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Will Afghanistan's New President Depart from "Business as Usual" in the Extractives Sector?

With the 2014 presidential election finally settled, Afghanistan could be on the verge of its so-called"transformational decade"—one focused on peace and development, following more than 13 years as a ward, more or less, of the international community and a frontline for the "war on terror" that has played out in the region.

One man and the unity government he is at this moment forging will bear much of the responsibility for changing Afghanistan’s course. What can Afghans and the world expect of Dr. Ashraf Ghani, newly inaugurated president of Afghanistan? In one narrow but strategic area—the management of Afghanistan’s considerable mineral and hydrocarbon wealth—President Ghani’s record on the campaign trail and off has generated high expectations. But what actions should follow? Here, I briefly examine these expectations and suggest actions that could signal the Ghani administration’s commitment to resource governance in Afghanistan.

On the campaign trail, Ghani promised major reforms: the creation of one million jobs; wooing the Afghan diaspora back to work and invest in the country; signing a long-term security deal with international forces; and cracking down on corruption, starting with the men behind the $925 million Kabul Bank scandal. Underpinning this tall order is a pledge to promote accountability through regular "citizens’ report cards" on government progress. This is a manifestation of that the fact that behind Ghani the president and politician is an intellectual with a public record on issues of governance and anti-corruption who has developed both a treatise and a think tank on state effectiveness.

As a former Afghan minister of finance and an ex-World Bank official, President Ghani demonstrates an understanding of how governance affects economic development, particularly as it relates to the extractive sector. "Our mining wealth is considerable," he told the Atlantic Council in May. "The key thing that is missing is a stable policy framework within which mining companies can engage with us."

As Ghani demonstrated in the telecoms sector when he was Afghanistan’s finance minister, it is possible to grow the economy with competitive and open practices while demonstrating that Afghanistan can be a viable market and investment destination. Today, the Afghan telecoms sector is one of the largest revenue sources for the government, generates hundreds of millions in investment, and boasts infrastructure to provide nearly 20 million Afghans with communications services. The development of not only wireless infrastructure but also a vibrant market of Afghan media entrepreneurs owes at least in part to Ghani’s insistence as finance minister on
<href="#axzz32r8h3n00">open participation and competitive bidding for telecoms licenses.

The lessons learned there could certainly benefit the resources sector, where, despite some recent disclosures, licensing and contracting processes are only partially transparent (see the Resource Governance Index) and the rules of engagement are especially murky under the recently passed mining legislation. President Ghani has publicly recognized the importance of contract transparency to meet "budget needs, both security and non-security," through mining revenues.

While recognizing the importance of international investment and expertise Ghani was also among the advisors in former President Karzai’s cabinet against investor-friendly revisions in the mineral law, questioning whether it served the national interest. "A balance has to be struck so we can make sure that our patrimony does not become a pot of porridge for others," he said in July 2012.

Even so, Ghani stood out from the more strident resource nationalists in the cabinet who merely wanted to exclude foreigners from "growing rich" from Afghan resources. As a presidential candidate, he explicitly linked development to the extractive sector through complementary and effective deployment of resource revenues and investment in human capital and economic infrastructure. (See quotations on extractives-led development, below.)

The government of Afghanistan, under former President Karzai, has already committed "to create an accountable, efficient and transparent framework for extractive sector management which builds upon and surpasses international best practices" as part of the2012 Tokyo Mutual Accountability Framework (TMAF). It has also taken forward important initiatives such as committing to the Extractive Industries Transparency Initiative (EITI) and disclosing some resource contracts. Building on this, President Ghani’s new administration can signal a "transformational decade" for extractives governance by:

  1. Issuing clear governance and performance objectives for extractive sector development as part of its strategy for the first 100 days in office.
  2. Building on the TMAF commitment to deliver a comprehensive framework in the extractive sector, with strategic targets and a plan to meet them by the next International Conference on Afghanistan to be held in London later this year. (In countries such as Tanzania and Nigeria, the Natural Resource Charter has been used as a model for strategic planning.)
  3. Reinvigorating Afghanistan’s EITI process (AEITI). The AEITI is at a critical junction and will be subject to international review in October. Despite progress in the last nine months, serious concerns remain as crucial momentum and operational efficiency have been lost in part because of political uncertainty. In the next few weeks the government should play an engaged and executive role to support the process and address remaining issues, or risk the suspension of Afghanistan’s candidacy.

President Ghani’s position on resource governance was only one factor in the election, but going forward, his administration will be beholden both to his track record and a public that is increasingly engaged and demanding on resource governance issues. The world will also be watching as the election drama subsides and the real work of democracy consolidation and good governance begins.

In his own words: Ashraf Ghani

On governance and corruption

"The question of rights and obligations of citizenship, the right to good governance, the right to an effective state, the right to freedom and justice—these are the issues that are central." (The Atlantic Council)

"…I am not going to tolerate impunity. The Afghan public is sick and tired of corruption; we are not going to revive the economy without tackling corruption root, stock and branch." (The Guardian)

On extractive sector governance

"From energy and agriculture to mining and construction, the country possesses the resources for robust and sustained development for decades to come. A mining-based economy is therefore a real medium-term alternative to the current drug-based economy." (The Financial Times)

"A government committed to transparency, accountability and the rule of law can create a stable, business-friendly environment in Afghanistan." (The Financial Times)

On extractives-led development

"We have the natural capital, but we do not have the human capital. And here what is required is a 10-year framework of the capabilities that are going to be required, and relentlessly investing in them. For instance, if mining is as important as I’m arguing it is, then we need at least 500 people who understand the legal aspects of mining contracts. Or 500 other people who are going to understand every aspect of copper." (The Atlantic Council)

"Investing in roads and railways to link the major mines in southern and central areas of the country to potential markets in the region and to China is essential." (The Financial Times)

Katarina Kuai is a capacity development officer and leads NRGI's work in Afghanistan.

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