Afghan finance minister sees boom in Indian, Chinese investment

Afghan Finance Minister Hazrat Omar Zakhilwal speaks during a news conference in Kabul August 7, 2012.

GENEVA (Reuters) - Afghanistan expects Chinese and Indian investments in iron ore and copper mining to buoy its economy after NATO troops withdraw in 2014, the country's finance minister said on Wednesday.

A group of Indian companies which in 2011 won rights to mine iron-ore in Bamiyan, in central Afghanistan, should invest from $10 billion to $13 billion, and Chinese firms should commit from $5 billion to $7 billion on the Aynak copper deposit in Logar province, Omar Zakhilwal told a news briefing in Geneva.

The Afghan government is trying to reassure foreign investors its economy will not sink following the NATO withdrawal. Gross domestic product should grow 10 percent this year, in line with the 10-12 percent annual expansion over the past decade, and expand by 6 percent next year, Zakhilwal said.

Asked about the withdrawal of U.S.-led troops, Zakhilwal said: "There will be an impact, no doubt about it, but it is not to the extent it is reported. The leaving of the military will not lead to the collapse of the economy."

Referring to China and India, he said: "As we move forward beyond 2014, when international assistance comes down, of course we expect it will be substituted by the private sector .... We believe the involvement of the private sector and private investment certainly has a more lasting impact on our economy than even aid."

Afghanistan signed a 25-year contract with China National Petroleum Corp in late 2011 covering drilling and a planned refinery in the northern provinces of Faryab and Sar-e-Pul, the first major oil production in the country.

CNPC, which has started oil production, should invest from $1 billion to $1.5 billion, Zakhilwal said.

Investors have to factor in the threat from the Taliban, who have fired rockets at mining projects and planted improvised explosive devices along roads.

In late November, most of the roughly 170 Chinese workers who fled rocket attacks at Aynak, the largest foreign investment project in Afghanistan, returned because of improved security, the mining minister told Reuters at the time.

Afghanistan was among countries classed as being at "very high risk" of corruption in a report issued by watchdog Transparency International UK on Tuesday.

But Zakhilwal, who signed an agreement with the United Nations on Tuesday for training of Afghan officials in governance, said reports of corruption were exaggerated and the country had made "significant improvement" in recent years.

Afghanistan expected to become a member in the next month or two of the Extractive Industries Transparency Initiative, he said, adding that some of its measures exceeded requirements.

(Reporting by Stephanie Nebehay; Editing by Jason Webb)