DEVELOPMENT, INVESTMENT AND CORUPTION

As NATO’s commitment to Afghanistan winds down, the Westminster Government is aiming to fund a £10 million pound programme to help Afghanistan exploit its huge natural resources. This may sound too many people like a lot of money but considering that estimates of what lies underground in Afghanistan range from some $1 – 3 trillion dollars (US) worth of gold, gems, iron ore, and oil and gas. Now this has little to do with largess, no doubt hoping for a percentage, David Cameron’s three-year funding programme, to support the Afghan Ministry of Mines was launched at an event at Downing Street (March 6th).

UK Mining Aid in Afghanistan: Throwing Good Money After Bad?

The announcement came as Mr Cameron hosted dozens of UK investors and mining contractors at Downing Street.  He said the UK had already played "a huge and honourable role" in stabilising Afghanistan, but that the country needed "prosperity, growth, jobs, investment and wealth". British mining companies welcomed the announcement. Cameron’s decision could be described as courageous, especially with the claims that the award of mining contracts in Afghanistan after the fall of the Taliban were directly affected by corruption.

Transparency International in 2012 Corruption Index (CPI) currently ranks Afghanistan as one of the (joint) most corrupt country with North Korea and Somalia. President Hamid Karzai in the United State for the NATO Summit in Chicago (in 2012) was asked by CNN’s Wolf Blitzer about this rampant corruption issue in Afghanistan. As usual, President Karzai’s answer was “it is the contractual mechanism that the US applies in Afghanistan” that encourages bribery, fraud, and corruption.

The Afghan President has always blamed the west for the loss of billions of aid dollars and the rise of corruption in Afghanistan. The reality is less simple as on a daily basis, ordinary Afghans are less concerned about the kinds of bribery that is (and does) occur when the US and Western  development agencies hand out big development contracts. Ordinary Afghans are more infuriated by the kinds of bribes that they often have to give to get what they are legally entitled to via “harassment bribes.”

Basically harassment bribes are like when a retired Afghan has to pay some cash to the pension officer to receive his retirement check. Or, when a young man or woman freshly graduated from college has to get his or her paperwork done in order to become a teacher. To accomplish this the prospective teacher will be asked to pay a hefty bribe. Or your Tazkira or national ID card is held up until you pay some cash to the officer in charge. These are all simple illustration of harassment bribes.

Harassment bribery is widespread in Afghanistan, and it plays a large role in breeding inefficiency and has a profoundly destructive effect on civil society. While President Karzai consistently wags the finger at the West for widespread corruption in Afghanistan, yet his administration has failed to take responsibility for banishing bribery on the lower level. The West has for a quiet life has looked the other way as local low level corruption tends to be written off as a fact of life something that indirectly may feed support for the Taliban.

Now it may be a question of scale, the World Bank has regularly appealed for future Afghan mining concessions to be better regulated and more transparent, and the UK’s new financial support is aimed at improving that process. Cameron’s theory is that by improving Afghan technical competence, and ensuring a transparent process, should help to secure that along with the concerns that vast investments made by companies from China and India have reduced  opportunities for others i.e. The UK.

When it comes to mining contracts it certainly appears to be a matter of scale. The award of a 30-year contract to a Chinese consortium to exploit the Mes Aynak copper mine in Logar province is one of the deals that has come in for particular criticism. The exact details of 2007 deal with China Metallurgical Group Corporation have never been made public, something that continues to fuel rumours of bribery and kick-backs along with serious concerns about the potentially massive environmental and cultural impact of the mining project on local communities and local people.

Some years ago, the Taliban blew up Afghanistan's ancient Buddha's of Bamiyan, provoking a degree of international outrage amongst the concerned and amongst the chattering classes. At the time the Taliban's brutal treatment of women and religious minorities oddly enough provoked less public outrage - no doubt because pipeline route deals (to get the oil out of Central Asia) were in the offing. Now, the country's rich archaeological heritage is facing a new and different threat - that of mineral exploitation and development of resources.

The Peoples Republic of China (currently busy sourcing minerals and foodstuffs from around the world to feed its economy and its people) has its sights on another ancient Buddhist site in pursuit of copper. Mes Aynak ironically is an ex al-Qaeda training camp and home to a 1,400 years old Buddhist monastery. This site is relatively intact with walls, corridors, stupas brightly painted red Buddha's. The monks originally settled here because there was copper in the ground; part of a Buddhist kingdom and a Silk Road way-station, other things carried Buddhism from India to Tibet, and into China.

The China Metallurgical Group (MGC) has a 30-year lease to mine copper to develop a copper mine. The mine alone could give Afghanistan $1.2 billion (£755 million) per year in revenue along with much needed jobs. Chinese miners have set up camp and special armed security guards patrol miles of fencing around the site. Beneath the site lies the world's second-largest untapped copper reserve, and the Chinese have bought the mineral rights to the entire area.

The archaeological site was discovered during excavation of the site for MGC - archaeologists have three years to salvage the site, which could easily take 10 years to properly excavate. Afghan archaeologists are aware of what has been lost in thirty years of war, and have deep concerns that a lot of their cultural heritage has been destroyed, damaged and looted. Their concerns stretch well beyond Afghanistan as they perceive the artefact's as not just belong to their country, but as human treasure which belongs to all of us.

Overwhelmed by both large and small scale corruption what can an endemically corrupt Afghan government do to discourage bribe givers and takers (at all levels of government) even if it wanted to? Endemic corruption aside the security situation is the key, with NATO leaving and the Taliban waiting in the wings things don’t look good.

Yet if things stabilise then there may be new rush to exploit Afghan mining opportunities, but, at what cost to the Afghans themselves, who have seen what has happened in other post-conflict countries. Elsewhere in the world, in Africa and elsewhere, large deposits of mineral resources have often proved to be a curse, often enriching the few (and the mining companies) rather than benefiting local people who have often lost out.

PAYING THE PRICE FOR EUROVISION?

Human rights groups around the world are putting pressure on the organisers of the Eurovision Song Contest to pressurise Azerbaijan, this year's host country, over its harsh treatment of political dissenters and ordinary citizens who are being evicted from their homes in Baku as the city gets an oil wealth funded pre Eurovision song contest makeover. Azeri authorities are imprisoning opposition figures and beating up journalists and they are now attacking (with only weeks until the competition) local musicians who have spoken out against the repressive Azeri president have become the latest target for repression and harassment. Last years parliamentary elections (held on 7th November) were described by the OSCE as “peaceful” but “not sufficient to constitute meaningful progress in the democratic development of the country.”



Despite the oil wealth, Azerbaijan is a deeply troubled country, with a troubled past. The flawed election took place against a backdrop of skirmishes along Azerbaijan and Armenia's ceasefire line and an increase in the defence budgets. Little or no progress has been made in the negotiations to end the Nagorno-Karabakh conflict (under the aegis of the OSCE Minsk Group). The country has around 600,000 people internally displaced by the war, who continue to suffer discriminatory registration requirements and inadequate housing. What price are the people of Baku playing for the Eurovision contest?

A LITRE OF THE BLACK STUFF...

Stars: Red = Gas, Green = Oil

Ever since I was a child there has been off and on talk about exploiting the potential oil and gas in the Celtic Sea and the western approaches. Work has been quietly carrying on to explore and exploit the resources in Irish territorial waters for many years. Now what drives oil exploration is commercial viability, Esso first discovered oil of Ireland in the 1970s, but at the time it was perceived not to be a realistic commercial prospect, as oil prices were pretty low at the time. As the oil price has rocketed from around $10 to $15 a barrel to around $125 a barrel and demand has risen this is now longer the case.

The search for the ‘black gold’ off Ireland may now be about to deliver some tangible results. Now an Irish company has found the Irish Republic's first viable oil well. The oil exploration company Providence Resources plc has announced that it has made the discovery some 70km off the Cork coast. The exploratory Barryroe oil well has delivered double the amount of oil needed for future full-scale extraction to make commercial sense.

The exploratory well yield comes in at almost 4,000 barrels of oil a day. Providence Resources Plc incidentally also has drilling permits in Northern Ireland. The company is now seeking international investors to help it exploit the well and the surrounding field, which the firm hopes will contain many further viable wells.

At the moment the bulk of Ireland’s energy comes from imported oil. Oil accounts for over 60% of Ireland’s overall energy consumption, significantly above the EU average. As Ireland’s economy grew, so did their reliance on imported oil. Ireland is also heavily reliant on gas and Ireland’s consumption of gas is increasing rapidly. There is now a major international shift from oil to gas as a source for power generation.

With oil supplies expected to decline in the years to come and growing efforts to reduce the emissions of greenhouse gases, many see gas as the primary energy source for the 21st century. In Ireland gas is extensively used for heating and more than 60%of our electricity is also generated by power plants fuelled by natural gas. No wonder there is a degree of excitement in Ireland at this discovery.

TWADDLE...

David Cameron

It would be far easy to dismiss David Cameron's emotive intervention into the Scottish referendum campaign as mere twaddle, designed to bully, frighten and patronise the Scottish people into voting No. It would be easy to dismiss him (and the Westminster Tories and their former New Labour and Lib Dem Unionist little helpers) an irrelevance, especially after the hammering they suffered in the Scottish parliamentary elections in 2011). Personally, although the independence of Scotland is not my direct concern, I would read Cameron's remarks as a warning shot about the pitch the Unionists are going to make.

Cameron's first problem is that he actually believes it, the Union he is waffling on about is long dead, the state is ceasing to serve or deliver for large numbers of people in Wales, as far as I can seen Scotland politics is now fundamentally different as are Scotland priorities and perhaps the Scottish peoples perception of their place in Europe and a wider world. The harsh reality is that behind Cameron's sentimental pitch lies a desperate need for Scotland's oil - the Conservatives wasted millions (if not billions) in the 1980's funding tax cuts for the rich and subsidising the disposal of state assets to their friends in the City.

The pre Thatcher Labour Government did nothing to establish a wealth fund in which to store future anticipated tax revenues from the North Sea (as was the case in Norway and may soon be the case in Scotland). The Conservatives under Thatcher and Major just blew the money looking after their own vested interests, New Labour under Blair and Brown did nothing to change the situation and opportunities were wasted. Given a logical non emotive rational debate, freely reported in the media (and here I include the BBC which no doubt will struggle to hide its bias)then we cold be in for an interesting debate.

Cameron's second problem is that we no longer live in the 17th and 18th centuries. The once perceived political necessities of curbing the divine right of kings, protecting Imperial trade, controlling Ireland and Scotland for historic strategic reasons and conceding the City (and its interests) a free hand in world trade are all history. The Empire is long gone, and any real perception (outside of the pages of the Daily Telegraph, Daily Mail, Express and the Sun and some parts of the Conservative Party and UKIP) that the UK remains a real power and influence in the world died quietly at Suez in 1956.

In Cameron's remarks I do detect a combination of arrogance, ignorance and  a lack of understanding of how the Union has actually worked and a basic understanding of how states actually work. Over time, peoples have combined, been conquered, formed, reformed, participated in and benefited from the existence of states, many of whom have been multi ethnic in nature. During the same period peoples have left failing states, established new states and re-established old states. It's actually part of the Human condition that's what we do.

The Union (as is) is no longer working, it is not delivering basic economic opportunities to people as individuals or as communities across significant parts of Wales (and Scotland). So simply appealing to emotive sentiment and arose tinted vision of what is effectively a long dead vision of the past won't do and just won't work. None of us can live of nostalgia, it won't butter any bread let alone buy any. I think at we are in for an interesting few years as the debate on Scotland's future develops. Personally I think that the Scottish Government should call in international observers for the referendum to ensure that poll is a free and fair vote and any Unionist skulduggery or interference in the democratic process can be avoided.

SAME OLD, SAME OLD...

Some of people may think that it was only a matter of time before the Conservatives reverted to type. So news that an oil firm whose chief executive has bankrolled the Conservatives has won exclusive rights to trade with Libyan rebels during the conflict, after secret talks which involved the British Government should come as no real surprise. Neither should we be surprised that the deal may have been organised by a former oil trader turned junior conservative minister, who happens to have close business links to the oil firm and was previously a director of one of its subsidiaries. Also probably best not to mention what the Tories (Sorry Con Dems) are planning to do to the planning process in England then or the news that David (“Call me the bankers best mate”) Cameron plans to quietly drop any banking reforms until after 2019. Perhaps it's best not to tell Vince... 

CRISIS OR OPPORTUNITY?

Here in Wales, we have over the years suffered from the loss of jobs overseas, as unscrupulous employers have (chasing higher profits by squeezing wages) moved their business overseas in search of cheaper labour leaving some of our more vulnerable communities up against it after years of loyal service. One thing that may change this unhappy state of affairs is the fact that as oil prices rise distance costs money.

This simple fact could have a significant impact on our country's economy as increased fuel costs will impact on company profits and indirectly provide an opportunity to revitalise our economy. Trade patterns change constantly, they will be altered by increased transportation costs, which will bite deeply into profits made by finding cheap labour in distant lands.

It is worth sparing some thought as to how we got to where we are; between 1960 and 1973 the percentage of exports as a share of world GDP rose by over 50%. This can be partially put down to to a combination of relatively cheap fuel (oil was around $14 dollars a barrel during this period) and an aggressive effort by the West to reduce trade barriers around the world.

Even factoring the effects of the 1973 oil crisis and the (with retrospect) the somewhat heated final lingering spasm of the cold war in the late 1970's/1980's there was a spectacular growth in world trade and further removal of tariff barriers between 1987 and 2002, when the average price of oil remained around $25 dollars a barrel.

It is worth noting (largely unnoticed in Europe where where we had our our problems) that the oil crisis of 1973/74 increased five fold the cost of shipping goods across the Atlantic and the Pacific and led to a 6% drop in US non fuel related imports and a corresponding growth in imports from Latin America and the Caribbean. I mention this because we have all lived with the rise in fuel prices over the last few years, there has also been a corresponding rise in shipping costs, something that will make manufacturing in distant lands increasingly uneconomic.

Over the last twenty years container ships have got bigger, they spend more time at sea than in port (85% in 2009 as compared with 55% some 15 years previously). The average container ship has also grown considerably larger along with the amount of goods carried by container has also grown from 35% to 75%. They have also become considerably faster something that has led to greater fuel consumption, which when combined with rising fuel prices begins to eat into profit margins of companies and organisations that relocated their manufacturing enterprises to distant lands.

Any economist will tell you that there is a direct link between transport costs and the price of the goods that we buy. The increase in oil prices between 2002 and 2009 roughly from £30 dollars a barrel to over $100 dollars a barrel increased the shipping companies costs and reduced the profits of their customers. The daily fuel bill for an average cargo ship increased from $9,500 dollars to $32,000 dollars and import costs (for the USA) rose on a standard 40 foot container travelling across the Pacific from China to the USA from $455 dollars to $1,100 dollars (between January 2007 and the end of 2008).

Despite a relative drop in fuel prices since the recession triggered by the World banking crisis we face a result of the consequences of peak oil in the near future a radical change in the way the world trades. There is a distinct possibility that it may become cheaper to manufacture goods closer to the market place rather than in more distant lands - the future energy and food crisis's aside for the moment - the real question that needs to be asked and answered is how we in Wales can take advantage of this situation and reboot our manufacturing economy in a sustainable way?

INGOTS OR ARCHAEOLOGY?

Mes Aynak

In all honest most people tend initially not to associate Afghanistan and Archaeology,but, despite the savage war against the Soviets, the brutal civil wars and the war against terror Afghanistan (a literal crossroads of the ancient world) is awash with rich and largely UN-excavated (if sadly occasionally well pillaged and looted) archaeological sites.

Some years ago, the Taliban blew up Afghanistan's ancient Buddha's of Bamiyan, provoking a degree of international outrage amongst the concerned and amongst the chattering classes. At the time the Taliban's brutal treatment of women and religious minorities oddly enough provoked less public outrage - no doubt because pipeline route deals (to get the oil out of Central Asia) were in the offing.

Now, the country's rich archaeological heritage is facing a new and different threat - that of mineral exploitation and development of resources. The Peoples Republic of China (which is busy sourcing minerals and foodstuffs from around the world to feed its economy and its people) has set its sights on another ancient Buddhist site in pursuit of copper.

The site in question is Mes Aynak lies, in Logar province, not far from Kabul. Formerly an al-Qaeda training camp, is also home to a a Buddhist monastery that is more than 1,400 years old. This site is relatively intact with walls, corridors, stupas brightly painted red Buddha's. The monks originally settled here because there was copper in the ground; it was part of a Buddhist kingdom. The site was a way-station on the Silk Road, which amongst other things carried Buddhism from India to Tibet, and into China.

Now the China Metallurgical Group (MGC) has been granted a 30-year lease to mine copper to develop a copper mine. The mine alone could give Afghanistan $1.2 billion (£755 million) per year in revenue along with much needed jobs. Chinese miners have set up camp. Special armed security guards patrol miles of fencing around the site.Beneath the site lies the world's second-largest untapped copper reserve, and the Chinese have bought the mineral rights to the entire area.

The archaeological site was discovered during excavation of the site for MGC - archaeologists have three years to salvage the site, which could easily take 10 years to properly excavate. Afghan archaeologists are well aware of what has been lost in thirty years of war, and deeply concerned that a lot of their cultural heritage has been destroyed, damaged and looted. Their concerns stretch beyond Afghanistan as they perceive the artefact's as not just belong to their country, but as human treasure which belongs to all of us.

The Afghans could with some luck and the rich mineral; deposits could prove a break form the past a decent revenue stream to enrich the country and its people, but, in Afghanistan and elsewhere in the world it's about balancing development with preserving (or at least properly excavating) our archaeological heritage for this and future generations.