When Gul Mohammed Niayz arrived in Kabul in 2002, everything was the colour of dirt. “Houses, roads... even the scenery seemed to be made of mud. People’s faces had hopelessness etched in them,” says the Afghan-American, who returned to his homeland after decades in exile. Having run a construction business in the US, he wanted to do the same back home, but got more than he bargained for. “We had so many difficulties at first. There was no infrastructure, no electricity, no fuel. Some of the equipment was from the 1930s but we had to use it because there was nothing else. We employed old Mujahedeen fighters who were more used to fighting than building work.” A year after the Taliban fell, the country was in chaos.

Fast-forward a decade and companies are poised for growth. Sectors such as construction, agribusiness, telecoms and mining have seen massive gains in the past few years and can present attractive opportunities.“It’s different today,” says Niayz. “Afghanistan has changed a lot, people are more open and the construction sector is more developed. There is foreign investment available, but there is also more competition.”

 The Afghanistan Investment Support Agency (AISA) says there are nearly 16,000 private companies registered in the country today, out of which 1,300 are foreign owned. It’s hard to get comprehensive statistics because data is often unreliable. The UN 2008 World Investment Report estimated foreign direct investment (FDI) in 2009 stood at $185m and total FDI stocks to date were at $1.11bn. But why would anyone invest in a war zone? Aren’t security companies and military contractors the only companies making money there?

 No, says Michelle Morgan, chief of the USAID-funded Afghanistan Small and Medium Enterprise Development (ASMED) project. Foreign companies are here for the market opportunities, even though operating conditions are still difficult.

“But profits will come to those who get in early.” She adds: “There has been progress in the last couple of years in terms of registration processes, administrative procedures, export taxes and other tax breaks and assistance for foreign investors. In fact many want our support to start up operations in Afghanistan, and local businesses are keen to connect with them.”

Under the current regulatory framework, investors are not required to secure an Afghan partner and have the right to move their capital and profits out of Afghanistan when they want. The only exception is that foreigners are not allowed to own land or real estate, although they may lease it for up to 50 years.

Early investors are able to reap the benefits as long as they are patient. “It’s a gamble – the risk is there like in all business,” says Niayz. “But the higher the risk, the higher the return. This is an emerging market and those who are on the ground right now will get their break.”

Data collected by the Center for International Private Enterprise in 2009-10 indicates that the economy has improved since 2009 due to declining inflation, a relatively stable exchange rate and increasing domestic sales. Further figures from the IMF show that economic activity grew by 15% in 2009 due to a production increase in the agricultural sector, growth in donor inflows and reformed policies.

The Afghan government is keen to open its doors to foreign investors, but starting a portfolio here can be a challenge because most of the country’s wealth remains hidden.

Afghanistan is remarkably rich in minerals and according to AISA there are more than 1,400 identified deposits of resources such as oil, gas and coal, as well as iron and copper. The total worth is estimated to be more than $1trn. Now, in its first move in four decades to open up the hydrocarbons sector, the government is seeking bidders for oil and gas exploration and production concessions in its Amu Darya Basin. One deposit alone is estimated to contain more than 80 million barrels of oil.

 But the basin is just the beginning. The US geological survey in 2006 estimated there were 1.6 billion barrels of oil, 16 trillion cubic feet of natural gas and 500 million barrels of gas liquids lying undiscovered in the north of Afghanistan. And the state- owned China Metallurgical Group (MCC) was an early mover, winning the right to develop a large copper deposit in Aynak, near Kabul, after agreeing to invest $3bn.

“Everyone in the world wants raw materials and Afghanistan has masses of untapped resources. There is a reason why the Russians invaded Afghanistan in 1979 and there is a reason why the Americans don’t want to leave,” says an Afghan investor, speaking anonymously. “This is the heart of the world. The

Americans didn’t help us when we needed them most during the invasion. Today there is all this chaos, which ultimately is caused by a fight over gas and oil and who gets the profits.”

For centuries Afghanistan has been the hub connecting Asia, Europe and the Middle East. It is strategically close to two of the world’s largest markets: China and India. It is also located between the energy-rich republics of Central Asia and the major South Asian ports, making it an ideal transit route for Central Asian oil and gas to these markets.

At the moment, just a handful of Pakistani and Iranian companies use Afghanistan as a supply route. Many roads, especially in the south and parts of the east, are controlled by the Taliban, which makes travelling on them a matter of life and death. The country is landlocked, surrounded by some of the world’s highest mountains, and its roads are in poor condition.

But the mountains hold a promise of treasure. There are emerald, jade, amethyst, alabaster, beryl, lapis lazuli, tourmaline, ruby, quartz and sapphire deposits; and high-quality marble is abundant in at least 400 varieties, valued at more than $150bn.

 Adam Doost is an Afghan who returned in 2006 to invest in mining through his company, Equity Capital Group. “We have invested over $40m in the marble quarry and processing factory in Herat,” he says.”I returned because there was a need for private-sector investment to create sustainable businesses that can eventually lead the country towards prosperity.”

 Afghanistan is still a rural society with agriculture generating 50% of the country’s $30bn GDP and supporting 85% of its people. According to AISA there are approximately a million farms in Afghanistan and more than 2,000 wholesalers. “Investment in agro-businesses will boost the economic development of Afghanistan and will give its people a sense of pride when they buy local products,” says AISA chief executive Noorullah Delawari. “We should become self-sufficient again and subsequently be able to create a sustainable export industry.”

Poor packaging is a major problem, however, resulting in the waste of 20%-40% of post-harvest horticulture products. “The market potential for food-related packaging is enormous,” says Delawari. “We need everything from basic storage containers to freezers.” Meanwhile, fewer than 50 refrigerated trucks serve a population of 30 million. Demand is also massive for new machinery such as tractor trolleys, ploughs and grain-cleaning and sieving equipment for flour, as equipment is currently imported from abroad or dates back to the Soviet era.

Another growth sector is technology and telecoms. Since the fall of the Taliban, when Afghanistan had only a few thousand landlines and no international service, the number of mobile phone users has grown to 13.3 million, generating $129m in taxes last year. Revenue from the sector is expected to reach $800m in five years, according to government figures.

The potential has not gone unnoticed by the growth-hungry Middle Eastern telcos. Indeed, the UAE’s Etisalat plans to invest $100m this year and next and seeks to launch 3G networks here.

This may all sound tempting for the brave and ethical investor, but the realities are far from ideal. Being an investor in Afghanistan carries different kinds of risks from those in an ordinary growth market.

Firstly, there is the lack of security and stability, making the country a veritable Wild West. If you’re in the wrong place at a wrong time, your life could be in danger. “The security situation changes almost daily,” warns one investor, who asked for anonymity. “It might be okay to drive to the north by road one day to survey a field, but another day, it might just cost your life if you are unlucky.”

Suicide bombings and shootings are commonplace even in the relatively peaceful capital, and criminal gangs have begun to target businessmen in the hope of claiming ransoms. “If word gets out how much money I’m making, I’ll be at the top of the kidnappers’ list,” says another entrepreneur. Afghanistan is still a very tribal society where the village elder’s word is law. “We have developed a good relationship with the local elders and community leaders and this makes security less of a hassle to deal with,” says Doost. “Some of the security challenges have been improved by developing a good relationship with the local communities by creating jobs. Challenges still exist, but having the trust and loyalty of the elders makes business in Afghanistan possible.”

Geography, too, presents a challenge when many places are not reachable by road. Morgan says: “Investors have to be aware of the fact that if you are planning to do carpets, you want to be in the north, whereas vegetable and fruit-processing opportunities are greatest in the south and east. Some areas have electricity on the grid, and access to transportation is easier, while others require generator power and may be difficult to access at times. This needs to be considered when choosing business partners. Sadly, 50%-60% of investors who come here are not aware of the landscape and the differences in the regions.”

Then there’s the rampant corruption, which makes everything difficult and at times near-impossible. In its 2009 rankings, Transparency International rated Afghanistan 179th out of 180 nations. “The country needs reforms desperately,” says Niayz. “To get the right permits and correct stamps, you need to pay hefty sums to various officials. It has become borderline unbearable.”

Years of war have left the country in a state of constant change. The regulatory framework is fluid, and for those who want to support Afghan businesses directly, finding the right investment target is not always easy. “The most difficult part is to find the right Afghan partner,” says Morgan, “because the majority of businesses don’t know how to advertise themselves or how to pitch business plans when meeting with potential investors.”

The country is not for the faint-hearted or those seeking a quick buck, but Niayz believes he’ll be rewarded in the end. “Security will come to Afghanistan, resources will come and that’s when the big bucks will come,” he says.

Afghans too deserve a break. Without economic transition and growth, it will be impossible to create the prosperous and secure future they deserve. And there is real hope in people’s eyes, says Niayz. “I see colours now, instead of just the dirt and mud.”