Contacts: In Kabul: Abdul Raouf Zia (93) 702 80800 In Washington: Erik Nora (202) 458 4735 enora@worldbank.org WASHINGTON, June 20, 2006 ─ The World Bank today approved a US$30 million grant to assist the Government of Afghanistan effectively regulate the country’s mineral and hydrocarbon resources and foster private sector development in a transparent manner. Afghanistan’s mineral sector offers a source of economic growth, employment, and export earnings with abundant mineral resources that include base and precious metals, construction materials, gemstones, coal, oil, and natural gas. However, war and chronic neglect has led to plummeting production, unlicensed operations and smuggling, and energy resources remaining largely in the ground. Investment requirements are large and cannot be spearheaded by the public sector alone. Under the 2004 Afghan Constitution, minerals and other subterranean resources are the property of the State. The Sustainable Development of Natural Resources Project supports a number of measures to ensure competition, transparency, and adherence to international investment standards. In many countries this is a sector prone to corruption, and this project will help ensure the revenues from these valuable resources are available to the country as a whole and not captured through corrupt practices. It will also help attract and retain qualified local and international investors. “Good governance is absolutely essential to avoid misallocation of national resources that could lead to increased poverty, corruption, and renewed conflict,” said Alastair J. Mckechnie, World Bank Country Director for Afghanistan. “This project will build sector governance and transparency to ensure that the benefits from extractive industries are properly managed and benefit the Afghan people.” The Government’s strategy for developing natural resources in the coming five years is restructuring and building capacity of the Ministry of Mining as a policy-maker, regulator, and enabler of the private sector. It aims to increase efficiency and competitiveness of the industries under its supervision. To this end, the Ministry of Mining is contracting a transaction advisor to conduct an internationally competitive tender for the Aynak deposit, a world-class copper resource located immediately south of Kabul. Response is expected to be strong given broad interest already expressed by the mining sector on an array of mineral resources held by the government. “At present, Afghanistan is forgoing enormous economic growth opportunities,” said Jean Mazurelle, Country Manager for Afghanistan. “None of the state-owned mining enterprises is operating on a commercial basis. This new regulatory environment will enable private-sector-led investment, facilitate economic growth, and increase government revenues.” Some of the innovative approaches the government will use to manage the sector include the Extractive Industries Transparency Initiative – a set of principles that support improved governance through full publication and verification of company payments and government revenues from oil, gas and mining. In addition, an International Advisory Council will be established to assist the government in evaluating the strengths and benefits of proposed contracts for Afghanistan in developing its natural resources. “This project will accelerate commercialization of activities in the mining and hydrocarbons sectors,” said Craig Andrews, World Bank Lead Mining Specialist and task team leader for the project. “This will have far-reaching impact, especially for people living in rural areas who will benefit from new employment opportunities and participation in the formal economy.” The grant is from the International Development Association (IDA), the World Bank’s concessionary lending arm.
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