December 1997

The threat of IT – Turmoil in Asia

The threat of IT

IT, or information technology, has become a major factor in the civilian world but also in the defence sector. IT improves the quality of life, things go faster, better and with lesser input.

IT means more than just the collection and dissemination of information. It encompasses the whole spectrum of everything what you can do with information. The jamming, the falsification, the manipulation, the collection, the processing, the emitting, the targetting, dissemination and so on. Information does not only play an important role in the military but also in all parts of the civilian society. The goal of IT in the defence forces is to reach a superior management of your own forces and to attain the ultimate victory as described by Sun Tzu: “vanquishing the enemy without fighting”. The decisive force multiplier of the future is therefore information. The side who possess the information dominance will most probably win the next conflict.

The giant leap forward because of the introduction of IT has also shown the achillesheel of modern society and their armed forces. IT is very susceptible to intrusions from the outside. With only limited resources you can enter IT systems and change their operation modus or even destroy it. Where as military systems are more or less protected against such intrusions, however they are certainly not invincible to intrusions, civilian systems are on the other side very easy to penetrate.

Most countries but also terrorist organisations are putting more attention into capabilities to exploit the weaknesses of the modern society. They are not only targeting military systems but especially civilian systems which are an absolute necessity like power systems, telecommunication, finance systems, sewage and water purification complexes and logistic systems which supply the necessary items to an urbanized society. If you destroy the command and control systems of modern society it will come to a standstill within a week. The same is ofcourse true for the defence forces as we have seen in the second Gulf War when the Iraqi forces were immobilized when their C3, Command, Control and Communications, systems were destroyed or jammed.

The military and especially the governments of the more developed countries are preparing themselves to fight the war on information. Several study groups have been launched to find out the weaknesses of our modern society and ways to eliminate or at least minimise the impact of IT warfare on a developed society.

This is just the beginning of a new kind of countering modern warfare. Therefore should the efforts to stay ahead in IT warfare be intensified. Study groups and firewalls to limit intrusions into IT systems are not enough. The intruders should be automatically tracked and indentified and at best active systems should be introduced to strike back at the intruder and eliminate his IT capabilities.

We should never forget that the development in the IT sector is moving ahead at an astonishing speed. And the basis of IT is knowledge which can be learned by everybody and can be moved across borders without a possibility to stop it. That is why we should continuously improve the capabilities on IT to stop rogue states and terrorist groups exploiting the possibilities of IT.

Turmoil in Asia

The Asian miracle has turned sour. The peculiarities of the Asian countries, like the protected home market, the availability of easy and cheap loans and the system of nepotism and cover ups, were the main reasons for the dramatic economic situation. After the devaluation of most of the Asian currencies and the subsequent fall of the stockmarkets all over Asia the last of the walls of Asian prowess fell down. The already stressed Korean economy and the problems in Japan were the last nail to the self esteem of Asia.

The Korean system which created in two decades the worlds tenth economy became victim of the trap they had created themselve. The Korean government builded there economic rise on a number of large companies, the Chaebols. Those chaebols were supported by a protected home market and very cheap loans to grow into global operators in a number of sectors, like steel, memory chips, electronics and cars. The already stressed markets were flooded by cheap products from Korea and the price was driven down even further. Then the devaluations of the Asian currencies destroyed the already small profit margins of the chaebols. The repayment of loans of as well the chaebols and the Korean government became increasingly difficult and finally the weakest of the chaebols had to file for bankruptcy and the government had to ask for support of the IMF.

This is a short summary of the beginning of the economic downfall in the northern Asian region. In the mean time the drop of the Nikkei, the Tokio stockmarket, under the 16.000 level forced the financial institutions in Japan to asses their position.

The Japanese financial powerhouses, or better former powerhouses, are finally coming to terms with their actual financial situation. Several institutions including the fourth largest and oldest broker, Yamaichi, went out of business. But it seems as Japan finally is introducing the necessary steps to clean up the mess after the bubble economy of the eighties bursted.

The bad loan problem has to be solved. As long this is not the case the Japanese banks will continue to feel the pressure of insolvency and they will not be able to grant loans to new enterprises which could stimulate the growth of the Japanese economy. As long as the bad loans stay on the balance sheet the Japanese economy will be in a vicious circle with only the export market as a small relieve.

The Japanese government has to open up the market and introduce harsh measurements and regulations to eliminate this problem. A number of banks will go bankrupt because of this but the survivors will emerge stronger as ever before. This is the only option to pull Japan and a great number companies out of the problems.

An economical and financial healthy Japan can than be the stimulant to push all other Asian countries to introduce the necessary steps to regulate their economies. Only after new regulations are introduced and the specific Asian “values” eliminated international investors and the national investors will be willing again to invest and re-start the economic boom. The devaluation of the currency, as happened because of the internal problems, will not suffice to solve the problems. It will promote the export on the short term but it will also destroy investment opportunities on the long term.

The investments are the pre-condition to stimulate trade and the economy. The importance of capital will only increase in the future because labor input growth is already to expensive to make an impact. There are other countries which offer cheaper labor costs than most of the Asian countries. The Asian Tigers and Tiger-cubs have to become investors into high tech and innovative production to maintain the impressive growth figures.

Asia is still a very promising region but the market has to be opened, the financial institutions regulated and the government influence minimised. This will be a guarantee to economic growth and political stability. The Pacific area can become the most important area in the next millenium but only if they can get their act together. This has nothing to do with Western values but just with a sound fiscal, economic and business policy.