How Afghanistan Can Escape the Resource Curse

Local Is the Only Way to Go

Until just a few weeks ago, serious talk about an Afghan economy based on natural resources seemed premature. But as Kabul inks more mining deals with international investors -- it awarded two major tenders at the end of 2011 -- and as NATO continues its drawdown of international troops, natural resources are shaping up to serve as the cornerstone of sustainable development there. This raises an unavoidable and possibly tragic question: Considering the country's lack of infrastructure and its rampant corruption, will Afghanistan become yet another data point in the literature on underdeveloped countries that fall victim to the resource curse?

The possibility is real. Officials in both Washington and Kabul claim that the country's mineral wealth is worth as much as $3 trillion. Experts have suspected Afghanistan's resource potential for decades, and U.S. Geological Survey fieldwork conducted between 2009 and 2011 confirmed the existence of significant copper, iron ore, gold, lithium, rare earths, and mineral fuel resources such as coal, oil, and gas, and possibly even uranium.

Mining corporations and the Afghan government have wasted no time. In late 2011, Afghanistan's Ministry of Mines signed an oil exploration and production deal with the Chinese National Petroleum Corporation to develop the Amu Darya basin's 80 million barrels of estimated crude reserves over the next 25 years; production is expected to begin this year. At the moment, the ministry is finalizing details with an Indian consortium of mining companies to develop the Hajigak deposit, one of the largest undeveloped iron ore deposits in the world, which has the potential to produce steel for the next 40 years. Both of these deals come after Kabul signed over to the Chinese the rights to the Aynak copper deposit in 2008, and the Qara Zaghan gold deposit to a consortium of investors gathered together by J. P. Morgan in early 2011. Taken together, these first forays into Afghanistan's newfound subterranean treasure chest will mean billions of dollars in investment over the next decade; there will be new rail infrastructure, power plants, and possibly even a refinery. Kabul will reap significant new tax revenues, and tens of thousands of Afghans will be put to work.

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