to manage the country’s natural resources effectively and transparently.

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 and regulate Afghanistan’s mineral and energy resources as international interest in Afghanistan’s rich mineral potential increases.

“Developing Afghanistan’s natural resources in an open, transparent and efficient manner is a top priority in the government’s agenda,” said HE Dr.  Omar Zakhilwal, Minister of Finance, Islamic Republic of Afghanistan.  “The government remains committed to ensuring the country’s rich mineral potential is managed according to internationally accepted norms and procedures for the benefit of the people of Afghanistan.”

The Second Sustainable Development of Natural Resources Project will 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 regulate and 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.

“Mining is a very important driver for the Afghan economy, including for employment generation,” said HE Waheedullah Shahrani, Minister of Mines, Islamic Republic of Afghanistan. “We are currently streamlining the mining law and taking steps to introduce greater transparency. In the last twelve months, significant progress has been made in reforming and restructuring the Ministry of Mines with special emphasis on introducing transparent practices. Recently, measures have also been taken to integrate mining projects with other major infrastructure developments in the country to ensure sustainability and long-term growth.”

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. An additional grant of $10 million was added to that project in 2010. Under that project, the 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. 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.

“With initial assistance from the World Bank, the Afghan government has made steady progress on several fronts,” said Josephine Bassinette, World Bank Acting Country Director for Afghanistan.  “They are not only implementing global standards of transparent management of mineral and hydrocarbon revenues, but are working to ensure that their remarkable natural resources will be used for the good of Afghanistan and for the communities where the resources are located. For example, steps have been taken to protect and make accessible the rich cultural heritage that has been uncovered at the Aynak mine and to create good jobs for villagers who live in the area.  The World Bank looks forward to using its international expertise and knowledge to continue to support the government in its efforts under this new project.”

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 gains to the country in terms of economic development and diversification, but the benefits that arise from them will depend on the transparent and effective management of new revenue streams.