Security Industry Association. Mission Statement

Transcription

1

2 RUSSIA SECURITY MARKET SECURITY INDUSTRY ASSOCIATION REPORT Security Industry Association Mission Statement To proactively represent SIA members in the global security and life safety markets in order to ensure a safer world. Founded in 1969, SIA is an international trade association whose membership has grown to almost 400 companies from every segment of the electronic security industry, including access control; biometrics; surveillance cameras and systems; fire detection and suppression; home automation; intrusion; remote and wireless monitoring; personal security products and response systems; mobile security; and many other specialized services. SIA s programming, products, and services fall into four core areas: education & training, government relations, research & technology, and technical standards. SIA s Research & Technology Department provides high quality, actionable data and analysis on a variety of issues in the global security industry by collaborating with the best international research organizations available. Groteck, a security market consultancy for Russia and CIS countries, to conduct the market research study for the SIA Russia Security Market Report. Groteck maintains a regularly updated database of securitydistributors and installers, and holds long standing relationships with major companies and players in the Russian security market. Established in 1992, Groteck has enjoyed over 15 years of successful operation and publishes more than 20 industry magazines and newspapers. Groteck mission statement Groteck provides up-to-date information to professional societies. Project team Sergey Trapani, Alexander Vlasov, Gennady Makarov, Julia Tsimakhova, Irina Vodopjanova, Irina Lebedeva, Olga Fedoseeva, Anastasia Miroshkina, Linda Lippner All rights reserved; reproduction in whole or part without prior written permission is prohibited by the Security Industry Association Russia Security Market Report 2 Introduction

3 Security Industry Association Forward Dear Colleague: Russia s recent robust economic growth and its impending entry into the World Trade Organization (WTO) are all good signs for any business that plans to open in Russia, including electronic security companies. Russia s long delayed entry into the WTO will likely be realized this year, removing many barriers to trade and foreign direct investment. The Russian government hopes to wrap up the process to gain full WTO membership by this summer (2008). The Security Industry Association (SIA) and the Russian Security Industry Association (RASI) are partnering on a range of new initiatives designed to enhance industry relations and build market opportunities between the two countries. As a result of a 2007 signed Memorandum of Understanding (MOU), the industry organizations plan to cooperate on a number of programs designed to promote business and market opportunity, while building awareness of the impact of the security industry in both countries. The Russia security market is growing at a double-digit rate for the past few years and it expected to continue at that rate through By partnering with RASI, SIA is able to position our members to capitalize on this lucrative market. SIA is pleased to be associated with such a high-caliber organization and we look forward to a long and prosperous relationship. The SIA Russia Security Market Report looks at opportunities for security companies that want to enter this rapidly expanding market. The report defines and quantifies the current size of the electronic security market and its short-term future growth. The report includes an overview of the general economic, social and business environment in Russia today. An in-depth analysis of the electronic security market in Russia, its drivers and restrainers, laws and regulations, follows. Detailed supplier profiles, and analyses of vertical markets wraps up the report. This report is an essential strategic planning document for any electronic security business that plans to do business in Russia. The SIA Russia Security Market Report would not have been possible without the extensive efforts of SIA research team, Mark Visbal and Linda Yelton, and Groteck researchers Sergey Trapani, Alexander Vlasov, Gennady Makarov, Julia Tsimakhova, Irina Vodopjanova, Irina Lebedeva, Olga Fedoseeva, Anastasia Miroshkina Linda Lippner, who worked to produce an accurate and high quality study. This report is a testament to their collective knowledge, experience and commitment to excellence. Sincerely, Richard W. Chace CEO and Executive Director Security Industry Association Russia Security Market Report 3 Introduction

4 Table of Contents Executive Summary Chapter 1. Introduction The Russian Security Market: general characteristics Volume of the Russian EPS equipment market and development trends Russian EPS market by sectors Different types of security purchases according to consumer Government regulation and its influence on the market Main driving forces for market growth Technical aspects of EPS equipment market development in Russia Competition and Primary Players Chapter 2. Russian Economy Economic structure Infrastructure Financial Services Telecommunications Fiber Optic Communications Major Foreign Direct Investors International Organizations and Commercial Agreements Legal Environment Labor Legislation and Policy Foreign Direct Investment Tax System Income Tax Foreign Investment Statute Chapter 3. The Market Introduction Consumers. General Groups Corporate and State Consumers: Branches Corporate and Government Consumers: Government and Commercial Purchases Government Regulation of the Security Market Corporate Consumer Russia Security Market Report 4 Table of Contents

5 3.3 Competition Share of Majors in Projects and Sales Main Factors of Competition for Suppliers and Producers Market Size Residential Homes & Security Protection types Companies Market Volume Retail Financial Sector Oil and Gas Industry Industry - Mechanical engineering, metallurgy, processing industries Power Engineering Transportation Small and Medium Businesses Market Tendencies Chapter 4. The Industry Video Surveillance Physical Access Control Systems Alarm systems market Fire alarm systems Appendix 1: Russia s Social and Economic Makeup Appendix 2: Criminal Statistics Appendix 3: Legal Restrictions to the Incorporation of Security Companies Appendix 4: List of major companies with shares in Gazprom (July 1, 2006) Appendix 5 : Russia s Construction Statistics Russia Security Market Report 5 Table of Contents

6 List of Diagrams Diagram 1: Expert assessment of the income distribution and market share between the installation organizations at the Russian projects market Diagram 2: Expert assessment of the distribution of income generated by the scales of ACS technical devices at the Russian market Diagram 3: Cargo transportation according to transport types Diagram 4: Passenger use of transportation Diagram 5: Concentration of federal public roads Diagram 6: Shares of the Russian telecommunication market Diagram 7: Mobil users and mobile penetration rate Diagram 8: Share of government and corporate companies, small and medium businesses and individual consumers in EPS equipment purchases in Russia Diagram 9: Share of companies and individuals in the EPS equipment market in Russia Diagram 10: Share of government and corporate consumption in term of branches in the amount of sales of EPS equipment in Russia Diagram 11: Government purchases and the main areas of sales were received as a result of telephone interviews from 121 industry experts Diagram 12: Ratio of electronic physical security equipment purchases in monetary terms and in physical terms in the controlled and commercial sectors Diagram 13: Division of types of regulation according to equipment type Diagram 14: Main regions of business activity in the security industry Diagram 15: Availability of uniform EPS equipment regulation documents in large consumer companies with developed branches Diagram 16: The degree of centralized decision making, concerning EPS equipment purchases Diagram 17: The centers of business activity in the area of technical security devices Diagram 18: Industry experts evaluation of the degree of competition Diagram 19: Consumer experts evaluation of the degree of competition Diagram 20: Industry experts assessment of profit distribution between installation companies Diagram 21: Industry experts assessment of profit distribution from the sale of access control systems Diagram 22: Industry experts assessment of profit distribution from the sale of fire and security alarm systems Diagram 23: Industry experts assessment of profit distribution from the sale of Russian produced fire and security alarm systems Diagram 24: Industry experts assessment of profit distribution from the sale of foreign produced fire and security alarm systems Diagram 25: Industry experts assessment of profit distribution from the sale of video surveillance devices Diagram 26: Experts analysis on market distribution according to the types of equipment in terms of the price Diagram 27: Profit distribution scale of the video surveillance market from sales of separate types of equipment Diagram 28: Sales volume by EPS type in terms of consumer price Russia Security Market Report 6 List of Diagrams

7 Diagram 29: Distribution of industry respondents according to their activity on the security market Diagram 30: EPS segments Diagram 31: Respondents by region Diagram 32: Respondents Internet connection Diagram 33: Market portions of government and private control panel system companies Diagram 34: Monthly cost of control panel guard services, that city residents are willing to pay Diagram 35: Acceptable reaction time for a control panel service supplier Diagram 36: EPS devices used by the upper and middle classes Diagram 37: Property insurance among those with technical security devices Diagram 38: Existing and potential demand for security systems in the upper and middle classes Diagram 39: EPS consumption by corporate companies in millions of US dollars Diagram 40: distribution of security expenses at retail companies Diagram 41: Retail trade dynamics Diagram 42: Distribution of EPS purchases in the financial sector Diagram 43: The ratio between the capital at Russian banks and GDP Diagram 44: Russian bank assets and GDP as compared to the same values for other G8 members Diagram 45: The volume of granted consumer credits Diagram 46: The volume of mortgage indebtedness Diagram 47: Industry-wide distribution of EPS costs Diagram 48: Distribution of EPS expenses in the industrial sector Diagram 49: Capital consumption in branches of industry Diagram 50: The structure of sources of financing of capital investments of enterprises Diagram 51: Distribution of EPS expenses in the power engineering branch Diagram 52: Distribution of EPS expenses in the transportation industry Diagram 53: Small business expenses on EPS devices Diagram 54: Small businesses in Russia, divided into sectors Diagram 55: What percent of consumers are using network data transfer? Diagram 56: Do you plan to use network infrastructure for video transmission in the future? Diagram 57: Do you use IP cameras? Diagram 58: When will IP cameras become as popular as analog cameras? Diagram 59: Popular brands of access control systems Diagram 60: Popular brands of identification control systems Diagram 61: Popular producers Diagram 62: Population of the Russian Federation Diagram 63: Residential buildings put into operation in 2005 and Diagram 64: Shares held by individual regions in total housing area put into operation Diagram 65: Total area and new office construction project in Moscow Diagram 66: Distribution and growth of offices in St. Petersburg Diagram 67: Growth rate and total area of sales centers in Moscow Diagram 68: Sales facility area growth in St. Petersburg Russia Security Market Report 7 List of Diagrams

8 List of Tables Table 1: Descriptions of security technologies Table 2: Russian market for security in Table 3: Main consumers of security systems Table 4: Share of consumer spending on security by technology Table 5: Year over year output growth by sectors Table 6: Volume of transportation routes in length Table 7: Density of routes Table 8: Access of independent gas producers to the gas transportation system Table 9: Credit organizations Table 10: International credit ratings of Russian insurance companies Table 11: Facilities commissioning in communication networks Table 12: Estimated communications development Table 13: General information of the companies leasing communication channels Table 14: The Russian Federation Codes Table 15: Foreign investments by type of economic activity Table 16: The amount of foreign investments in the Russian economy by investing countries Table 17: Major taxes Table 18: Share of large state and corporate consumers, small and medium businesses and individual consumers of EPS equipment purchases in Russia Table 19: The share of consumers in the total amount of EPS equipment purchases in Russia Table 20: Distribution of interview data, assessing the volume of the Russian EPS market Table 21: Distribution of answers, assessing the volume of the Russian EPS market Table 22: Total amount that consumers pay for security projects Table 23: Consumer experts recalculating experts No. 1 s data Table 24: Types of security equipment not included in the research Table 25: EPS equipment purchases by industry Table 26: Sectors of trading networks in which the consumer experts work Table 27: Answers from consumer experts as to how much of the retail budget goes toward EPS systems and physical guard services Russia Security Market Report 8 List of Tables

9 Table 28: Budget for EPS and physical guard services Table 29: Physical and technical security expenses at retail stores Table 30: Distribution of expenses on technical security devices Table 31: Russian video surveillance companies, products, brands Table 32: International video surveillance companies operating in Russia Table 33: Russian physical access control systems companies, products, brands Table 34: International physical access control systems companies operating in Russia Table 35: Russian burglar alarm companies, products, brands Table 36: International burglar alarm companies operating in Russia Table 37: russian fire alarm companies, products, brands Table 38: International companies doing business in Russia Table 39: Economic figures on Russia Table 40: Socio-economic situation in various Russian regions Table 41: Major economic areas Table 42: Price indexes Table 43: Population s income level in Table 44: Unemployment rate Table 45: Number of registered criminal offenses Table 46: Largest increase or decrease in registered crime Table 47: Rates of registered crime, as per specific offense descriptions Table 48: Russian compulsory certification systems applicable to the safety/security sector Table 49: Federal executive authorities responsible for licensing of specific activity lines pertaining to the safety/security sector Table 50: Major companies with share in Gazprom Table 51: Regions with the highest average residential building construction costs Table 52: Residential building construction in Russian constituent entities Russia Security Market Report 9 List of Tables

10 Executive Summary Russian economic growth and its impending entry into World Trade Organization (WTO) are all good signs for businesses that plan to open in Russia, including electronic security companies. Russia is currently the world s eleventh largest economy, according to the World Bank. It has been growing at a rate of approximately 7% annually since the financial crisis of Last year, the economy broke through the trillion dollar mark. Initially driven by the worldwide rise in oil prices, increased consumer demand has played a larger role in economic growth for the past five years. A 2007 survey of the Russian population revealed that 80% of Russia s 140 million residents consider themselves middle class. Personal income grew by 14% in 2007, which has increased the buying power of Russian consumers, including consumers of electronic security. Russia s long delayed entry into the WTO could be realized this year as many of the barriers are being worked out. Talks with the US and the EU on agricultural subsidies and intellectual property rights are ongoing and progress is positive. WTO accession requires Russia to liberalize foreign trade and foreign direct investment (FDI) policies. The Russian government hopes to wrap up the process to gain full membership by this summer (2008). In anticipation of WTO accession, FDI rose 70% in 2007, led by the United States, which invested $193 billion in Russia. The Security Industry Association (SIA) and the Russian Security Industry Association (RASI) are partnering on a range of new initiatives designed to enhance industry relations and build market opportunities between the two countries. As a result of a 2007 signed Memorandum of Understanding (MOU), the industry organizations agreed to release the SIA Russia Security Market Report, the first of its kind study to define and quantify this dynamic market and its short-term future growth. The report examines the markets for electronic security including access control, video surveillance, intrusion and fire detection and alarms, and perimeter control. It also profiles top vertical markets and top security players in Russia. The Russian economic environment and regulations for foreign direct investment are also discussed. The report serves as a guidebook for security companies that want to open in this market. SIA commissioned Groteck, a security market consultancy for Russia and CIS countries, to conduct the market research study for the SIA Russia Security Market Report. Groteck maintains a regularly updated database of security distributors and installers, and holds long standing relationships with major companies and players in the Russian security market. Established in 1992, Groteck has enjoyed over 15 years of successful operation and publishes more than 20 industry magazines and newspapers. Groteck conducted in-depth interviews with hundreds of electronic physical security equipment manufacturers, distributors, and integrators, government agencies and end users. The robust methodology served to define the Russian security industry and identify business opportunities in this rapidly growing market. Groteck also leveraged its internal knowledge base and utilized data from key local sources of information, such as statistical agencies, government and industry organizations to make this report comprehensive. Summary data include: In 2006, the market for electronic security (video surveillance, access control, burglar /fire alarms and perimeter control) was estimated at US$1.1 billion (1% of GDP) The growth rate from 2005 to 2006 is estimated at 15%, twice the rate of GDP In 2007, the industry is estimated to have grown 19% over 2006 to total US$1.3 billion Russia Security Market Report 10 Executive Summary

11 Share of Russian Security Market by Technology Video surveillance 35% 37% 39% Access control 25% 25% 26% Burglar/fire alarms 20% 20% 18% Perimeter control 20% 19% 18% Video Surveillance accounts for the largest share of spending and the fastest growth. In 2006, spending estimated at US$385 million By 2007, spending is projected to have grown 25% to US$481 million Major end-users are retail and financial institutions, transportation, oil & gas production and industrial facilities Digital video entered the market in 2003 on local area networks Access Control is the second fastest growing technology sector in the Russian electronic security market. In 2006, spending estimated at $US275 million By 2007, spending is projected to have grown 18% to US$325 million Major end-users are retail and financial institutions, transportation, oil & gas production and industrial facilities RFID is gaining popularity Passport requirements of US and EU push growth in biometrics Integration with network based business systems is growing Burglar and Fire alarm systems is the third ranked technology sector in the Russian electronic security market. Growth in this sector, although robust, is slowing down slightly due to saturation in the residential and retail markets In 2006, spending estimated at $US220 million By 2007, spending projected to have grown 18% to US$260 million Major end-users are residential property and small to medium businesses Must be certified by Okhrana There is a trend toward integration with access control and building systems Perimeter Control is the fourth ranked technology sector in the Russian electronic security market. Demand for perimeter control is strong, but growth is slower than other technologies. In 2006 estimated at $US209million By 2007, projected to have grown 18% to US$247 million Major end-users are the government and power production facilities Russia Security Market Report 11 Executive Summary

12 SIA s Russia Security Market Report is an instruction book for security professionals who want to enter the Russian market at any level. This report not only includes an overview of the general economic, social and business environment in Russia today, with a short term forecast, but also contains a highly detailed in-depth analysis and forecast of the market for electronic security in Russia. Quantitative methodology was used to ensure that the broadest sample of experts and end-users were interviewed for their market knowledge. In addition, the report provides detailed supplier profiles, and analyses of vertical markets. An overview of laws and regulations that apply to the security industry is also included. Whether you are already doing business in Russia, or plan to, you must read this report. Russian Security Market Segments Government Small/medium business Retail Financial *Oil/Gas *Industry *Power Production *Transportation Other commercial *Residential 0% 5% 10% 15% 20% 25% Share of electronic security market Russia Security Market Report 12 Executive Summary