Afghanistan On Path To A Transparent Extractive Sector

By Mark Robinson – EITI - Executive Director

 

Afghanistan’s citizens have a fundamental right to know how the country’s extractive resources are developed and managed. President Ashraf Ghani and the Extractive Industries Transparency Initiative (EITI) are aligned in this vision for an accountable resources sector. Afghanistan’s recent assessment against the EITI Standard – the global benchmark for transparency in mining, oil and gas – shows that the country is steadily translating this ambition into reality.

 

Yet progress with the EITI does not represent a “clean bill of health” for the governance of the extractive industries. Rather, it shows that the EITI is performing its function of examining extractive industry governance, with the EITI Standard as a reference point. Its assessment highlights areas for reform and outlines steps to ensure that citizens have oversight of how the sector is governed.

Shining light to support reforms

Since it began implementing the EITI in 2010, Afghanistan has made efforts to improve transparency in areas under the government’s control. Over the past two years, the country has made significant advances. The EITI’s global quality assurance mechanism – Validation – has recognised this progress, thereby lifting Afghanistan’s suspension imposed in January 2019.

EITI implementation has led to important gains both in the government’s disclosures and in extractive sector reforms. The Ministry of Mines and Petroleum’s (MOMP) has started publishing more timely information on mining, oil and gas activities and government revenues through its Transparency Portal. A first-ever audit has shed light on two state-owned enterprises (SOEs) – Afghan Gas Enterprise and North Coal Enterprise – that contributed nearly two thirds of the government’s extractive revenue between 2008 and 2017.

 

The Afghan government has undertaken a number of sector reforms. In 2018, it introduced a new law requiring the disclosure of beneficial owners of mining, oil and gas companies, and started publishing information on the real ownership of companies in the sector. The Ministry of Finance started requiring tax on individual extractive projects, thereby strengthening the government’s ability to collect the right amount of tax from investors. The MOMP has rolled out a more systematic way for tracking property rights in the sector, thanks to a robust cadastre system and to the publication of all mining, oil and gas contracts.

Not the end of the road

EITI reporting highlighted the need for these reforms, demonstrating that it is a tool for governance, not public relations. Countries that implement the EITI do not achieve the highest mark by claiming that all is well. Afghanistan’s latest Validation has highlighted areas where more work is needed, such as providing data that can be used to track the ownership and terms of licenses, revenues collected from the sector, taxes and royalties paid and other information that is in the public interest.

While Validation provides a snapshot of the extractive industries at a particular time, it is critical for Afghanistan to build systems that deliver up-to-date, publicly accessible information. Public-sector audits, including of state-owned enterprises, should be performed regularly. Payments that SOEs make on behalf of the state (for example, fossil fuel subsidies) should be as transparent as the government’s budgeted spending. The data disclosed through the Transparency Portal should be reviewed to ensure that it is reliable and complete. Beneficial ownership transparency should be strengthened to prevent public officials from holding mining rights through opaque structures. Industry associations – such as the Afghanistan Chamber of Commerce and Industries (ACCI) and the Afghanistan Chamber of Mines and Industries (ACMI) – should meet the same level and standard of transparency in their regular disclosures as the government.

Yet transparency alone is not enough to curb corruption and ensure good governance in the extractive industries. The data and recommendations from EITI reporting need to be proactively disseminated, analysed and discussed to ensure that the national debate on Afghanistan’s crucial extractive industries is based on facts. The EITI can provide a platform for dialogue on issues of national importance such as widespread illicit mining, building on existing data from development partners and the MOMP.

Despite broader security challenges, there needs to be a safe environment for all stakeholders to openly debate the strengths and weaknesses of extractive industry governance. Civil society organisations need support to be able to use extractive data in their research and advocacy, so that they can strengthen their role as watchdogs. Anyone who wants to contribute to the debate on how Afghanistan’s resources are managed should be welcome to participate in the EITI process.

 

Afghanistan is currently pursuing national peace discussions and will renew its partnership with the international community at the 2020 Afghanistan Conference later this month. The time is ripe for all stakeholders in Afghanistan to consider if the objectives for EITI implementation support these broader national priorities.