Following its second Validation, Afghanistan has made meaningful progress in implementing the EITI Standard. The country has improved its transparency of licenses and contracts, state-owned enterprises and quasi-fiscal expenditures. As a result, Afghanistan’s temporary suspension has been lifted.
Afghanistan’s President Ashraf Ghani noted the important role the EITI plays in the country. “Every citizen has the right to know who is developing the country’s natural resources and how the government is managing the revenues from these industries on their behalf,” he said. “The EITI is one of the tools that is helping us achieve this policy objective. It has been instrumental in supporting our institution-building efforts in a sector critical to the economic future of Afghanistan.”
Building transparent institutions and systems
Afghanistan’s government has embraced open data platforms, establishing online reporting systems to enhance transparency of extractive sector management and to address shortcomings identified in its first Validation. This has been achieved in an evolving political environment marked by presidential elections in 2019 and intra-Afghan peace negotiations in 2020. The World Bank underscored the EITI’s value in driving public finance management reforms in a context of fragility and violence.
In 2018, the Ministry of Mines and Petroleum (MOMP) launched a new Transparency Portal, providing information on licenses, fiscal terms, legal and beneficial ownership information, production data and non-tax company payments to government. Since then, the portal has become even more comprehensive.
Moving forward, the government will need to develop these systems further to ensure that data is reliable, accessible and useful to all. Building on the momentum of Afghanistan’s progress, the country was selected to participate in the EITI’s pilot programme on alternative approaches to reporting. This will enable Afghanistan’s multi-stakeholder group to evaluate the new reporting systems to ensure they are complete and reliable.
Taking action to improve accountability
State-owned enterprises (SOEs) are important players in Afghanistan’s extractive sector, accounting for nearly two thirds of government extractive revenues between 2008 and 2017. Two SOEs – Afghan Gas Enterprise and North Coal Enterprise – are strategic for the government’s plans to improve revenue generation from the sector.
In 2019, Afghanistan undertook the landmark achievement of auditing the two SOEs for the first time. This exercise highlighted gaps in the SOEs’ record-keeping and financial management, and was a necessary step in the government’s plans to corporatise the enterprises. Moving forward, the government will need to ensure auditing becomes regular practice, drawing on EITI support to follow-up on findings.
Afghanistan’s government has legislated for beneficial ownership information to be made public for mining, oil and gas licenses. The country began publishing ownership data on its Transparency Portal earlier this year. Yet more work needs to be done to ensure that all beneficial owners are publicly disclosed, including politically-exposed persons and owners who control companies through non-equity means.
Strengthening multi-stakeholder oversight
EITI Board Chair Helen Clark commented on the significance of Afghanistan’s recent progress. “Afghanistan has made concrete achievements in improving transparency despite challenging circumstances,” she said. “The priority should be to draw on this emerging transparency for policy-making in the sector. This is key to broader economic development efforts and ensuring that all citizens have an opportunity to engage in debate on the governance of the sector.”
Data from EITI reporting – spanning several legislative changes and wide commodity price fluctuations over the past decade – provides a key resource to support further research and analysis. But despite proactive dissemination efforts, including in provincial capitals, there is a lack of data use by diverse stakeholders.
Yet an initiative by Integrity Watch Afghanistan stands out. The civil society organisation is expanding its community-based monitoring programme to include extractive activities, empowering host communities to track the impacts of extractive projects in their areas. Stronger engagement in EITI implementation by government, industry and civil society could lead to more such innovations.
Afghanistan’s informal mining sector is one area where there is a high demand for data. While the government collects USD 45m a year in mining revenue, it is estimated that more than six times that amount is being lost through unmonitored, small-scale mining activities. There is strong interest, particularly from civil society, to use EITI reporting to shed more light on unrecorded mining and support efforts to formalise the sector.
Afghanistan will have until 28 April 2022 to address five gaps in its implementation of the EITI Standard.