By Zahid Omarzai 

Afghanistan is a war-torn country which has witnessed over three decades of war and political turmoil. The economy, as everything else, dreadfully deteriorated over the course of war. The elected administration after the fall of Taliban regime in 2001 and subsequent administrations required enormous revenues to help build the country’s economy from scratch. The stated administrations have heavily relied on grants and sovereign external borrowing to provide essential services in the country. Grants and external borrowing are not readily available because financing authorities always require conditions precedent to provision of grants and loans. Therefore, Foreign Direct Investment (FDI) is perceived to be a top priority for developing countries such as Afghanistan to mobilize revenue and stabilize economy. Resources in different forms available in Afghanistan can create enormous revenue which can be mobilized and utilized to a significant extent by FDI. 

Afghanistan has a rich mining sector which can be perceived as the main investment attraction given its value. The United States Geological Survey (USGS), through its extensive scientific research of minerals, concluded that Afghanistan may hold significant minerals both from a financial perspective and the importance of their utilization by relevant industries. The research illustrates that Afghanistan holds 60 million metric tons of copper, 2.2 billion tons of iron ore, 1.4 million tons of rare earth elements (REEs) such as lanthanum, cerium, neodymium, and veins of aluminium, gold, silver, zinc, mercury, and lithium. The research further informs that the initial analysis of Pentagon demonstrates that at one location in Ghazni province showed the potential for lithium deposits as large as those of Bolivia, which has the world’s largest known lithium reserves. The USGS estimates the Khanneshin deposits in Helmand province will yield 1.1 to 1.4 million metric tons of REEs. 

In the words of the World Bank, “only extractive industries can provide sufficient government revenues and exports to offset expected declines in aid.” but, the lack of expertise to extract and utilize the mines remain the main reason, together with poor security and instable political conditions, as to why Afghanistan has been unable to mobilize the mines into revenue. FDI can be of a significant use to help overcome the mentioned challenge. FDI is considered vital in, inter alia, technological progress, productivity improvement and ultimately economic growth. One of the reasons FDI can help fill the gap of expertise shortage is because it has proven to have a prominent role in transferring the know-how of advanced technologies. 

In summary, it can be established that Afghanistan rules over trillions of dollars of untapped treasures despite being heavily dependent on foreign aid. The international community and institutions have not yet reached a consensus on the future of Afghanistan considering the dramatic collapse of Afghan government following the complete take-over of the country by the Taliban in August 2021. It is undeniably true that the world cannot always remain silent on Afghanistan, therefore, an environment conducive to FDI in what can be referred to as the “new Afghanistan” should be considered as a priority.

The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench


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