Afghan cash starts going to China
By Syed Fazl-e-Haider
QUETTA, Pakistan - Several hundred Chinese workers and technicians are already sending home cash from their work on developing Afghanistan's vast Aynak copper deposits - the world's second-largest untapped reserves - after the project got underway in July.
Yet many analysts believe the project, backed by security from the United States, will bring few economic gains to war-torn Afghanistan, merely an environmental disaster and profits to the Chinese investors.
Aynak is 75%-owned by state-owned Metallurgical Corp of China (MCC), which paid US$3.5 billion for the contract to develop the resource, and 25% by Jiangxi Copper, China's top integrated copper producer. Critics concerned about the value the development will bring to Afghanistan point to MCC's involvement in the Saindak copper project in neighboring Pakistan.
At Saindak, the company is extracting copper without any effective evaluation and monitoring mechanism and there is still no reliable data available on production and its environmental impact. MCC is also charged with excessive mining at Saindak, reducing the mine's estimated lifespan.
MCC, which last May signed an exploration, exploitation, processing and smelting contract for the Aynak copper deposit, a 28-square-kilometer field in Logar province, south of the capital, Kabul, is expected to start production by the end of 2011.
Already, the Chinese firms have increased the Aynak project's designed capacity to 320,000 tonnes of copper in concentrate a year, from the planned 200,000 tonnes, according to a report published by Reuters on September 29. The project would increase the supply of copper concentrate to Jiangxi Copper, which is expanding capacity to 900,000 tonnes of refined copper a year in 2010, from 700,000 tonnes.
This does not surprise critics, who point to the company's development of Saindak, a copper and gold mine in Chagai district, in the insurgency-hit Pakistani province of Balochistan.
MCC has extracted more copper than expected from Saindak, according to a January 2008 report by Integrity Watch Afghanistan, a European research group. The report said the project had virtually no spillover effect on the local economy to date. At the same time, numerous examples of toxic contamination of surrounding areas through wastewater from copper extraction were documented, resulting in environmental and social disasters, although solutions to curb such contamination theoretically exist.
Saindak contains estimated copper ore reserves of 412 million tonnes. Under a formal contract worth $350 million, MCC acquired the project on a 10-year lease in September 2002. MRDL, a subsidiary of MCC, has operated the project, with an initial investment of $26 million, since August 2003.
The Saindak mine has an estimated life of 19 years, but the Chinese firm is reportedly indulging in excessive mining and higher production of blister copper at the site. This has not only reduced the lifespan of the mine, but also caused financial losses to Pakistan. There has so far been no effective monitoring mechanism to check the excessive mining.
Critics in Pakistan blame the government of former president Pervez Musharraf for signing the lease contract with MCC without adequately addressing issues relating to excessive mining. No technical body for monitoring and evaluation of the production and export of copper, gold and silver from the project has yet been constituted, even after the lapse of seven years. Local analysts fear that the higher rate of production may reduce the mine's lifespan to that of the 10-year lease if the excessive mining goes unchecked.
Saindak is also being developed in the absence of an environmental impact assessment. Of most concern, the absence of a surface flow of water means the district where the mine operates faces an acute shortage of water. The mine itself, and the high volume of water required for production of what is known as blister copper, depends on sub-surface water, raising concern about the impact this will have on the surrounding area over the next three years on local supplies.
The Saindak mine draws on water resources from the Taftan-Tahlab basin. These resources, which are shared with neighboring Iran, have not been evaluated.
The investment to mine Aynak, 60 kilometers southeast of Kabul, is considered to be the largest in Afghanistan's history, giving MCC and Jiangxi Copper the mining rights in the central and western mineralized zones for 30 years. Under the deal, construction work is due to finish in less than three years. MCC will pay the Afghan government $400 million a year to operate the mine, and provide jobs for thousands of Afghans. This works out at $1.2 billion over 30 years.
The Chinese are also committed to complete some infrastructure projects, including a coal-based power station, a groundwater system, roads, new homes, hospitals and schools for mine workers, along with Afghanistan's first national railway.
With the Aynak deposit alone, its estimated 13 million tons of copper is forecast to be worth up to $88 billion. This could make Afghanistan one of the world's top 15 copper producers, but the involvement of local communities and the environmental impact have not yet been approached as a major issue.
The Integrity Watch report warned of the potential for an environmental and social disaster if the Aynak project was not properly managed by the Chinese firm. In particular, water consumption and wastewater management will have to be very carefully dealt with, since mismanaging these could have potentially disastrous consequences.
Experts, from the very beginning, expressed their concerns about the Aynak bidding process, in which MCC was the favorite of the Afghan Ministry of Mines' technical group. The Chinese company become the Afghan government's preferred bidder in November 2007 after beating eight other mining groups, including Phelps Dodge of the US, Hunter Dickinson of Canada and London-based Kazakhmys. No economists and environmentalists were involved in the technical analysis.
Afghan expertise was not used to its fullest extent, and officials controlled by Ibrahim Adel, the Afghan mining minister, had too much influence in the process, said a news report published in October 2007 in Nature, the international science journal. The report also noted the importance of the bidders' track records, citing James Yeager, the top World Bank geological consultant to the Afghanistan government. The report also drew attention to MCC's poor environmental mining record outside China.
While MCC is being watched with concern at how it develops Aynak, the company itself has other worries, notably the security threat from Taliban insurgents. For this, at least, it at present has US armed forces as some form of protection. About 1,500 Afghan police guard the site, subsidized by the Japanese, and the American army's Tenth Mountain Division patrols the area, according to The Economist magazine.
That balance of profit to China and cost of defense to the US and its allies is drawing its own share of critics. Analysts believe that China's interests in the Aynak and Saindak copper projects coincide with its plans for the development of western China, its regional trade links and expansion of economic influence in the region.
"We're giving tens of billions of dollars in assistance to Afghanistan, and we're getting no credit," NBC News last month quoted Donald Ritter, the president of the Afghan-American Chamber of Commerce, as saying. "We need a policy on developing mines and minerals and oil and gas in Afghanistan. Otherwise, it will be dominated by the Chinese, who are wired to the Iranians through their oil investments, and the Pakistanis, because of China-India competition."
Syed Fazl-e-Haider (
http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at
sfazlehaider05@yahoo.com.
(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
Afghan cash starts going to China
Linear Mode
