011019 Firms' Security Risks Rise in Muslim Areas

New York - U.S. companies with operations in Islamic countries face greater security risks after the Sept. 11 attacks, and may have to pull back or face risking the security of their staff and assets, security consultants said.

Since the attacks on the World Trade Center and the Pentagon U.S. firms operating in Islamic nations have been reviewing crisis management plans and beefing up security to prepare for bombing or other violence against U.S. targets.

However, some companies may have to chose between the rewards of investing in a growth market with the risks of operating in politically unstable countries such as Pakistan or Indonesia, the world's largest predominantly Muslim nations.

Though both countries have sided with the United States in its war against terrorism, large Islamic groups have staged anti-U.S. protests and threatened revenge if the United States attacks Afghanistan or any Muslim country.

"Companies will increasingly have to decide between brand awareness and security. That's a question businesses are going to have to face, on the assumption that this war against terrorism will be a long and drawn out affair," said Jake Stratton, head of research at Control Risks Group, a business risk consulting firm in London.

"It has been discussed and I don't know of any companies poised to put their plans into practice. But it's a dilemma they're beginning to face when they look at their long-term strategies in places with a large or significant Muslim population," he added.

VISIBLE COMPANIES AT RISK

The stakes for U.S. companies can be high, as Muslims account for almost one-fifth of the world's population.

U.S. heavyweights such as Procter & Gamble (PG.N), Motorola (MOT.N), General Electric (GE.N) and Halliburton Co. (HAL.N) have stores or offices in Pakistan, a reluctant ally in the brewing fight against the Taliban in neighboring Afghanistan.

McDonald's Corp. (MCD.N) has 11 restaurants in Pakistan, while Citigroup's (C.N) Citibank has five full-service branches in the country, according to their Web sites.

Since the Sept. 11 attacks, U.S. companies with operations in the Mideast and parts of Asia have been on heightened alert, the consultants said. Firms are rushing to update contingency and evacuation plans or implement them if none existed before, causing a surge in demand at corporate security firms.

Oil companies such as Chevron Corp. (CHV.N) and Conoco Inc. (COCb.N), which have operations in Muslim parts of Asia and the Mideast, have increased security at their offices and facilities in those regions, said spokesmen at both firms.

Heavy machinery maker Caterpillar Inc. (CAT.N), which has a manufacturing plant in Jakarta, Indonesia and sales offices in the Mideast, said it has banned travel to those regions and is closely monitoring State Department advisories.

And mining company Freeport-McMoRan Copper & Gold Inc. (FCX.N), which operates the world's biggest copper and gold mine in Indonesia, said it has increased security at its Jakarta office and mining facilities.

"All Western companies operating in Muslim countries are very concerned at the moment. There's concern about spillover into central Asia as well," said Martin Stone, head of country and political risk advisory services for Deloitte & Touche. "I think it's an overreaction, but for understandable reasons."

U.S. SYMBOLS

So far, no U.S. company has left a Muslim country for security reasons, Stone said. But those with prominent storefronts or brands, such as restaurants and consumer products makers, are more likely to be targets of violence, analysts said. Such businesses are seen as U.S. symbols, though they are often controlled by local companies through a joint venture or the purchase of a franchise from the U.S. parent.

Should the U.S. anti-terrorism campaign continue for several years, American companies may need to reevaluate their marketing and advertising campaigns in Muslim countries, where anti-U.S. sentiment can be high.

"We haven't counseled any companies about downgrading their marketing because the situation is so uncertain. But my view is that it will take many years and have long-term effects on the way Western companies do business in the Muslim world, and that will include marketing," said Stone.

For now, most companies say they are taking a wait-and-see approach toward their marketing plans.

Procter & Gamble, which owns plants in both Pakistan and Indonesia and has representative offices in heavily Islamic Uzbekistan and Turkmenistan, which border Afghanistan, said it has not changed its business strategy in those regions. The consumer products giant, which recently sponsored a "Miss Uzbekistan 2001" beauty contest and health education campaigns, has not yet changed its marketing plans, said a spokeswoman.

CALM URGED

Dunkin' Donuts, which has six stores in Pakistan and 223 stores in Indonesia, leaves marketing and advertising decisions up to the local franchisees, said Bob Kendzior, vice president of international marketing.

"I don't know what their marketing plans are, and I suspect there's very little going on now. But our thinking is for the short-term and to respond to the security situation as it changes," Kendzior said.

Some consultants are cautioning clients against making any long-term business decisions, even as the White House prepares the United States for a long war against terrorism.

U.S. businesses may be at risk right now with anti-American sentiment running high in Muslim countries, but that will likely die down in the months ahead, said Harry Brandon, co-founder of Smith Brandon International, a Washington, D.C.-based business intelligence and security consulting firm.

"We think the highest risk factors for U.S. companies operating abroad now are more short than long term. The ability of Osama bin Laden to rally forces against Western interests will probably diminish over time. It's pretty hard to keep people whipped up over several years," he said.

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