Engineered Microbes Pose New Bioterror Threat

Well, well, well! I just hope that these articles open the politicians' and policymakers' eyes to the cold, hard reality of our world today. This is exactly what I had in mind when I posted my blog “70-20-10” - U.S. Security Still Needs A Focus on Technology (which can be accessed at http://nanomat.blogspot.com/2006/06/70-20-10-us-security-still-needs-focus.html) on June 14, 2006. I especially like the following quote: All it would take for advanced bioweapons development is one skilled scientist and modest equipment — an activity we are unlikely to detect in advance. — Charles Allen, U.S. Homeland Security Department Chief Intelligence Officer.

However, I strongly disagree with Mr. Allen's following statement:

"The capability of terrorists to embark on this path in the near- to mid-term is judged to be low," Charles E. Allen, chief intelligence officer for the Department of Homeland Security, said in testimony May 4 before a panel of the House Committee on Homeland Security. "Just because the technology is available doesn't mean terrorists can or will use it."

Should we wait for a terrorist incident to happen? Once it happens, we could say "Oh, no! Terrorists not only have the technology available, but they also know how to use it." I just do not understand the U. S.' suffering from ostrich syndrome.

We are all only obsessed with nuclear weapons proliferation. Fortunately, nuclear precursors and technology are reasonably much better controlled and protected than chemical and biological weapons precursors. For better, or worse, nuclear scientists foresaw the destruction that those weapons could wreak and tried to place adequate controls on the development and proliferation of technology. Here comes the bad part: we did not anticipate the ease with which the chemical and biological weapons technologies could be spread. Hence, the technology is everywhere. In terms of biotechnology, any country with decent biologists and biochemists could develop these dreaded bioweapons. I would especially be wary of the following countries: Cuba, China, Iran, Syria, North Korea, Libya, Malaysia, Pakistan, Israel, India, and Russia, just to name a few. (Of these countries, India may not have an ax to grind with the U. S.) To make things even worse, one could buy these "oligonucleotides" (DNA fragments) and viruses from U. S. companies very cheaply, by mail; yes, by mail. (Are you surprised, yet?) In fact, the author of this blog has purchased many of these "fragments" and viruses on many occasions from these companies. I do not know how many of us know that Japan was a pioneer in bioweapons (bubonic plague) program during World War II. Only Providence and stupidity and infighting on the Japanese's part prevented the delivery of these deadly pathogens to the U. S. (The chief Japanese scientist on the program was later an Adviser to the U. S. Government, despite the fact that he tested the efficacy of these pathogens on innocent Manchurians, instead of being tried for Crimes Against Humanity. Go figure!) Lastly, the articles completely ignore the development of a nascent (but it has been in existence since Mankind was known to be on earth) technology - nanotechnology. Nanotechnology can be universally employed across the boundaries of traditional disciplines. This interdisciplinary nature of nanotechnology makes it perhaps the single most important discipline today. Specifically, in the context of this discussion, nanobiology and nanochemistry. One has to realize the significance and reach of nanotechnology and its impact on all the other disciplines. For instance, nanotechnology could enable the creation of synthetic viruses and other biological entities. Another example of nanotechnology is the weaponization of biological agents. (The author does not wish to disclose the specific techniques on an open, public website.) We must be extremely mindful of the convergence and fusion of nanotechnology, biotechnology, and information technology.

The Central Intelligence Agency (CIA) and Defense Intelligence Agency (DIA) have also published studies on status and mitigation of proliferation of bioweapons programs:

https://www.cia.gov/csi/studies/vol48no3/article06.html

http://www.dia.mil/publicaffairs/Testimonies/20050317_DR_Jacoby_WWT_SASC_SFR-U-Final.pdf

I very strongly advocate the following (these action items are work in progress and may be modified as further refinements are made):

• Invest in the biological and chemical weapons technology development, detection, and neutralization.

• Form an International Technology Working Group - ITWG - perhaps, under the U. N. umbrella. (However, I do not have much faith in the U. N's ability to police the spread of anything, much less a technology that is already widespread. This is, perhaps, because of our own doing. Responsibility without authority does not mean anything!)

• The ITWG must comprise personnel from industry, academia, intelligence community, and armed services from across the globe.

• Invest in nanotechnology and nanomaterials, for it would be the deadliest future weapons platform.

• Screen and limit publicly available information. (This may be very difficult, if not impossible, because the proverbial cat is already out of the bag and playing gleefully.)

The following is an article posted on the Global Security Network website:

Engineered Microbes Pose New Bioterror Threat

Rapid advances in microbe engineering that could new biological weapons are outstripping U.S. efforts to prevent bioterrorism, the Washington Post reported today (see GSN, June 29, 2005).

Diseases could be overcome and lives saved through new technologies now under study in hundreds of laboratories around the world. However, they also could be used to increase the lethality of pathogens or restore early strains such as the 1918 influenza. The technologies could also be used to improve ways to widely deliver disease agents.  “The biological weapons threat is multiplying and will do so regardless of the countermeasures we try to take,” said Steven Block, a Stanford University biophysicist and former president of the Biophysical Society. “You can’t stop it, any more than you can stop the progress of mankind. You just have to hope that your collective brainpower can muster more resources than your adversaries’.”

The U.S. Centers for Disease Control and Prevention to date has not moved to monitor the expanding gene-synthesis industry. The supervision of controversial experiments is voluntary and irregular at universities and private laboratories in the United States, and even more rare internationally, the Post reported.  Conventional biodefense practices such as stockpiling antibiotics or controlling strains of known fatal diseases are still important, but more efforts are necessary, bioterrorism experts said.  “There’s a name for fixed defenses that can easily be outflanked: They are called Maginot lines,” said molecular biologist Roger Brent, a former biodefense adviser to the Defense Department. “By themselves, stockpiled defenses against specific threats will be no more effective to the defense of the United States than the Maginot line was to the defense of France in 1940.”

The development of biotechnology has been compared to the start of the nuclear age. Analysts, however, noted important differences. Rather than seeing a U.S. monopoly on such advances, there are dozens of nations conducting this work, the Post reported.  No treaty or oversight agency exists to prevent abuse of this work, and biological secrets can be obtained for free over the Internet, said Robert Erwin, a geneticist and founder of Large Scale Biology Corp “It’s too cheap, it’s too fast, there are too many people who know too much, and it’s too late to stop it,” Erwin said at a recent forum in Washington.  The threat comes not only from exotic diseases. Modifications to harmless bacteria that enter a body could change normal functions such as immunity or hormone production, according to “Biotechnology: Impact on Biological Warfare and Biodefense” a report authored by three biodefense experts with the Defense Intelligence Agency.  There have been no recorded bioterrorism incidents involving engineered microbes, though experiments on genetically altered strains occurred late in the Cold War in the Soviet Union. Some experts say terrorists are still more likely to use ordinary germs that could produce the same deadly effect. “The capability of terrorists to embark on this path in the near- to mid-term is judged to be low,” Charles Allen, chief intelligence officer for the Homeland Security Department, told the House Homeland Security Committee on May 4. “Just because the technology is available doesn’t mean terrorists can or will use it.”

More dangerous perhaps is a “lone wolf” scientist or biological hacker — working alone or in a small group — motivated by ideology or personal issues, Allen said. “All it would take for advanced bioweapons development is one skilled scientist and modest equipment — an activity we are unlikely to detect in advance,” he said. The U.S. federal “Select Agent” rule restricts access to select deadly bacteria, viruses and toxins. However, there are few CDC restrictions on transfers of synthetic genes that could be made into lethal bioterrorism agents, according to the Post. Modifications are being considered, but the lapse is an example of technology growing beyond law and policy. “It would be possible — fully legal — for a person to produce full-length 1918 influenza virus or Ebola virus genomes, along with kits containing detailed procedures and all other materials for reconstitution,” said Richard Ebright, a Rutgers University biochemist and bioterrorism expert. “It is also possible to advertise and to sell the product, in the United States or overseas.” Some scientists favor more oversight, or even peer review to impede the accidental or deliberate release of genetically modified organisms.

The National Institutes of Health has set guidelines to commission volunteer institutional biosafety committees for federally funded schools and private laboratories. A 2004 National Academy of Sciences report urged the committees to expand their oversight efforts of research that could produce more lethal biological agents, the Post reported (see GSN, Sept. 10, 2004). In many cases, the committees are only theoretical bodies. The nonprofit Sunshine Project in 2004 requested meeting minutes or notes evaluating research projects from 390 committees. Only 15 of those institutions showed full compliance with NIH guidelines, said survey director Edward Hammond. About 200 had poor or missing records, or had none at all, while some committees had not actually met. New techniques and research in microbes could help overcome bioterrorism threats and cure natural diseases, but the search for new drugs is slow.

Five years after Sept. 11, the government sets aside nearly $8 billion a year for civilian biodefense. Billions more have been spent to develop, purchase and stockpile new drugs, primarily related to identified bioterrorism threats such as anthrax. While efforts are being made to make the system more efficient, the development of one new drug could take up to 10 years and cost hundreds of million of dollars. If proven successful, the drug would treat only one of many illnesses on a growing list of bioterrorism threats (Joby Warrick, Washington Post, July 31).

The following is an article published in the Washington Post:

Custom-Built Pathogens Raise Bioterror Fears

By Joby Warrick

Washington Post Staff Writer

Monday, July 31, 2006; A01

STONY BROOK, N.Y.

Eckard Wimmer knows of a shortcut terrorists could someday use to get their hands on the lethal viruses that cause Ebola and smallpox. He knows it exceptionally well, because he discovered it himself. In 2002, the German-born molecular geneticist startled the scientific world by creating the first live, fully artificial virus in the lab. It was a variation of the bug that causes polio, yet different from any virus known to nature. And Wimmer built it from scratch. The virus was made wholly from nonliving parts, using equipment and chemicals on hand in Wimmer's small laboratory at the State University of New York here on Long Island. The most crucial part, the genetic code, was picked up for free on the Internet. Hundreds of tiny bits of viral DNA were purchased online, with final assembly in the lab. Wimmer intended to sound a warning, to show that science had crossed a threshold into an era in which genetically altered and made-from-scratch germ weapons were feasible. But in the four years since, other scientists have made advances faster than Wimmer imagined possible. Government officials, and scientists such as Wimmer, are only beginning to grasp the implications. "The future," he said, "has already come." Five years ago, deadly anthrax attacks forced Americans to confront the suddenly real prospect of bioterrorism. Since then the Bush administration has poured billions of dollars into building a defensive wall of drugs, vaccines and special sensors that can detect dangerous pathogens. But already, technology is hurtling past it. While government scientists press their search for new drugs for old foes such as classic anthrax, a revolution in biology has ushered in an age of engineered microbes and novel ways to make them. The new technology opens the door to new tools for defeating disease and saving lives. But today, in hundreds of labs worldwide, it is also possible to transform common intestinal microbes into killers. Or to make deadly strains even more lethal. Or to resurrect bygone killers, such the 1918 influenza. Or to manipulate a person's hormones by switching genes on or off. Or to craft cheap, efficient delivery systems that can infect large numbers of people. "The biological weapons threat is multiplying and will do so regardless of the countermeasures we try to take," said Steven M. Block, a Stanford University biophysicist and former president of the Biophysical Society. "You can't stop it, any more than you can stop the progress of mankind. You just have to hope that your collective brainpower can muster more resources than your adversaries'." The Bush administration has acknowledged the evolving threat, and last year it appointed a panel of scientists to begin a years-long study of the problem. It also is building a large and controversial lab in Frederick, where new bioterrorism threats can be studied and tested. But overall, specific responses have been few and slow. The U.S. Centers for Disease Control and Prevention has declined so far to police the booming gene-synthesis industry, which churns out made-to-order DNA to sell to scientists. Oversight of controversial experiments remains voluntary and sporadic in many universities and private labs in the United States, and occurs even more rarely overseas. Bioterrorism experts say traditional biodefense approaches, such as stockpiling antibiotics or locking up well-known strains such as the smallpox virus, remain important. But they are not enough. "There's a name for fixed defenses that can easily be outflanked: They are called Maginot lines," said Roger Brent, a California molecular biologist and former biodefense adviser to the Defense Department, referring to the elaborate but short-sighted network of border fortifications built by France after World War I to prevent future invasions by Germany. "By themselves," Brent said, "stockpiled defenses against specific threats will be no more effective to the defense of the United States than the Maginot line was to the defense of France in 1940."

How to Make a Virus

Wimmer's artificial virus looks and behaves like its natural cousin -- but with a far reduced ability to maim or kill -- and could be used to make a safer polio vaccine. But it was Wimmer's techniques, not his aims, that sparked controversy when news of his achievement hit the scientific journals. As the creator of the world's first "de novo" virus -- a human virus, at that -- Wimmer came under attack from other scientists who said his experiment was a dangerous stunt. He was accused of giving ideas to terrorists, or, even worse, of inviting a backlash that could result in new laws restricting scientific freedom. Wimmer counters that he didn't invent the technology that made his experiment possible. He only drew attention to it. "To most scientists and lay people, the reality that viruses could be synthesized was surprising, if not shocking," he said. "We consider it imperative to inform society of this new reality, which bears far-reaching consequences." One of the world's foremost experts on poliovirus, Wimmer has made de novo poliovirus six times since his groundbreaking experiment four years ago. Each time, the work is a little easier and faster. New techniques developed by other scientists allow the creation of synthetic viruses in mere days, not weeks or months. Hardware unveiled last year by a Harvard genetics professor can churn out synthetic genes by the thousands, for a few pennies each. But Wimmer continues to use methods available to any modestly funded university biology lab. He reckons that tens of thousands of scientists worldwide already are capable of doing what he does. "Our paper was the starting point of the revolution," Wimmer said. "But eventually the process will become so automated even technicians can do it." Wimmer's method starts with the virus's genetic blueprint, a code of instructions 7,441 characters long. Obtaining it is the easiest part: The entire code for poliovirus, and those for scores of other pathogens, is available for free on the Internet. Armed with a printout of the code, Wimmer places an order with a U.S. company that manufactures custom-made snippets of DNA, called oglionucleotides. The DNA fragments arrive by mail in hundreds of tiny vials, enough to cover a lab table in one of Wimmer's three small research suites. Using a kind of chemical epoxy, the scientist and his crew of graduate assistants begin the tedious task of fusing small snippets of DNA into larger fragments. Then they splice together the larger strands until the entire sequence is complete. The final step is almost magical. The finished but lifeless DNA, placed in a broth of organic "juice" from mushed-up cells, begins making proteins. Spontaneously, it assembles the trappings of a working virus around itself. While simple on paper, it is not a feat for amateurs, Wimmer said. There are additional steps to making effective bioweapons besides acquiring microbes. Like many scientists and a sizable number of biodefense experts, Wimmer believes traditional terrorist groups such as al-Qaeda will stick with easier methods, at least for now. Yet al-Qaeda is known to have sought bioweapons and has recruited experts, including microbiologists. And for any skilled microbiologist trained in modern techniques, Wimmer acknowledged, synthetic viruses are well within reach and getting easier. "This," he said, "is a wake-up call."

From Parlor Trick to Bio-Bricks

The global biotech revolution underway is more than mere genetic engineering. It is genetic engineering on hyperdrive. New scientific disciplines such as synthetic biology, practiced not only in the United States but also in new white-coat enclaves in China and Cuba, seek not to tweak biological systems but to reinvent them. The holy grail of synthetic biologists is the reduction of all life processes into building blocks -- interchangeable bio-bricks that can be reassembled into new forms. The technology envisions new species of microbes built from the bottom up: "living machines from off-the-shelf chemicals" to suit the needs of science, said Jonathan Tucker, a bioweapons expert with the Washington-based Center for Non-Proliferation Studies. "It is possible to engineer living organisms the way people now engineer electronic circuits," Tucker said. In the future, he said, these microbes could produce cheap drugs, detect toxic chemicals, break down pollutants, repair defective genes, destroy cancer cells and generate hydrogen for fuel. In less than five years, synthetic biology has gone from a kind of scientific parlor trick, useful for such things as creating glow-in-the-dark fish, to a cutting-edge bioscience with enormous commercial potential, said Eileen Choffnes, an expert on microbial threats with the National Academies' Institute of Medicine. "Now the technology can be even done at the lab bench in high school," she said. Along with synthetic biologists, a separate but equally ardent group is pursuing DNA shuffling, a kind of directed evolution that imbues microbes with new traits. Another faction seeks novel ways to deliver chemicals and medicines, using ultra-fine aerosols that penetrate deeply into the lungs or new forms of microencapsulated packaging that control how drugs are released in the body. Still another group is discovering ways to manipulate the essential biological circuitry of humans, using chemicals or engineered microbes to shut down defective genes or regulate the production of hormones controlling such functions as metabolism and mood. Some analysts have compared the flowering of biotechnology to the start of the nuclear age in the past century, but there are important differences. This time, the United States holds no monopoly over the emerging science, as it did in the early years of nuclear power. Racing to exploit each new discovery are dozens of countries, many of them in the developing world. There's no binding treaty or international watchdog to safeguard against abuse. And the secrets of biology are available on the Internet for free, said Robert L. Erwin at a recent Washington symposium pondering the new technology. He is a geneticist and founder of the California biotech firm Large Scale Biology Corp. "It's too cheap, it's too fast, there are too many people who know too much," Erwin said, "and it's too late to stop it."

A Darker Side

In May, when 300 synthetic biologists gathered in California for the second national conference in the history of their new field, they found protesters waiting. "Scientists creating new life forms cannot be allowed to act as judge and jury," Sue Mayer, a veterinary cell biologist and director of GeneWatch UK, said in a statement signed by 38 organizations. Activists are not the only ones concerned about where new technology could lead. Numerous studies by normally staid panels of scientists and security experts have also warned about the consequences of abuse. An unclassified CIA study in 2003 titled "The Darker Bioweapons Future" warned of a potential for a "class of new, more virulent biological agents engineered to attack" specific targets. "The effects of some of these engineered biological agents could be worse than any disease known to man," the study said. It is not just the potential for exotic diseases that is causing concern. Harmless bacteria can be modified to carry genetic instructions that, once inside the body, can alter basic functions, such as immunity or hormone production, three biodefense experts with the Defense Intelligence Agency said in an influential report titled "Biotechnology: Impact on Biological Warfare and Biodefense." As far as is publicly known, no such weapons have ever been used, although Soviet bioweapons scientists experimented with genetically altered strains in the final years of the Cold War. Some experts doubt terrorists would go to such trouble when ordinary germs can achieve the same goals. "The capability of terrorists to embark on this path in the near- to mid-term is judged to be low," Charles E. Allen, chief intelligence officer for the Department of Homeland Security, said in testimony May 4 before a panel of the House Committee on Homeland Security. "Just because the technology is available doesn't mean terrorists can or will use it." A far more likely source, Allen said, is a "lone wolf": a scientist or biological hacker working alone or in a small group, driven by ideology or perhaps personal demons. Many experts believe the anthrax attacks of 2001 were the work of just such a loner. "All it would take for advanced bioweapons development," Allen said, "is one skilled scientist and modest equipment -- an activity we are unlikely to detect in advance."

Genes for Sale

Throughout the Western world and even in developing countries such as India and Iran, dozens of companies have entered the booming business of commercial gene synthesis. Last fall, a British scientific journal, New Scientist, decided to contact some of these DNA-by-mail companies to show how easy it would be to obtain a potentially dangerous genetic sequence -- for example, DNA for a bacterial gene that produces deadly toxins. Only five of the 12 firms that responded said they screened customers' orders for DNA sequences that might pose a terrorism threat. Four companies acknowledged doing no screening at all. Under current laws, the companies are not required to screen. In the United States, the federal "Select Agent" rule restricts access to a few types of deadly bacteria, viruses and toxins. But, under the CDC's interpretation of the rule, there are few such controls on transfers of synthetic genes that can be turned into killers. Changes are being contemplated, but for now the gap is one example of technology's rapid advance leaving law and policy behind. "It would be possible -- fully legal -- for a person to produce full-length 1918 influenza virus or Ebola virus genomes, along with kits containing detailed procedures and all other materials for reconstitution," said Richard H. Ebright, a biochemist and professor at Rutgers University. "It is also possible to advertise and to sell the product, in the United States or overseas." While scientists tend to be deeply skeptical of government intrusion into their laboratories, many favor closer scrutiny over which kinds of genetic coding are being sold and to whom. Even DNA companies themselves are lobbying for better oversight. Blue Heron Biotechnology, a major U.S. gene-synthesis company based in suburban Seattle, formally petitioned the federal government three years ago to expand the Select Agent rule to require companies to screen DNA purchases. The company began voluntarily screening after receiving suspicious requests from overseas, including one from a Saudi customer asking for genes belonging to a virus that causes a disease akin to smallpox. "The request turned out to be legitimate, from a real scientist, but it made us ask ourselves: How can we make sure that some crazy person doesn't order something from us?" said John Mulligan, Blue Heron's founder and chief executive. "I used to think that such a thing was improbable, but then September 11 happened." Some scientists also favor greater scrutiny -- or at least peer review -- of research that could lead to the accidental or deliberate release of genetically modified organisms. In theory, such oversight is provided by volunteer boards known as institutional biosafety committees. Guidelines set by the National Institutes of Health call on federally funded schools and private labs to each appoint such a board. A 2004 National Academy of Sciences report recommended that the committees take on a larger role in policing research that could lead to more powerful biological weapons. In reality, many of these boards appear to exist only on paper. In 2004, the nonprofit Sunshine Project surveyed 390 such committees, asking for copies of minutes or notes from any meetings convened to evaluate research projects. Only 15 institutions earned high marks for showing full compliance with NIH guidelines, said Edward Hammond, who directed the survey. Nearly 200 others who responded had poor or missing records or none at all, he said. Some committees had never met.

Stockpiles Aren't Enough

New techniques that unlock the secrets of microbial life may someday lead to the defeat of bioterrorism threats and cures for natural diseases, too. But today, the search for new drugs of all kinds remains agonizingly slow. Five years after the Sept. 11 attacks, the federal government budgets nearly $8 billion annually -- an 18-fold increase since 2001 -- for the defense of civilians against biological attack. Billions have been spent to develop and stockpile new drugs, most of them each tied to a single, well-known bioterrorism threat, such as anthrax. Despite efforts to streamline the system, developing one new drug could still take up to a decade and cost hundreds of millions of dollars. If successful, the drug is a solution for just one disease threat out of a list that is rapidly expanding to include man-made varieties. In a biological attack, waiting even a few weeks for new drugs may be disastrous, said Tara O'Toole, a physician and director of the Center for Biosecurity at the University of Pittsburgh Medical Center. "We haven't yet absorbed the magnitude of this threat to national security," said O'Toole, who worries that the national commitment to biodefense is waning over time and the rise of natural threats such as pandemic flu. "It is true that pandemic flu is important, and we're not doing nearly enough, but I don't think pandemic flu could take down the United States of America. A campaign of moderate biological attacks could." © 2006 The Washington Post Company

Best,

Nanoguru.

Emerging Giants

This is an article that appeared in the July 31, 2006 edition of Business Week:

Emerging Giants

JULY 31, 2006 COVER STORY

Emerging Giants

Multinationals from China, India, Brazil, Russia, and even Egypt are coming on strong. They're hungry -- and want your customers. They're changing the global game.

Like other rural residents of southern Mississippi, Jamie Lucenberg, 35, faced a huge cleanup job last fall in the wake of Hurricane Katrina. He needed a tractor fast to clear debris and trees from his 17-acre family farm, just 16 miles north of devastated Biloxi. "We literally had to cut our way up and down the blacktop roads," recalls Lucenberg.

But rather than buy an American-made John Deere or New Holland, brands he grew up with, Lucenberg chose a shiny red Mahindra 5500 made by India's Mahindra & Mahindra Ltd. "I have been around equipment all my life," says Lucenberg, who also used the tractor to earn extra money clearing destroyed homes along the Gulf Coast. But for $27,000, complete with a front loader, the 54-hp Mahindra" is by far the best for the money. It has more power and heavier steel," Lucenberg says. "When you lock it into four-wheel drive, you can move 3,000 pounds like nothing. That thing's an animal." The local dealership in nearby Saucier, Miss. (population 1,300), figures it has sold 300 Mahindras in the past four months. Surprised that a company from India is penetrating a U.S. market long dominated by venerable names like Deere & Co.? Then it's time to take a look at how globalization has come full circle. A new breed of ambitious multinational is rising on the world scene, presenting both challenges and opportunities for established global players.

These new contenders hail from seemingly unlikely places, developing nations such as Brazil, China, India, Russia, and even Egypt and South Africa. They are shaking up entire industries, from farm equipment and refrigerators to aircraft and telecom services, and changing the rules of global competition.

Unlike Japanese and Korean conglomerates, which benefited from protection and big profits at home before they took on the world, these are mostly companies that have prevailed in brutally competitive domestic markets, where local companies have to duke it out with homegrown rivals and Western multinationals every day. As a result, these emerging champions must make profits at price levels unheard of in the U.S. or Europe. Indian generic drugmakers, for example, often charge customers in their home market as little as 1% to 2% of what people pay in the U.S. Cellular outfits in North Africa, Brazil, and India offer phone service for pennies per minute. Yet these companies often thrive in such tough environments. Egyptian cellular operator Orascom boasts margins of 49%; Mahindra's pretax profit rose 81% last year.

Some already are marquee names. Lenovo Group, the Chinese computer maker, made waves last year by buying IBM's (IBM ) $11 billion PC business. Indian software outfits Infosys, Tata Consultancy Services, and Wipro (WIT ) have revolutionized the $650 billion technology services industry. Johannesburg brewer SABMiller PLC is challenging Anheuser-Busch Cos.' (BUD ) leadership right in the U.S.

These companies are just the first wave. The biggest international cellular provider? Soon it may be Mexico's América Móvil (AMX ), which boasts more than 100 million Latin American subscribers and led BusinessWeek's latest rankings of the world's top information technology companies. Never heard of Hong Kong's Techtronic Industries Ltd.? If you buy power tools at Home Depot Inc. (HD ), where its products now fill the aisles, you probably know some of the brands it manufactures: Ryobi, Milwaukee, and RIDGID. Brazil's Embraer has surged past Canada's Bombardier as the world's No. 3 aircraft maker and is winning midsize-jet orders that otherwise would have gone to larger planes by Airbus and Boeing (BA ). Western telecom equipment leaders have long looked down on China's Huawei Technologies Co. as a mere copier of their designs. But last year, Huawei snared $8 billion in new orders, including contracts from British Telecommunications PLC (BT ) for its $19 billion program to transform Britain's telecom network. The deal "sent a chill through the rest of the telecom manufacturers," says analyst Michael Howard of Infonetics Research Inc. in Campbell, Calif.

Many more companies are using their bases in the developing world as springboards to build global empires, such as Mexican cement giant Cemex, Indian drugmaker Ranbaxy, and Russia's Lukoil (LUKOY ), which has hundreds of gas stations in New Jersey and Pennsylvania. "What is surprising is the amount of progress emerging-market companies have made in the last few years," says Harold L. Sirkin, senior vice-president at Boston Consulting Group (BCG), which recently published a study based on data collected from 3,000 companies in 12 developing nations. BCG identified 100 emerging multinationals that appear positioned to "radically transform industries and markets around the world." The 100 had a combined $715 billion in revenue in 2005, $145 billion in operating profits, and a half-trillion dollars in assets. They have grown at a 24% annual clip in the past four years. "There is no doubt in my mind that Corporate America has started to take this threat seriously," Sirkin adds.

What makes these upstarts global contenders? Their key advantages are access to some of the world's most dynamic growth markets and immense pools of low-cost resources, be they production workers, engineers, land, petroleum, or iron ore. But these aspiring giants are about much more than low cost. The best of the pack are proving as innovative and expertly run as any in the business, astutely absorbing global consumer trends and technologies and getting new products to market faster than their rivals. Techtronic, for example, was the first to sell heavy-duty cordless tools powered by lightweight lithium ion batteries. Jetmaker Embraer's sleek EMB 190, which seats up to 118, has taken smaller commercial aircraft to a new level with a fuselage design that offers the legroom and overhead luggage space of much larger planes. Globalization and the Internet are ushering in this "seismic change" to the competitive landscape, says management guru Ram Charan. Because they can tap the same managerial talent, information, and capital as Western companies, "anyone from anywhere who sets his mind to it can really restructure an industry," Charan says. "Make no mistake, this now is a global game."

U.S. corporations, of course, have weathered waves of new rivals before. The 1960s and '70s saw the rise of Western European industrial groups such as Unilever, Philips, Siemens (SI ), and Volkswagen. Then came Japanese giants such as Sony (SNE ) and Toyota, followed by South Korean powerhouses such as Hyundai and Samsung and Taiwanese electronics conglomerates in the '90s. Each time, chief executives found themselves caught off guard. The best U.S. corporations adapted and emerged stronger than before.

Yet this new group of game-changing companies is different on many levels. For starters, the new players are coming from many nations at once and deploying an array of strategies. They're also arriving from lands that, while growing fast, remain relatively poor. Germany and Japan were industrial powers before World War II and built on those strengths to reemerge as global heavyweights. By contrast, China and India have begun to emerge from extreme poverty only in recent decades. Per capita income in China is still just $1,300 a year. In India it's $620. That sounds like a huge handicap for companies from those nations: It implies low-income customers, meager capital, and hand-me-down technologies. It also means struggling with arcane regulations, corruption, and poor infrastructure.

Fit Survivors

Hardscrabble origins, though, can be a vital source of strength. These companies have learned to make money by developing reliable, easy-to-use goods and services at very low prices. And those skills have equipped them well for operating elsewhere in the Third World. Telcos such as Orascom and India's Bharti Telecom, for example, earn high margins while selling cellular service in some nations for 2 cents or 3 cents a minute, while América Móvil pioneered the use of pay-as-you-go cellular service that allows the masses to pay as little as $4.50 for a prepaid card. India has some of the lowest pharmaceutical prices in the world. The country has 101 brands of generic ciprofloxacin, used to treat bacterial infections such as pneumonia and anthrax, costing an average of 63 cents for 10 tablets of 500mg each. That compares with $51 for generic ciprofloxacin in the U.S., according to Ranbaxy Laboratories. "By learning to compete in this environment, we have gained strength in development and marketing that helps us around the world," says Ranbaxy CEO Malvinder Mohan Singh.

The late 1990s proved to be a time of key opportunity for these companies. In the wake of financial crises in Asia, Latin America, and Russia, many Western companies and banks pulled back from all but a few developing nations. Well-run local players bought assets from retreating Westerners on the cheap and doggedly pursued opportunities from Nigeria to Pakistan to Colombia. From 1995 to 2003, the World Bank estimates, corporate investment from one developing nation to another more than tripled, to $47 billion annually. It probably has neared $60 billion since.

That leaves the new multinationals in a strong position. Over the next decade, the World Bank projects, developing nations' share of world gross domestic product is expected to grow from one-fifth to one-third. During the next two decades, predicts Goldman, Sachs & Co. (GS ), China, India, Brazil, and Russia alone will add to their populations some 225 million consumers who earn at least $15,000 a year. That's more than the combined population of Germany and Japan. Of 1.2 billion new cellular-phone subscribers worldwide by 2010, estimates Pyramid Research in Cambridge, Mass., 86% will be in developing nations. Chicago economic consultant Keystone India figures emerging markets will make up 69% of all new car sales by 2030, compared with 26% now.

Where they choose to fight, of course, the established multinationals still hold big advantages over the upstarts. Citibank (C ), General Electric (GE ), Honda (HMC ), HSBC (HBC ), Motorola (MOT ), Nokia (NOK ), and Philips (PHG ) are masters at using low-cost manufacturing, engineering, and managerial talent from Bangalore to São Paulo. Few developing-nation companies have such management agility.

That's especially true in China, where promising consumer-electronics makers such as Bird, Konka, and TCL have stumbled because of overcapacity at home and poorly managed acquisitions abroad. "Everyone sees Chinese enterprises as a threat, but in fact they face a lot of difficulties going global," concedes Zhang Xuebin, CEO of $1.5 billion color TV maker Skyworth Digital Holding Ltd.

The best emerging multinationals, though, have amassed piles of cash, have built global research and development networks, and boast world-class management. You get the idea how far some companies have come by touring Embraer's campus in São José dos Campos, the size of 55 soccer fields. On the floor of one hangar, dozens of workers in impeccable overalls put the finishing touches on three luxurious Legacy 600 corporate jets that seat up to 16. In a classroom perched above the assembly line, 30 engineers enrolled in the company's graduate aerospace program fine-tune a PowerPoint presentation on a hypothetical new jet they have designed after conducting exhaustive market research and cost-feasibility studies.

Local Heroes

Other emerging players are using their access to deep pools of low-cost local engineers and experience gained in developing nations to close the gap with Western incumbents. Just three years ago, Huawei was known in the U.S. mainly as the company that Cisco Systems Inc. (CSCO ) caught copying its designs. But Huawei, which spent $558 million in R&D last year and employs 7,000 engineers at its sprawling Shenzhen campus, is winning respect globally. Last year 57% of its sales were outside China. It boasts a 15% market share in Asia and 9% in Latin America, cutting sharply into Cisco's lead in those regions. Huawei is the global leader in the rapidly growing equipment market for voice-over-Internet protocol service.

Besides undercutting Western rivals' prices by 20% to 50%, Huawei is adept at designing equipment appropriate for developing nations. "A Cisco always starts a discussion with its software superiority," says Steven Davidson, leader of strategic change at IBM in Asia. "But many companies in developing nations would rather pay half the price for software that gets the job done."

A raft of Indian companies also have gotten in position for a U.S. assault after building heft at the margins of the global economy. Ranbaxy may rank just No. 14 in the $28 billion U.S. market for prescription generic drugs. But it is a leader in nations like Nigeria and Brazil. It has earned goodwill by being one of the biggest suppliers of $1-a-day generic AIDS treatments to Africa at cost, and hopes to have its own new malaria drug on the market by 2008. It has also snapped up smaller generic drugmakers in Belgium, Italy, and Romania. When Ranbaxy first began to market its drugs in Europe, recalls CEO Singh, its sales staff was often kept waiting hours before skeptical purchasing managers would hear their pitch. Now, Ranbaxy is a top supplier in much of Europe, and 80% of its $1.2 billion in revenues comes from overseas. It has staff in 49 nations, plants in seven, and an R&D team of 1,100 at its 17-acre campus outside New Delhi.

Ranbaxy hopes this R&D base will enable it to vault into the top five in the U.S. by 2012 and to No. 1 globally, passing Israel's Teva Pharmaceutical Industries Ltd. It has 58 generic medicines pending U.S. Food & Drug Administration approval, including a version of the anti-cholesterol drug Lipitor. Ranbaxy's pipeline is the second-biggest in the generic industry.

How can Western multinationals respond? The first step is to begin respecting the new competition. That is the attitude David C. Everitt, president of Deere's $10.5 billion agricultural division, is adopting toward Mahindra. Everitt concedes the Indian rival could someday pass Deere in global unit sales. Mahindra dominates the Indian market, which is bigger even than America's, and is especially strong in the small tractors that account for two-thirds of U.S. sales. But Deere also is picking up its game by, among other things, boosting R&D in higher-end tractors for mega-farms in the U.S., Europe, and Brazil, and expanding its own production in India and elsewhere. "We are not afraid of competition," Everitt says. "It gets the juices going and helps us find ways to be better."

Standing Pat

Another strategy is to refuse to cede ground either at home or abroad. Last year, Whirlpool Corp. (WHR ) agreed to pay a surprisingly high $2.8 billion to buy Maytag Corp. It wanted to keep Maytag out of the hands of China's Haier, which is ramping up in the U.S. and had made a rival bid. Cisco, meanwhile, is keeping up the pressure in China, Huawei's home market. Cisco continues to win large orders from Chinese corporations, has plowed $650 million into Chinese tech startups, and has forged a tieup with local Huawei rival ZTE Corp.Then there's always the strategy of joining the new challengers. Nortel Networks Ltd. (NT ) and 3Com (COMS ) have formed telecom equipment and design ventures with Huawei. And Navistar International Corp. in Warrenville, Ill., has a joint venture with Mahindra to build trucks and buses for export. "These companies can be opportunities," says BCG's Sirkin, "if you can work with them.

"No matter how the big U.S. companies respond, gone is the era when they could afford to wait for an emerging market to ripen, then count on their ability to roll over the unsophisticated local players. "If you don't participate in these markets, you not only miss opportunities but also are cut out of all the innovation that comes from competing there," says University of Michigan management strategist C.K. Prahalad. "Then you won't be able to withstand the pressure when these companies come and hit you here." Whether one chooses to confront or collaborate, the new multinationals are set to change the rules in industry after industry.

By Pete Engardio, with Michael Arndt in Chicago and Geri Smith in São José dos Campos, Brazil.

This reinforces my contention that the U. S. is seriously falling behind the Rapidly Developing Economies (RDEs), especially China and India. To redress these issues, we must very quickly reprioritize our goals (and act on, of course) to include education of our citizens; investment in technology (regardless of religious convictions; read: President Bush's veto of the Stem Cell Bill); invest in a strong defense (read: do not fight other people's wars); learn from other countries and adapt to the challenge; and above all acquire, invest in, and nurture talent from anywhere in the world (read: legal immigration).

The following is another related article, which also appeared in the July 31, 2006 edition of Business Week:

Why It's A Small World After All

JULY 31, 2006 COVER STORY

Why It's A Small World After All

By Ram Charan

Radical change in the structure of the world economy is rare. But make no mistake: The emergence of world-class companies from developing nations is a shift that portends a new global game.

Indeed, emerging economies are no longer just about outsourcing or tapping into local markets. We are seeing the first wave of emerging-nation players that have clear advantages in their industries. Rather than the competition among three or four countries that long dominated global commerce, we have entered an evolving game of multiple geographies. The importance of that change -- and the challenge it poses to the dominance of the West and Japan -- cannot be overstated.

This seismic shift began roughly 10 years ago, brought about by three forces: mobility of talent, mobility of capital, and mobility of knowledge, thanks largely to the Internet. As a result, anyone from anywhere with determination can restructure a global industry. Lakshmi N. Mittal used knowhow from his family's steel business in India to build London-based Mittal Steel Co. (MT ), the world's largest. Mexico's Cemex is a new world leader blossoming far from traditional business centers like New York and Tokyo. If India's Tata Motors (TTM ) can develop a $2,000 car, it will become yet another.

The rise of these multinationals shouldn't be surprising in this age of globalism. But what few realize is that the advantages of such developing giants amount to more than cheap labor and low currencies. (Even companies that are lucky in those respects can have productivity and quality problems.) Instead, their leaders are good executors who see niches in the global economy and can tap world intellectual capital and financial markets to consolidate control across their industries.

Many of these companies are headed by entrepreneurs who were trained in the West and who know how to attract top talent from America and elsewhere. Wipro of India recruited Vivek Paul from General Electric Co. (GE ), and he helped build Wipro into a highly profitable, global information technology powerhouse. Shanghai Automotive Co. recently hired Philip Murtaugh, who used to run the China office for its joint-venture partner, General Motors Corp. (GM ). And Haier Group Co., China's $12 billion consumer-electronics leader, has given Mike Jemal, its U.S. president and a former New York electronics retailer, free rein to pursue markets where Haier wants to be at least No. 2 or 3 -- not just on cost but by embracing an almost manic customer focus to fulfill unmet needs.

First World businesses must recognize that top intellectual capital is available to local entrepreneurs in emerging nations, and they should expect intense competition from these newcomers at home and abroad. But such nascent competitors have another potent advantage: a lack of legacy costs that keep even the most savvy Western outfits from fully realizing the efficiencies of their size and market power. That's one reason budding multinationals will not be a passing fad. Ready or not, the globe is about to get a lot smaller.

Ram Charan is a leading U.S. management consultant and co-author of two business best-sellers.

There is also a report by the U. S.-based Boston Consulting group entitled "The New Global Challengers: How Top 100 Companies from Rapidly Emerging Economies Are Changing the World." The New Global Challengers: How Top 100 Companies from Rapidly Emerging Economies Are Changing the World Vast majority of the companies on this list are from India and China. (This does not discount the fact that we are facing imminent threats from other RDEs.) All it evidences is that we (the U. S.) cannot dismiss these companies and countries as whippersnappers, upstarts, greenhorns, etc.

Best,

Nanoguru.

Russia Opens New Nanotech Center

Russia opens new nanotech center

Nicolas Mokhoff

EE Times (07/13/2006 5:44 PM EDT)

MOSCOW — A multimillion dollar nanotechnology development center here funded by the Russian Federation expands on anticipated $400 million overall Russian investment in nanotechnology development by 2007. The Pilot Scientific and Technical Center of Excellence for Nanotechnology Development opened in June 3. Robert Cresanti, U.S. undersecretary of commerce for technology, and Bob Gregg, executive vice president at FEI, participated in the opening ceremonies. Global public investment in nanotechnology development is expected to reach $5 billion in 2006. Corporate investment is expected to exceed government funding this year, reaching nearly $6 billion. "Government nanotechnology investments were initially led by Europe, North America and Japan," Sean Murdock, executive director of the U.S.-based NanoBusiness Alliance, said in a statement. "Now countries such as Russia, China, Brazil and India have joined the trend and are making significant investments."

Here we go, again! It is not as if we do not have enough competition, already. I would not be surprised if there were to be a "nanowar," just like the cold war! A decent Russian engineer gets paid about $300-400/month. The correct exchange rate is 26.9 rubes per dollar. This provides the $400-million investment in nanotechnology center with nearly 10-15 times greater impact and return-on-investment (ROI) than it would in the U. S., or any of the other "first-world" nations, for that matter. Furthermore, the Russians already possess the technological know-how that the U. S. and its Western allies do not in many of the fields. (The only significant exception is computer technology; even there, the technology is out in the open and available for the "right" price!) We (the U. S.) must do more - a lot more - immediately! Instead of spending money on such idiotic wars as Iraq, we could invest money in alternative energy sources (sorry, coal not included).; education; medical research; defense (read: not "unnecessary" offense) and the list goes on and on like an Energizer Bunny!

Best,

Nanogurul.