Sunday, April 18, 2010

China “Helps” Afghanistan

China, who has never shown much interest in the area of Asia including Afghanistan and Pakistan, has begun to realize that these countries have some things to offer besides Islamic rhetoric. Afghanistan for example, has the worlds largest Copper mine. The Chinese have just announced a deal with President Karzai, our good buddy, to invest 3.5 billion dollars in the Ayak Copper fields.

It does not stop there, other Chinese investments are already underway. The Chinese have contracted with Afghan Ministry of Communications to implement digital telephone switches, providing roughly 200,000 subscriber lines. China has also taken part in the Parwan irrigation project, restoring water supply in Parwar province. They are also active in the reconstruction of public hospitals in Kabul and Kandahar. On top of that the EU has hired Chinese firms for various construction projects in Afghanistan, including road restoration activities.

This Chinese investment is the far largest in Afghanistan’s history and involves not only mining but also the construction of a $500 million electrical plant and a railway from Tajikistan to Pakistan to support exploration. The mine will be in full operation in around six years. It is estimated to employ 10,000 Afghans. $400 million of royalties will go to the Afghan government (Karzai) yearly – more than half of the present yearly state budget. The mine is also estimated to generate millions of dollars in taxes and $200 million in annual shareholder revenues for the Chinese.

You ask why the Americans did not see an investment opportunity like this right under their noses. We did. The Chinese government out bid American and European companies for this contract by almost double and are still in a position to see excellent returns on their investment. In other words, the entrepreneurial countries were out 'entrepreneur-ed'.

A great deal has been said recently about the lack of export potential for Afghanistan and how it is such a poor country. The facts seem to be rapidly changing. Afghanistan’s oil and natural gas resources have recently been upgraded by a factor of 3 times that originally thought. They have large iron ore deposits between Herat and the Panjsher Valley, and gold reserves in the northern provinces of Badakshan, Takhar, and Ghazni. Major copper fields also exist in Jawkhar, Darband, and in above mentioned Aynak, located around 30 km southeast of Kabul. All of these resource-rich areas are also situated in the relatively stable northern and northwestern regions.

The Chinese are smart investors and have ambitions far beyond the cards they are showing at present. At the moment we are poised to help the Afghan people and to check the spread of Chinese influence in this region. Unfortunately, we seem blind to the opportunity and slow to take advantage of our strategic advantage. It is time our government woke up to what is happening. Moving Afghanistan from it’s traditional opium based economy would not be nearly as hard as the administration seems determined to make us think. Why is that?

Today's Fun Picture

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