* U.S. lifted two decades of sanctions in October
* Investors study farming, energy and mining possibilities
* Sudan close to fast growing, wealthy markets
* But currency down 40 percent this year
* Would-be investors worry about reputational risk
LONDON, Dec 15 (Reuters) - Sudan's president is wanted for crimes against humanity, the economy has lost much of its oil output and the government is in arrears with the IMF. And yet Osama Faisal's target of boosting foreign investment tenfold is not quite as daunting as it seems.
Faisal, who is Sudanese state minister for investment, is touring destinations from Germany to Bahrain to drum up interest - and finding businesses ready to listen since the United States lifted two-decade old economic sanctions on his country in October.
"The margins of profit in Sudan are more than the margins of profits in the region or elsewhere in the world, simply because the demand is so huge," he said this week during the London stop on his global roadshow.
Faisal's aim is to attract foreign direct investment inflows of $10 billion a year, compared with United Nations' estimates of $1 billion in 2016. He says he has already seen a surge in interest in Sudan's agricultural, energy and mining sectors, as well as power generation projects.
Sudan is one of the newest countries to come onto the radar of "frontier market" investors, who scour the world for opportunities in places which are only just opening up to foreign capital.
Not long ago the country was riven by civil war and is still accused in the West of backing terrorist groups. But now Washington has lifted a trade embargo, unfrozen Sudanese assets and abolished financial restrictions on its economy.
The World Bank estimates annual economic output at $96 billion. That is considerably higher than two African countries more open to foreign investors, Kenya and Ethiopia, which both have GDPs of about $70 billion despite larger populations.
Faisal said the first big projects are already on the horizon, with plans to sign mining concessions with European, Canadian and Russian companies. Oil concessions are also being discussed with Turkish companies and a big Norwegian group was in talks over a renewable energy project, he added, although he did not wish to disclose any names.
His London appearance at least got would-be investors through the door.
"The sanctions are gone, so here we are," said Maria Stratonova, project director at Aldwych International Ltd, a London-based company that develops and operates power generation, transmission and distribution projects in Africa.
It is still early days however, said Stratonova, describing her attendance at the conference as a "scouting mission" before she travels to Sudan to research possible projects.
Involvement of firms such as Aldwych would be especially welcome to Faisal. Power shortages are a major bottleneck in much of Africa and have hobbled economic development. Sudan shares borders with seven countries, meaning electricity could also be exported if it generates a surplus to its own needs.
People at the conference organised by Developing Markets Associates were also looking into agriculture, citing Sudan's location at the crossroads of sub-Saharan Africa and the Middle East. While much of the country is desert, it also has an estimated 20 million hectares (50 million acres) of arable land - nearly as much as Mexico.
Food made up 16 percent of exports last year from a country that lies close to markets with rapidly expanding or wealthy populations, such as in Egypt and the Gulf. In 2016 the United Arab Emirates and Saudi Arabia were Sudan's second and third biggest overall export markets respectively, behind China.
"Agriculture ticks all the boxes for a sector that is going to be strategically very important over the next decades - just look at consumption patterns, population growth," said Ahmed Amin Abdellatif, president of Khartoum-based CTC Group.
CTC, a trading, exporting and manufacturing group, is active in sectors from farming to textile manufacturing and real estate. In recent months it has received overtures from a number of foreign investors, Abdellatif told Reuters. Most are looking at investing in Sudanese farms, trying to sell machinery and high-yielding seeds or starting to grow products themselves.
With 45 million people, Sudan's investment prospects are clearly present but so are the problems. The economy has not recovered since South Sudan seceded in 2011, taking with it three-quarters of the country's oil output which was the main source of foreign currency and government income.
Annual inflation is running at over 33 percent and authorities oppose the International Monetary Fund's recommendation to float the currency. The Sudanese pound is fixed at a rate of 6.7 per dollar, but trades considerably weaker on the black market, hitting a low of 27 in November before recovering to around 23.
Abdellatif estimates the currency has weakened 40 percent against the dollar since the start of the year and acknowledges such falls would wipe out a foreign investor's profit were they to continue. "There is no business that makes a margin of 40 percent," he said.
Sudan is also one of the few countries in arrears with the IMF, with the Fund noting this was a factor hindering access to external financing and weighing heavily on development.
The country ranks 37th out of 48 Sub-Saharan African nations in a World Bank report on the ease of doing business.
Investors at the conference insisted they would require government guarantees that they would be able to repatriate money freely.
"When you are just starting out in a country like that, it is really hard...this is the type of situation where you can lose a lot of money," Stratonova said.
Another concern is politics and the risk of reputational damage from associating with a government that, despite the end of sanctions, is still designated by Washington as a state sponsor of terrorism.
President Omar al-Bashir is still wanted by the International Criminal Court over his alleged role in war crimes including genocide in Sudan's Darfur province.
"It is a big question for us," said one UK-based investor at the conference, who is considering putting money into Sudan's agriculture sector.
"What if we produce in Sudan, and the whole politics flare up again? It is a worry to have your name associated with that," the investor said, declining to be named. (Reporting by Karin Strohecker; editing by David Stamp)