Keeping the bodyguards in check

By bne IntelliNews July 29, 2010

Phil Cain in Graz, Austria -

Societies across Southeast Europe have been plagued by a catalogue of brutality, extortion, murder and corruption by rogue private security companies. Serbia will be the last in the region to regulate the sector, while some doubt if Bulgaria's efforts to regulate the sector have really achieved much.

Private security made few inroads in Serbia the 1990s, with police and army kept up to strength while it fought the wars which accompanied the break-up of Yugoslavia. During the same period Bulgaria experienced something akin to the sudden explosion of criminality seen in post-Communist Russia, set against a background of profound economic hardship. A private security company in those years was a vital accessory to enter the often-bloody struggle for power and resources.

Over 100,000 Bulgarian army and police personnel were put out of work, a pool of ready muscle supplemented by thousands of former state-employed athletes with time on their hands. A dysfunctional judicial system, rampant corruption and lax law-enforcement, together with the absence of an orderly debt-collection process and a grey economy, amounting to around 40% of GDP, provided the ideal environment for some entrepreneurs to make this plentiful, rough-hewn labour-force pay. Bulgaria's prime minister since July last year, Boyko Borisov, a black belt in karate, is among the success stories, founding a highly successful private security company called Ipon-1 in 1991. He has since relinquished ownership.

Many businesses resorted to using the crude debt collection services private security companies offered or gave in to suggestions they buy stickers to "insure" their property. Private security entrepreneurs with police connections, meanwhile, were well placed to pick up lucrative contracts to guard state property that the police no longer had sufficient officers to patrol.

The havoc which ensued peaked in the mid-1990s, yet even now, three years after Bulgaria joined the EU, the link between security, crime and some murkier areas of state power are staples of the local media.


There are many livelihoods at stake with 57,000 people officially employed by private security companies according to the National Social Security Institute, 40% more than the army's 40,000 troops. Many thousands more work for the private security sector cash-in-hand.

Legislation has put a stop to debt collection and "insurance" activities, says Ivan Ivanov, executive director of the National Association of Security Companies. "There were such practices 15 to 20 years ago, but it was stopped. The law prohibits private security companies from being involved." And the industry is keen to improve its grubby image, "Light is the best kind of disinfectant." His association, he says, bars membership from those with "any kind of unclear business in the past or insufficiently good reputation". Beyond Ivanov's association, however, the Interior Ministry licensing regime, "Does not mean there is no risk of criminal elements entering the business."

Others still have serious doubts about how effectively the Bulgarian sector has been cleaned up. Costel Iordache, head of the operations of Swedish security company Securitas in Romania, says: "It is too much of a risk to be there. There are too many companies paying black [off the books] and contracts where you have to pay a 'commission' [a bribe]. It is the same in Romania, but not 100% of the market."

Ivanov, however, takes issue with the idea that corruption can even be described as "widespread" in Bulgaria, adding that local players face the same hurdles as foreign rivals.

But what of the sector's political links, in particular PM Borisov's previous involvement? "No special status is given to the security industry despite Prime Minister Borisov's background, believe me. This is not only the case now, but also when he was the head of the Ministry of Interior. Private security is not a main priority or the main problem of the Bulgarian government or society," says Ivanov.

Whatever the truth of the matter, "I don't think Securitas will be in Bulgaria soon," says Iordache. The only other EU markets where Securitas is absent are Greece and Italy, and in these cases it is because of technical legal issues rather than the risks posed by the marketplace. UK-centred security company G4S has, however, entered Bulgaria and other foreign companies may be tempted to follow, with the development of Bulgarian airports, sea ports and other critical infrastructure expected to deliver growth in coming years. By 2017 such these developments are expected to bring private security companies $385m in Bulgaria, compared to $210m in Romania, a country with almost three times the population, according to a report published this month by research company Frost & Sullivan.

Despite its concerns about the Bulgarian market, Securitas has already expanded into Serbia, a country still years from EU membership and with a complete absence of laws on the private security market, since 2006, employing around 2,600 personnel making its Serbian wing around half the size of G4S.

The private security industry was late to develop, but since the Yugoslav wars ended a security industry has sprung up which is often connected with brutal criminality. Registering a security company in Serbia is no more than an administrative formality, with some found to be run by known mobsters. For some it is no more than a means of adding an air legitimacy to an armed gang. The lack of paperwork means it is impossible to determine how many people work in the sector, but there are generally thought to be upwards of 45,000 gun-toting security men, not far short of the military, which has 47,000 troops. Many are posted to guard schools, sports venues and government buildings.

"There was poor communication between the security companies and the police. That provided a 'dark zone', so to speak, for some criminal people to implement security. Since then everything has improved," says, Djordje Vucinic, who heads the manned guarding group in the Serbian Chamber of Commerce. "The problem here is that there is no law for private security. The ministry of interior is creating one which should be finished by the end of this year or the early next year."

Vucinic says he is pushing for the law to reflect EU standards. If the Bulgarian example is anything to go by, applying such a law may present another serious challenge.

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