Perhaps out of pique or anger for what has seemed as an ignominious defeat suffered at the hands of the ramshackle Taliban, the US has frozen the nearly $9.5 billion in assets belonging to the Afghan central bank. The Biden administration is also said to be blocking the Taliban's access to Afghan government accounts managed by the Federal Reserve and other banks, and prevent them gaining access to foreign-exchange reserves held at the International Monetary Fund.
This is going to seriously disrupt the on-going process in Kabul (since August 15), of putting together an all-inclusive, universally acceptable government that would rule the war torn country in the interim. A common code of governance is also being sought as various Afghan factions and representatives of Taliban engaged in the process are seen trying to reach an accord over what can be said to be the irreducible minimum acceptable to all.
In case the US carries out its threat and actually denies the resources already in the pipeline, it would only push Afghanistan back into the black-hole of 1996-2001 turning it once again into a fertile terror ground.
Afghanistan needs lots and lots of resources and urgently too to fund the setting up of a civil government, police, educational institutions, hospitals, trained health care personnel, persons to man civic works like roads and bridges, import of fuel, make provisions for agri-inputs and storage of its output and marketing. And of course, a well -trained and motivated defence services.
Afghanistan's own economy which is solely poppy dependent is too fragile to rescue the process and fund these activities. In fact, it is the poppy cultivation that takes the country's economic front seat. Last year, Afghanistan produced at least 6,300 tons of opium, according to the United Nations Office on Drugs and Crime - enough to make some 900 tons of heroin - and accounting for around 85% of the world supply. If this was a legal business, it could win awards for innovation and resilience.
To be sure, on the face of it, poppy appears to be the only identifiable economic wealth of the country which perhaps may not be available if and when it rejoins the 'law-abiding' world order.
The other known wealth, gemstones and marble, are said to be plundered openly. Due to insecurity and limited presence of the government in some parts of the country, warlords, insurgents and politicians are said to be involved in illegal exploitation of minerals. There are said to be an estimated 1,400 illegal mines in the country.
If exploited effectively, Afghanistan's rich mineral resources, it is believed, could prove to be the best substitutes for foreign aid and could decrease the country's dependence on donor countries and foreign support. These resources, if properly managed, provide an opportunity for Afghanistan to write its own story of economic success. Robust policies and strong institutional arrangements together with clear policy direction will help attract both domestic and foreign investors. Better management of mineral resources could result in sustainable economic growth.
There are numerous Soviet developed charts in the government files in Kabul which document a vast amount of iron, copper, gold, cobalt, rare earth metals, and lithium reserves.
An internal Pentagon memo claims that Afghanistan could develop into the "Saudi Arabia of lithium," referring to the mineral that is an integral component of laptop and smartphone batteries.
Washington was ecstatic about the findings and in 2010 claimed that at least $1 trillion in resources was up for grabs. US officials had claimed that the deposits could sustain the Afghan economy and generate thousands of jobs, reducing corruption and reliance on foreign aid.
Afghanistan may hold 60 million metric tons of copper, 2,200 million metric tons of iron ore, 1.4 million tons of rare earth elements such as lanthanum, cerium and neodymium, and lodes of aluminum, gold, silver, zinc, mercury and lithium. For example, the Khanneshin carbonite deposit in Afghanistan's Helmand province is valued at $89 billion.
According to the World Bank, revenue from mines in two sites-the Aynak copper deposit and the Hajigak iron deposit-could "generate an average of $900 million per year until 2031."
What Afghanistan lacks is technical knowledge and the capital needed to exploit the mineral riches. This technical knowledge and the required finances can be supplied by the US, China and other technically and financially endowed foreign countries, helping Afghanistan to develop rapidly.
This will benefit the countries extending the needed technical/ financial hand, including the immediate neighbors too, because with their higher incomes the Afghans will not only be able to buy goods from these countries but also export the minerals badly needed by them.
According to Antony Loewenstein (Natural Resources Were Supposed to Make Afghanistan Rich. Here's What's Happening to Them, published in The Nation on Dec. 14, 2015) acknowledging the inability of the Afghan Ministry of Mines and Petroleum to handle a burgeoning resource industry, the US government had once pledged to help implement a sustained program.
"However, regulations like the mining law-revised in 2014 to bring greater transparency-have had little effect on illegal mining and the non-payment of royalties."
Logar province is home to one of the world's largest untapped copper deposits, at Mes Aynak. The Chinese company, China Metallurgical Group Corp. (MCC), controls the $3 billion mine, having obtained rights to the area in 2007, but operations haven't commenced because of security concerns.
When President Ghani visited Beijing in October 2014, he was asked by the Chinese government to cut the royalty rate from 19.5 percent to roughly 10 percent, which would cost the Afghan government an estimated $114 million annually. Chinese frustrations with the project, especially regarding the lack of security, were said to be behind the demand.
MCC purchased the rights to the copper for 30 years, and the Afghan government has few if any other companies willing to take over the contract in such a volatile region. There's no reliable transportation route for taking the metal out of the landlocked country; and MCC withdrew its workers from the site in 2014. The firm claims that tens of thousands of jobs could be indirectly created if operations commenced.
A US study had found that illegal mining has been costing the state up to $300 million annually. Insecurity in eastern Nangarhar province and elsewhere prompted interested parties to warn Afghan lawmakers in 2015 that monitoring the thousands of mines around the country was impossible and that the complete and unrestrained looting of local resources could continue to happen in the absence of lasting peace in the country.
Historically, Pakistan is said to have been a major recipient of the illicitly obtained minerals from Afghanistan.
As a landlocked country, Afghanistan has remained dependent on Pakistan for its transit trade while both countries are also immediate markets for each other. Unfortunately, trade relations between Afghanistan and Pakistan have continued to remain troubled.
In the light of international conventions, arrangements like the Afghanistan Transit Trade Agreement (ATTA) 1965 and the Afghanistan Pakistan Transit Trade Agreement (ATTA) 2010 did provide legal frameworks for bilateral trade and transit relations but reality has never matched the paperwork. Even, major changes like the end of the Cold War, the collapse of the Soviet Union in 1991 and later the onset of a new Afghan regime in the aftermath of the September 11th attacks could not influence the bumpy trade relations between the two neighbors.
Many attempts have been made to identify the difficulties and address the grievances of the two sides but to no avail. The impediments identified in various studies relate to issues of trade facilitation, transit and transport, en route security, customs procedures, illegal trade, tariffs, banking and payments, competitiveness, and infrastructure.
Still, it seems too preposterous for a country of over 220 million with a GDP of over $300 billion to fence itself against 'threats to its economy' from one of the poorest countries (more than 54% of the population lives below the poverty line) of the world having a population of just 35 million and a GDP of a mere $23 billion. Indeed, most Afghans see poverty, unemployment and government corruption as the causes of war and not the Taliban.
It is, therefore, imperative that the strategic policy planners in Pakistan do an urgent review of their current approach towards Afghanistan and consider some other options to improve the bilateral trade and economic relations of the two countries along with generating a significant geo-economic dividend for the benefit of the two neighbours.
One such option could be the setting up of a free trade zone (FTZ) in the region which so far has remained a free terror zone-the KP plus the southern part of Afghanistan. In this regard, we could also get the Americans to dust up their much forgotten Reconstruction Opportunity Zones (ROZs) project they had proposed to set up along the Durand Line during mid-2000. The idea was to establish with US funding Afghan-Pakistan joint manufacturing units to fabricate items for the US market.
Copyright Business Recorder, 2021
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