Extractive Industries in Post Conflict Countries:

Afghanistan and DR Congo

Craig AndrewsWorld Bank, Washington DCAfrican Development BankTunis, 12/13 February 2007

Afghanistan:The “Un’s”

• Unconquerable: Alexander the Great, the British and the Russians tried and failed; present efforts a “?”

• Ungovernable: rugged, mountainous, no roads, valley cultures, ethnic and tribal animosities and alliances

• Unfortunate: 1960s and 1970s reasonable growth; since 1979 continual war and disturbance

Afghanistan:Consequences of Unconquerable

• Gradual deterioration of security situation since 2002• Resurgence of Taliban, primarily in southern provinces• Supported by Pakistan intelligence services;• Funded by opium; well armed, manned and disciplined• Spring offensive last year almost succeeded in Helmand• But Taliban defeated by superior Nato air and fire power• Spring offensive this year will use “asymetric” warfare• Need change of “sweep and destroy” tactics to maintain

support of population; only 10-20% pro-Taliban• But, if popular support for Taliban increases it could

mean defeat for Nato• Government needs to show some positive results in

these areas

Afghanistan:Consequences of Ungovernable

• Traditionally, weak central government control, considerable regional and local autonomy

• Traditional model still holds: Karzai is “mayor” of Kabul, limited central government presence in other areas of the country, war-lords and drug-lords are supreme in these areas, well armed and well financed

• However, central government does have legitimacy due to reasonably fair elections

• But, government services widely viewed as corrupt• Kabul is a shambles, but Heart, Mazar-i-Sharif, and other

areas of country are booming• Rural development projects (e.g. schools, health centers) are

more successful than other projects• If they have community support (instead of “gifts” from the

military)

Afghanistan:Consequences of Unfortunate

• Physical infrastructure in the country utterly destroyed; Kabul in 2002 resembled German cities after WWII

• Road links, irrigation/water/sanitation systems have to be re-built

• Telcoms infrastructure destroyed, but now adequate cell phone coverage

• Land mines and unexploded ordinance (UXO) is a continuing problem

• Government departments and education system destroyed during war and Taliban regime

• Biggest tragedy: two generations of leaders and educated personnel have been lost

• Consequence is “time warp”: civil servants still of the 1970s/1980s mind-set

Mineral Resources in Afghanistan

• Country is well endowed with minerals: base and precious metals, semi-precious stones, coal, gas, and oil

• Fairly well explored, though data is missing• Difficulties to develop due to lack of infrastructure, land-

locked, lack of trained personnel• Current minerals production is quarry and construction

materials, some gas• Semi-precious stones funded the Northern Alliance• World class copper resource at Aynak under tender; iron

ore at Haidjak; coal in Bamiyan and Baghlan• Government management of the sector according to

Soviet model command and control

World Bank Activities in Mining Sector

• First mission in March/April 2002• Identified needs and proposed USD 2 million in technical

assistance• Sector study in 2003/2004 further refined knowledge of

sector• Policy advice work with government on mining law and

reorganization of ministry• Preparation in 2005 of sector grant of USD 30 million for

mining sector• Grant approved in 2006; implementation currently

underway

Grant for Sustainable Development of Natural Resources

• Development objective: assist government to effectively regulate Afghanistan’s mineral resources development in a transparent manner and to foster private sector development

• Components: - improve internal efficiencies- develop regulatory capacity- develop mineral resources- enhance sector governance

• Project is under implementation and, after some start-up difficulties, is going well

Problems Encountered

• Frequent changes in ministers, lack of effective leadership; two ministers of mines assassinated

• Difficult to understand hidden political, ethnic and personal agendas; language difficulties

• Old habits die hard; ministry personnel resistant to change;

• No exposure or knowledge of modern developments• Too many foreign advisors, too well paid, engender

resentment• Donors have conflicting agendas, lack of effective

coordination, • Development decisions over-ridden by military and

security considerations

Some Lessons Learned

• Orthodox approaches can only go so far; need to think “out of the box”

• For instance, forget the mantra about privatization• Don’t overburden young government with too many laws

all at once• Work through existing ministry structures rather than try

to create new ones• Afghan repatriates are limited in effectiveness and

resented • Recruiting resident international advisors is difficult• No immediate or perfect “fixes”

Transparency and Governance in Mining Sector

• We can never know in good time every deal that is in the works; but, we can establish some checks and balances

• Mine law provides for clear licensing procedures and independent cadastre/mine title registry service

• All mine titles subject to review by licensing board within ministry

• Any mining deal over USD20 million subject to inter-ministerial approval

• These are also reviewed by independent “international advisory panel”

• Government has endorsed EITI

Faces and PlacesAfghanistan

Kabul, AfghanistanApril, 2002

Vestiges of War

Aynak Copper Depositand

Al Queda Training Camp

Democratic Republic of CongoTroubled Mining Country

• Geological scandal: Cu-Co (Katanga), Au-coltan (Kivus), diamonds (Kasai), oil (Bas Congo)

• Large mining is coming back; in 3 years DRC could produce as much as it did in 1980s

• ASM: 90% production and livelihood for 5+ million• Rival factions attempt to capture wealth; credible allegations of

minerals for arms trade, human rights abuses, rampant resource stripping, clandestine operations; very opaque and chaotic; “let’s do a deal” mentality

• Historic difficulties establishing central government hegemony over resources and regions; still a problem with FARC

• Significant problems with sector governance at all levels; deeply ingrained culture of rent seeking

The Political Context

• Country has been exploited by slave traders, King Leopold, Belgians, Union Miniere, incompetent and corrupt government

• Fall of Mobutu regime, civil war, foreign intrusions and interference since 1996

• Peace agreement brokered by South Africa in in 1998 • Transitional government since 2003: 1 + 4• 17,000+ UN and EU peace keeping forces• Reasonably fair elections held in 2006; Kabila elected• Significant turbulence and conflict still goes on in some

areas• Decentralization poses unique political problems;

retrocession of mining revenues

Bank Involvement• Bank presence and program since 2001• CAS focus on governance and capacity building • Work through grants and component of multi-sector credit• Accomplishments include:

- new mining law and regulations- TA to restructure parastatal Gecamines- mining title cadastre and registry- arbitration commission on titles and contracts

- Extractive Industries Transparency Initiative

• Mining sector review; “Growth with Governance”• Number of new grants and credits with possible mining

component• Stand alone mining sector grant USD30-50 million

Some Emerging Political Lessons

• Ministries reflect political patronage, not sector requirements• Senior political figures control regions and mineral resources• Our good offices and name can be used and abused• Government capacity is severely depleted, especially in the

provinces • Working more with NGOs is perhaps indicated• Need for radical surgery: excise the cancer of corruption: out-

source key sector functions• Internationally imposed sanctions could be counter-

productive• Traceability and certification schemes may not work and will

be expensive

Some Emerging Economic Lessons

• Learn to work with non-traditional industry players• Do our orthodox prescriptions work? Or fly in the face of

political realities?: Gecamines• Partnerships with others can help: Kimberley process,

EITI with UK, private companies with USAID• Legal regime and capacity are keys, but do not expect

immediate miracles • Expect considerable frustration on results and consultant

exasperation• Prioritize the “do-able” with new private sector

companies to produce tax revenues• Tackle artisanal and small scale during second phase