Managing Afghanistan’s Mineral Wealth: Can Afghanistan’s Mineral Wealth Be Used to Rebuild the Economy? Task Force 2015 University of Washington Henry M. Jackson School of International Studies Cover Photograph Parallels. “Afghan Mineral Treasures Stay Buried, Hostages to Uncertainty.” Digital Image, 2013. Available From: http://www.npr.org/blogs/parallels/2013/05/18/184775139/Afghan- Mineral-Treasures-Stay-Buried-Hostage-To-Uncertainty All trademarks mentioned in this report remain the property of their owners. Their inclusion in this report should no way be taken as an endorsement of this report or its conclusions by the trademarks owners. Printed at the University of Washington in Seattle, Washington Managing Afghanistan’s Mineral Wealth: Can Afghanistan’s Mineral Wealth Be Used to Rebuild the Economy? Faculty Advisor Scott L. Montgomery Affiliate Faculty, Jackson School of International Studies University of Washington, Seattle Evaluator Matthew Golden Economic Team Lead US State Department on Afghanistan, Washington D.C. Task Force Thomas Caetano (Editor) Rachel Caren (Coordinator) Ryan Bersentes | Patricia Denga | Adam Easter | Jessica Mellinger | Devon O’Neill Igor Sirotkin | Michael Lane Smith | Xiangjun Wan | Sara Wong | Sarah Yu The Henry M. Jackson School of International Studies University of Washington Task Force Report 2015 Table of Contents Acknowledgements ........................................................................................................................5 Introduction ....................................................................................................................................6 Executive Summary .......................................................................................................................9 Part I: Mineral Wealth ................................................................................................................10 Part II: Infrastructure .................................................................................................................17 A. Water ....................................................................................................................................17 B. Electrical Supply ..................................................................................................................35 C. Transportation ......................................................................................................................48 D. International Diplomatic Concerns ......................................................................................62 Part III: Regional Concerns ........................................................................................................73 A. Security and Stability ...........................................................................................................73 B. Ethnic Relations ...................................................................................................................87 Part IV: Governance....................................................................................................................96 A. Legal and Judicial System ....................................................................................................96 B. Mining and Extraction Governance ...................................................................................105 Part V: Economic Institutions ..................................................................................................112 A. Financial and Business Institutions ....................................................................................112 B. Human Capital and Job Training .......................................................................................121 C. Case Studies .......................................................................................................................133 Conclusion ..................................................................................................................................142 Policy Recommendations...........................................................................................................143 Acknowledgements The authors of this Task Force Report would like to extend their gratitude and thanks to all individuals and institutions which made this report possible. Our Task Force was given great opportunities this quarter to ask questions of experts on this topic and individuals with insight on Afghanistan. We would specifically like to thank Carmela Conroy, Dr. Rohullah Amin, and Dr. Anish Goel for speaking with our class and providing unique insights which helped to shape the following report. Above all, we would like to thank Scott Montgomery for his exceptional guidance and unyielding support throughout this process. This Task Force would not have been possible without his feedback, patience, assistance, and expertise. 5 Introduction “A river is made drop by drop” – Afghan Proverb From 2005 to 2009, the US Geological Afghanistan has been plagued with nearly Survey performed a series of remote sensing four decades of instability since the Soviet surveys in Afghanistan in an attempt to invasion of 1979. Years of war have quantify the nation’s mineral resource disrupted the traditional lifestyle of Afghans, potential. Their findings stand to destroyed vital infrastructure and created a significantly transform the future of constant power struggle amongst varying Afghanistan’s economy and development. interests groups. The national lack of Afghanistan’s potential mineral wealth is security severely undermines any potential valued at $908 billion. This places economic revival that the Afghan Afghanistan amongst the top five nations in government may attempt. the world by mineral wealth. The abundant minerals are diverse in value and industry Although security in Afghanistan has potential, with large deposits of iron, copper, improved since 2001, unrest, armed and cobalt, in addition to deposits of gold, insurrection, guerilla warfare, assassinations gemstones, and rare earth elements. of high-ranking domestic and international public officials, car bombs, and IEDs As one of the poorest nations in the world, continue to plague any buddying economic Afghanistan’s newly realized mineral wealth growth in Afghanistan and will dramatically represents a potential source of indigenous impact the potential mining industry. Based revenue and is closely tied to the nation’s on the most recent Security and Defense future economic prospects. At present, 60% Cooperation Agreement between the US and of Afghanistan’s GDP is the result of Afghanistan, both countries are adopting a foreign aid and 30% arises from poppy policy of military collaboration that cultivation and illegal opium production. continues far into the future. Only 10% of Afghanistan’s GDP stems from domestic industry and economic activity. In addition to war and insecurity, With a value of nearly $1 trillion, Afghanistan’s economy faces several other Afghanistan’s policy makers and advisors impediments to development. are looking ambitiously upon its mineral Approximately 85% of Afghans depend on endowment as a basis for a sustainable agriculture for their employment and economy. livelihoods. However, this industry is currently inefficiently and largely This report will call into question whether susceptible to geographic and political Afghanistan’s mineral potential can be changes. In recent years, precipitation has utilized to catalyze a sustainable and been scarce and the percentage of arable legitimate economy. A combination of land is low. The lack of irrigation factors will dictate the success of mineral infrastructure and property rights laws extraction in achieving these goals and must continues to limit the potential expansion of be accounted for in order to utilize mineral the domestic agriculture industry. resources to rebuild the state and boost the economy. 6 Domestic considerations will also need to nation is landlocked and directly bordered include Afghanistan’s many ethnic and by China, Iran, Pakistan, Tajikistan, tribal groups. Divisions amongst ethnic Turkmenistan, and Uzbekistan. Due to its groups and between rural and urban strategic location, Afghanistan is highly populations create a structure of authority in susceptible to the interests and Afghanistan that is not centralized, but socioeconomic climates of neighboring dispersed amongst local elite and tribal nations. Many of its neighbors are pursuing leaders. As demonstrated with Hamid greater influence in the region and will seek Karzai’s presidency, efforts to enforce a to be economically and politically involved centralized government produced resistance in the potential mineral industry. Therefore, and backlash. There is considerable successful mineral extraction will depend on animosity between rural populations and the Afghanistan’s ability to independently central government. In order for mineral negotiate issues regarding infrastructure, extraction to provide sustainable economic transportation, power, foreign investment, growth, it is vital for collaboration and and security. communication to occur among local, tribal, and federal governments. However, since 2001, economic development in Afghanistan has progressed. Furthermore, Afghanistan’s high levels of Despite these hampering factors, the last corruption continue to hinder economic decade has seen rapid, albeit fluctuating, development. Corruption is rampant in economic growth,