As Afghanistan hots up, private security moves in

By Luke Baker

LONDON (Reuters) - Private security companies are expanding operations in Afghanistan as the war there heats up, but industry experts say those that made fortunes in Iraq may find business much tougher in the new market.

As Iraq has grown more stable, Afghanistan, where the Taliban insurgency is strong, has been a natural next-step for dozens of mainly British and U.S. firms that compete for contracts to protect military bases, escort engineers and diplomats and help train local security forces.

In Iraq the market was fairly loosely regulated and there was room for niche players as well as established operators, but Afghanistan is a more mature market with tighter regulation and no over-arching source of major contracts.

And even with the new U.S. administration making Afghanistan a focus, it is far from certain the vast security and reconstruction contracts seen in Iraq will be available again.

"The security situation in Afghanistan is deteriorating rapidly and that means more people wanting to buy security," said Andy Bearpark, head of the British Association of Private Security Companies and a former senior official with the U.S. Coalition Provisional Authority in Iraq.

"But if I were an investor, I'm still not sure I would be looking for a boom in the market," he told Reuters, pointing out that $18.6 billion of U.S. taxpayer funds were made available for reconstruction and security in Iraq.

While there are contracts to be had in Kabul, they are less lucrative, more spread out and those offering them -- including the Afghan government -- are more aware of potential pit-falls than Iraq was when it dolled out contracts in 2004-05, he said.

"Some of the gold-digging that went on in Iraq can't go on in Afghanistan," said Bearpark, who on Thursday will address a conference in London on private-sector support for European Union and NATO operations in places such as Afghanistan.