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Thursday, 21 October 2010

UK defence cuts will skew Royal Navy

Pirates, drug runners and terrorists may be toasting the UK defence cuts as an early Christmas present, for the cuts will skew and emasculate the Royal Navy's defence capability. The strategic defence and security review will cut spending on the armed forces by 8% in real terms over the next four years, a cut much less than the Treasury wanted.

Much more worrying, however, is that Britain has confirmed it will complete the two new large aircraft carriers, at nearly £6 bn, even though some military chiefs reportedly urged the Prime Minister, David Cameron, to scrap at least one of the carriers. The outgoing chief of defence staff, Sir Jock Stirrup, argued that pressing ahead with the two carriers would skew Britain's defences because of the huge expense, which over 10 years, with running costs and aircraft, would reach about £35 bn, close to matching the black hole already in the incompetent Ministry of Defence's (MoD) budget.

The justification seems to be that it would cost more to cancel the carriers than build them owing to contractual obligations but there is a specious ring to this. Hard-strapped taxpayers might well fume at such crass and onerous contract conditions yet it still would have been cheaper to cancel the carriers owing to the overall, much higher lifetime running cost of the two ships. The likelihood is that one of the carriers will be immediately mothballed, while the other is altered to fit an electromagnetic launching system to take the conventional JSF jets, but the scrapping of the harrier jump jets will mean the carriers will go to sea without any UK planes for the next 10 years. But if one of the carriers can be quickly sold at a sensible price then the waste will not have been so huge.

Horse-necked admirals?

The carrier programme is worrying most of all because of its impact on the rest of the Royal Navy, which could see the number of its surface ships fall from 23 to 19. These types of vessels do splendid work in the Caribbean, seizing drugs, and in the Indian Ocean and Persian Gulf protecting oil installations and fighting piracy. "Almost everybody in the navy sees the calamity of this," said an MoD official, "except the people in the top half of the service." Another senior military figure added: "We should never have bought them in the first place. We've got better ways of spending our money. We could have had more frigates, more money for cyber, more special forces. It's £5 bn of lost opportunities."

But what about the need to project power globally as only carriers can and ably did so in the Falklands' campaign? The problem with this argument is that the world's security issues are changing and will stem from intangible threats, such as cyber warfare, international terrorism and pandemics. Carriers are only for state on state warfare that is well down the government's risk assessments. Moreover, carriers are useless for work like anti-piracy, drugs running and terrorism. The navy's argument that it would not be able to defend the Falklands without the carriers is breathtakingly fatuous. A permanently stationed, adequate air force and troops, to be paid out of any future oil revenues, would deter subsequent invasions.

Perhaps their lordships of the Admiralty still believe in the carriers because they could defend St Helena, Tristan da Cunha or that hotbed of tax evasion, the Cayman Islands. Arguably, the carriers can only be justified for use in a world war but are they not going the way of the battleship? A strong, belligerent power could sink these costly, highly vulnerable leviathans at the press of a few buttons. It took only 12 bombs to sink the four Japanese carriers at Midway, a battle that turned the tide of war in the Pacific.

It would be charitable to think that the admirals' lucubrations were inspired by over indulgence in horse's neck cocktails and pink gins. The reality is, alas, that the military mind is rarely original, often lacking in a comprehensive view and tinged with vanity.

Alas, vanity also afflicts politicians, not least at the top. It should worry observers when they hear a British Prime Minister remark: "Britain has traditionally punched above its weight in the world and we should have no less an ambition for our country in the decades to come." A more sober response came from a senior Whitehall official: "We will punch above our weight? Well, we will punch our weight." Long suffering taxpayers will hope so but David Cameron has promised that defence spending will increase in real terms in the years after 2015 if he is re-elected, much to the relief of defence chiefs but to the potential dismay of voters who thought the coalition government would be fiscally responsible, unlike the profligate labour government it replaced.

The Royal Navy will also be pleased in some quarters that the Trident submarine replacements will go ahead, albeit delayed by up to five years to save money. It seems that they are to have fewer launch tubes and that the Defence Secretary, Liam Fox, has won his battle with the Treasury to have the Trident renewal programme ring-fenced from the MoD's core budget. Yet this programme is far more costly than the two aircraft carriers, with lifetime costs of £100 bn, and possibly very much more if America cuts back on the number of its nuclear-armed submarines to be ordered.

In economic terms the scrapping of Britain's submarine-based nuclear deterrent makes sense, though that does not mean it would be wise to drop the deterrent entirely, at least for the present. There are much cheaper alternatives, like land, sea and air-launched cruise missiles, the velocities and ranges of which can reach over 3,000 mph and 2,500 miles respectively, which would put all cities in belligerent nations within reach.

Ultimately, however, it may be a far off, land-locked country which knocks economic sense into UK politicians and military chiefs. It seems that the UK will not be able to undertake a military deployment of the kind seen in Iraq and Afghanistan for some time owing to defence cuts that will see some 42,000 job cuts by 2020. That far off land is Afghanistan, where logistics, economics and an ideal guerrilla warfare terrain all work together in the Taliban's favour. That war has already cost Britain well over £11 bn, with nothing to show for it, and as explained in my earlier blog headed "Logistics will be Britain's Afghanistan Calvary" the resolution of that struggle can only leave the coalition forces exiting the country less than fulfilled.
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Tuesday, 28 September 2010

Somali piracy may cripple global logistics

Rarely, if ever, in the annals of piracy have so few cost global logistics so much as the 1,000 or so Kalashnikov-toting Somali pirates. And rarely has the international response been so supine and dismissive that, in earlier times, would have appalled and shamed less spineless generations in dealing with an age-old crime.

At the IMO London offices' handover of a piracy petition on World Maritime Day, September 23, David Cockroft, general secretary of the ITF (International Transport Workers Federation), chastised the majority of those who make most from shipping for "doing little or nothing." But are the ship owners themselves contributing to the crisis, helped by the insurers, because they have adopted the 'calculated risk' approach which arguably is much cheaper than a final solution to the problem?

The anti-piracy petition, bearing nearly one million signatures, is the centrepiece of a campaign to persuade all governments to commit the resources necessary to end the increasing problem of Somalia-based piracy. It calls for:
1) Dedication of significant resources and work to find real solutions to the growing piracy problem,
2) Immediate steps to secure the release and safe return of kidnapped seafarers,
3) Work within the international community to secure a stable and peaceful future for Somalia.

The stakes are high and will simply get higher without effective action. In ransom monies alone an estimated $150 million have been paid to pirates and extra insurance premiums cost at least $400 million more annually. Then there are the increased crew costs while they are transiting the pirate zones plus the warships on patrol. All that, however, pales into insignificance against damage to the global supply chain, which may even cripple just-in-time (JIT) practices. On top of all this is the cost in human misery. Some 1,500 crew members have been taken hostage and kept in squalid conditions since 2008, at least 36 have been murdered, and currently 354 seafarers remain detained along with 16 ships.

Many ships, particularly oil tankers, are being re-routed via the Cape of Good Hope. An idea of just how costly re-routing a super tanker is on a liner trade for the Europe-Far East route can be gauged by the fact that it would raise costs by $89 million per year. Multiply that many times by the number of tankers bypassing the Suez Canal and the cost would soon reach billions for shippers. Yet this solution, if it could be called that, is apparently favoured by the International Federation of Shipmasters' Associations (IFSMA).

In an exclusive interview with Captain Bjorn Haave, vice-president of IFSMA, this writer was told that the whole area should be closed to shipping except to ships that have to go into ports in the area, escorted one by one. Such an approach, however, would have appalling cost implications, particularly for Europe, whose economies are geared to JIT deliveries. There would also be incalculable damage to Egypt's economy through the loss of billions of dollars in canal transit fees, which could destabilise the whole country. For a country which has so much at risk, Egypt has, to its shame, shown strikingly little action in deploying its 12 frigates to patrol the infested areas.

Captain Haave is only defending his patch when he says: "I represent the seafarers and masters and I don't think seafarers should be put at risk in the way they are today. They have to keep the area closed until the political situation in Somalia is solved."

Defeating the wisdom of Solomon

The political state of Somalia is the crux of the problem. A failed state torn by conflict for decades, desperately poor and governed by petty war lords in waters muddied by Islamist insurgent groups like Al-Shebab, a peaceful resolution to this problem would defeat even the wisdom of Solomon. Pouring in aid would simply not work without a prior desire by all Somalis to work for the common good. So what other proposed solutions does that leave?

There can be no doubt that shipping lines and their affiliated bodies have a genuine desire to see a prompt end to Somali piracy and the suffering of the 354 seafarers currently held in squalid conditions. Ship owners are also concerned that the impact of piracy will exacerbate the current shortage of skilled seafarers. But all of the proposals that the maritime industry have suggested seem doomed to failure. The piracy petition, for example, called for the the dedication of significant resources but Admiral Mark Fitzgerald, commander of NATO' Allied Joint Task Force Command, Naples, has said: "We could put a World War 2 fleet of ships out there and we still would not be able to cover the whole ocean." It is also questionable about how long the presence of a large naval force could be sustained, given the huge costs at a time when most states face increasing pressures to cut budgets, including the military kind. Instead, he advocates the arming of civilian ships in the Horn of Africa. Convoying has been suggested as a solution but this would be unattractive to shippers because it would be uneconomic and impractical.

The arming of merchant vessels has also been mooted and could be undertaken in different ways. One option would be to put armed security teams on board vessels. This has already been done, particularly on ships considered at high risk, but it has been said that, given the low risk of hijack, stationing security teams on all vessels would not be cost effective; all part of the 'calculated risk' scenario. A second and more controversial option is to arm the merchant crews but this has largely been rejected by shipping lines and port authorities because of the added security risks, costs and legal liabilities, all deemed to be too high.

There is, however, a third option, the secondment of weapons-trained naval personnel posing as civilians for use in the pirate zones. This would give some comfort to untrained civilian crews and would be like a return to Q-ships, which had significant success against U-boats in World War 1. At most, such naval guards would require no more than heavy machine guns and light firearms and they would have a huge advantage over pirates clambering over gunwales, where they would be extremely vulnerable.

However much ship owners may eschew the arming of their ships, more and more lines are seriously considering the option unless more is done to protect vessels. The world's second largest container ship line, MSC, is considering the option and working closely with Maersk Lines and CMA CGN. But what more can be done that has any chance of permanent success?

Insurance companies hold the key?

In this writer's view all the mooted suggestions so far can only be temporary at best. Shipping lines have clearly shown that their supine response is governed by the profit motive as enshrined in the 'calculated risk' approach. After all, it is insurance companies who ultimately pay the ransom money but they, too, are doing very nicely out of the piracy because their jacked-up premiums since 2002 far exceed the ransom monies paid. In any event, all these raised costs are ultimately passed on to hapless consumers. On account of this, when told that the insurance companies seemed under no pressure to bring their undoubted influence to bear, Captain Haave, of IFSMA, said: "I agree with you." His contention is that if insurance companies stopped insuring voyages through the pirate-infested waters most ship owners would re-route via the Cape of Good Hope, which would make voyages much safer. That said, however, they could then be attacked by Wast African pirates.

The current arming of merchant ships, preferably by trained naval personnel, deserves to gain ground. Shamefully, however, when pirates are caught they are often released without charge, sometimes within hours of capture, to resume their depredations. This clearly must stop. With a growing sense of immunity, Somali pirates will only be emboldened to raise the stakes, risking a human and environmental catastrophe at sea, not to mention staggering global economic damage. Alas, therefore, logic inescapably points to a military solution in the known pirate ports.

The current wave of piracy is primarily motivated by the desire for financial gains and exacerbated by lack of good governance and high poverty levels. Illegal fishing by foreign countries and dumping of toxins in Somali waters, for which Somalis themselves must share some of the blame through their own bad governance, may have played some role in turning to piracy during the early days but the current level of piracy cannot be explained by such activity. Rather, piracy has become a lucrative business, generating huge incomes, which Somalis are unlikely to give up unless military action no longer makes the game worth the candle.

There is, of course, a problem with such a response -- the safety of the 354 crew members still held hostage. These numbers will decline to zero provided that the ransoms are paid but it is essential that no further ships are hijacked and that is where the armed merchant vessels must play a role. An alternative might be well-planned Entebbe style rescues. When it comes, as is likely, any attacks on pirate ports should be aimed primarily at the fishing vessels large enough to act as mother ships. The tragedy of this, of course, is that innocent fishermen's vessels could suffer along with the guilty, as there are no more than an estimated 600 to 1,000 Somali pirates. But would it not be a far greater tragedy still if Egypt and other countries were destabilised by adopting an indefinite exclusion zone around the Horn of Africa?

The reason no military action has yet been undertaken on shore stems from political rather than legal constraints. The UN Security Council resolution 1851, in fact, authorises military action against piracy on Somali territory. If the piracy problem persists or, more likely, worsens, such escalatory steps would look increasingly more plausible and pressing. There are historical precedents which show that the application of superior force against piracy, the only language that all pirates respect, can work well. In 1816 and in 1824 the bombardment of Algiers by British and Dutch fleets forced the release of 1,000 Christian slaves unharmed and broke the hold of the Barbary pirates permanently.
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This story first appeared in Bob Couttie's Maritime Accident Casebook, for whom this writer is the UK correspondent, under the headline: Piracy: Is closing Africa the Answer?

Tuesday, 14 September 2010

Ireland's shameful role in migrant fishermen exposed

A complaint to Ireland's Broadcasting Commission over an Irish television series called "Skippers" has exposed deeply-ingrained abuse and illegalities in the country's trawler fishing industry that would have brought shame even in the pre-industrial era. The complainant is the International Transport Federation who believe that RTE, Ireland's national television and radio broadcaster, showed an indulgence to the Irish fishing industry in stark contrast to what is happening in Britain. It goes further by saying: "We believe that the block on cleaning up this appalling situation is at the political level and reflects the power of the fishing industry in Ireland, as indeed does the sycophantic documentary broadcast by RTE."

But how bad are the infringements, is RTE being unfairly pilloried and who is ultimately to blame for the exploitation of non EU nationals, many of whom are working illegally? In its defence, RTE claimed that it was 'an observational documentary series' and that it could not be expected to cover every aspect of the conditions on the trawlers in a few episodes. It would also be naive for viewers to expect hard-searching questions from RTE on issues of badly-treated illegal migrants as the skippers would clam up and prevent any more trips by cameramen. There has also been a similar television series in Britain called "Trawlermen", and it seems no such awkward questions were asked on that series, despite the fact that Scottish trawlers are also up to their necks in migrant abuse and illegalities. A whiff of double standards, perhaps?

Examples of shabby abuse claimed by ITF are many and serious. Ken Fleming, ITF's inspector for Ireland, says that in his experience helping fishermen, particularly non EU nationals working illegally and who form a high proportion of the workforce, "the industry is rife with exploitation." Illegal crew members have been dumped on quays without any pay to make their own way home, he says. Others have been seriously injured, spending months in hospital, while many were grossly underpaid. They live in cramped conditions on land in caravans or sleep on board because they cannot afford to pay the rent, says Mr Fleming. There have even been cases where foreign migrant workers expecting to work on deep-sea cargo ships on three or six-month contracts have been shanghaied onto Irish fishing vessels even though they have had no training on trawlers, and so pose a risk to themselves and other crew members. "When we met the fishing industry owners," said Mr Fleming, "they actually refused to contemplate paying the national minimum wage. It appears that they enjoy immunity from the laws that apply to the rest of the community. Fishermen, many of them non-EU nationals working here illegally, are picking up the tab by working in hazardous and harsh conditions on our behalf."

Pusillanimous Government?

There seems to be some justification for the claim that the Irish Government is foot dragging because it does not want to offend a powerful industry. As ITF explained, back in 2008 the then Department of Enterprise, Trade and Employment drew up regulations to govern the Irish fishing industry. ITF received the impression that these regulations would be introduced shortly to ensure workers were treated in a fair and humane way. Nothing was done.

There is no doubt that the Irish fishing industry is a powerful one, employing 11,000 workers at sea, which has been stable since 1997. If UK fishing figures are any guide then the 11,000 fishermen support 10 times that number of land jobs. Their fishing fleet has actually grown to almost 2,000 vessels, up from 1,800 in 1997, while at the same time the overall EU fishing fleet has fallen by about 20%. Between 1954 and 2004 the total volume of fish caught in Irish waters rose from 160,000 tonnes to 530,000 tonnes. Irish boats now catch about 25% of fish caught in Irish waters, up from an average of 16% in the 1970s, and currently Irish fish exports are worth about Euro360 million.

These figures are in stark contrast to what has been happening in Britain, where currently only 12,700 fishermen support about 10 times that number of land-based jobs. Between 1973 and 2006 the UK catch fell by 45% and in 2007 its vessels landed 610,000 tonnes of fish, including shellfish, worth about £645 million. These figures show the much greater, relative importance of fishing to Ireland's economy and suggests that conditions are not such that Irish trawler owners are hard pressed by declining incomes and therefore have no excuse to underpay illegal migrant workers who are too frightened by their status to raise objections.

Ireland has done relatively well out of the Common Fisheries Policy (CFP) since joining the EU but that policy has been an indisputable catastrophe for Britain's fishing industry and the economy. According to a comprehensive investigation by the Taxpayers Alliance, the total annual cost to the UK of the CFP is £2.8 billion. It could also be argued that the CFP has been an unmitigated failure and obscenely wasteful, as by the EU's own admission between 40% and 60% of all caught fish is dumped dead, owing to quota regulations. In some trawl fisheries the dump rate is 70-90%.

British trawler owners could be said to have a much greater grievance than Irish owners and therefore a higher incentive to cut corners and abuse foreign crews to improve profitability but to the authorities' great credit the UK Border Agency began a massive crackdown on similar abuses after fishing boat owners and operators failed to respond to an amnesty. They now face fines of up to £10,000 or two years imprisonment if they continue to ignore regulations. Owners, masters or agents caught bringing in non EEA crew into the UK intending to use them in breach of the law may also face prosecutions for facilitation, which carries penalties of up to 14 years imprisonment and an unlimited fine. The concessionary visa arrangement was in effect a three-months amnesty introduced in March 2010 that would allow up to 1,500 migrant fishermen working illegally in British ports to be registered with the authorities and thus be allowed to work legally until September 2011, provided they received proper employment contracts.

MAIB rebukes MCA over fishing accident

A serious accident on board the beam scalloper, Olivia Jean, on October 10, 2009 has not only revealed abuse of unqualified, sleep-deprived crew, three of whom were Ghanaians, but shows shortcomings in the Maritime and Coastguard Agency's administration of survey and inspections, despite a previous internal review, says the Marine Accident Investigation Branch (MAIB). It also found that the main trawl wire which had snapped, not for the first time, was not subject to inspections under LOLER. Consequently, there is a need for the fishing industry's exceptions to compliance with LOLER to be reviewed. Following this, the guidance on LOLER and PUWER to both surveyors and the industry should be clarified to ensure that lifting and working equipment on board fishing vessels is properly maintained and surveyed. MAIB also suggests that to reduce the risk of fatigue-induced accidents the fishing industry's extensive exceptions from the working time regulations should be reviewed to ensure that the risk of crew fatigue is properly controlled.

MAIB believes that a policy change within the MCA is required to improve fishing vessel standards and fishermen's occupational safety. "While safety remains the owners' responsibility," says the report, "MAIB believes the deep-rooted failings in the MCA's procedures require significant policy changes to improve fishing vessel occupational standards and to ensure the safety of fishermen."

For long now, fishing has been the most dangerous of occupations, but the deep-seated greed of many trawler owners is now adding to the risks of injuries and deaths and nowhere is this more glaring than among Irish trawler operators. Back in the 1930s Ireland was roundly condemned for its filthy trade in live horse exports. Must it now be condemned for its filthy trade in migrant fishermen?
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This story first appeared in Bob Couttie's Maritime Accident Casebook under the headline: "Ireland's trawler fishing shame exposed"

Thursday, 26 August 2010

Sexual shame before the mast

In the South African village of Nxarhuni, Eastern Cape province, a freshly-dug grave marks the last resting place of Akhona Geveza, a 19-year old female officer cadet just short of qualifying as a navigation officer. Ordinarily such a grave would have passed unremarked but this is no ordinary grave, for it exposes a deep canker that infects and shames much of the world's mercantile marine. That shame is sexual abuse, often by officers, including female rape and sodomy. The lash may have gone but rum and sodomy remain deeply ingrained, to which must now be added the growing scourge of rape, despite the attempts by organizations like Nautilus International and ITF to eradicate the shame.

An only child and hope for her unemployed parents, Akhona Geveza was found dead on June 24 floating near the port of Rijeka, Croatia, after her ship's captain raised the alarm on board the British-registered container ship, Safmarine Kariba. Suicide is suspected but murder has not been ruled out by the South African police who are conducting their own enquiry.

The South African newpaper, The Sunday Times, reported that Akhona Geveza alleged being repeatedly raped by the ship's Ukranian chief officer but was reluctant at first to report the issue to the captain because, according to a fellow female confidant on board, she feared that she would not be believed. When she finally complained to the captain he immediately confronted the chief officer and convened a meeting with him and Geveza for 11 a.m. When she failed to arrive, a search was conducted, and following the discovery of pills and thinners in the foc'sle, the captain raised the alarm. Safmarine ordered the chief officer to be relieved of duty.

Akhona was one of over 100 young South African women to have gone through the Transnet National Ports Authority's maritime studies program as part of the campaign to encourage young women to become seafarers. In a sense, she was a pioneer in a male-dominated industry and her tragic and suspicious death risks setting back the issue of equal opportunities by decades, warns Mark Dickinson, general secretary of the maritime officers' union, Nautilus International.

Some 10 years ago Nautilus issued its own report, Fairplay, which showed serious problems of sexual harassment in shipping. Although only 35 questionnaires were returned, a response rate of 13% and therefore deemed not be be statistically significant, it nevertheless confirmed findings of other surveys and research that had been carried out by the ITF and the Seafarers International Research Centre at Cardiff University. The report revealed "alarming levels of sexual harassment," with over three quarters replying that they had suffered sexual harassment at sea. This included unwelcome physical contact, leering and rude gestures. Half of respondents said that the harassment affected their morale and 38% their health and safety.
As a result, the union developed equal opportunities policies with the UK Chamber of Shipping and these have been subsequently taken up across the European Union.

The 10-year old report, however, is revealing in that there was no mention of the most serious sexual offence of rape. Following the story of Akhona's death, other Transnet cadets have come forward alleging male and female rape, bullying and harassment. Speaking under conditions of anonymity, several cadets told South Africa's The Sunday Times that there was systematic abuse of power by senior officers who threatend cadets' careers if they did not perform sexual acts. The sex abuse allegations include claims that two male cadets were raped by senior officials while at sea. One female cadet terminated two pregnancies following alleged rape and three female cadet trainees were made pregnant by the end of their 12-month training stint. One male cadet was sent home a month before finishing his training program because he refused to have sex with a senior official.

This form of blackmail, i.e. the threat to cancel cadets' contracts, is probably what keeps many more cadets from coming forward to expose shipping's hidden vices. It is all part of the odious marine culture which says the captain is God, that the sea is no-man's land and that what happens at sea stays at sea.

Spurred by the failure of the industry to clean up its shameful act, Nautilus International is reviewing its existing arrangements for enabling members to report problems on board their ships and has approached the Chamber of Shipping to discuss ways in which the industry can reassess its equal opportunities policies and to ensure lessons are learned from the case of Akhona Geveza. "We have a 30% wastage rate among young people entering this industry," said Mark Dickinson, "and we really need to make it very sure that bullying and harassment and discrimination are not tolerated in shipping and that all seafarers, regardless of sex, sexual orientation and race are not treated in ways that were not even acceptable 100 years ago." Nautilus is also calling on the UK Transport Minister and Home Secretary to highlight the need for Britain to play a leading role in the criminal and accident investigations.

Akhona Geveza's tragic death marks the tip of a very ugly iceberg but if her case can galvanise the marine industry to clean out its Augean stables her death will not have been entirely in vain.

Thursday, 5 August 2010

Recession exposes Just-in-Time failings

Just-in-Time (JIT) supply chain practices have done much to make manufacturing leaner and financially fitter and although the problems of and solutions to JIT interruptions have been well documented from the outset there is, perhaps, one aspect no experts have warned about. This is the impact of a sudden, global recession on suppliers and the lack of support for them from leading manufacturers. Such a scenario is now unfolding as suppliers are unable to meet the demands of leading manufacturers experiencing an upturn, and thus threatening to delay the nascent global recovery. Ultimately, there can only be one solution to this problem -- the elimination of violent, cyclical swings in the global economy through better governance to excise the casino-style mentality that the financial industries and acquiescent governments have wrought upon the world in recent years.

It has been said that JIT mainly benefits the leading manufacturers, who have effectively offloaded their costly stock holding problems onto their suppliers. This is not entirely true as some leading producers have helped their suppliers to become leaner through better logistics practices but there is some justification for the accusation, though less so for Japanese producers whose Keiretsu arrangements protect suppliers.

In the current downturn, leading companies were quick to turn off the tap, which caused suppliers to cut back sharply on capacity or go out of business altogether. Now that demand is picking up again, leading manufacturers are plagued with shortages of parts, particularly from the electronic component makers. The problem is worse than in previous recessions since many large companies have outsourced their parts supply, putting the onus on suppliers to raise deliveries more so than in the past. A good example of how this can trip up manufacturers is the recent strikes in China which disrupted supplies and output at Honda & Toyota's Chinese plants.

There is, however, another problem holding back suppliers. This is the apparent reluctance of banks to lend to manufacturers at acceptable interest rates. American small businesses, for example, are having to pay more to borrow relative to the Federal Reserve's benchmark rate than at any time in the last 25 years. To be fair to banks, they may only be trying to restore their financial strength as quickly as possible because many have still not come clean on their exposure to bad commercial property loans and huge, multi-billion pound potential losses from loans to shipping lines, most of whom are probably bankrupt.

Supply chain companies may also be reluctant to invest heavily in new capacity to meet rising demand because of volatile, uncertain, global economic conditions. China's vigorous growth rate appears to be faltering and the impact of government spending cuts across Europe and the dreadful US housing market has still be be felt.

A double dip in the global economy, expected by many, may well ease the supply chain deliveries problems but companies, nevertheless, are now committing JIT sacrilege -- stockpiling scarce components as a buffer in case supplies run out. The leading producers, however, are now beginning to realize that they should have paid more attention to their supply chain partners, at least towards their tier one suppliers. This could involve extending easy credit terms to suppliers who feel that they are being fleeced by their traditional lenders, a common practice in Japan.

Ultimately, however, governments and business institutions must work more together to smooth the economic cycle, and above all that means trammeling the greed culture which has seen so many financial institutions throw caution to the winds. As ye sow, so shall ye reap.
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Tuesday, 20 July 2010

Will Trident sink blue sea Royal Navy?

The current wrangling between Britain's Treasury Department and the Ministry of Defence (MoD) over defence cuts will decide the fate of the Royal Navy's blue sea capability, and by extension the safety and rule of law on the high seas. The stakes have been raised recently because the Treasury ministers are now saying that the MoD must fund Britain's nuclear deterrent, embodied in the £20 billion renewal of the Trident submarine defence system, from within its own core budget, currently running at about £35 billion a year.

Liam Fox, the Defence Secretary, insists that the Treasury must stick to a commitment made by the last Labour Government, that the nuclear deterrent is of special strategic significance and that the cost of renewing it, therefore, must be ring fenced from spending on conventional defence equipment. If not, then the MoD claims that within 10 years the Trident replacement programme will absorb a huge chunk of the equipment budget, about 25%. This would mean a hugely skewed defence structure, dominated by two aircraft carriers, fast jets and Trident.

The problem is not just a shortage of money brought on by the credit crunch, oxygenated by a global, casino-style environment. It is also a function of a globalized economy in which money moves at electronic speed and punishes those deemed to be financial delinquents.

For Britain, in some ways still cursed by its imperial legacy, the problems are greater than for other countries. It must decide if the wellbeing of the economy and the approval of foreign creditors, who could so easily pull the plug on Sterling, are more important than a defence commitment to replace the ageing Trident nuclear submarines. If the decision to go ahead with the costly Trident replacement prevails, then the Royal Navy's blue sea capability will almost certainly be seriously impaired, if not reduced to a brown sea navy status confined to protecting home shores.

The jury may still be out on whether Britain still needs a sea-borne nuclear deterrent in a post cold war environment but what cannot be in doubt is that such a costly project, if approved, will cost far more than current estimates. Such huge capital projects involving taxpayers' money invariably over run substantially and the MoD is the least reliable department to trust on estimates. A department that has had its accounts qualified for three successive years and has lost track of over £170 million of battlefield radios, can surely never be trusted to come clean.

Other bodies, like Greenpeace, believe that the Trident replacement bill will be at least £34 billion once costs like VAT are factored in. Nick Clegg, the coalition government's number two, claims that the lifetime cost of Trident will be £100 billion for a defence system that he claims no longer meets Britain's needs.

There is, however, another costly fly in the ointment. Critics argue that Britain is so technically dependent on America that, in effect, Trident is not an independent system. The British Tridents, for example, are serviced in a Georgian port and the warhead components are also made in America. But the United States Government, like Britain's, is also looking at its defence budget because its own economy is, in some ways, messier than Britain's. The US navy plans to build 12 new submarines to replace the Ohio class nuclear submarines that carry the Trident missiles but the US Defence Secretary, Robert Gates, is expected to challenge these plans, which could cost up to $80 billion. Up to another $120 billion could be spent on 60 of America's latest guided missile destroyers. If cuts are made to America's proposed submarine nuclear deterrent then, owing to Britain's dependence on the US, this could raise UK costs hugely.

Given the parlous state of Britain's economy, logic suggests that the case against replacing Trident is overwhelming on economic grounds and therefore economics should overrule politics.
There are precedents on what harm profligate military spending can do to economies, from which not even super powers are immune. Was it not the threat of an American star wars defence shield which finally forced Russia into a rapprochement with America because the cost of developing its own such shield would have been cripplingly expensive? And did this not lead to a partial dismantling of its nuclear capability?

Britain's former First Sea Lord, Sir John Slater, believes that submarine-borne nuclear weapons are the best means of deterrent because they are almost undetectable under water. If that was ever true it is far less so today, as some nations have sea bed listening devices capable of tracking submarines over vast areas. There are also other weapons, extant or under development, in national arsenals capable of killing whole populations but at far lower costs than nuclear weapons, such as biological* and weather warfare through projects like HAARP.#

This is not to argue that Britain should relinquish all of its nuclear weapons now. Rather, it should examine ways and means to a much cheaper nuclear stance, perhaps based on cruise missiles launched from mobile platforms, despite being much slower than Trident, of shorter range and more prone to effective counter measures.

The problem for the Royal Navy in parlous economic times is that if Trident is not scrapped, whether ring fenced or not from the MoD's core procurement budget, it is hard to justify a Royal Navy without a reduced blue sea reach. The two costly aircraft carriers now on the stocks will preserve some of that reach but they will have no impact on the navy's splendid work, for example, curtailing the Caribbean drugs trade or piracy wherever it rears its ugly head. That would be tragic for safety issues on the high seas. The go-ahead for Trident could also spell the end of at least one naval dockyard, with Portsmouth and Devonport the most likely contenders for closure.

*Although biological weapons are subject to a global ban, many countries have not signed up to it.

#High-Frequency Active Aural Research Programme. Run by the US air force and navy, it is the Pentagon's main weather warfare programme. It constitutes a system of powerful antennas capable of creating controlled local modifications of the Ionosphere.

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"When might is right money takes flight"

Saturday, 10 July 2010

Logistics will be Britain's Afghanistan Calvary

Afghanistan is a harsh, arid, unforgiving land, prone to temperature extremes, two thirds mountainous and honeycombed with caves -- ideal guerrilla warfare terrain. As if these natural advantages were not enough for any home-grown insurgents, the Taleban have one other great advantage -- their enemy's logistical problems, the cost of which could break the coalition forces' will at a crucial time when nations must tighten their belts as the world faces another, possible financial meltdown. Earlier this month, Britain finally came clean on the cost of its 9-year Afghanistan war. Between April 2001 and March 2010 Whitehall figures show that tax payers stumped up £11.1 billion for Afghanistan and currently about 30% of Britain's £35 billion annual defence budget is devoted to that country. Such a staggering cost, however, does not include troops' basic salaries or long- term care for the seriously wounded. And the payback for such a war? Over 300 British dead, many permanently maimed and traumatised, with suicides certain to follow, and a conflict that is worsening almost daily, along with commensurate cost rises. 

 Wars are often sparked by unexpected international incidents and the reactions hasty and poorly thought through. If the American and British governments had carefully considered the logistics of fighting in a distant, land-locked country, surrounded by friendly neighbours or others suspicious of America, and recalled the lessons of history then events might have taken a more sensible turn. History is important but only if its lessons are learned by subsequent generations. Over the last 170 years Afghanistan has humiliated two super powers, Britain and Russia, by sending their invading armies packing with their tails between their legs. In both cases, the combination of natural and logistical forces crucially forced their humiliation. In 1842, the British retreat of 16,500 during a horrendous winter, harried by Afghan attacks in the passes, massacred all but one survivor. Would a British public tolerate such losses today? Hardly. In the 1980s, attacks on Russia's stretched supply lines in perfect, mountainous, ambush country played a major role in their defeat, helped, admittedly, by stingers.

Land-locked but sinking the Royal Navy 

 The military mind, alas, is rarely original and often blinkered on subjects outside their remit and so we have fatuous cases of top service chiefs griping, for example, about cutbacks in the Royal Navy while insisting that Afghanistan must still be the MoD's top priority. The former First Sea Lord, Sir John Slater, berated the outgoing labour government for a decade of underinvestment which "has left the Royal Navy with a serious shortage of ships." Any further cuts, he warned, would lead to "an enormous strain on the service." He was particularly concerned at the decision to halve the number of type 45 destroyers. Labour said it had to make Afghanistan its priority and could not afford to pay for the number of ships in service. Sir John agrees that Afghanistan must be Britain's top defence priority but seems unable to grasp that Afghanistan is part of the Royal Navy's underfunding problem. Can Britain really afford an Afghan war while at the same time properly funding the navy during severe financial belt tightening? The incumbent First Sea Lord, Sir Mark Stanhope, is similarly fighting his corner for a properly funded navy, arguing that: "Maritime capabilities are not a luxury, they are a necessity." Agreed, but he, too, should recognise that you cannot have it every way with limited resources and a worsening economic climate. 

The British electorate is being asked to make huge sacrifices and as Bob Crow, general secretary of the Rail, Maritime and Transport Union said, ministers could not cut jobs and services while the "grotesque waste of money in Iraq and Afghanistan dominate spending priorities." The grotesque waste of money can be gauged by a look at the logistics of the Afghan war, but first the military reality. The occupation has failed to suppress an insurgency that has significant popular support. Even with the extra 17,000 US personnel promised there will still be less than 90,000 US and Nato troops. Given the size and population of the country, military analysts estimate that a force of up 500,000 would be needed. President Obama has admitted that the US is not winning the war in Afghanistan. Even in Pakistan, the operations of 100,000 Pakistani troops have failed to break the Taleban's grip. The coalition forces cannot hope to engage the Taleban in pitched battles, much as they would like to. It is not that kind of war. This means that the use of superior weapons, which in some wars was decisive and even changed the course of history, like the needle gun and Krupp steel cannon, is not an option. 

The $105 billion bill so far 

 The logistical scope of resupplying US forces in Afghanistan is immense. There are currently nearly 400 US and coalition force bases in the country. The Pentagon has said that there are now 87,000 US troops alongside 47,000 troops from 44 other countries. The number of contractors to the US military is a staggering 107,000. By the end of 2010 fiscal year, Afghanistan will cost nearly $105 billion. Examples of obscene waste can be judged at specific levels. The cost of airlifting one Stryker brigade of 3,900 men and all its vehicles is $210 million at a cost of $14,000 per tonne for all the 15,000 tonnes needed. Transport by rail through Russia would only be $500 per tonne, or just $7.5 million. America is looking at other supply routes than through Pakistan, where currently 75% of supplies pass through the port of Karachi. But this involves a treacherous, 1,200-mile road journey taking in the Khyber Pass. In just one attack in 2008, 42 oil tankers were destroyed. "The idea that you can wage an effective military campaign in this land-locked country without safe and dependable logistical support is crazy," one US Defence Department official at the policy-making level was heard to have remarked. But whatever 'safe' routes may be negotiated it is clear that a determined, fearless, war-hardened Taleban, whose per capita support costs are less than one tenth of American troops, with logistics problems working in their favour, will stymie a coalition victory. National cohesion will only come through a political process. The recent announcement of up to $2 trillion worth of mineral reserves in Afghanistan may only serve to lengthen the endemic conflict. But if all Afghans could agree to adopt good governance of the people and by the people as one unified nation, eschewing petty sub nation differences, then a golden age would beckon. 
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"Before the fighting proper, the battle is won or lost by quartermasters" -Erwin Rommel