Promoting good governance in the mining sector
Title: Promoting Good Governance in the Extractive Sector in Afghanistan
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Partner: Ministry of Mines and Petroleum (MoMP) in Afghanistan
Lead executing agency: Ministry of Mines and Petroleum, Islamic Republic of Afghanistan
Ministry of Finance, Islamic Republic of Afghanistan
Overall term: 2013 to 2018
Afghanistan is rich in mineral resources, such as copper, lithium, iron, rare-earth elements, gold and cobalt. The country could become one of the world's leading mineral exporters by taking a sustainable approach to extraction. The tax revenues derived from mineral extraction would even be sufficient to make Afghanistan independent of international donors. To this end, the Afghan Government must control the extraction and marketing of minerals to ensure that revenue generated is actually reinvested in the country and used for its development.
In addition to a large number of illegal and informal mining operations, there are still shortcomings in the transparent allocation and oversight of exploration licences. The public revenue from this sector is collected by two different ministries, which has a negative impact on financial management. The Afghan Ministry of Mines and Petroleum (MoMP) also collects little data on mineral extraction and the revenue generated, and does not publish any reports.
Confidence in the legitimacy and efficiency of public services has increased.
Mining is controlled by MoMP in accordance with the criteria of good governance. Mineral extraction is structured and transparent, enabling public revenue to be duly channelled into the development of the country and increasing the return on investments in the mining industry.
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH has been advising MoMP on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) since 2014 with a view to improving capacity for strategic governance and effective mining oversight. This involves a number of approaches, such as revising laws and policies in mining, building expertise and capacity in the administrative bodies and the mining supervisory authorities, and promoting transparency in the extractive sector by introducing international standards.
MoMP has delegated numerous administrative and supervisory roles to provincial authorities and the project has provided administrative and technical training for some 350 mine inspectors and administrative experts from Kabul and the northern provinces. MoMP inspectors and employees have also undergone further training – in other countries in some instances.
Afghanistan has been seeking full membership of the Extractive Industries Transparency Initiative (EITI) since 2010. The project supports the Initiative in promoting cooperation between the extractive industry, the state and civil society. To this end, the Afghanistan EITI organises discussion forums to bring key players from civil society, industry and public authorities together. The results are fed into the national debate on the sustainable extraction of the country's mineral resources. The EITI Standard is also taken up in national policies like the Afghanistan National Peace and Development Framework.
A road map has been developed to facilitate regular publication of ownership structures of mining companies by 2020, in accordance with the EITI Standard, and this journey has already begun. Revenue generated from the extractive sector is also being published in annual reports. Increased transparency and participation are boosting public confidence in the state. Moreover, the measures are contributing to a more stable and improved investment climate in the extractive sector.
The technical and administrative training courses in various provinces have equipped 350 mining inspectors with the skills they need to perform their administrative and monitoring duties more proficiently. MoMP employees also attend further training courses in order to process licence applications correctly and to model best practice in applying the rules and regulations of the mining sector. 261 inspectors have been acquainted with modern mining companies, contemporary mining practices and mining supervision in Turkey, Iran and South America, and have received further training in sector-specific and engineering-related issues. 10 inspectors have also been prepared for in-service training tasks in the provinces. Further training has also been undertaken by 72 employees from the middle and senior management tiers at MoMP, 25 per cent of them women.
In addition, many transparency standards have already been introduced with a view to combating corruption in the mining sector and putting in place a structure of control and oversight. The Afghan government is seeking full membership of EITI which it joined in 2010. The Initiative promotes cooperation between the extractive industry, the state and civil society, and its stated aim is to monitor and publish public revenue from the extractive sector. The resulting dialogue between various key players and the greater degree of transparency will ultimately also increase public confidence in the state. Through the training of Afghan experts and visits to foreign mines, the project will help the Afghan Government to implement international standards and to guarantee transparency in order to enable Afghanistan to join EITI after 2018.