Reports 2000

Index 2000

– December 2000, Mergers, Fusions and Take Overs

– November 2000, The Israeli – Palestinian dilemma

– October 2000, Islamic Fundamentalism

– September 2000, Internet Strategy

– August 2000, War in Modern Times

– July 2000, Prospects in the Middle East

– June 2000, Turmoil in Africa

– May 2000, Financial Affairs, volatility on the U.S. stock market

– April 2000, A Note on Business Management

– March 2000, Notes on the future of Warfare

– February 2000, Conflicts in the World. Part II

– January 2000, Portfolio management in the new millenium

December 2000

December 2000

Mergers, Fusions and Take Overs

Consolidation of companies

The business world has been since many years experiencing a virtual wave of mergers, fusions and take overs, friendly or hostile. Companies are consolidating into a few large players to get the assumed necessary mass to survive in an ever more hostile environment of high quality, lower prices and foreign competition..

Consolidation should deliver more room and opportunities to survive. New and more advanced products from increased research capabilities, lower costs through cheaper production methods and a larger and more efficient capacity, a larger market share, e.g. more customers, and because of the combined sales power. The consolidation should deliver many advantages which would benefit everybody, except the people who lost their positions because of the inevitable duplication of functions and the excess capacity.

Increasing shareholders value and market share are the main movers of the merger mania. The wizard word synergy also played an important role in every decision to take over or merge with another company.

All reasons how good they might have sounded before the merger did not deliver what they promised to do. On the short term some of the desired results could be met but on the longer term the vast majority looked worser after the merger.

Mergers and take overs are delicate processes which easily can go wrong as different corporate cultures clash. The two employees of each company are mostly suspicious towards eachother and sometimes even hostile. How good a proposal might have looked on paper if the people working in the company frustrate it,the new endeavor has only a small chance to succeed. The merging or fusion process has therefore to be clearly guided to reach at least some of the results which were so much desired. If a merger is succesful is largely dependent on the people management in the new company.

Guiding the process

To have all people positively supporting the new developments in a corporation they should be informed as much as possible. Only clarity will build trust in and support for the management team which is necessary to do such a demanding job.

A merger, fusion or take over will demand much from every company. It will mean big changes to the company, not only financially but also the structure will change as two have to become one. The people working for the company are likely to be most affected by the changes.

It is therefore very important to define an approach to inform the people and create some stability in the workforce. Dissatisfied employees full of rumors, working below their normal capabilities or even want to go on strike is the last thing needed in a fusion/merging process.

Divisions and units who will continue to operate in the new company in the same manner as before the fusion/merger will not be directly affected but the parts of the company which are to be fysically merged are the ones who need extra attention.

Merging and fusing is for a large part a peoples case, the size of the companies involved does not matter that much, but a new co-operation in the company will have to be created. The rules of conduct of one company can become dominant but there is always the question how the rules are used and this should be of premium concern. An environment in which the best of both is integrated and which is acceptable to the employees is what is needed. A good working environment is after all a condition to keep your best employees at the company

The fusion/merger has been started after the management, after several financial, economical and market analysis, decided what would be the new direction of the company. The new merged company should according the management deliver the best opporunities for the company. If the judicial and financial fusion/merger is completed, the actual merger of the companies will begin.

This is mostly the most difficult part as two entities will have to be melted into one.

The foundation of the restructuring is the strategy, the desired structure, defined by the management based on the analysis before and during the fusion/merging process.

To do this with as little as friction and problems as possible the following approach could be helpful to manage your employees and keep them happy.

The approach is build on the principles of doing what is necessary and on a healthy and productive co-operation between all concerned parties.

To proceed there are three steps necessary. Firstly, all existng and future positions in the company have to be identified and described in a job list. Secondly, a social contract has to be created with support of the management and the employees, e.g. their representatives. And thirdly, a placement, replacement, list has to be created about which function would be the most preferable to every person.

The job list should include all positions in the two old companies and all future positions in the new company. This to have a clear look at the old and new organisation structures and to make all positions visible to all employees. The old and new position descriptions should be made to a common standard but should include the tasks, competences, responsibilities and an indication of the wages.

The social contract should be created with the help of the management and the employees to make clear that the merger/fusion is for the good of the company and all will be responsible for the success. Another advantage is that all concerning groups can influence the structure of the new company. The main function of the social contract is to arrange who will get what position, The social contract should therefore include the goals, policies and the arbitration of the matching of employees with their new position in the company. All staff in the company should be involved in the creation of the new company. The people will not feel betrayed or left alone with a social contract. On the contrary they will feel part of the company and will do their utmost to make the merger/fusion succeed.

And finally, the placement, replacement, list. The placement list should be made by an independent commission with members from the management and employees and under the guidance of an independent chairman.

To improve the acceptance of the placement list it should work according the following four conditions. The placement list should not use the merger/fusion as an assesment instrument. As many as possible positions should be done by people who did the same thing in the old structure/company. And to be certain about a fair treatment the placement should be completed in a siuation where all assesment criteria are all known in advance. The criteria should be about suitability, quality and the wage group of each position. As many as possible employees should be placed following this procedure. One of the most important elements of the merger/fusion is to be certain that all are treatened honestly.And finally the placement, replacement, list should after completion be circled around ones or twice and evaluate to reactions and possible remarks on what could be done better of diffferent. This to put the right people at the right place and to make the people feel involved.

If the people believe in a merger/fusion and support it whole hearthely the chances for success are much larger than if they would be hesitant or even worser against the new direction. It should always be remembered a merger/fusion is more then just numbers, opportunites and capabilities, it is also about managing people and motivate them to do, to reach, just a little bit more. In the end the people are responsible for the good numbers and those great inventions and products.

November 2000

The Israeli – Palestinian dilemma

A short history

The recent explosion of violence in Gaza, on the West Bank and in some parts of Israel proper after the somewhat disputable visit of Ariel Sjaron the leader of the oppositional Likud party with an armada of police officers to the Temple mount, Al Aqsa, surprised many people in the world. The people, the world, had become used to some kind of agression and violent demonstrations in this rather volatile region but not of the intensity and scale as is and was happening this time around. On the contrary, the world still believed the peace process was more or less on track and the violence would be ended.

The eruption of violence after the visit of Sjaron, which was considered as an insult to the whole muslim community in the world, was in the first place an expression of the frustrations of the Palestinian community in the region.

The Palestinians have been promised a lot in the slowly developing peace process. A process which promised so much after decades of violence between Israel and the many Palestinian organisations. The peace process was however caught by the inertia of time and the political process of the Middle East. After a good head start the majority of the positive developments were slowed down if not nullified by the events around them. The Palestinians were granted some land and the right to establish the Palestinian Authority, PA, to administer the land under their control, Gaza and some parts of the West Bank. Events like the changes of the Israeli government after the elections, twice, and some terrorist attacks put everything to a temporary halt. These delays became more frequent and all social and economical progress was made impossible by the existing regulations like that everything had to be transported through Israel. This led to several new negotiations and a new interpretation and even re-writing of existing treaties.

In every new agreement the PA have been promised with more of the same transfer of land. This transfer of land and the sovereignity belonging to it has been in short delayed by two consecutive Israeli governments after radical elements of one of both sides tried to frustrate the peace process by an useless and senseless act of terrorist agression.

The peace process had been delayed by the above mentioned security problems and by four more contentional questions; the final status of Jerusalem, the return of the Palestinians living in the diaspora, the position of the Jewish settlements and the division of water in this water starved region.

The policy of delay, the seemingly immobile position of the Israeli government to adress the contentional questions to the satisfaction of the Palestinians and the problems with the economy of the areas under control of the PA created a lot of dissatisfaction in the population. There has been none to little progress in the last years and this made the people willing to use violence to warn and attent Israel and the world about their dissatisfaction.

The visit of Sjaron to the Temple mount was just an excuse to launch the violence against everything what was considered Israeli. The demonstrations quickly turned violent to express the dissatisfaction and this is the only way to receive the attention of the Israeli government and the world community.

As usual Israel closed, isolated, the territories under PA control and other Palestinian inhabited regions.

The conflict became even more serious as some soldiers lost the road and accidentally entered Ramallah they got victims of the dissatisfied mob. The mob simply lynched the sodiers without to much, interference, from the Palestinian police force.

The Israelis decided to react with determination against this kind of violence and called in the armed forces, the IDF. With the encirclement of the Palestinian villages with IDF armoured and infantry forces and the missile strikes of helicopters against Palestinian targets, police stations, infra-structure and other suspected buildings, the Israeli government tried to make a point that Israel would not accept the continuation of the violence.

Nevertheless, the violence, the demonstrations and the stone throwing continued without much care about the demands out of Israel to stop the violence. Which could be expected, as such a demand would be absolutely unacceptable for the Palestinians. The would not obey Israeli orders, who are in the view of many Palestinians the occupier of Palestinian land, land which 50-55 years ago belonged to them.

The renewed violence reached very quickly a status quo, as no party would be able to win. The Palestinians can not defeat the much superior Israeli army and the Israeli security forces can not pacify the region without the use of excessive force which would be politically suicidal. The former status quo, was beneficial for Israel, a slow moving peace process in which they did not need to sacrafice to much and without to much violence against Israeli interests.

In the new situation Israel was under fire, a public uprise of the Palestinians in the occupied territories Gaza and the West Bank but also problems with the Palestinians living in Israel proper. This was the first time that the socalled Arab-Israelians moved against the government and took part in the violence.

An international conference of the two belligrents with the U.S.A., Russia, Jordan and Egypt in the Egyptian city of Sharm el-Sheikh should end the unrest between the two sides. What seemed to be impossible became possible, Israel and the PA came to the agreement to end the violence and they would try to restart the peace process.

They agreed that Israel would end the isolation and Jassir Arafart would call upon his people to end the violence.

The agreement to end the hostilities, the violence, will be difficult to fulfil as it will become difficult to persuade the Palestinians to end the resistance. The majority of the Palestinians are frustrated and dissatisfied about the current situations. They feel that their situation has not improved that much and if they resist, operate, against the hated Israeli occupiers, At least they will try to make the live of Israel a little more difficult. The stone throwing and even small scale attacks against Jewish people and property will therefore continue.

There will be some differences in the intensity of the violence but it will be very difficult to put the anger back in the box. In some respects it will increase as Palestinian groups, probably of the Tanzi organisation, the Fatah military wing, started to attack Jewish settlements with gunfire. The attacks took and take not only place in the occupied territories but also in Israel, especially the suburban of Jerusalem. Especially villages which were build after the 1967 war and are thus build on confiscated Palestinian property were targeted. This fact will also complicate the negotiations in all future peace negotiations, a lot of Palestinian land has been confiscated on a rather dubious legal base, according to international standards, and Jerusalem as been enlarged through the annexation of Palestinian counties. On the other hand the violence will remain the same, stone throwing and making the movement for the Israelis difficult.

The situation have got its own dynamic as the Israeli government is compelled to react on the Palestinian violence which will encourage the Palestinians even more and as the Palestinians suffer the most casualties and because there is an increasing understanding for the Palestinian situation, they are prepared to accept casaualties. The international community will condemn the Jewish use of violence and this will put Israel in the corner of the bad boy. Every action like the closure of the Palestinian areas to starve them into submission or the cancellation of the peace talks will back fire as this will only make Israel even look worser.

The use of violence in therfore advantageous for the Palestinian case of an independent Palestinian homeland and it simply feels good. They finally can do something against the Israeli occupation. Even if they have no change to win a military conflict with Israel, the violence permits them to win politically.

To put it bluntly every stone thrown by the Palestinians is an act of legitimate resistance, if they use firearms and somebody would get hurt it is seen as a cosmetic mistake. As long as they do not use bombs, missiles, explosives, limit the number of casualties in each attack and do not attack civilian targets in Israel proper they are on the save side. Any Jewish victims on the West Bank and in Gaza are ever more considered internationally as that it should not have happened but that it is their own fault. The Palestinians are ever more portrayed as the victims in an unequal and unfair fight. The Palestinians are fighting for a right cause against the mighty Israeli army with insuffucient and less capable equipment. And this is clearly an advantage to receive international political support.

But if Israel uses force, teargas and riot police, or even worser rubber-bullets, it will be considered as the brutal suppression of the poor Palestinians. If they hurt or even kill a Palestinian it is considered as the use of excessive, unlegitimate, force, not to speak about the use of missiles and the isolation of the PA territories which is ever more seen as absolutely out of bound.

As long as the Palestinians do not use heavy weapons and large scale operations with large number of casualties against light defended Israeli targets, like Kibbutzm the Israeli security forces are very limited in their actions. All Israeli actions will be thoroughly scrutinized by the international community on their merits, and excessive violence will be immediately become public knowledge so deteriorating the Israeli international position.

The dilemma

Israel and the Palestinians are, if they like it or not, sentenced to live with eachother. Some kind of co-habitation agreement has to be created that both groups can live together in this relatively small region. Both have a legitimate claim on living over there but to find a mutual acceptable agreement about where and how to live with eachother will remain difficult. The religious claim on Jerusalem will further complicate a solution.

Israel and the Palestinians have to divide the territory to allow both people to live in the area, allow the Palestinian fugitives in the neighboring countries to return and divide Jerusalem according the border of before 1967. If the muslims are not able to control their holy places, it will always remain a potential bone of contention. These are necessities for every Palestinian leader to achieve if he or she wants to remain in power.

The Israeli government has the same kind of set of demands and worries in regard of the Palestinian question. The loss of the occupied territories and eastern Jerusalem will be considered by Israel as, first, a security problem and second a religious-politically unwanted development.

The Israeli society has a problem with security. They are constantly looking to maintain the highest standard of security for their people and a former foe living so close to the population centres of Israel seems to be unacceptable. The divison of Jerusalem will be difficult if not impossible to sell to the population as a large part of the Israeli population regards Jerusalem as their political and religious capital, which is indivisable in their understanding. Another complicating factor is the annexation of several communities around Jerusalem by which Jerusalem have become much larger than ever before. Originally Jerusalem was much more smaller, the enlargement is therefore considered as a way to confiscate more land to the advantage of the Jewish population.

The land question is very important and without some kind of fair division of the territory and the division of Jerusalem any peace is simply impossible. Maybe one could exclude Jerusalem form the negotiations if Jerusalem would become some kind of separate entity, with no relations with what ever country. A religious city governed by the communities who live in the city.

However as long as the Palestinians are considered as a threat to Israel and need to be controlled and if possible kept on distance good neighborship will be impossible and a peaceful co-habitation will remain an illusion.

The Future

As stated before the current situation is rather complicated any violence of the Palestinians is being retributed by the Israeli security forces. The Palestinians throw stones, Israel responds with tear gas and rubber-bullets, the Palestinians have a shoot out with some radical religious Kibbutz inhabitants or the Tanzi attacks some towns in Israel, the Israeli response is to close the occupied territories and to fire some missiles at police stations and other governmental institutions. Israel will most likely try to regain the initiative in the battle in the occupied territories by trying to go after the Tanzi and mind-like militias but they will be most likely be unsuccesful as these organisations do not really reprensent a clear target. The heavy handed approach with armour, infantry, artilley and air power will be unuseful against a mobile, small and light adversary who will disappear quickly after every strike.

The harder appraoch might limit the violence and clashes somewhat but they will continue and will get harder as the Palestinians have nothing to loose and can only gain something in resisting the Israeli security forces. Israel will be punished internationally by the harder treatment of the Palestinian population.

This cycle of violence can continue forever, the Israelis can not be defeated in the field but the political costs to Israel will become very high. The relations with nearly all other countries will deteriorate which in the end could be much more harmful for the Israeli society and security.

The international reactions will be limited to the freezing or elimination of the diplomatic and trade relations with Israel. The western world, with the exception of the U.S.A., will convict Israel and will reduce the relations to the absolute minimum. The Arab world, of which some countries entered for the first time diplomatic relations with Israel will end these relations, the others will increase their negative attitude against Israel.

The chance for a war will be limited as no country in the region is able, even if they would co-operate, to militarily defeat Israel. The military superiority is simply to large and a war would only damage the Arab and Palestinian political position in the current situation. The goodwill will quickly be lost. As beside the inferior military capabilities, the Arab countries, with a few radical exceptions, are also not willing to start a war because it would bring to little but will be very expensive.

A small and short military stand off is more likely between Israel and Syria about some actions in or out of Lebanon than about the Palestinian question. In this case Israel will be the most likely aggressor because they would want to punish Syria for the involvement in the Lebanese/Hizbullah activities against Israeli targets.

The Arab oil producing countries wil also not use the oil supply as a weapon to support the Palestinian case, as is demanded by some radical elements in the Palestinian and Arab world. The current high oil prices are just what the Arab countries needed after a long term of very cheap oil. They will not destroy the big revenues they now get and desparately need. And it would be a big gamble if the use of oil as a weapon would get the desired results. It would be more likely to be unproductive. The Western world does not like to be black mailed, other oil resources could be tapped, substitute products could be invented or introduced and the Arab oil producing countries need the oil income to stay in power.

Conclusion

Israel can not be defeated or to put it differently, can not be forced to accept a solution which it does not want. Militarily and internally Israel is simply to strong to be forcefully subjected to an agreement. The military superiority is organisational, technological and morally. With other words the battle order, the doctrine-strategy-tactics and the training are superior, the equipment is much more capable and finally the Iraelis are fighting in their understanding for a just cause and if they would loose Israel, they would have no other place to go. These three factors have made them much better then everything around in the region.

The Palestinians, or for that matter, the Arabs are no match for the Israelis militarily.

The Palestinians are badly armed, trained and led and lack any clear organisational and combat structure. There are many different kind of organisations in the PA with different strengths, even if all are working to reach the same goal, the different masters and policies will make a coherent attack impossible. But this weakness can be used to reach more than could be expected from such a diversified force. They could slowly undermine Israeli capabilities and create a political advantage.

Israel has proved to be not very good at assymmetrical warfare as became clear during the intifadah and during their presence in the self proclaimed secuirty zone in southern Lebanon. The unrest, demonstrations and the guerilla style of warfare, in short low intensty conflict, proved to be difficult to handle for the high intensity conflict trained Israeli defence forces. Israel could retaliate against supposed headquarters of the Hizbullah and of the PA and they can destroy the infra-structure but they were and are unable to control the activities of the Hizbullah, the Hamas, the Islamic Jihad, the Tanzim and many other small and relatively weak Arab and Palestinian organisations. Not to speak about the stone throwing youths on the streets of the occupied territories who make the live of the security apparatus very difficult.

The Hizbullah, the Hamas and now the PA make use of the weakness of Israel to combat low intensity warfare. The Israeli security forces cannot suppress this elusive enemy which take the brunt of the casualties but also wound and kill Israelis, and slowly undermine the Israeli fighting power and moral in a drawn out conflict.

Israel is politically not able to accept to many casualties and the retaliation of Israel always looks and seems to be overdone, to excessive. Thus after being internally demoralized, the international community will cause the largest damage to Israel.

The Israeli weaknesses are the political perception of Israel in the world and the difficlties to accept casualties.

The position is especially undermined by the conduct of the armed forces in the field. The Israeli weakness is fully understood by the Palestinians, they play the resistance game to get as much as political support as possible and to demoralize the IDF that much that they will overreact and make mistakes.

On the short term the Palestinian and Arab activities, low intensity warfare, will not change to much but on the longer term Israel wil be forced to find a solution to the Palestinian problem, if they do not wat to become a pariah nation and loose to much of the desparately needed international support.

October 2000

Islamic Fundamentalism

The increase of Islamic fundamentalism in South-East Asia

Islamic fundamentalism, a radical and strict implementation of the the Islamic faith and its holy book, the Koran, has become a very popular religion and has been able to attract ever more followers in the Islamic world. What started in Iran, as the religious caste under the leadership of Ayatollah Khomeini, could take over power, developed into a dynamic in which the Islamic case could spread all out over the Islamic world. With Iran as a lightning example and with active support of Iran all countries in the Arab and Islamic world saw the emergence of Islamic fundamentalistic organisations as the Islamic Brotherhood, the Jihad, Hamas and Hezbollah.

The Islamic fundamentalist organisations have in general a three tiered policy. Firstly, to attract the people for their case by providing free education, medical services, food and sometimes even employment. They give the people hope and a goal in a world, a country, which does not care about and provide to much to the people. The majority of the countries with a large number of Islamic inhabitants are run by autocratic governments which are very often incapable, corrupt, suppressive and are only very generous to their own group or clan. The Islamic fundamentalistic organisations have become that popular because they are the only charity organisation in the country who do actually something for the people, even if they have a hidden agenda, e.g. a clear political objective.

Secondly, to undermine the government by the infiltration of fundamentalistic personalities in the government hierarchy and then especially in the security apperatus, state department, treasury and regonial and local entities.

And thirdly, by which they are so much feared all around the world, by the application of violence to all kind of perceived national and international enemies. The attacks of the fundamentalistic organisations are not only aimed at the security and other kind of controlling government services but also at economic targets and all kind of persons, including foreign tourists, which might be perceived as enemies of the Islam or the achievement of their objectives.

Islamic fundamentalism has found inroads into various countries in the Middle East, Africa and in Asia. Their influence, role, differs from suppressed oppositon and often terrorist movement, influential interest group, political party to dominant ruling party. Iran and Afghanistan are examples of the last group and the Islamic Brotherhood in Egypt an example of the first.

All fundamentalistic movements have some kind of relation with eachother. There are regular meetings and they support eachother with advice, material, money, armement and men. The level of support will vary but if possible it is very intensive and large. The only exception might be the relations between Afghanistan and Iran which can be called as bad if not outright hostile. The countries are neighbors which have some differences in the interpretation and execution of the religion, call their case the right one and are after the same group of clientele.

A new and relatively underdeveloped area of interest of the Islamic movement is South-East Asia. Large groups of Islamic people live in this region who have become dissatisfied with the government and feel unfair treated by those governments. The right circumstances to promote the fundamentalistic case.

Islamic fundamentalism in South-East Asia

The Islamic religion has established itself a long time ago in South-East Asia, it has become in some countries or regions the dominating religion. The religion did not play a very important role in the live of the average South-East Asian civilian but this changed very quickly. As the economies of the South-East Asian countries deteriorated and political and social instability increased the peoples of the region remembered, re-discovered, the religion which might offer an escape from the misery which encountered them. The attraction became even stronger as the western world could be blamed for everything bad and worse happening in their region or in the world for that matter. A concept invented by and very often used by Islamic fundamentalistic organisations. The west as the evil and decadent aimed to destroy the right and good Islamic faith and people.

The Islamic people of Malaysia, Indonesia and the Philippines became more religious in the time of hardship and according the fundamentalistic conviction they could blame the world for their misery. Islamic fundamentalism offered a chance for improvement of the political, economical and social situation of the people. The return to the old rules and values has been especially beneficial for the self-esteem of the people. It could be improved and the association in a group provided a platform to receive comfort and support and to operate against the ruling government. In short it offered alternatives, leadership, support and hope for a better future.

Islamic fundamentalism have and will change Malaysia, Indonesia and the Philippines. The way it will change and what will be the implications of more fundamentalistic rule in those countries will be dependent on the level of true Islamic government, the duration of the economic hardships and the hostility between the different religions and ethnic groups in the region.

If the Islamic government is like that of Iran or Afghanistan the changes will be very large and will fuel the hostilities between the different groups. If the hostilities take to long and have caused to much hatred among the population any peaceful co-existence will become very difficult. Not to talk about the international reactions to the atrocities. It will destroy any investments into the region. Those countries would be considered as to insecure and to unreliable on the short to medium term as an investment opportunity. The consequences of Islamic fundamentalism should not be underestimated, in a worst case scenario it will destroy any chance of progress.

The Philippines

Since many years the Philippines suffer from an insurgency in the south of the country. The Islamic majority in the south of the country, Mindanao and the surrounding islands, demand more autonomy or even independence from the Philippines which is a Christian country. After an agreement was reached with at that time largest muslim organisation, the Moro National Liberation Front, another smaller but more radical muslim organisation, Moro Islamic Liberation Front, refused to join the agreement. The MILF continued to fight the government and could for some time, with the acceptance of the government during the extensive negotiations period, built their own infra-structure with several training camps in the area.

The struggle however continued during the negotiations only the intensity varied somewhat. In a near equal development the negotiations collapsed, and the fighting between the two sides increased. The government was succesful in the fight as the majority of the MILF camps could be taken over by government forces, thus severely hurting the fighting capability of the MILF. The return to the jungle was the only option for the MILF after the recent defeats. But never the less the MILF remains a force to be reckoned with. They are still capable to launch small scale operations and subsequently keep large number of forces occupied and damaging the economy of the region.

Beside the MILF there are several other organisations fighting the Philippine government. They all demand an independent Islamic home land for the muslim population and they are not willing to settle for anything less. These organisations like the Abu Sayyaf Group, most are less succesful ASG copies, are rather extreme in their conviction but they are also very criminal. The majority of their time is used by criminal activities like kidnapping. The ASG became recently very well known because of the kidnapping of several tourist from a Malysian holiday island and the large ransoms paid by Libya to liberate the hostages. One might question the Libyan sincerity as Libya has a record of supporting all kind of terrorist organisations especially if they fight the west and are of Islamic origin.

The Philippines will have a lot of problems with the dissatisfied muslim minority in the country. The majority of the muslims will feel comfortable with the autonomy they have received on Mindanao but a minority will continue fighting the government. The MILF can be controlled at some level but the ASG kind of organisations are much more difficult to defeat as the criminal activities make them very attractive to the youths in the region and their organisation structure and scale make them difficult to destroy. For every one destroyed a new one will emerge just as fast. The criminal activities of the ASG kind of organisations are much to tempting in the economical underdeveloped region of the southern Philippines were poverty and unemployment are all around.

Malaysia

The Malaysian federation is a country with an Islamic majority. The Islam is the largest religion which is having an increasing impact on the society. Elements of the Islamic law, the Sharia, have been introduced in the Malaysian legal code. This to satisfy some conservative elements in the Malaysian society but also to control the population and to limit the influence of fundamentalistic organisations.

The Asian economic crisis and the subsequent political instability of the government of dr. Mahatir bin Mohamad caused a lot of discontent in the population. The opposition in the country had been virtually suppressed by many years and Islamic fundamentalism offered in this stiuation not really an opportunity, as its major political objectives had been fulfilled by the government. The government policy of introducing Islamic rules and traditions in the society and the economic progress destroyed any real organised opposition.

The opposition could only find a home in cult like organisations like the Al-Ma’unah, the Brotherhood of Inner Power. The Al-Ma’unah is originally an organisation associated with martial arts and traditional medicine who only later and by a small group started to embrace the idea of an islamic state. The followers of the Al-Ma’unah, about 1.000 people, are from the whole Malaysian society with a majority coming from the middle class and former military people. The group is not really a political organisation and hardly a terrorist organisation. Only a small group within the Al-Ma’unah are belonging to the group who demand a political change.

This small group who demand an Islamic state are the most active oppostion in Malaysia and are suspected of doing more than just political opposition. They are certainly willing to use force to reach their goals.

These members are suspected of robbing weapons, ammunition and explosives from the Malaysian armed forces and they are allegedly willing to use them. The people who staged the largest robbery of arms in Malaysia could be apprehended very quickly after the theft but the radicalisation and the intensity of the battle at the arrest of the criminals made the government very worrisome about the threat of the Al-Ma’unah.

The activities of the majority of the opposition movements could be controlled until now but the dissatisfaction about the policy of the government increases in the society. The level of organisation is still rather rudimentary but this could change on the short term if no changes in the government are made.

The opposition and the dissatisfaction in the population is increasing and will have to be channeled otherwise it will explode right in the face of the government without that they have the opportunity to end it. The opposition organised in the Al-Ma’unah have a clear political objective and they are willing to use every method available for them. The Islamicification of the society is just part of their strategy, the organisation of the opposition and to force the current government out of power are equally important, if not more important.

The violence, instability, will most likely increase in Malaysia on the short term as the population will probably get more disappointed by the government and the opposition will become larger and more aggressive. Islamic fundamentalistic ideas will play a role in it to attract people and keep them in line. This will however automatically mean more power to the fundamentalists and a closed and intolerant society.

Indonesia

Indonesia, the most populous Islamic country in the world is experiencing several problems in the large and divided country. The Asian economic crisis has had the worst effects in Indonesia. Not only its economy, financial system and currency collapsed but also the integrity of the country has been severly undermined. Ever more ethnic groups and some regions of the country want to have more autonomy or even independence from Indonesia. The centralised state which used to run the country out of Jakarta is having ever more difficulties to control, satisfy, the peoples living outside Java.

Groups in the country, with overt and covert support of the government, are rallying against the ethnic groups in the country who demand autonomy or independence. With the use of violence, beating, raping, killing, burning and looting, the groups operate against the ethnic groups. This has been and is happening on the Moluka island group, West-Papua, Borneo, Sumatra and on Celebes.

It has become a normal procedure in Indonesia to react on problems with violence against ethnic/religious minorities. As the Asian crisis started, the ethnic Chinese were blamed and proscecuted by groups of Javanese. Soon after the Christian people from the Molukas who were living in Jakarta and on Java were targeted.

As the problems in the outer regions, Molukas, Celebes, Sumatra, Borneo, West-Papua and on East-Timor, became more present and active, the reaction was the same. The Javanese, Muslims, who migrated to the outer regions, or for that matter neighboring islands, started to terrorise the regions in an effort to stop the autonomy/independence ideas. These groups were later reinfoced with people from Java to increase the strength and fighting power of the groups in defeating the autonomy/independence movements.

The Islam was and is increasingly used as a weapon against the ethnic minorities in the regions who demand autonomy or independence. This support for these groups became only possible as the Indonesian society could become more fundamentalistic.

The crisis caused a lot of poverty in Indonesia which offered a fertile ground for the fundamentalistic Islamic organisations who became ever more radical. By putting the blame for the crisis at foreign organisations and countries, like the financial institutions and the U.S.A., the Indonesian Islamic organisations quickly found friends with other fundamentalistic organisations in the world.

The Indonesian politics and society, at least the Javanese and the muslim communities throughout the country, could become ever more fundamentalistic. The Islam will provide a bound between the muslims and an instrument to maintain as much power as possible for the current political hierarchy and system.

The Indonesian fundamentalists are not the fundamentalists as we know them out of the Middle East or Afghanistan, they are dressed and behave like the average Indonesian, Javanese. But their retoric and policies are just like that of the Islamic Brotherhod or the Iranian mullahs.

Other ethnic and religious groups will most likely have not a bright future on the short to medium term in Indonesia. They pose a to big threat the current power structure in Indonesia. The larger groups/islands could eventually get their way as they are to far away, geographically, or are to large as a group. But the smaller groups and islands will not stand a chance against the agression of the fundamentalistic organisations.

Indonesia still believes it can control the Islamic fundementalistic organisations, who are doing the dirty work for them, but they will proof to be wrong. The power, influence and stamina of the Islamic organisations will be stronger and more effective then anticipated. They will demand a reward and they will most likely get it as the popular support for these organisations will most likely increase. They deliver hope and an opportunity to improve the lives of the ordinary citizens and they actually did something, something the politicians could not do.

The Islamic fundamentalistic organisations slowly undermine the government structure of Indonesia which is very complicated and dependent on personal relations. This complicated structure gives the fundamentalists a perfect opportunity to manipulate all people of influence and execute their policy. The Islamification of the country with all territories of Indonesia firmly under central control, e.g. the rule of Islamic Jakarta.

If the current politicians do not act immediately to end the violence with all means available, if they do not pacify the outer regions with acceptable agreements to all concerning parties, if they do not initiate programs to stimulate the economy to create some progress for all groups in all parts of Indonesia and if they do not put the country’s interest above party politics the Islamic fundamentalist organisations will get ever more influence and a take over of power will then be inevitable.

September 2000

Internet Strategy

The Internet

The internet, a new medium to use and to improve the efficacy and communication in a company. The internet can further be beneficial to reach customers and new prospects. The internet is a relatively new technology which gained in the last three years considerable attention and is predicted as the new revolution in the world, on par with the invention of the steammachine, the electric light and the combustion engine. The internet is and will do a lot of things and if it is of the same importance as other great inventions will have to be seen. The internet is a new technology with the ability to greatly improve the communication in the world. This is the major advantage of the internet. The internet will give everybody the opportunity to reach other parties with an unprecedented speed and if done right with great accuracy.

The difficulty with the internet, as with all new technologies / inventions, is what can the internet do actually for the world. This has to be discovered before any larger investments have been made in internet activities. As using the internet is certainly not cheap, larger investments in technology, people and marketing wil be necessary before the intenet will behave as expected.

For every new application a new vision and strategy will have to be developed. To develop the right internet strategy the next questions have to be answered. What do you want to reach and who are the customers / users of your internet site. These two answers decide which and what kind of technology and design is necessary to make a venture into the world of internet a success.

Strategy

The right strategy of your operation determines the success of your operation. Every move in the virtual world has to be focussed on the target group otherways the message you want to spread with your site will be lost in the ocean of information now available on the internet.

The strategy will determine what, when, how and how to implement the advantages of the internet. Strategy is essentially how to manage the resources in a company and how to anticipate on future developments and demands.

The internet strategy is dependent on what is your objective and who is targeted. The objective might be to inform your customers or your staff about the products and ventures of your company. Something like a brochure of your products or to inform your staff about company policies and new projects and/or targets which have to be reached. The internet will be in this situation like an information channel which can be active or passive. Just what is demanded by the management. Or finally the internet as a division / part of the company. The company will in this case offer the internet related services to the market and earn something through the services delivered and the value of the internet as a business and investment opportunity

The internet as information site for customers

The most commonly used way of the internet is like a medium to inform people about the company. The internet was originally designed as a communication system to improve the communication between actors. The internet was therefore at first mostly used by a company as a kind of product brochure. Companies gave and give a presentation of the company, the products and how to reach the company, e.g. the sales department. As the internet is available to large groups of people it is an efficient and relatively cheap marketing instrument.

The target of this kind of site are the existing customers, to give them an up to date view of the company, and to attract new customers who are looking for products offered by the company. The potential customers can be directed to the company’s site by conventional marketing campains or by a premium treatment of the search machines who can direct people to particular sites.

An internet site can also be used to publish financial, sales and product information of a company. This will give all investors the equal opportunity to get informed about the company and avoid of being accused of treating some groups of investors better as the general public.

The internet as comunication channel within a company

The second and increasingly used method of the internet is like a LAN or WAN, respectively a Local Area Network or Wide Area Network. Especially larger companies can use the internet as a communication medium to improve the communication within a company. All employees in a company can create new relationships with people in a different divison in another town or continent for that matter through the use of a LAN of WAN. The quality of such a realtionship can be equal if they would be working door to door.

The LAN or WAN can be used to transfer information/data to all people working in a company or there can be an active exchange of information and ideas between several departments. It is possible to have several Research and Development departments on different continents to work together. New and better products can be developed by the combined power of the R+D departments of a company.

Who is receiving what information and who is allowed into what databank can be perfectly be controlled and arranged. Protocols and passwords can be used allow people into a file or allow them to look into the computer, hard disk, of fellow project members.

The internet as buying and selling instrument

The internet as mentioned before can be perfectly used as an instrument to improve the efficacy of the procurement and sales departments. The procurement of products can be handled by the internet, it will give suppliers the opportunity to know what is wanted when and at what price. This will give them the opportunity to offer the right product at the right price and at a predictable delivery schedule. Another advantage of internet procurement or sales is that the suppliers and buyers can combine the supply and demand therefore they will be able to generate a larger order andthey will be able to get a better price.

The sales department can also achieve big improvements by an internet sales channel. The service to customers can be improved and potential new customers can be reached more freely and more open by the use of the internet.

But again your objective should be clear, what do you want to sell and what are your objectives about selling the product. What place do you want to occupy in the market. There are roughly three types, the seller’s market, the buyer’s market and the neutral market.

The seller’s market is dominated by the seller, the company can use its advantages it normally enjoys in the real market to his benefit. Product information, price, quality and delivery can be decided by the seller. The internet site has only to be practical and beneficial to the seller. The information on the site is written and edited by the producer/seller. The real story might be somewhat different from what can be seen on the site. The site is an extension of the company and very often found by companies who have a direct seals channnel.

The buyer’s market is different as the buyer is like in the real world having an advantage over the seller. The buyer can choose between several products. Product information, price, quality, service and quick delivery will become important. The internet site has to be practical for the buyer, easy to use and inviting to come again.

This will mean an advanced very good looking site. The site has to be interactive to fulfil all needs and wishes of the buyer and it has to remember preferences of the buyer. Most buyers like it to be treated specially and be taken immediately to the part of the site which interests them most. The information on the site is much closer to the truth as the buyer is able to influence the site, he can even write his own recommendation about a product without any interference of the seller/producer. This site is closer to the customer as he needs to be treated with care. This kind of site is often found at a reseller’s site, this site just wants to sell a product and as he has more products on sale it is not that important what product is sold as long as a product is sold.

The neutral market is the most difficult. Nor buyers nor sellers are able to dominate the market. This will mean that the site has to be convincing and practical but with not the same level of service as the buyer’s market. The site will however be very fair about the products as it is not allied to a certain producer nor a customer. The disadvantage of a neutral site is that not always the best products and prices are available nor will they become available on the short term as it is not seen as the task of the site to improve the product. This kind of site will be mostly found at sites of government, consumer advisory organisations or at the sites of large multi-product sales companies.

The internet operation in a company

The internet is not only beneficial to a company to exchange information or to sell products but it can also generate additional capital for a company. The question here is what to do with the new internet division. Essentially the internet operation is a new part of the company which will most likely have outgrown its origin, just as an addition to the sales and marketing departments, and will need very often more capital than the company is able or willing to finance with company resources.

There are three options to play the internet. The internet operation as an independent company, as a joint venture or as a consolidated division.

The parts of the company responsible for the internet operations, design, management, sales and procurement, will be taken together, in sofar they are not already belonging to the same department, and will be set up as an entity of its own. The indepence of the entity will have to be decided considering the position of the company in general.

As mentioned before the new entity can be constructed as an independent company with only a minority ownership wich will be rendering services to the former holding company. As a joint venture, the new entity is only partly owned and managed by the holding company. It will be very often merged with another internetcompany which has some services/skills on offer which previously were not present in the company. The joint venture will remain a big supplier to the former holding company. Or finally the internet entity remains a part of the holding company as a consolidated division. The consolidated division will be under direct control of the company’s management and directly delivering a share to the company’s balance sheet. Where as the other two options wil only be listed as a participation and only become visible if there are any profits.

All have their advantages, an independent company is the less risky and will if the IPO, Initial Public Offering, is done properly the most beneficial as it will generate a lot of immediate available capital and value for the holding company.

The joint venture has its own advantages as the risks will be controllable as any losses will not drain the profits of the former holding company, if a service can not be delivered you are free to look somewhere else, new technologies can be incorporated and finally it is still able to deliver a nice return.

The consolidated division is the most controllable, the activities can be focussed on the holding company but it can be the most expensive in regard of the investments and will deliver a lower return on investments as it is closely connected to the holding company, it willhave however lesser sales opportunities and there will not be any high return as the entity will remain part of the holding company.

All have their advantages and disadvantages, it will depend on the holding company which alternative to choose. The most important factor to the decision is in what business you are and what are the immediate needs and expectations of the holding company. For example if the internet activities have become an important part of your sales system, it is profitable, or will be on the short term, and if the company is not in a desparate need for capital, the internet activities can be best kept as a consolidated division. But if certain technologies are needed and the company does not have the skills to develop it in house and/or the financial position is weak, a joint venture would be the best choice. And finally if the internet activities are considered as a nice to have and are not an important part, or better non-replacable part, of the company and the holding company is in need of capital or wants to improve its figures and the internet activities are large enough the spin off of the internet activities in an independent company would be the best choice.

The decision about how and when to use the internet is of strategic importance for a company. It is necessary to have some kind of internet application for every company but every company does not need an advanced internet site or a fully utilized internet department, this all will depend on the specific situation of every individual company. It is however necessary to be aware of the situation and what is possible as some kind of internet stragegy, game plan, is unavoidable.

August 2000

War in Modern Times

War has changed in recent times. The causes of war, the nature of war and the way to fight a war have changed. This demands a different approach how to execute military operations in a war or a war-like situation. The new approach will differ in some parts from the old way, especially with respect to the scale of the conflict and the task of the politicians who want or feel compelled to become involved in a conflict. The modern conflict is a conflict, mostly internal between two or more factions including the government or more rarely between two countries, with very often a bad guy who is breaking all rules of civilian conduct and who has the bad luck not to possess some valuable resources or weapons of mass destruction with the appropriate means of delivery and in short he or she for that matter receives the world’s attention. This bad guy, the enemy/opponent, has to be stopped as his behaviour or the conflict he is involved in is considered as unwanted and needs to be ended. One or more nations feel the need and have the wilingness to end the conflict, thus become involved. It is therefore of the utmost importance that the interfering nations will not make the same mistakes which have lengthened previous conflicts. A new approach to war and how to deal with all the involved parties is therefore necessary.

The difficulties in the last wars, or better substitution conflicts, between the superpowers and their clientele and the problems of governments with rather agressive opposition movements are known and have been very well docmented.

In nearly all events the actors, governments, have tried to solve their problems with the use of military forces. As the first strategy and tactics failed to reach the wanted results, another strategy and tactics was chosen. But with the change of tactics or even strategy one might question if a different military tactic, strategy, would have solved the problem adequately. History learned us that the problems could not be solved by a change of strategy or tactic. On the contrary it can even be stated that if the majority of conflicts were handled more carefully, dealing with all factors of conflict, most of the conflicts could have ended much sooner and at more favorable conditions. And this will be even more valid in the conflicts of our time.

Wars/conflicts can only be partly solved by a military operation. The military will play a central role in ending a conflict but the entire environment, political, social, economical geographical and ofcourse militarily, around an operation will have to be considered. It will demand a wider scope beside a careful preparation and the proper execution of the military operation to end a conflict. The military is only part of the solution and without the right pre-conditions and political support conflicts tend to become messy and longer then needed.

The pre-conditon for success in military operations

Strategy and tactics are part of the solution, the right strategy has to be applied and the units have to use the right tactics to defeat the opponent but this will not bring a final solution as long as the fight is put in a box which clearly limits the winning capabilities of the security forces. All battles, wars and conflicts were very often confined to a politically determined space, geography. This has undoubtly the advantage that it will put clear limits on the scope of the conflict, preventing it from widening, or the escalation into a conflict between several states, but at the same time it delivers an opportunity to get support and thus lengthening the conflict. The creation of the so-called no-go areas, sanctuaries, will also not solve the conflict, it will only make the conflict harder to end and will in the end cost more casualties.

Wars, conflicts and battles are complex operations with many inputs, outputs and interdepencies. A major factor in all have been supplies, logistics, as all forces fight on support. This support can come from the logistical train, home industries or allies.

If an enemy has to be defeated its logstical support should be eliminated,thereby limiting its fighting capabilities.

Consequently it should be clear to all sides in the conflict, especially to the allies of the bad guy, that any support to the “enemy/opponent” will not be tolerated. Political, moral, support could eventually be tolerated but any material support to the parties involved in the conflict should be considered as hostile and should be ended with all available means, even if this would mean to widen the conflict.

The situation has changed dramatically since the demise of the Soviet Union which made it necessary to contain conflicts. Presently if the situation would demand it a widening of the conflict to end the support to the enemy/opponent would be preferable if not an obligation. As the support of other countries, the socalled allies/friends, could be dangerous to the success of an operation. A nation possesses nearly unlimited resources to help the enemy/opponent thereby lengthening the conflict and increasing your losses and giving the enemy the opportunity to weaken your fighting power and finding out your weaknesses and increasing his changes for success.

No conflict can be considered as an isolated incident, it is in the majority of cases a conflict between two dominant parties with at least two levels of supporters. The supporters who support a case politically and the supporters who not only deliver political support but also material support and it will grant basing rights. This will offer the enemy not only a headquarter, planning and organisational base but also a political stage to support their cause and direct political, media and military, terrorist, operations against the legitimate government, party. The first might be considered as a lesser evil the second will become an outright threat to the survival, success, of every operation.

Future military operations should be kept preferably limited in numbers and geography but above all it should be kept isolated from outside support. The contradiction of limitation and isolation is sometimes difficult to take as it is mostly a key objective to keep the conflict small and controllable. As if small conflicts are more easy to control.

The policy of isolation might in some situations enlarge a conflict instead of limiting it. As it could be necessary to attack the supporters of the opponent, the bad guy, with all means available to stop the support. This will immediately receive much political opposition as small and controllable is the normal concept. This concept will however only create a false sense of control, small is controllable is an illusion. On the contrary, it might be harder to end a small conflict as there are no large interests at stake and a solution is supposedly always around at the next corner. Unfortunately people tend to take the wrong corner and the conflict drags on.

If you are really willing to end conflicts all support must be ended as soon as possible this will limit the fighting ability and capability of the warring factions or the opponent, the bad gay. The isolation policy is therefore of a higher importance then limitation.

The execution of military operations

Future military operations demand after the preparations and the execution of isolation operations, surprise, swiftness and lethality. And ofcourse the operation has to be planned, at best, in total security. The enemy has to be kept as long as possible in the dark of any possible operation against his country. This to facilitate the success of the next two points which are more or less connected to eachother.

Surprise remains an important asset as it will get the opponent’s forces at the barracks or least not dispersed around the country side.

Swiftness is important as the operation has to be executed with speed to increase the effectivety and to limit the losses of your own forces. Your objectives have to be reached as fast as possible to minimise the chance of attrition warfare and a drawn-out conflict.

Lethality has to be achieved by pin-pointed attacks against concentrations of forces, logistic bases and infra-structures and the main traffic nodes in the country through the use of advanced precision guided munitions. Civilian casualties, collateral damage, have to be avoided as long as it does not infringe with the military objectives.

The potential targets have to be selected in advance through the use of national recconnaisance assets and humint intelligence from the region and ofcourse through the correct interpretation of the intelligence. The gathering, processing and the circulation of intelligence and the preparations of the important isolaton and informaton.measurements is just as important as the actual operation, the deploymoent of forces. The success of the operation depends on the preparations, the operation itself should be seen as a rehearsal.

The combination of surprise, swiftness and lethality should place your forces in the advantageous position of air and ground dominance. In this situation of absolute dominance the forces should be able to eliminate the enemy before it can deploy, reach their objectives or disperse in the country side. If the enemy can disperse it will become much more difficult to defeat it and making a fast execution of the operation very unlikely. Any delay in the elimination of the enemy will increase their chance on survival and success to withstand the attacking forces. Time will be advantageous for the enemy/opponent as it will increase your own losses, make attrition more likely and will allow the enemy to gather support, thus returning to the point of isolation. Any support should be at best be impossible. Outside support will not only deliver direct support but just as importantly it will motivate the enemy to continue and keep on fighting. The isolation measurements in advance will if the actual operation would take longer than planned make a succesful operation more likely as the stamina of the enemy will be limited or at least weakened.

A final note

This in someways harder and more ruthless kind of warfare has to be supported by the government which is willing or is being compelled to use military forces to solve a conflict. Political support is important as it this will motivate the armed forces to execute the operation flawlessy and without any hesitation.

The government has in turn to convince the public about the legitimacy of the operation. The public has to be informed properly and honestly about the why, how and what of a conflict from the start. If the public is comprehensively informed they will accept and even support the measures taken but do not leave them in the dark under the guise of national security or because of not endangering operations. This will make the people speculate and think the worst of it and subsequently demand an end to the involvement. Information has become a fluid and very fast commodity which can be easily manipulated in our days of global communication technologies like the world wide web and mobile phones. Use the information and the technological capabilities to your advantage and do not leave this to the other side. Thus make the people aware of what is at stake and about the fact that war is cruel and destructive but sometimes necessary. War is a nasty business and it will be impossible to make a war as clean as often is demanded by the media. The best way to limit wars is to execute the military operations as fast as possible and reach a decisive victory. Nobody will gain something from an indecisive end as this will only create new conflicts on the short to medium term. And the renewed conflict will be very often more vicious and more difficult to end.

July 2000

July 2000

Prospects in the Middle East

Relations between Syria and Israel

The political relations between Syria and Israel have been focused on territory and on a totally out of control enemy perception understanding. The territorial dispute is based on the fact that Israel is illegally occupying Syrian territory, the Golan heights and that it had occupied a security zone in Lebanon for nearly two decades.

The enemy perception of both countries is much more diffuse as it can only partly traced back to facts, the majority of the perception is psychology, history and imaginative. The Syrian enemy perception is based on the historical battle between the good Arab/Islam and the bad Jewish/crusader contradiction. And on the idea that the young Israeli nation robbed Arab land, suppressed and extradited the Arab population and they continue to expand and behave rather aggressively.

The Israeli enemy perception is just as paranoid as it uses to consider every move of the other side as a conspiration against the existence of Israel. As Syria is allegedly not willing to accept Israel as an equal neighbor, it is and ally of Iran, it is supporting Islamic fundamentalism and through its influence in Lebanon it allowed the Hizbullah to operate freely against the Israeli Defence Force and its allies of the South Lebanese Army. The IDF and SLA were operating in the former security zone in Lebanon to protect Israel from infiltration and missile attacks out of the north.

The security zone in Lebanon has now been eliminated by Israel just as the current prime-minister, Ehud Barak, promised to do so as he was elected. The withdrawal was however not an organised affair in the sense of a negotiated withdrawal. It was an unilateral affair, Israel wanted to limit, end, the casualties in Lebanon which seemed to increase every year as the IDF and SLA were sitting ducks in the attacks of the elusive Hizbullah. The Hizbullah gained the initiative in the fight about southern Lebanon were as the IDF and SLA were forced on the defensive and were limited to patrol the region to show presence and to react out of their strenghtened positions and incur losses during the very well planned Hizbullah ambushes, attacks and mines/boobytraps.

The much heralded peace process which should solve all problems between Syria and Lebanon on one side and Israel on the other side was weakened by the several seperate agreements of Israel and its hostile neighbors and it collapsed after a draft agreement leaked to the press and this compromised the position of Hafez al-Assad who considered himself as the protector of the Arabs and the man who would not sacrifice the Arab case like Egypt, Sadat, Jordan, Hussein, and the PLO, Arafat, had done to reach a peace agreement with Israel. Assad wanted an Arab all encompassing agreement agreed between equals without any sweeteners to facilitate some kind of compromise to the sole advantage of Israel. The collapse of the peace process was therefore not about facts but about procedures. Very simplified, Israel should first withdraw, or show the intention to do so, before Syria could negotiate directly and seriously and accept any peace treaty. The leakage made Assad look like exchanging the Golan for peace something he refused to do.

The relations with Syria seemed to be in a stalemate as no side was able nor willing to give up something. The recent dead of the lion of Damascus, the long sitting president of Syria, Hafez al-Assad, could bring some changes to the relations between the long time foes.

Changes in Syria

The relations between Israel and Syria were heavily influenced by the person of Hafez al-Assad. As the longest sitting president in the region, Assad was present at all developments between the two countries. And the military success of Israel in the three wars against Syria made Assad very suspicious to Israeli proposals to promote peace in the region. Everything short of an unconditional total return of the Golan heights was unacceptable for Syria. The return should therefor happen before a peace treaty could be completed. The Golan is Syrian territory so exchanging your own property for something in return is like a cigar out of your own cigarbox. A compromise with regard to the time table or giving Israel larger parts of the Golan would be unacceptable.

The dead of Assad could eventually change the situation as his successor could and would be more open to a compromise on the timetable and even to some overdone Israeli security concerns.

Immediately after the dead of Assad it was decided by the political elite in the country, the topbrass of the Baath party, to nominate Hafez al-Assad’s son, Bashar al-Assad, as the new president. As the continuity and the positions of the party could be protected best with Bashar as president. And after all it was the wish of Hafez al-Assad

The parliament supported the choice of the Baath party and in turn voted that the age to be eligible as president was to be lowered from 40 to 34, the age of Bashar. The parliament nominated Bashar for the same reasons as the Baath party, continuity and the preservation of stability.

The people of Syria will most likely support the election of Bashar as the new president as Assad is at the moment quite popular in the country and they will like to fulfil Assad’s last wish to have Bashar as president. The referendum in the second week of July 2000 will endorse the choice of Bashar al-Assad. The people of Syria are thereby moderate in their wishes as they want economic progress and a little more freedom like a more liberal press and the access to the World Wide Web. And they assume, Bashar as a young and educated men will most probably fulfil their demands.

The biggest opposition against Bashar will come form the Islamic-Sunnite fundamentalists, a militant opposition movement who demand a new start and the end of the authoritarian Baath regime. The militants have been harshly suppressed with a culmination in 1982 when approximately 20.000 got killed after an uprise against the Assad government. In 1982 they failed as Assad could rely on his security forces. Bashar on the other hand is more vulnerable as he still has to receive the loyalty of the armed and security forces. But it will be very unlikely that they would support the militants as they will pose an equal threat to the security forces as to Bashar.

Another big threat to the newly elected president is the claim of Rifaat al-Assad, his uncle and brother of Hafez, to the presidency. Rifaat tried to take over power in 1983 after which he has been exiled in Marbella, Spain. Rifaat considers himself as the most able to become president and he might still have some friends in the country. But the influence should not be overestimated as most friendships and alliances will not survive 17 years of exile and out of power/influence. The lack of support became evidently as the security forces claimed that they will arrest Rifaat if he would show up in Syria.

Finally, the most immediate threat to Bashar are the armed and security forces. Some general might like to do what Hafez al-Assad did and take over power. Bashar, not a military man by trade, is dependent on the goodwill of the armed and security forces to stay in power. The position of Bashar is somewhat saver because of the economical problems, the negative international impact of coup d’etat by the military and the acceptance of the military of Bashar as an acceptable alternative with no strong links to no side and with no ambitions to become involved in the armed forces..

The policy of Bashar will therefore be centred first on the consolidation of his position. Create alliances in the administration, Baath party and with the all important military and security apparatus. Secondly, improve the economy of the country and satisfy some demands out of the population, like a little bit more freedom. And only on the third place Bashar will move outside and will talk about stability in the region.

Any speculation about Bashar or his policy because he is someone new in the region with fresh ideas like the kings of Jordan and Morocco should be very careful. It is correct thay they are all high educated young men without being brought up of the old connections/hierarchy system, until now free of to the old bad habits and no direct involvement in old nasty conflicts. They are young, are not compromised by history and are highly educated but the leaders of Jordan and Morocco are much more powerful in creating a new policy. Bashar is contrarily much more dependent on allies in the administration, Baath party and the military. Bashar can be more open to new ideas, compromises, in negotiations but in the end he is dependent on the approval of his sponsors in the old hierarchy. This will limit any new and changing policy in the Middle East political constellation.

The impact on the region

The situation in the region, Syria, Lebanon and Israel, will not experience big changes on the short term. The impact of the change of power in Syria will only become visible if certain conditions in Syria will be fulfilled and at best become visible on the medium term.

The first and most important condition for change will be the survival of Bashar al-Assad as president of Syria. Secondly Bashar should be able to implement economic reforms, create progress and a liberalisation of the society. This should put him in a strong position to enforce the foreign policy we all expect from him. Namely to put Syria on the chart as a sensible country with the aim to reach a peace agreement with Israel and help the region to achieve political, economical and social progress. This idea might be however a little bit to much wish thinking.

Political reality will force Syria, Bashar, to small internal changes to reach eventually even smaller changes in Syria’s foreign policy. Bashar will most likely be able to become and stay president but a fast agreement with its neighbours and essentially at the expense of Syria will be out he question. The influence of Hafez al-Assad and the still large influence of the Baath party and military will only allow small deviations from the Hafez al-Assad designed peace plan. The return of the Golan heights might eventually be part of the peace treaty instead of a condition before the peace treaty. But any more compromises will be very difficult to gain from Syria.

The virtual stand still between Israel en Syria will only change slowly. But Syria and Israel will come closer together in the coming two years. The path towards cooperation will be an uphill and slow one. It will take patience and stamina from both sides to continue the peace process. The expectations are high and both sides want to maximise the results in all negotiations to satisfy the demands out of both countries. Israel wants security, the right to keep some Kibbutzim on the Golan and most of the water. Syria wants the return of the Golan heights according to the borders of 1967 when they lost them to Israel. Syria wants to Golan back without to many, to none, conditions. Essentially, this has been more or less accepted in negotiations with Israeli officials but political pressure out of Israel forced Israel to demand some additional rights and territory. A compromise is certainly possible but it has to be sweetened to be acceptable to both sides.

The instability in Lebanon will most likely lessen after Israel left the country. There will be some differences about the exact border demarcation and some attacks from the Hizbullah but now Israel is able to respond better to any attack. And the Hizbullah will be much less effective because they lost their striking power. The Hizbullah lost the territorial advantage and the initiative both very important in fighting a much stronger foe. The problems, border demarcation, in Lebanon are thereby now better suited to be ended by negotiations. The international dimension, Syria’s and Iran influence, has been eliminated making it a problem between two countries so much more controllable.

The influence of Syria, including the Syrian armed forces in Lebanon, will also become lesser as Lebanon, especially the Lebanese population, is getting enough of the Syrians in the country. Israel has already withdrawn thus eliminating the main reason for Syria to be around and more importantly the Syrian population is getting enough from the deployment in Lebanon as being stationed there is more dangerous and very expensive. Socio-economic pressures will force the Syrian government to evaluate the deployment in Lebanon.

The region will become a little bit more safe on the medium term as the political differences are replaced by social and economical questions which are finally receiving more attention. The new leaders of the region are more or less forced to change their policies, the long term dominating security/military policy has become to expensive and socio-economic problems are increasing. The change of policy has become more urgent as the political motivated support from the now disfunct Soviet Union had ended. This meant all military expenses were now for their own account, and no friendship prices, all products and services only against hard currencies. The countries, especially Syria, have to spend more on defence to maintain existing capabilities but the costs have become higher, the revenues lower and the socio-economic demands larger, ergo, change your policy before you will go bankrupt, be forced to change your policy or being put out of office.

So the new leaders will most likely adress the new problems and have the advantage that they are not inhibited by the old contradictions which led to several wars and conflicts in the recent history of the region. A negotiated solution to all existing problems seems to be very likely but these negotiations will take some time and all negotiating skills will be used, including threats and walk-outs, to improve the situation. The road towards more stability and cooperation is however entered and a return will be ever more difficult.

June 2000

June 2000

Turmoil in Africa

Inter-State Conflicts in Africa

The African continent has received many names in its history, ones upon a time it was some kind of paradise, the promised land, but this is a long time ago. Only the tourist guides and the travel agents continued to sell the African continent as a paradise as it is if you talk about the beautiful nature and landscape.

The continent is however a political, economical and social nightmare. The majority of the countries are ruled by autoritarian regimes and human rights or democracy are being regarded as western cultural imperialism. The economy is weak as it is at a virtual standstill, it is dependent on mono-cultures and to make things really worse it is being robbed by government officials. The social picture looks just as bleak, the people live in poverty at best but very often they are close to starvation and infected by or under threat of many dangerous diseases like Aids, TBC or even the Ebola virus.

The majority of the African states came into existence after the decolonisation drives after the second world war. The majority of the areas, territories, were economically and socially in a relative good shape. The agri-cultural output and the abundance of all kind of resources delivered a steady revenue. On the negative side, the people of the continent were somewhat behind in education and industrialisation but there was at least food and some kind of work for all. In general the perspectives were promising.

Only politically the continent was underdeveloped, only some were higher educated but all were still divided in the former clan, tribe, people, structure of the continent. The loyalty belonged to the tribe not the country. The country was considered as a mean to improve the position of the tribe and personal wealth. And this was the road to corruption, nepotism, self enrichment, suppression of the opposition who mostly happened to belong to another tribe/clan and coup d’etats.

The economically and socially promising former colonies of Great Britain and France were given independence even as most people considered it to early. Politically they were simply to immature and there were to many different groups, tribes, in one country. This was firstly ventilated by former field-marschall Montegomery who stated after a field trip to Africa that the continent was far from being able to govern themselves. Regrettably his words proved to be right. Thirty to fourty years after independence, Africa was called the dark continent or the lost continent.

Many conflicts and wars have passed by on the continent and anno 2000 several conflict are still going on. The African continent is the only area with more than one inter-state conflicts and in nearly every country some kind of intra-state conflict. To name a few Algeria, Sierra Leone, Senegal, Nigeria-Cameroun, Sudan, the Democratic Republic of Congo, the People’s Republic of Congo, Somalia, Ethiopia-Eritrea, Uganda, Rwanda, Burundi, Angola, Namibia and Zambia. The scale and intensity may vary by country and time but the consequences tend to be devastating for the civilian population.

Inter-State vs. Intra-State

The conflicts can be divided into inter-state and intra-state conflicts with the latter the most common. Inter-state conflicts are conflicts between two or more countries and intra-state conflicts are conflicts within a country between two or more groups, mostly between the sitting government and an opposition group which has been suppressed and moved underground to fight the government.

Intra-state conflicts are the most terrible as it is some kind of civil war. Atrocities and the ruthless suppression of any kind of deviation from the government or for that matter opposition political doctrine are the normal modus of operandi. Intra-state conflicts have their own dynamics which are difficult to control or stop. The government is protected by the international law and the United Nations charta which states that foreign involvement in internal affairs is not allowed. This rule would only be broken if a government would commit large scale systematic human right abuses, like mass killings. The intra-state conflict is further difficult to end as none of the sides is able nor willing to tolerate and negotiate with the other side. The enemy is criminalized making any diplomatic solution very difficult to achieve. Negotiations will only be considered if both sides have fought themselves into total exhaustion.

Inter-state conflicts are much more controllable as the international community can use their influence to stop or at least force the participants to the negotiation table. Preventive diplomacy can work in the avoidance of inter-state conflicts or if the conflict has already started, diplomacy can create a fast exit, an end of the conflict. At least in the majority of the cases.

In this article we will therefore describe some of the inter-state conflicts and the shortterm future of the countries in question.

Inter-State conflicts

In relative terms there have been only a few inter-state conflicts on the African continent. Most have been intra-state conflicts between groups wanting to govern, exploit, the country. And in nearly all conflicts the opposition/rebel organisations received support from one or more neighbors in the struggle against the sitting government, giving it an international flavour. Strictly they remain however intra-state conflicts as there is no involvement of foreign troops, or better foreign armed forces, as the use of mercenaries is still quite common on the African continent.

Currently there are about four conflicts which can be described as inter-state conflicts, namely Western Sahara vs. Morocco, Nigeria vs. Cameroun, Eritrea vs. Ethiopia and the involvement of many of its neighbors in the conflict in the Democratic Republic of Congo, DRC. The first two conflicts are not yet active but the tension is running high. The third conflict is a textbook inter-state conflict. And the fourth conflict is a conflict between several factions which all recieve more or less support from foreign countries, including military forces.

Morocco vs. Western Sahara

The conflict between the Morocco and the Western Sahara is going on for several decades. In short, Morocco occupied the Western Sahara after the Spanish forces left the area. Morocco immediately put a claim on the territory which has been violently resisted by the original population. A number of western Saharian people created the Polisario movement to resist the Moroccan occupation. The Polisario received in time support, at least passive support, from the majority of the population. To resist the Moroccan armed forces more effectively Polisario received support from Algeria. Which happened to have some territorial differences with Morocco.

After a prolonged fight between the Moroccan armed forces and the Polisario the conflict seemed going to be settled by a diplomacy, e.g. an United Nations organised referendum about the future of the Western Sahara.

The referendum has been delayed several times as both sides disagreed about who should be allowed to vote. A large number of Moroccan settlers have been moved into the Western Sahara and a lot of original people from the Western Sahara fled abroad and live in several camps in Algeria. Each side want their people in and the other people out of the election lists.

The Moroccan government would like to delay the referendum even further as time is on their side. Morocco can in the mean time increase the grip on the territory and even more importantly the Moroccan government can delay an unwanted outcome of the referendum. Morocco is politically unable to loose the territory without creating big internal problems. Morocco has invested to much money, manpower and time into controlling the area to give it up that easily.

The lack of progress has led to increased tensions in the region. Especially the Polisario is getting tired of the delays and are becoming ever more willing to restart the military operations against the what they call the Moroccan occupation force.

The return of hostilities is therefore very likely on the short term as the Polisario has no other option to regain the territory and to remain a viable opponent as time is working against them. With every month lapsing the Moroccan government is increasing its grip, changing the demographics, estranging the original population from the cause of the Polisario and is weakening the fighting power of the Polisario and their relations with Algeria.

The last effort of Algeria and Mauretania to work out a solution with the Polisario and Morocco to execute the long promised referendum on the future of western Sahara will most likely not succeed as the interests of Morocco and Polisario are to divergent. The stakes are to high for all parties to compromise and the delaying strategy worked out very well for Morocco. Time is on their side and as long as they talk Morocco can not be accused of agression, that ball will be on the side of Polisario. If they want to change the status quo they will have to return to violence and therewith receiving a bad press.

Nigeria vs. Cameroon

The bone of contention between Nigeria and Cameroon is the demarcation / ownership of the Bokassi region. The Bokassi region is suspected of possessing large quantities of fossil energy, or better oil. Both countries have a claim on the region and put it before the international court in the Hague to solve the poblem peacefully.

The patience of both is however limited and the trust between the two countries is equally low. Both suspect eachother of creating facts which are difficult to change if one of both sides would have taken firm control of the region. Both countries have increased the number of armed forces in the region waiting to march into the region or blocking a move of the opposite side.

The respective governments are walking on small line which can be easily crossed, only a wrong perception of the other side’s motives will start a conflict. Mediation and the start of mutual confidence building measures could avoid a conflict but both are not yet willing to start. The internal problems of both, especially in Nigeria, could become an additional dangerous factor. The insecurity in Nigeria could force Nigeria to move into the Bokassi region to avoid that Cameroon could benefit of Nigeria’s weakness.

Preventive diplomacy and the involvement of outside powers, the international community, could avoid military actions but the international comunity is downplaying the seriousness of the conflict. So the start of hostilities are very well likely on the short term.

Eritrea vs. Ethiopia

The conflict between the youngest country on the African continent, Eritrea, and one of the oldest, Ethiopia is somehow a conflict between brothers. Eritrea have been for many years part of Ethiopia and the governments of both countries were ones brother in arms, allies, in the battle against the communist regime of Mengistu.

After the government under the leadership of Mengistu was defeated in 1992, Eritrea received independence in 1993. The borders between the two countries were in those moving times not exactly demarcated which would lead to war some years later. But at first the relations were good and Eritrea kept on using the the Ethiopian national currency for some years and this turned out to be one of the causes of the conflict. Eritrea created, printed, to much money and bought everything they could get in Ethiopia and sold it on the international market earning hard currencies at the expense of Ethiopia. The currncy problem erupted when Eritrea introduced their own currency and demanded from Ethiopia to change the Ethiopian currency, they had printed to much and to freely, into hard currency. Consequently the relations between the two deteriorated very quickly.

The real problems started as Eritrea claimed and sended in soldiers in the area around the city of Badme that Ethiopia considered theirs, this was the immediate cause to start the war between the two countries.. Eritrea was at first very succesful in occupying the land in question and they could even defeat some Ethiopian forces in the first encounters. After two cease fires, or better battle pauses to recover and rearm, and international mediation the Ethiopian armed forces started another offensive. This offensive of May 2000 proved to be very succesful as Ethiopia could defeat large number of Eritrean forces, conquer substantial stretches of Eritrean territory and they could even take the bordertown of Zalembessa. The territorial gains placed the Ethiopians forces only 100 kilometer away from the Eritrean capital Asmara. The Ethiopian offensive and the subsequent Eritrean withdrawal forced Eritrea to withdraw from the questioned territories and ask for negotiations. These have been accepted but not eagerly by Ethiopia. Ethiopia could claim a large victory and even that they have defeated Eritrea. But this remains to be seen on the long term. Eritrea has been forced to accept an initial defeat and need at the moment negotiations and time to recover. In these circumstances they will promise a lot to be able to consolidate their positions but they will be very dissatisfied and in some time in the future have another attempt to regain the area around Badme.

The war between Ethiopia and Eritrea has the doubtful achievement that it is, or was, the largest war, about 100.000 Ethiopian were and are deployed on the Ethiopian side and 80.000 on the Eritrean side, going on in the world. The war is fought in a very old fashion of trench warfare which limits the mobility of the armed forces of both countries. The cease fire, battle pause, of over one year delivered both forces an opportunity to recover and rearm. Ethiopia was however the country which took the initiative and broke the stalemate of trench warfare.

The Eritreans are now forced to accept the Ethiopian military success as they failed to respond adequately. Ethiopia has now the upper hand but Eritrea will remain vindacative of the humiliating loss and they will wait and strike back and possibly retake the lost territory. It is just a matter of time until Eritrea will try to win back the lost territory. The war according to Eritrea’s state of mind has just started and will only end if they control all territory they consider as rightfully theirs.

The Democratic Republic of Congo

The Democratic Republic of Congo, DRC, has experienced since the fall of the Mobuto regime a nearly continuous civil war. After Laurent Kabila became president of the country with considerable support from Angola, Rwanda and Uganda and several dissatisfied groups in the country he very soon estranged himself from his strongest internal and external supporters. His policies to support or lack of action against the ethnic Congolese, the Hutus and the terrorist groups out of Uganda made him the Banyamulenge, Rwanda, Burundi and Uganda to his most dangerous enemies. The ethnic minorities like the Banyamulenge quickly organised, with support of the three before mentioned countries, resistance against the rule of Kabila. The new resistance/rebels/terrorists, depending on the viewpoint, movements soon after received support from other dissatisfied groups in the country. Creating a serious security problem for Kabila as they conquered nearly the whole eastern part of the country.

The civil war in the DRC spread through the whole country and the divided the country in two main groups. The government of Kabila with support from Angola, Zimbabwe, Namibia and the Sudan. And the rebel group consisting out several factions with the same goal of forcing Kabila out of office, namely the MLC, the RCD, the Banyamulenge and the ever switching Mayi-Mayi militia supported by Uganda, Rwanda and Burundi. The conflict turned very quickly from a pure internal conflict into an external conflict as Angola, Zimbabwe and Namibia sended ground and air support to rescue the Kabila government. Kabila desparately needed this support as nearly the whole of eastern Congo was conquered and controlled by the rebel forces. Who received considerable support, including ground forces, from Uganda and Rwanda. The increasing tensions and even clashes in the DRC between Uganda and Rwanda will deteriorate and extend the conflict even longer as no decisive power can be developed which could beat the other side, in this case the Kabila government. The status quo between the two main sides will be strengthened by the problems between Uganda and Rwanda.

All foreign parties in the conflict have their own interest in the conflict, Angola wants to limit the movement of the UNITA in the DRC, Zimbabwe is protecting its commercial interests it acquired after it supported Kabila in gaining power, Uganda wants to end the existence of several organisations living in the DRC who commit terrorist activities in Uganda and finally Rwanda and Burundi want to eliminate the Hutu extremists which also use the DRC as a base to strike into Rwanda and Burundi. All have also their own interests in the country which have nothing to little in common with the good for the DRC.

All efforts to end the conflict, including the Lusaka accords and the proposed UN peacekeeping/observer force, will do little to end the conflict as long as the demands from the external parties are not met and the opposition/rebel groups are not invited to join the negotiations. The agreed cease fire, which has been violated many times by all sides, will only be used to recover and rearm to restart the conflict on the short term with the goal and hope to defeat the other side. Both the Kabila government and the opposition/rebel forces still hold the conviction that they will be able to defeat the other side and end the conflict on their terms with the use of violence. As long as this conviction is present the conflict will continue, especially as long the foreign supporters remain generous suppliers of equipment and forces. And no side is at the moment or on the short to medium term exhausted enough to ask for a diplomatic solution. Negotiations have been and are still part of the strategy to defeat the other side by military means.

The conflict is therefore likely to continue until the security and commercial demands of Angola, Uganda, Rwanda, Burundi and Zimbabwe are more or less satisfied. And as long all the external parties continue their support the internal conflict will go on. Only if the external support would end and all concerning partis would be allowed to be part of the negotiations, the conflicting parties would very likely be willing to negotiate. The other option would be to fight until one of the sides would be defeated but this might very unlikely. A victory is expensive and both sides would most likely be exhausted long before a victory could be attained due to the lack of resources. A victory is not impossible but difficult and only if one side is displaying a fundamental weakness. And above all it will take time.

So the only road to peace on the short to medium term would be the end of foreign involvement, e.g. support, allow all parties join the negotiations and that all share the mutual insight that war does not bring a solution. This opens the way to serious negotiations with the goal to end the conflict.

May 2000

May 2000

Financial Affairs, volatility on the US stock market

The markets in the first quarter

The US and for that matter the world’s stock markets have delivered an incredible growth during the first quarter of the new millennium. New all time highs were reached on several stock markets around the world but especially the U.S. based Internet, Technology, Communication, ITC, companies doubled or even tripled in value. The emerging markets also reached new highs as they could continue the recovery started in 1998. The markets in general carried over their bull tendency from the last quarter of 1999.

This essentially lasted until the second week of April 2000, Friday the14th, saw an very large drop in the share prices, were especially the ITC markets experienced a nearly free-fall, the Nasdaq index lost over a quarter of its value. The unbelievable growth of the first three months was wiped away within a couple of days.

The drop in share prices happened in an economic situation were the economic growth in the U.S. was equal to the previous years with only a small increase in the inflation which is caused by the increased oil prices, from $ 12 to $ 28 dollar a barrel. The economic growth is based on strong fundamentals as U.S. companies keep on turning out good earnings figures with over 70 percent of the companies coming out with earnings above expectations. The U.S. economy is in better shape than ever before and seems able to stay in very good shape. The economies of the world are at the same time improving. Europe is slowly growing to the growth figures of the U.S. of the last decade, around 4 percent where as Japan and the emerging markets are definitely on the road to recovery with growth figures of over 5 percent annually. The Asian economy has the additional benefit that the foundation of the new growth is stronger than ever before. More money into productive sectors, no short term debt and restructured companies.

The economic forecasts, fundamentals, are therefore very promising. The recent correction is only of limited effect as the share prices are and were of a large number of companies much to expensive and based on unrealistic expectations. The internet/tech craze created a bubble which at some moment had to burst..

The correction of the stock markets, especially the ICT stocks, could turn out to be very healthy to the stock markets in general. The blue chips and the socalled old economy stocks, which lagged behind in the first quarter, or for that matter in the previous quarters, have now the chance to improve and at least partially recover their former position and role. ICT will remain strong players but the old economy companies still have something to offer in products, profits and potential especially if the new technologies are applied in their businesses.

Volatility in the future

The large drop in share prices and indexes after a period of big gains and the up and down movement is a perfect example of the volatility in the stock markets.

The correction ghost was already around for some time. The stock markets, the fund managers, needed in this kind of situation only a small incentive to drop the overvalued ICT stocks of which a number never had turned in profits and/or had a earning per share in the 80 + range. The threatening interest rates rise and/or an earning warning from a tech or tech related company could start the sell off. As it did.

The correction will however not eliminate the volatility in the market. It will take some time until the markets will move up strongly and decisively. The market will remain cautious as some economic data like the deflator figure, unemployment number, the employment cost index and the costs of durable and consumer goods may lead to an interest rate hike and consequently to some more selling.

The sell off, correction, might be, as mentioned before, be favorable as it punctured the bubble of the very high prices, will dampen the spending of the consumer, will make the effects of an interest rate hike smaller, will create new opportunities and very importantly it will divide the good ICT companies from the bad. As figures and performance will become more important than expectations.

There are now opportunities to buy the most promising and profitable companies at reasonable prices. And this inflow of new money will turn the sell off, bearish mood, into a bull again within four to six months. This will be inevitable as the performance of the economy will remain positive, the good earnings and returns of a large number of companies will remain at the same level as in the first quarter and as the old economy stocks will most likely participate in the next rally. The interest rates will influence the stock market but the consequences will be much smaller than expected. They will create volatility on the short term but they will not influence the market on the medium term, the market, economy, is simply to strong to be curbed at the moment.

The third quarter might deliver a wide based rally with the best of the ICT companies and the majority of the old companies benefitting from the impulse from the booming, world, economy and the advantages of the new economy.

The only disadvantage will be that the future growth of the stock market could and will most likely lead to another bubble, although smaller than the previous one, and will consequently lead to a new correction. As the people will be enthousiastic about the good results and buy into the bull market, essentially creating a vicious circle. Beside the home grown volatility, volatility will also be induced as long as the legal and financial structures in the emerging countries remain unclear and as long as the consequences of the new economy, technological capabilities, are not fully understood and not, wrong or not fully applied at home and abroad.

The future of stock investing

The best way to invest your money will remain the stock market. The largest gains can be made here over the long term. This growth and especially large exceptional growth will lead to tensions and to corrections but they are part of the game. The stock market is a very efficient instrument and will reward good and punish the bad companies but on the long term it will deliver the highest return.

The market will gain the most during periods of an economical boom but this will automatically lead to some very high expectations of some companies which never can be met. Everybody wants to be in the new group and this will consequently make the stocks very expensive, if not to expensive. As such a group, like the ICT stocks at the moment, are part of a revolution in doing business, they will be very vulnerable to high expectations and will become a victim of insecere and even uncapable companies who just want to get their part and cash in.

To avoid the bad stocks and paying to much, stock picking will be the name of the game, especially in a relatively new group like the ICT group of companies. The good ICT companies will continue to improve and become the shooting stars of the market again. Stock picking is an absolute necessity in the volatile market of 2000.

The stock market will receive a boost from the increased attractivity of the old economy companies which continue to deliver respectable returns and those who can make the turn to the new technologies best will receive the largest rewards. This wide based growth will be less susceptible to a collapse and any correction will have a lesser impact. A broad based growth secures a balanced growth and a shortfall, correction, can be made up by the elasticity of the ICT companies which have shown a very big resilience in the last years.

The following ICT stocks will most likely belong to the good group of companies and will therefore deliver above average returns. They are very often the market leader with one or more products, have clear concepts and have the capability to bring good ideas to the market. We have listed some hardware, backbone and productsuppliers with a large internet content who have been succesfull and do possess a large potential. Companies like Lucent, Cisco, Nortel, Qualcomm, Oracle, CSC, CA, AOL/Time Warner, Amazon, Ebay and Charles Schwab. In the tech sector we like Intel, Sun Microsystems, CMGI, Dell, IBM, Texas Instruments, Applied Materials, Red Hat and for the people with the stomach for risk Microsoft. In the communication sector we like Nokia, Ericsson, Motorola, Vodafone, Bell South, MCI-Worldcom, KPN/Qwest and AT&T and its wireless offspring.

April 2000

April 2000

A Note on Business Management

Business Affairs

In our series on business management we would like to pay some attention to project management and the use of information systems. To stay competitive, companies are forced to develop new products which in the best situation are wanted and needed. To organise, manage and conclude those new developments, focused teams should be placed at the helm. The project team should use as many information systems as possible because it would be very beneficial as they collect, store and process information, run simulations, control the activities of the project team and improve the communication between the team members.

Project teams

New products, ventures, need to be developed, introduced and delivered. The most succesful approach would be the use of a project team. A project team is a group of people with several skills and abilities which are specifically brought together to realise an objective. The project team is a purpose aimed group which should, firstly, built something new but which should afterwards form the core of a new department, division, with the deletion of some old and addition of new members. Some members of the original team, the more enterpreneurial and research kind of people, are to be put in new teams and managing kind of skills are to be added. In short more accounting and managing in exchange for some research. Some reasearch activities have to be maintained to improve the product and keep it attractive.

The team members should ideally come from different departments, like accounting, research, sales, marketing and production, and a led, guided, by a rather multi-talented kind of person which is able to coordinate the activities, to keep the team on track, avoid diversions, stimulate the team and which is driven to achieve, deliver the product.

The research and development input should ofcourse be the most dominant but sales, marketing and production should have an important input to avoid that the new project would loose contact, the connection, with the outside world. Research and development might be sometimes tempted to design something technological very advanced but forget about the market and the produce-ability of the product. Sales, marketing and production should avoid this mistake. Sales and marketing should know about the demands and wishes from the customers and the society. And production should deliver their knowledge to make the product effective and efficient to produce. The project team should create a synergy to create superior products and services. The project team should be the balance between the genius of the research and development department on one side and the reality of the street on the other side.

The promote the activities and success, the project team should be supported by adequate equipment. The abilities of information systems should therefore be used as much as possible. Modern information systems would deliver better products through superior data-management, control, communication and simulations.

A note on R + D

The performance of the company can further be improved by using the synergetic powers of the research and development department. New ventures are more or less created and executed by project teams with a considerable support from R + D which have their people on board of the project. The R + D part of the project team should remain in close contact and should regularly be exchanged for other people out of the R + D department. This to keep them up to date and to stimulate the inventing spirit. As the research and development department which is responsible for research, inventing, and development of new exiting products should be groomed and given enough space, freedom, to promote the invention drive. R + D are the roots of any new venture in the company.

Research and development can be divided in to two groups. They work directed towards a potential product or commit research to something what might become a product. The directed work is the applied research with a clear goal and mostly done in a project team where as all other research is done in the department. This distinction is important as the project team has to generate tangible results where as the research and development department has to do general research, trial and error kind of things, generate ideas and support the invention ambitions and skills of the company.

Information systems

The capabilities of information systems are very often not optimally used. Only the most general and obvious options of information systems are used, like data storage and some basic information exchanges. And this is done without to much structure and method. The consequences are a large and difficult to use database, people exchanging all to often unuseful information or to the wrong people leading to additional lengthy meetings to keep the project on track. The team members will get frustrated by this process leading to below average performance. The synergies which could have been achieved by multi-skill project teams can be undermined/undone by faulty methods and unnecessary delays.

The information systems should be used to the advantage of a project, to support the team. This demands a clear structure, methods and a common understanding of the procedures. The information systems should be available for the following tasks: Control, Communication, Data Management and Simulations. The optimal use of these four factors will improve the work of a project team. The four factors are however interdependent and rely on eachother to reach the maximum benefit.

Control

The control application has two functions. First the team leader will be able to monitor the work and performance of the team members and second the team will use the control application as a central score/information table to report about the project. The table should contain the summarized information about the goal and timeline of the project, the progress, the problems and the assigned workload to each team member.

The first function is a management tool for the team leader to observe the team members. Each team member can only enter his own file and is obliged to report working hours, what he is busy with and if he met some problems. The team leader is the only person to view all files and can make some changes in the work plan, stimulate/support each member personally and keep the project on track.

The second function is available to all members and will keep all members informed about the project, e.g. progress and problems, and will deliver the synergy we were looking for.

The information entered in this application will be according a pre-determined format to avoid duplication, to keep the information controllable/observable and to remain focused on the goal of the project.

Communication

Information systems deliver the opportunity through the use of a local area network, intranet, to improve the communication within the team. Information can be added and reviewed in the control and data management applications and the team can exchange information with eachother.

Meetings can be avoided, kept to the absolute minimum, as intensive pre-meeting communication and virtual meetings can keep the actual meetings limited to the absolute necessary. Problems can be discussed in the control and data management applications and directly to the people concerned. Thus avoiding the waste of time.

The majority of communication has to be handled by a communication protocol which put limits to the amount of the information exchanged but improves the quality of the exchanged information. The controlled and limited transmission quantity is to avoid duplication, inconsistencies and to keep the project focused and understandable to all team members.

Data management

The core of each team are the data management capabilities. The proper use of data management will make the project run faster, smoother and with greater results than without or inappropriate use of information systems.

Data management can be divided into three areas of capabilities: data collection, data storage and retrieval and data procession. Each area has it own qualities and rules but all have a couple of superior demands: uniformity, accessability and applicability.

Data collection includes data, voice and pictures. The data collection application has to be accessable for every researcher and will need a common addition method with translation tools to allow all kind of information to be stored in one system. To achieve a common data collection, storage and retrieval system every entry has to be added by a standard format. The standard format will have space for the content, description, who entered the content with e-mail adress and a specific code to link to content with other files of the same subject.

The data storage and retrieval system has to be twin tracked. One summarized version and a full scale version which is linked to the summary. This will limit search time and will make any use of the data base faster and more productive.

The data storage and retrieval application will be highly structured in design and will use standard formats for every new entry which will be instantly checked if the same content is already stored. The storage system, by category and subject specific codes, will allow for fast search tools which will make the information very quickly available including cross references. The use of this kind of system will avoid duplication, make the user aware of who has knowledge about a subject and will increase the operations tempo.

Data procession has become much simpler and better by the use of a standard format. As all stored data is in the same language it can be processed by a number of ratio programmes and evaluated by programmes looking for time lines, systematic developments and references.

The data procession application will be very useful in any research project as it allows the researcher find, evaluate and use information stored in very large data storage sytems. Research can become more accurate and succesful as information can be better reviewed, processed and put to work in new ventures.

Simulations

Information systems have a very big advantage, simulations, it allows prototypes to be tested on behavior, efficacy and even costs during the development phase. Even in the first phases of development a new product can be tested in virtual reality about how it would be, how it would behave and what it is able to achieve.

Simulations will not only decrease research costs but it will deliver better products as the products are better and more tested. The products will experience more changes in design and even in production methods during the development phase and this will eventually deliver a better product to the customer.

Conclusion

The development of new products is a very important activity of a company. The products are invented in the research and development department where after the further development into an actual product can be best done in a project team.

The project team is a product focused group of people which come from different departments in a company. The aim of the project team is to develop a good idea into a product the customer desires. To achieve that goal it is important that people with different skills and trades work together to built the right product. The research people deliver technical knowledge, the sales and marketing people deliver customer knowledge, the accounting department keep the cost-benefit ratio acceptable and the production department assures that the product is produceable. If all factors can brought in balance it will lead to a superior product which will improve the market position and profits of a company.

Information systems will support the project team as it will improve the efficacy and efficiency of the development process while keeping the development costs at acceptable levels. Information systems can not do miracles but if used correctly it will improve control, communications and data management of all projects and it will deliver simulations of any new product leading to better products and services and ultimately to a better company.

IN-SE Services

Intelligence – Security Services

Categorie archief: Reports 2000

Index 2000

December 2000

November 2000

November 2000

The Israeli – Palestinian dilemma

A short history

The dilemma

The Future

Conclusion

October 2000

October 2000

Islamic Fundamentalism

The increase of Islamic fundamentalism in South-East Asia

Islamic fundamentalism in South-East Asia

The Philippines

Malaysia

Indonesia

September 2000

September 2000

Internet Strategy

The Internet

Strategy

The internet as buying and selling instrument

August 2000

August 2000

War in Modern Times

The pre-conditon for success in military operations

The execution of military operations

A final note

July 2000

June 2000

April 2000