
A 2007 study by the Swiss Peace Commission found there were 18,500-28,000 private security guards. The Karzai government now says there are between 30-40,000.
NATO declined to comment on the president's speech.
A Western official familiar with the negotiations said they support the president's decree. Discussions were ongoing to find a way to implement it that doesn't undermine the development and security of Afghanistan, he said. He spoke on condition of anonymity because he was not authorized to speak to the media.
Karzai tried to reassure international donors that the Afghan security forces would provide protection for large, national reconstruction projects. Military commanders say projects which help provide agricultural materials and improve infrastructure such as roads and bridges are essential to winning hearts and minds in areas that military forces have cleared of Taliban.
The U.S. Agency for International Development alone has budgeted $4.2 billion to spend this year in Afghanistan and asked for $3.7 billion next year to fund projects ranging from road and infrastructure building, hydroelectric dams, health programs and training local officials to govern.
But if no solution was available to provide security for their contractors, Karzai said, that target might not be met.
"We are going to take special security measures for those projects," he said.
Some contractors responsible for the projects had warned that the decree meant they would have to close because they would be unable to ensure their staff if they were being protected by the badly trained, poorly paid Afghan police. Companies running reconstruction projects can't legally operate in Afghanistan without insurance but insurers don't trust local security forces.
Less than 20 percent of entry-level police are literate and around 10 percent of serving police tested positive for drugs, a NATO official said in an August briefing.