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Afghanistan: Minerals and Gemstones

Volume 717: debated on Wednesday 3 March 2010


Asked By

To ask Her Majesty’s Government what assistance they are providing to the Government of Afghanistan for managing minerals and gemstone resources.

My Lords, between 2004 and 2008, the UK spent £4 million to map mineral deposits in a geological survey of Afghanistan. This helped identify the growth potential of the mining sector and restructure the Afghanistan Geological Survey. We have agreed to help the Ministry of Mines to undertake an ambitious reform programme, with a budget of some £950,000, and the Ministry of Finance to implement the Extractive Industries Transparency Initiative in Afghanistan, with a budget of £515,000. In February 2010 the EITI board accepted Afghanistan as a candidate country.

My Lords, I thank the Minister for that reply. Is he aware—I am sure that he is—that Afghanistan is one of the poorest countries in the world, yet it has huge reserves of the highest quality lapis lazuli, silver, copper, rubies and emeralds—examples that can be seen even today in the British crown jewels, the Taj Mahal and the Russian imperial collection? What else are Her Majesty's Government doing to encourage development of these reserves to help alleviate poverty and help the Afghanis diversify from their reliance on the poppy?

My Lords, the good news is that reliance on the poppy has been much reduced, from 13 per cent in 2007 to 4 per cent in 2009. The noble Baroness is absolutely right: Afghanistan is the second poorest country in the world. This is why we have committed £510 million over four years on a series of measures: on assistance to government, more than £300 million; to create jobs and economic growth, more than £80 million; to help stability and development, £72 million; and to produce alternatives to the poppy, some £30 million.

The noble Baroness is also correct in saying that a well regulated mining sector would have great benefits. The World Bank has identified the potential for an annual production of something over $250 million, and for 19,000 jobs. We continue to support the Afghan Government in their endeavours to diversify: that is part of our ongoing commitment.

My Lords, after the geological survey that my noble friend referred to, which was funded by the British taxpayer, a Chinese metallurgical company paid $3 billion for a copper mine in Aynak province, with a potential profit of $88 billion. How can the Minister justify coalition troops guarding that mine and possibly laying down their lives when China picks up all the profits and provides no troops or any other form of military assistance to Afghanistan?

We are in Afghanistan to assist the Government of that country to provide security and prosperity for their own people. It is true that the Aynak copper deposit is the second largest unexploited deposit in the world. It is equally true that the open tender for the contract to develop the mine was managed by the World Bank and won by the Chinese Government. One cannot develop a copper mine in one or two years: it has the potential for a lifetime of work. Our endeavour will be to ensure that the security situation in that country is such that its armed forces, police and Government can provide their own security for what is an international operation. Had the tender been won by a European or North American country, would we be making the same points?

My Lords, there are indications that the value of minerals in Afghanistan could be $1 trillion. Does the Minister find potentially chilling—given the effect on fragile states such as the DRC of having that sort of mineral wealth—the level of corruption in Afghanistan, with countries and companies tripping over themselves to exploit it? How can we work internationally to ensure that it is the many and not the few who benefit?

The noble Baroness makes a very important point. I do not know the number of noughts one would put when estimating the potential value of minerals in that country: it depends on extraction costs and the world market. The noble Baroness is right to highlight the potential danger in a country that has had endemic corruption as one of its problems for a long time. It is important that President Karzai has made a commitment, both in his statement on his election and subsequently at the London conference, to make the fight against corruption his number one priority. Now we want to see that commitment turned into action. This is why we are putting our funding through government agencies to the extent of 50 per cent. We are anxious to ensure that the Afghan Government take advice, learn from the experience of others and remove corruption. The noble Baroness is right that if in the long term that is not the case, the wealth that could come to that country could be not a blessing but something worse, as we have seen in some parts of Africa.

Does the Minister recognise the wide support for the point made by the noble Lord, Lord Anderson; that the Chinese are moving in and taking advantage of the situation that has been created by coalition forces in support of the Afghan Government? Does he agree that there is a strong argument for the greatest pressure to be put on the Chinese Government for them to play a bigger part in helping in the overall task to which we are all committed?

I find myself in slight disagreement with the noble Lord. On his latter point that the Chinese should play a bigger part, they are making major endeavours on the African continent in terms of assistance to some countries, development of some countries and, of course, the extraction of minerals. The noble Lord is absolutely right to say that the Chinese should play a more responsible role.

On his first point, while I am not personally a great advocate of it, international capitalism is all about open tendering and those who bid the most money winning the contract. I have to make the point again that this is not a short-term contract. In the longer term, our intention is to ensure that there is a situation in Afghanistan where the Government can rule effectively and provide whatever protection is required for their industries and for their own people. That is what should guide us, and we should not be diverted. However, I take the point that the Chinese could play a much bigger and more responsible part. We would welcome that.

My Lords, the Minister has mentioned that our Government are making funds available, at least in part, to a suitable agency of the Afghanistan Government. There are large question marks over whether that is an efficient way of operating. The wider neighbourhood of that part of the world contains the world’s largest democracy next door, which has huge experience of gemstones, mining and so on. Are the Government considering working with the Indian Government on this issue? Would that not be a better way forward than just an isolated, incidental expenditure on a small scale, which is albeit laudable, through the agency of a very corrupt Government indeed?

My Lords, we are in constant communication with our coalition colleagues and the countries in the region. The noble Baroness makes an important point in saying that India has a major interest in the gemstone industry both in its own sub-continent and beyond. I am sure that if there is assistance and advice that could be given, we would welcome Indian assistance in that direction. However, in the end it has to be for the Afghan Government and the Afghan people to determine their own future. All we seek to do is not to colonise the country; ironically, although we may have diamonds in Russian and British crowns, that is not what we are about in 2010. We are concerned with helping the Afghan people rid themselves of a form of insurgency and govern themselves. Those are the objectives that we should retain as our central focus.

My Lords, does the Minister accept that the problem is not the small-scale mining of gemstones, but that of getting them out of the country and on to the international market? I understand that this is done on foot across the most dangerous frontier in the world; namely, that between Afghanistan and Pakistan. Can the noble Lord tell us what is being done to add to the security of that border?

The question of the security of the border is much broader than one of people smuggling gemstones in small quantities, which must be the case by definition if they are being transported on foot. What we have is a much greater military and civil project, which is to assist the Government in defending themselves against incursions by people from neighbouring states who support the Taliban and al-Qaeda. That is in our own British interests as well as in the interests of the people concerned. I have no particular knowledge on the narrower point about gemstones, but I shall certainly look into it and write to the noble Lord.