25.01.2021

Afghanistan’s Integration into the Belt and Road Initiative

In a new series of policy briefs, our YLFees discuss current political challenges and recommendations

Afghanistan struggles to integrate itself into the Belt and Road Initiative. Evidence suggests that the lack of proper internal infrastructure and lack of cooperation between Afghanistan and China's investors are the barriers the country faces. Unless the internal infrastructure – mainly railroads – is constructed, Afghanistan will not turn into a transit and trade hub and export its products to foreign markets. The government should also collaborate with China's investors in Afghanistan to resume Mes Aynak and Amu Darya Basin's work, which are currently stalled. This study examines four policy alternatives: first, securing funds from international banks; second, controlling corruption; third, the presence of a monitoring and evaluation committee; and fourth, hiring local employees.

In 2013, Chinese President Xi Jinping visited Kazakhstan and Indonesia, where he announced the Silk Road Economic Road and the 21st Century Maritime Silk Road – collectively called the One Belt and One Road Initiative. It eventually became the Belt and Road Initiative (BRI). BRI is an infrastructure project that stretches from East Asia to Europe.  According to the Belt and Road Initiative, "the five major goals of BRI are policy coordination, facilities connectivity, unimpeded trade, financial integration, and people to people bonds." In 2017, the first Belt and Road Initiative Forum was held in Beijing, China, where more than 100 representatives from different countries, including Afghanistan, participated. Since the inception of BRI, Afghanistan has shown interest and has welcomed the project.

As Afghanistan has already expressed interest in joining BRI, most of the country's initiatives align with the project's aims. Former Finance Minister Eklil Hakimi stated, "We have already aligned most of our domestic plans according to OBOR initiative." And during a seminar held on BRI in the Ministry of Foreign Affairs of Afghanistan, Hekmat Khalil Karzai, the Deputy of Foreign Minister, stated that "OBOR is a crucial step towards regional cooperation, regional and inter-regional connectivity." Besides, Afghanistan has shown interest in joining the China-Pakistan Economic Corridor (CPEC), which is part of BRI and stretches to the Indian Ocean coast through Pakistan. In 2016, in an interview with DownNews, Omar Zakhilwal, Afghanistan's ambassador to Pakistan, extended Afghanistan's support for CPEC. "The CPEC was a great project that was equally relevant to Afghanistan like Pakistan, and anything that will be good for Pakistan will be good for the entire region. He has said that Afghanistan's people were 'thirsty for development' and by becoming a part of the project, Afghanistan can recover the damages it suffered during the decades-long war." Both Pakistan and China seem open to this possibility.

Scope of the Problem

First, the lack of proper internal infrastructure – mainly railroads – remains one of the main constraints in facilitating transit and trade. Without the ability to transit goods, Afghanistan will not be able to integrate itself into the BRI. Firm-level surveys by the World Bank suggest that domestic transportation is one of the main causes of export interruptions: "It took Afghan exporters 86 days on average to ship their goods in 2014, compared to 33 days on average for South Asia." The World Bank's Enterprise Surveys suggest that "nearly half of surveyed firms see transport as a major or severe obstacle to export." It demonstrates that Afghanistan still lacks the essential means to transport its products and resources abroad and facilitate the transit of goods between regional countries.

Afghanistan has been working on two major railroad projects: the Five Nations Railway Corridor (FNRC) and the Afghanistan National Railway Plan (ANRP). The agreement on building the FNRC was signed in December 2014 in Dushanbe, Tajikistan. The railway starts from China, passes through Kyrgyzstan, Tajikistan, Afghanistan, and ends in Iran, covering 2,100 kilometres. Over one thousand kilometres travel through Afghanistan's provinces of Herat, Badqhis, Faryab, Jawzjan, Balkh, and Kunduz. Based on the initial agreement, as discussed by Mantraya, "the railway line would have been laid in five years, i.e., by the end of 2019. By the middle of 2016, all participating countries should have conducted technical and economic feasibility studies on this project so that practical work could start on this project." But, as of February 2018, according to a TOLOnews report: "Afghanistan National Railway Authority (ANRA) announced the technical and economic survey for the establishment of the multinational railway project is about 50 per cent complete." This explains that Afghanistan is behind its initial plan.

Also, the Afghanistan National Railway Plan (ANRP) was developed by the U.S. Central Command (USCENTCOM) as a foundation for economic growth and was provided to the ANRA in August 2013. The ANRP is comprised of four corridors: west – north – northeast; west – south – southeast; north-south; and central. It is a largescale initiative to change Afghanistan from an aid-dependent economy to a self-sufficient economy through transit and trade. Since the inception of both projects, according to the ANRA, only the Hairatan – Mazar and the Aqhina – Torghundi railway projects are completed, which cumulatively amounts to 120 km.

Second, though China has invested in different sectors in Afghanistan, these investments' outcomes have remained insignificant. The country has initiated several major projects in Afghanistan's four key sectors: mining, transportation infrastructure, agriculture, water, and electricity. These projects make China the biggest investor in Afghanistan. Research focused on China's Afghanistan Policy in the Observer Research Foundation (ORF)states, "Today China is the biggest foreign investor in Afghanistan, having acquired the US$4.4 billion extraction contract to develop the Mes Aynak copper field located in the province of Logar, winning the bid for oil exploration in the Amu Darya basin in northern Afghanistan, and developing extensive railway infrastructure in the country."

In November 2007, a 30-year lease worth $3B was granted to the China Metallurgical Group Corporation (MCC) and Jiangxi Copper, Ltd, (JCL) to develop a site, extract and smelt copper in the Mes Aynak Copper Mine. "The Afghan government hoped to generate $1B in revenue from its mining sector by 2017, with the Mes Aynak development helping lead the way with $350M in revenue. A little more than ten years later, exactly zero copper has been minded by China at Mes Aynak. The 2017 revenue reported by the Ministry of Mines and Petroleum amounted only $86M, 8.6% of its target." The contract was stalled. No agreement has been reached yet. There have been many challenges, including security. Mohsin Amin, former energy advisor to Afghanistan's government, states that, "deteriorating security has been reported to be one of the causes for the prolonged delay in opening the mine."

In addition, China's National Petroleum Cooperation (CNPC) and Watan Oil and Gas – an Afghan Oil Company – were contracted to extract the oil in the Amu Darya Basin in 2012. According to a report by TOLOnews, almost a year after the contract, Amu Darya Basin oil extraction was halted. It is stated that "China National Petroleum Corporation (CNPC), a Chinese oil company with major investments in Afghanistan, has reportedly put the brakes on its massive drilling operation in the Amu Darya basin of Afghanistan after disagreements emerged over the exact conditions set for the transportation of oil out of the country." This asserts that the agreements signed between Afghanistan and China since 2007 are aligned with the BRI aims. The problems which arise in the process of implementation should be considered to cooperate fully.

Policy Alternatives

This analysis examines four policy alternatives to facilitate Afghanistan's integration into the BRI. First, Afghanistan should invest more in its internal infrastructure – mainly railroads. Afghanistan already has plans and designs for the construction of the FNRC and ANRP. It should seek funding from the Asian Development Bank, World Bank, and Asian Infrastructure and Investment Bank to build the railroads. As discussed by Nivedita Jayaram, "20 per cent of South Asia's western trade were transported through roads; goods worth 100 billion dollars would pass through Afghanistan. Afghanistan's improved connectivity with the regional economy through trade and transit is estimated to bring earnings worth USD 606 million to the country." Considering that railroads will be a source of sustainable revenue for the nation, securing its costs from international banks will be the best option for the government. If utilized, Afghanistan could turn into a hub of transit and trade in the region and can be used to connect CPEC to central and west Asia as well.

To get realized effectively, the government must include the funding partners when making policies for a railroad to use their experiences of similar projects and increase accountability from their sides. Besides, corruption has been choking development in Afghanistan. Therefore, the government should confirm the transparency of the process. According to Transparency International, Afghanistan scores 16 out of 100. This indicates that Afghanistan is one of the most corrupted countries in the world. The sources of corruption should be identified and reduced to increase the creditability necessary for the work's progress.

Second, Afghanistan's government and the Chinese companies investing in Afghanistan's mining sector should communicate to resume the halted projects' work. While signing the contracts, both parties should commit to the agreed articles, and the possibility of implementing each article should be measured. Mohsin Amin, a former energy advisor to the Afghan government, discusses why Mes Aynak has been stalled and states that "the contract also foresees the construction of a 400 MW coal-fired power plant building a railway from Hairtan to Torkham dry ports. However, little has been done on the ground, and MJAM has reportedly asked for substantial modifications to the contract. The 400 MW, coal-fired power plant option, has been cancelled by MJAM, stating that their survey found that insufficient coal resources were available in Ishpushta. MJAM also argued that phosphate, which is an essential component for smelting and processing (neutralizing the sulfuric acid) copper, is not readily available inside Afghanistan." While these elements needed to be researched and addressed initially to avoid breaks and inconveniences in the implementation phase, both sides failed to do so.

A monitoring and evaluation committee consisting of members from both sides should observe the process closely – government and the contractor. Now, most of the contractors do not report to the government. On the other hand, the government does not cooperate with the companies to assist them in the construction process. 

Also, companies should hire their employees from local communities. Locals have a better knowledge of the environment and understand efficient ways of interacting with other community members. This will ease the process of implementing the project, secure income to the local community, and ensure the area's security. Besides, having employees who understand the region's language is an asset since they understand how to use the resources available.

Conclusion

The government of Afghanistan has already expressed its interest in joining the BRI. Most of the cooperation initiatives taken by both sides align with the aims of the project. But to fully integrate into the BRI: first, Afghanistan should prioritize constructing internal infrastructure; second, the country should resume the halted projects signed between the governments of Afghanistan and China. Afghanistan has plans to build two mega railroads, the FNRC and the ANRP, but the country is behind in its initial construction plan. The total rail length for the railroads in Afghanistan cumulatively only amounts to 120 km. China has invested in different sectors in Afghanistan. The Mes Aynak Copper Mine and Amu Darya Basin are two of the most significant projects, but neither has been completed.

 

Policy Recommendations

The government should consider the following policies to integrate itself into the BRI more easily:

  • The Afghan government should seek funding from the International Banks to complete the railroad projects, and funding partners should be included when making the polices. They will be able to share their experience of similar projects and jointly, with the government's inputs, make comprehensive polices.
  • When building railroads, the government should ensure the funding partners about the transparency of the project. Corruption should be taken under control through systematic reporting. Also, transparency should be the priority upon agreeing to fund the project. Otherwise, a significant outcome will not be achieved. 
  • A monitoring and evaluation committee should be included from the government of Afghanistan and the contractor's side.
  • Local employees should be hired since they have a better understanding of the people, culture, and the environment. Besides helping the company, it will become a sustainable source of income for locals. 

Fatima Airan is a member of the 2020/21 Young Leaders Forum.

The views expressed in this publication are those of the author and not necessarily those of Friedrich-Ebert-Stiftung.

Friedrich-Ebert-Stiftung
Afghanistan

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Afghanistan

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