Security firms to cash in protecting China’s ‘New Silk Road’

Thousands of Chinese workers are likely to be involved in infrastructure and industrial projects in Asia and beyond, creating lucrative contracts for security companies

PUBLISHED : Monday, 24 April, 2017, 10:12am
UPDATED : Monday, 01 May, 2017, 3:23pm

Global security companies and their smaller Chinese rivals are jostling for business along Beijing’s modern-day “Silk Road”, the grandiose plan for land and sea routes connecting the world’s second largest economy with the rest of Asia and beyond.

Representing investments of hundreds of billions of dollars, the pet project of Chinese President Xi Jinping is seen boosting economic growth at home, and as positive for everything from steel prices to cement makers.

Security firms also expect to tap the rush, offering to protect thousands of Chinese workers - and the pipelines, roads, railways and power plants they build - as they fan out across the world under the “Belt and Road Initiative”.

It will not be easy, however, with executives warning that state-owned enterprises running or planning projects from Africa to Vietnam sometimes prefer to deal with fellow Chinese, treat safety as an afterthought and try to keep costs to a minimum.

“One Belt, One Road is a lifetime [of work] for us,” said John Jiang, managing director of Chinese Overseas Security Group.

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The small consortium of security providers was set up early last year and operates in six countries: Pakistan, Turkey, Mozambique, Cambodia, Malaysia and Thailand.

“In eight years’ time, we want to run a business that can cover 50 to 60 countries, which fits with the ‘One Belt, One Road’ coverage,” Jiang said.

Chinese personnel are essentially barred under Chinese law, and that of many host nations they work in, from carrying or using weapons.

Instead, Chinese Overseas Security Group and its rivals usually work with and train local staff and focus on logistics and planning.

In Pakistan, for example, where attacks by militants and separatist insurgents are considered a serious threat, the firm has a joint venture with a local security company with links to Pakistan’s navy.

The Pakistani army also plans to provide 14,000 to 15,000 armed personnel dedicated to guarding Chinese projects, according to local media reports.

The US$57 billion China-Pakistan Economic Corridor, the largest single project under the Chinese trade initiative banner, envisages roads, railways, pipelines and power lines that link China’s western reaches with the Arabian Sea via Pakistan.

Major international security operators hope their scale and experience can convince China’s price-conscious state-owned giants to pay for foreign expertise.

Firms like Control Risks and G4S offer staff with military backgrounds and decades of experience in risky regions around the world.

G4S said it had seen an acceleration of interest in its services since the trade push began gaining traction.

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Michael Humphreys, a Shanghai-based partner at Control Risks, said about a third of the security consultancy’s work in China was related to the Chinese initiative.

Hong Kong-based logistics firm Frontier Services Group , co-founded by Erik Prince who created the US military security services business Blackwater, announced in December it was shifting strategy to capitalise on the Belt and Road scheme.

It plans to set up an office in the southwestern province of Yunnan, which adjoins Southeast Asia, and another base in Xinjiang in China’s west, the starting point for the China-Pakistan Economic Corridor project.

Smaller Chinese firms like Shanghai-based Weldon Security and Dewei Security, meanwhile, see their advantage over multinationals in state-owned enterprises’ preference for hiring Chinese to handle sensitive projects.

Only a handful of the estimated 5,800 Chinese security companies operate overseas, with the vast majority focusing on the domestic market.

“For Chinese firms, especially with security work, they [state companies] want to speak with another Chinese person. We can also 100 per cent reflect their thinking when we work,” said Dewei general manager Hao Gang.

Security risks facing Chinese workers abroad are varied and often unpredictable.

Yu Xuezhao, a former soldier working in Kenya for Dewei, is helping to train hundreds of local guards to protect Chinese contractors operating there, including oil giant Sinopec and China Road and Bridge.

Africa, where China invested long before the latest Chinese trade initiative was formally created, is considered a part of the international project.

“The most common incidents we encounter are thefts and strikes,” 27-year-old Yu said, speaking from a training compound in the Kenyan capital Nairobi he has managed since 2015. “We train security guards to inspect cars and do ground patrols.”

Events can quickly escalate.

An attack on a hotel in Mali two years ago, for example, killed three workers at a Chinese state firm, leading to calls by Beijing for beefed up security.

Officials revealed then that 350 security incidents had occurred between 2010 to 2015 involving Chinese firms abroad.

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Such concerns do not easily translate into lucrative contracts, however.

In some cases, security companies are called in to deal with an emergency rather than to coordinate a long-term strategy.

“For a lot of companies, they come to us when they’ve [already] got a problem,” said Humphreys of Control Risks.

“They’ve started the project and they can’t move it forward because they have a labour dispute or someone is throwing petrol bombs at their trucks.”

Hao and other Chinese security executives added that most state-owned enterprises were building their overseas security capabilities from a low base.

“A lot of the larger state-owned enterprises have only just started to go out in the last few years. As such, overseas security work remains a blank space for those firms who had not gone out before,” he said.

Some Chinese experts said companies operating abroad were beginning to think more about the importance of safety.

“This is something Chinese companies need to study more,” said Lu Guiqing, general manager of private builder Zhongnan Group and former chief economist at China State Construction Engineering Corporation.

“When you ‘go out’ safety is the most important. What’s the point if you end up losing people?”