Chinese firms set to invest in Afghan energy sector

Special Chinese firms set to invest in Afghan energy sector
The investment plans are being seen as the latest sign of growing economic engagement by Chinese entrepreneurs in the mineral-rich country. (AFP)
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Updated 31 May 2021

Chinese firms set to invest in Afghan energy sector

Chinese firms set to invest in Afghan energy sector
  • Afghan officials hail plan as sign of growing links between the neighbors

KABUL: A group of Chinese firms was poised to pump $400 million into a coal-fired electricity generation project in Afghanistan, officials revealed on Monday.

The investment plans are being seen as the latest sign of growing economic engagement by Chinese entrepreneurs in the mineral-rich country.

The group, involved in a number of private businesses in Afghanistan, shared its spending ambitions during a meeting with Afghan President Ashraf Ghani on Saturday.

Sangar Niazi, a spokesman for Afghanistan’s power department, told Arab News: “Several Chinese companies during their meeting with President Ghani showed their preparedness for investing $400 million in the energy sector through which we can generate 300 megawatts of electricity.”

Fatima Murchal, a spokeswoman for Ghani, said the planned investment was a “good opportunity” for the Afghan energy industry, adding that the president had “instructed authorities to facilitate the necessary cooperation in this regard.”

While the technicalities of the project had yet to be finalized, Niazi pointed out that the initiative would be expected to provide a much-needed jobs boost to war-ravaged Afghanistan, which imports 80 percent of its electricity from neighboring countries.

“Using coal for producing electricity is also cheaper than importing hydroelectric power from the region,” he said, adding that necessary measures would be taken to limit environmental pollution.

Khan Jan Alokozay, deputy head of Afghanistan’s Chamber of Commerce and Industry, told Arab News: “This (the Chinese energy investment plan) indeed is important. Other foreign investors will also be encouraged to come here and invest.

“The Chinese have a huge interest in investing here, and without any doubt, Afghanistan is a big market for them. China is an international economic superpower; we are neighbors and have the resources for their investment and raw materials for exporting for their domestic consumption too,” he said.

HIGHLIGHT

The group, involved in a number of private businesses in Afghanistan, shared its spending ambitions during a meeting with Afghan President Ashraf Ghani on Saturday.

Alokozay noted that since the Taliban’s ousting in late 2001, the Chinese government and private investors had been at the helm of several small and megaprojects throughout Afghanistan including oil exploration in the north, copper mining in Logar province south of the capital Kabul, and road building in northern border areas.

Decades of war in Afghanistan had seen China reluctant to invest in major Afghan infrastructure development schemes while almost 70 other countries, including Pakistan, benefitted from inclusion in Beijing’s 2013-launched global Belt and Road Initiative (BRI).

“The volume of trade between the two countries stands at some $3 billion annually while China is keen to include Afghanistan through Central Asia in its BRI for reaching Gulf nations,” Alokozay added.

However, he noted that a Chinese firm’s oil exploration operations in the northern Afghan province of Sari Pul had been suspended “because of violence there and due to contractual problems,” and that copper extraction work had been halted in Logar.

Saturday’s talks coincided with the recent start of work by Kabul on the construction of a $5 million road in the mountainous Pamir region to connect with China via a land route for the first time.

Building of the 50-kilometer highway through the Wakhan Corridor in Afghanistan’s northeastern Badakhshan province was expected take 18 months to complete and, once ready, would allow Beijing to export raw materials from untapped Afghan mines for its increasing domestic consumption.

Both countries have been using the railway network in Central Asia for their commercial interactions, while Afghanistan has been flying its famed pine nuts to China.

Kabul has a $2.2 billion five-year deal to export its pine nuts to China and Afghanistan is already a huge market for Chinese goods. Over the past 20 years, China has steadily increased its presence in Afghanistan, contributing nearly $240 million in development aid between 2001 and 2013 and ramping up investments in the country, especially since the reduction in the number of US-led troops in Afghanistan began in late 2014.

In 2007, China inked a multibillion-dollar deal with the Afghan government to secure exclusive rights to extract copper from the Mes Aynak mine in Logar. As part of the contract, China will build a railway network to export the mined copper to the northern Afghan city of Mazar-i-Sharif and on to Beijing through an existing rail network in Uzbekistan.

However, the ambitious project has yet to get underway due to delays in copper extraction, the ongoing war in Afghanistan, and the discovery of an ancient Buddhist site.