Trilateral deal for hidden assets
By Shahid Javed Burki
Monday, 28 june, 2010
THERE is an urgent need for Pakistan to define its economic future in the context of what is happening in the countries it borders. Major developments are occurring in all the countries around Pakistan as well as in those that are not far from it.
In this context let us take a look at Afghanistan, not at the way the American led war is going in the country but with reference to the possibility that the areas in around Afghanistan may become the centre of global mining activity. The recent reports in a section of the American press about the unexploited mineral riches in Afghanistan lend further substance to the approach I have been advocating.
“The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself”, wrote The New York Times in a story carried by the newspaper on the front page of its issue of June 14.
“The value of the newly discovered mineral deposits dwarfs the size of Afghanistan’s existing war-bedraggled economy, which is based largely on opium production and narcotics trafficking as well as aid from the United States and other industrialised countries. Afghanistan’s gross domestic product is only $12 billion”. Afghan officials, in commenting on the report said that the American estimates were on the low side: the total value of the deposits may be as high as $3 trillion.
The story of how this conclusion was arrived at is, in a way, the story of the recent conflict in Afghanistan. The first indication that the country may have very large deposits of a variety of minerals came from the investigations done by the Soviet experts when the country was occupied by its soldiers. Maps and data produced by the Soviet scientists were deposited at the Afghan Geological Survey in Kabul but were removed by the Afghans who had also worked on the investigations.
The decision to remove this material was taken when the country was run over by the Taliban in the late 1990s. They were returned only after the Taliban were defeated by the Americans. However, this material did not come to the attention of the Americans until 2004 when geologists from that country were sent to Afghanistan as a part of a broader reconstruction effort.
The Americans decided to carry out a series of aerial surveys after they had studied the charts prepared by the Soviets. This was done in 2006 using advanced gravity and magnetic measuring equipment attached to an aircraft.This way about 70 per cent of the country’s area was surveyed and mapped. The data was so promising that an even more sophisticated investigation was carried out a year later. The results were astonishing but were largely ignored for another two years.
The Americans were too preoccupied with Iraq to spend much time on this discovery. It was only when the conflict in Iraq wound down that Afghanistan reappeared on the American radar screen. Under the new administration of President Barack Obama America turned its attention towards Afghanistan. It was then that the Washington began to look at the country’s economic future. The Americans and its NATO allies were worried that an insurgency that was fed not just by ideology but also by the production and trading of drugs would be difficult to bring under control.
That was the lesson the Americans had learnt in the long drawn-out fight against drug trafficking in Colombia. American aid to Afghanistan is likely to de cline significantly once Washington begins to pull out its troops beginning next summer. In that case the drug economy and the associated drug culture will take an even greater hold over the country. These will also seep into Pakistan.
In 2009 a Pentagon task force that had worked on developing business opportunities in Iraq was transferred to Afghanistan and was told of the studies done by the Soviets followed by the investigations by a series of America teams. The Pentagon team firmed up the estimates and briefed Defence Secretary Robert Gates about their findings. “For the geologists who are now scouring some of the most remote stretches of Afghanistan to complete the technical studies necessary before the international bidding process is begun there is growing sense that they are in the midst of one of the great discoveries of their careers”, continued The New York Times report cited above.
What is particularly exciting for the geologists is that Afghanistan may have large deposits of some of the rare minerals the demand for which is increasing because of the development of new technologies. Lithium is one such material, an important ingredient in batteries that power not only mobile phones and computers but also hybrid automobiles. Ghazni province showed the potential for lithium deposits as large as those of Bolivia in Latin America which now has the world’s largest known reserves of this important mineral.
Other finds include large deposits of niobium, a soft metal used in producing superconducting steels. The Pentagon estimates put the value of this particular deposit at $81.2 billion, third in importance among the 22 minerals identified by the geologists. Iron with estimated value of $421 billion and copper at $274 billion are the two largest finds.
Would the discovery of these potential riches make Afghanistan rich almost overnight? It will take time before the country becomes a mining giant. The initial reaction of the large mining companies is that of caution. Poor security particularly in the areas that have the largest potential is not the only reason why Western companies are not likely to move into the country with any kind of speed.
Afghanistan’s mining laws are also a problem. Even if a company invests heavily and discovers exploitable reserves, the government can move in and assume control over them and rebid the contract. To remedy this, the government has turned to the World Bank to update the laws and also draw up standard bidding documents to minimize the scope for corruption.
The minister in charge of mining in the previous Karzai government was removed from office when reports began to circulate that he had enriched himself mightily by taking bribes from some of the mining companies that were admitted into the country. If the Western companies are slow to enter Afghanistan, China, which already has a large mining project in the country is likely to increase its involvement.
What do these developments mean for Pakistan? If we look at the geological map identifying the various deposits in Afghanistan, several of them are right on the border with Pakistan.There is no reason why these mineral deposits should not extend into Balochistan and parts of the Pakistani tribal belt. Copper is already being mined by the Chinese in Balochistan and there are reports of large deposits of the metal in the areas nearby.
It would be a good idea to create a trilateral arrangement involving Afghanistan, China and Pakistan to plan for the exploitation, processing and transport of this enormously large mineral wealth. This could transform the Pakistani economy along with the economy of Afghanistan.