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Afghanistan: Courting Capital in a Hot Spot

Security stepped up in Davos Thursday, literally, with the arrival of delegations from Afghanistan and Pakistan. Both countries have the potential to be major destabilizing forces for the Middle East and South Asia and face the challenge of trying to grow and modernize their economies while battling terrorism.

The threat of terrorism is evident by the sheer number of security personnel and police guarding government officials from both countries at the Congress Center. Bodyguards for Afghanistan President Hamid Karzai didn't snake their way though to one of the meeting rooms, they cleared a path, physically scattering reporters and CEOs alike.

At opening remarks last night, Karzai warned countries about the "wildfire" of terrorism engulfing the region, and this morning Afghanistan’s Finance Minister Anwar ul-Haq Ahady echoed those remarks, calling terrorism the greatest threat to the country's economy.

But Ahady said that while his country is pleased by the substantial amount of international aid, the country needs private sector investment and the starting point is a deal with a state-owned mining company in China.

"We need to have the private sector investment because in the long run it is really the private sector investment that is more sustainable," Ahady told me. "Official aid will not continue forever."

"We are rebuilding infrastructure and we're coming to a critical juncture in building roads and in providing power," Ahady said. "And I think within a year or so we will have substantially more amount of power available."

"We are about to conclude a major deal with China for exploiting a copper mine [worth about] $2.8 billion" and there is hope for deals for investment in iron ore, gas and oil sectors, he said.

Another major stumbling block to the economy is drug production, which Ahady said must be stopped, but not too quickly.

"I think there is consensus that the elimination should be gradual and there should be alternative livelihood for people who will be affected by the elimination because frankly it's more than one third of our total economy," he said.

Overall, Afghanistan's economy will grow by about 10% this year, Ahady added.