Lifting the lid on Afghanistan’s biggest mining deal

To read the full report, click here.

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Afghanistan’s biggest mining deal has major implications for managing conflict, corruption, the economy, the environment and heritage, said Global Witness today. In the first look of its kind at the Aynak copper contract, their report highlights positive provisions that need to be fully implemented, and identifies significant weaknesses which threaten to undermine this vital deal.

The pivotal 2008 Aynak agreement between Afghanistan and the China Metallurgical Construction Company/Jiangxi Copper Company consortium sets the foundation for the country’s entire mining sector. With the contract still secret, Global Witness’ new report Copper Bottomed? Bolstering the Aynak contract: Afghanistan’s first major mining deal provides the first detailed insight into the deal struck and what this means for Afghanistan’s future.

“Setting up major mining projects in a county with ongoing conflict, widespread corruption and major environmental challenges was always going to be a challenge,” says Global Witness’ Juman Kubba. “The Aynak contract is better than other contracts we’ve seen in Afghanistan, but it doesn’t go far enough.”

The report highlights positive economic, infrastructure and social commitments, as well as crucial commitments to protecting the local community and environment from potential adverse impacts that could arise from mining. These are undermined by serious gaps and weaknesses. The Afghan people cannot see the terms agreed, nor is there any contractual requirement to engage communities on decisions and plans that directly affect them.  High royalty rates are undermined by provisions which enable renegotiation, and priority access to other resources at the site. Key human rights and cultural protections are absent, and it is not clear how commitments to best practice will be implemented and monitored.

” What’s the point” said Kubba, “in promising safeguards and benefits to local communities, when the communities themselves  do not know what protections they have and are excluded from the contract’s dispute resolution process?  Inevitably, such gaps will breed frustration and discontent – that isn’t good for the government, the company or, most importantly, the Afghan people.”

Mining has been heralded as the key to the future stability and prosperity in Afghanistan with announcements of up to $3 trillion in mineral wealth.^a  Aynak alone is projected to generate an estimated $541 million per year from 2016, creating around 5000 jobs and bringing in much-needed infrastructure investment.^b  With more mining contracts set to be signed in the coming months including Indian investment in the massive Hajigak iron ore concession, getting the Aynak deal right is crucial to set Afghanistan’s extractives sector on the right path.

The Afghan government has made important commitments to good governance, and last month saw the publication of over 200 extractives contracts.  Building on this positive progress, it is time for Afghanistan and MCC to work together to strengthen the foundation for this all-important project by:

• Publishing the Aynak contract and all linked agreements without delay;
• Agreeing processes to fully engage local communities, and to address their concerns and complaints effectively;
• Ensuring the implementation and enforcement of promised standards and safeguards, including controls over mine security forces; and
• Enabling open and independent monitoring of the project by official bodies and civil society.

By taking these steps, the Chinese consortium can live up to its motto of ‘Serve the local, benefit the local’, leading the way for all mining investment in Afghanistan by establishing a project which operates for the mutual benefit of all.  For Afghanistan, and the international community which supports it, the learning from Aynak is critical to establishing a sector which generates the benefits and prosperity that the Afghan people desperately need and deserve.

To read the full report, click here.

/ Ends

UPDATE:

In December 2012, Afghanistan's Ministry of Mines issued a response to this report, which is available to read here on their website.

Global Witness' follow up response to these comments can be viewed here or downloaded below. 

Contact:

In Kabul: Juman Kubba at [email protected], +93 (0)792 864 484 or +44 (0)772 097 2394; and Gavin Hayman at [email protected], +93 (0)792 865 073 or +44 (0)7874 305 8756.

In Europe: Patrick Alley at [email protected] or +30 694 864 4381.

Notes to editors:

1. The Aynak contract was signed on 25 May 2008 between the Government of the Islamic Republic of Afghanistan and a Chinese state-backed consortium made up of the China Metallurgical Construction Company and Jiangxi Copper Company.

2. This report follows the publication of the Global Witness report Getting to Gold: How Afghanistan’s first mining contracts can support transparency and accountability in the sector.  This report compared the 2008 Aynak contract to the 2011 Qara-Zaghan gold contract (backed by a JP Morgan-facilitated group of investors).  The report found that in most respects, the Qara-Zaghan contract was either the same or weaker than Aynak.

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