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Thread: UK leads the world in private security industry

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    UK leads the world in private security industry

    UK leads the world in private security industry - Business Analysis & Features - Business - The Independent

    UK leads the world in private security industry

    The recent crises around the world mean demand for armed guards is soaring with the UK leading the way


    Somalian pirates, earthquakes, Arab uprisings, fresh rumblings from the eurozone crisis. They all trigger the same effect in the corporate world: a phone call to a private security firm to plot a plan.

    It might be hiring ex-marines to guard their top executives 24/7 with AK-47s. It could be teaching oil executives in Bogota how to escape from a potential shooting in a high-speed chase. Or it might be working out a back-up plan in case the whole of southern Europe goes on strike. That's why the recent string of political crises and natural catastrophes has triggered a boom in the private security and risk industry.

    It's a particularly British success story. Take London-headquartered Control Risks: its 34 offices around the world, including in Basra, Beijing and Bogotá, hire out men with guns to clients from sectors ranging from energy to retail. Business is growing by more than 50 per cent this year, according to its chief executive Richard Fenning. That's after the company enjoyed a 54 per cent jump in annual operating profit to £19.1m in the year to April 2011, thanks to a higher workload in the Middle East and a gush of contracts in Iraq.

    The corporates euphemistically dub the bulk of their work "protective security". What that means is that armed men, and they are always men, are dispatched around the world, ready to press the trigger if any of the VIPs, diplomats and businessmen and women they are paid to guard get into trouble.

    Little surprise most of those involved are ex-military: the industry behemoth G4S says its average staff working in "complex environments" are former Marines, Paras, or Army, aged around 35, and who, having already experienced life in Basra and others of the world's most dangerous places, are adroit at staying alive. They wear branded cargo pants and a polo shirt, often with a flak jacket too. At any moment, life could turn into an episode of shooting game Call of Duty: Modern Warfare.

    Iraq remains one of the biggest markets, with private security staff clearing mines to develop the southern oilfields around Basra and guarding executives and foreign officials elsewhere in the country. But it hasn't been without scandal, most notably Blackwater, when guards working for that US security firm (which has since twice renamed itself, most recently as Academi) to protect American diplomats opened fire in Baghdad's busy Nisur Square, killing at least 14 civilians.

    The industry claims it has moved out of Blackwater's shadow, with insiders pointing to initiatives like the International Code of Conduct for Private Security Service Providers, whose steering committee was led by British firms Saracen International, Aegis and G4S. Critics, however, remain unhappy that the international industry is still reliant on self-regulation.

    The workload isn't growing everywhere. Afghanistan, once a hot spot for the sector, is becoming a no-go area after president Hamid Karzai banned private security firms apart from those with guards working in foreign embassy compounds. Only this week Afghan police arrested two British contractors working for private security firm Garda World after claiming to find them carrying 30 unlicensed AK-47 rifles.

    But there seems to be more than enough demand for armed guards in the rest of the world to make up for it. When G4S bought ArmorGroup, the private security business chaired by

    the former Tory minister Sir Malcolm Rifkind, in 2008, the firm was struggling as Iraqi and Afghan security contracts dried up. Now, the market for protection is booming: G4S works at more than 40 embassies around the world, including Afghanistan's.

    "The growth of the private security industry was driven by the US," a G4S spokesman explains. "In 2003, the US government started outsourcing contracts for convoy protection in Iraq, and British companies have been at the forefront of security work for 20 years. The UK government has followed as the public purse grew tighter, so the level of private contracting looks set to grow further."

    There's training work to be done too. Corporates call on private security muscle to teach their suits going to South America or Africa how to avoid hostage situations.

    The industry also tackles white-collar crime prevention. "It's an interesting time in the world," Mr Fenning adds. "There's major fraud and corruption work going on. The Bribery Act in the UK has made a lot of companies relook at their security standards around the world and come to us to help."

    Private security firms might be spreading their gaze but it's still their gun-wielding protection staff that they're best known for. As the defence cuts kick in and thousands more British military are laid off, this is one area where the private sector is lying in wait with jobs.

    Name Game: But reputation's still shot

    The word "Blackwater" is practically banned these days in the private security industry. It was the name of the US firm whose guards, hired to protect American diplomats, opened fire in Baghdad's Nisur Square, killing at least 14 civilians, including children.

    The shooting hit US-Iraqi relations, the Iraqi government banning the firm from the country. Shortly after, the security group, founded by former Navy Seal Erik Prince, was renamed Xe Services. But it couldn't leave controversy behind. Xe was hit by reports the CIA hired its contractors as part of a secret programme to kill top al-Qaeda figures. Mr Prince sold his stake to US private-equity firms Forte Capital Advisors and Manhattan Partners in 2010.

    The group changed its name again last month, to Academi after Plato's institution in ancient Greece. The company's president, Ted Wright, said its objective was to be "boring". That looks unlikely: Mr Wright also said he plans to apply for a licence to operate in war-torn Iraq again.

    Name change or not, the Iraqis are unlikely to see the group formerly known as Blackwater as anything other than that.

  2. #2

    Re: UK leads the world in private security industry

    FEATURE-Investing in Iraq requires patience, drinking tea | Reuters



    Investing in Iraq requires patience, drinking tea

    By Serena Chaudhry

    BAGHDAD, Jan 11 (Reuters) - Foreign investors seeking a foothold in Iraq take heed: you'll need a healthy dose of patience, a flexible schedule, and a love of tea.

    Nearly nine years since the U.S.-led invasion that toppled dictator Saddam Hussein, Iraq remains a state-centric economy and, beyond oil, private businesses have yet to play a significant role in the rebuilding of the once thriving Middle East bread basket.

    Infrastructure remains dilapidated after years of war and economic sanctions, and investment is needed to reform banking, build houses and roads and fix a chronic electricity shortage.

    That means plenty of opportunities for investors, but foreign executives already on the ground say it can take more than a year to become operational in Iraq, where security is one of the most costly risks.

    Taking the time to build relations with local partners is the key to success, they say.

    "Nothing is fast in Iraq," said Alan Morrell, vice president of American bottled water firm Oasis. "We're going to have to start with tea and relationship building and we may dance for three or four months if it's a big deal. If it's a simple deal, we might dance for two weeks, but we're going to dance."

    Attracting foreign investment is essential to the rebuilding of Iraq and the OPEC-member state has already signed a series of contracts with oil majors to develop its vast oil reserves - the fourth-biggest in the world.

    Iraq set a goal to attract $86 billion in investment by 2014 under a five-year economic development plan. The infrastructure, housing and electricity sectors need the most development.

    The National Investment Commission (NIC) was created in 2006 to facilitate the process for international firms. It offers 'one-stop' shopping, including help with visas, registering a company and housing and security for investors during a first visit.

    NIC Chairman Sami al-Araji said dozens of companies contact him a month regarding business opportunities in Iraq.

    LOCAL PARTNERS ESSENTIAL

    Iraq's market - an educated populace of 30 million with big requirements after years of war and sitting on huge oil reserves - is considered a potential gold mine in a weak global economy.

    But risk factors - corruption, security against an ongoing and lethal insurgency and lack of legal safeguards - are high.

    "I don't know anywhere else in the world where it's more essential (to have a local partner). There's so much uncertainty, so many unknowns to be navigating," said James Hogan, former chief executive of banking giant HSBC's business in Iraq.

    "Even before you navigate, you've got to understand the socio, economic, political drivers. And it is complex."

    A lack of clear regulation makes even a simple process like obtaining a visa an arduous task.

    According to Araji, getting a 10-day single entry visa to Iraq should take 4-5 days and a six-month to one-year multiple entry visa about 10-14 days. Many foreign investors say it has often taken months to get visas for themselves or their workers.

    Most businessmen say getting a good Iraqi lawyer should be the first step, especially to assist with licensing. The cost of a lawyer to facilitate registering a company can range from $1,000 to $40,000, investors say.

    Some investors say the sheer number of different licences needed makes the process of starting a business lengthy. Each ministry operates separately and has different requirements.

    "We admit that right now we have some difficulties time wise but we are in the process of trying to simplify it," Araji said.

    While the banking sector is undergoing reform with the help of the World Bank, Iraq remains a cash-driven society.

    At the height of the war, it was common for businessmen to carry suitcases of cash into the country. Investors are now able to transfer money directly into bank accounts but some still use bags stuffed with greenbacks to pay for services.

    "They're not big bags, they're very normal. Like the ones you get from the supermarket, just not transparent," said Daniel Zamfiropol, Iraq branch manager for Romanian firm Octagon Contracting & Engineering.

    "That's the way you should carry (money). Don't carry it in a nice bag ... low profile, that's the key word."

    HIGH OPERATING COSTS

    Security remains a primary concern nearly nine years after the U.S. invasion, with bombings a daily occurrence, and most foreign companies hire personal security teams.

    Hogan said HSBC spends around $3,000-$6,000 a day on security. Ground Works Inc, an engineering, construction and logistics firm, said security for housing and business compounds can run at $14,000-$18,000 a month, while a local bodyguard costs $1,500 a month and a foreign guard $4,000 per month.

    Electricity is intermittent and having a generator is a necessity. Businessmen say fuel for generators can cost around $3,000-$8,000 a month.

    While high overheads, low initial returns and delays in licensing are frustrating, many investors say the steepest learning curve is understanding the culture.

    "What we found is that Iraqis don't appreciate a direct conversation of pressure associated with their performance. They would prefer patience and ongoing communication and relationship building," Morrell said.

    "In a Western culture, we're used to going in and saying 'it's your job, sort it (out), what's the problem?' and demanding services. In this culture, that's not what they're looking for."

    Face-to-face communication is highly valued but telephone calls and text messages are also acceptable. Iraq did not have a mobile phone industry under Saddam and the sector has since boomed. E-mails, however, are rarely answered.

    "I stopped relying on e-mails as a means of communication. Either they don't get read, or even if they do get read, they might not necessarily generate a reply," said Hogan.

    So what are the essential rules for doing business in Iraq?

    "Throw your timeline out the window, stick to your budget, and your plan needs to be able to be fluid," Ground Works President Greg Holmes said. (Editing by Jim Loney and Susan Fenton)

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