Eli Lilly banks on cost controls for higher 2013 profit

(Reuters) - Eli Lilly and Co said on Friday it expects profit in 2013 to increase by more than Wall Street had been forecasting, primarily due to cost controls and improved productivity.
Lilly, whose shares were up nearly 4 percent on Friday, said 2013 sales will be flat to a bit higher, despite the loss of patent on its $5 billion-a-year antidepressant, Cymbalta, in December.
The Indianapolis-based drugmaker is coming off a particularly difficult 2012 when sales declined sharply because of competition from cheaper generics.
It expects 2013 earnings to increase to $3.75 to $3.90 per share excluding items, from a forecast of $3.30 to $3.40 per share in 2012. In 2011, its adjusted earnings were $4.41 per share.
Analysts on average forecast earnings of $3.71 for 2013 and $3.36 per share for 2012, according to Thomson Reuters I/B/E/S.
"Overall, it was better than anyone expected," said Barclays Capital analyst Tony Butler. "From an earnings perspective, no one believed that operating expenses would be kept in check."
Morningstar analyst Damien Conover said, "They're cutting costs at a pace that's maybe a little quicker than people were anticipating, and that was one of the reasons for the outperformance in their guidance."
The company said 2013 net profit would benefit from a tax credit that had been pushed into this year because of the late signing of the American Taxpayer Relief Act of 2012 - the legislation that prevented the so-called fiscal cliff.
The company said it is not sure yet of the amount of the tax credit, which is related to research and development accounting, and said it would provide more information during its January 29 earnings conference call. Lilly said it excluded the impact from all of its financial guidance.
Similar uncertainty could face other drugmakers, as well as other corporate sectors with extensive research budgets, such as technology and defense. However, "It could be resolved by the time everybody else reports," Butler said of the pharmaceutical industry. "We've got another three weeks before anyone reports."
Lilly said the adjusted earnings forecast also excludes payment and income for revenue sharing with Bristol-Myers Squibb Co's Amylin unit on Byetta, a diabetes drug, and restructuring charges. Lilly severed ties with Amylin when it agreed to collaborate with Boehringer Ingelheim on diabetes drug development.
HELP ON THE WAY
Lilly forecast 2013 revenue of $22.6 billion to $23.4 billion, driven by sales of its drugs for diabetes, osteoporosis, cancer, erectile dysfunction and animal health. The company said it also expects significant revenue growth from Japan and emerging markets, such as China.
Analysts are looking for 2013 revenue of $22.82 billion.
While Cymbalta is not expected to start facing generic competition until the end of the year, the company cautioned that sales declines could begin sooner if wholesalers start to reduce inventory supplies prior to the patent expiration.
As a result, it said, the fourth quarter could look significantly different than the first three.
Lilly has already been battered by generic competition for its once top-selling schizophrenia drug, Zyprexa, and will face generic competition for its $1 billion-a-year Evista osteoporosis drug in early 2014.
But help is on the way. Lilly said it now has 13 drugs in late-stage testing, the most at any one time in its history. It could seek approvals this year for drugs for Type 1 and Type 2 diabetes, gastric cancer and for a type of lymphoma.
Chief Financial Officer Derica Rice told analysts on a conference call that the company was firmly focused on replenishing the developmental pipeline. "This is our future and it's our first priority."
The company also vowed to maintain its dividend payout and complete its share repurchase plan.
"Lilly has financially done a really good job. Obviously, you need the pipeline to come through," said Barclay's Butler, adding that positive late-stage data on ramucirumab in breast cancer could signal an important new product for Lilly. The drug is also in late-stage testing for the smaller gastric cancer market.
Other key events for Lilly in 2013 include the start of a new Phase III trial of solanezumab in patients with mild Alzheimer's disease after an earlier study failed but showed some signs of hope for the memory-robbing condition, and an August trial challenging a method of use patent on the $3 billion-a-year lung cancer drug Alimta.
Should Lilly prevail in court, the company could have patent protection on the medicine into 2022 even though the basic patent lapses in 2016.
Asked if the company would consider settling the case before it comes to trial, Phil Johnson, Lilly's vice president for investor relations, said: "Nothing is off the table, but we have not historically entered into those kinds of agreements."
Eli Lilly shares were up 3.8 percent at $51.60 on Friday afternoon on the New York Stock Exchange.

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Lilly 2013 profit forecast tops expectations

INDIANAPOLIS (AP) — Eli Lilly and Co. unveiled a better-than-expected 2013 earnings forecast Friday, in part because the pharmaceutical company expects growth from several established drugs to help make up for revenue lost to generic competition.
The Indianapolis drug developer saw sales for its all-time best-selling drug, the antipsychotics Zyprexa, crater in 2012 after it lost U.S. patent protection. Lilly will take another hit next December when it loses patent protection for its current top seller, the antidepressant Cymbalta.
But company executives told analysts Friday they still expect Cymbalta and another product that loses patent protection in 2013, the insulin Humalog, to help drive revenue growth along with products like the cancer treatment Alimta and the erectile dysfunction drug Cialis.
Lilly also expects more growth from Japan, developing countries and its animal health business.
All told, the drugmaker forecast 2013 adjusted earnings of between $3.75 and $3.90 per share on $22.6 billion to $23.4 billion in revenue.
That topped analyst expectations, on average, for per-share earnings of $3.72, according to FactSet. Analysts also expected $22.87 billion in revenue.
Company shares climbed $1.84, or 3.7 percent, to close at $51.56 Friday, while broader indexes rose less than 1 percent.
Lilly said it expects operating expenses will be flat or drop slightly compared with 2012, and that was slightly better than what Edward Jones analyst Judson Clark expected.
He called Lilly's 2013 forecast "a pleasant surprise," but he also noted that plenty of long-term concerns remain. Lilly won't feel the brunt of the Cymbalta patent loss until 2014, and Clark expects the company's earnings to shrink then. What remains to be seen, he said, is whether the drugmaker is willing to preserve its dividend and cut expenses enough to tame that loss.
"We think the real question marks are in 2014," he said.
Lilly also expects to counter the patent expirations by developing new drugs, and the company said Friday it has 13 experimental drugs in late-stage testing, the last phase before a company seeks regulatory approval.
Lilly reiterated on Friday that it expects at least $3 billion in net income and revenue of at least $20 billion through 2014. It also expects to keep paying its dividend and to buy back $1.5 billion in shares this year.
Zyprexa once brought in more than $5 billion in annual revenue for Lilly, but its sales sank 66 percent through the first nine months of 2012 after generic competition entered the market. The company expects revenue from Cymbalta, which topped $4 billion in 2011, to start falling in this year's fourth quarter.
Humalog, Lilly's best-selling insulin, brought in about $1.4 billion in U.S. revenue in 2011. That product may take less of a sales hit after it loses U.S. patent protection in May because it's a biologic drug made from living cells instead of a chemical formula. Those are harder for generic drugmakers to replicate.
Lilly should not expect to replace blockbuster drug revenue with another round of blockbusters, said WBB Securities analyst Steve Brozak. He said the company's success will depend on a combination of drug development, partnerships with other companies and acquisitions that help stoke its product pipeline.
But that approach will be difficult because other drugmakers also are facing patent expirations and will be competing with Lilly on those deals.
"If (Lilly executives) think that business as usual applies, their shareholders are going to vote with their sell orders," he said.

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"Cliff" concerns give way to earnings focus

NEW YORK (Reuters) - Investors' "fiscal cliff" worries are likely to give way to more fundamental concerns, like earnings, as fourth-quarter reports get under way next week.
Financial results, which begin after the market closes on Tuesday with aluminum company Alcoa , are expected to be only slightly better than the third-quarter's lackluster results. As a warning sign, analyst current estimates are down sharply from what they were in October.
That could set stocks up for more volatility following a week of sharp gains that put the Standard & Poor's 500 index <.spx> on Friday at the highest close since December 31, 2007. The index also registered its biggest weekly percentage gain in more than a year.
Based on a Reuters analysis, Europe ranks among the chief concerns cited by companies that warned on fourth-quarter results. Uncertainty about the region and its weak economic outlook were cited by more than half of the 25 largest S&P 500 companies that issued warnings.
In the most recent earnings conference calls, macroeconomic worries were cited by 10 companies while the U.S. "fiscal cliff" was cited by at least nine as reasons for their earnings warnings.
"The number of things that could go wrong isn't so high, but the magnitude of how wrong they could go is what's worrisome," said Kurt Winters, senior portfolio manager for Whitebox Mutual Funds in Minneapolis.
Negative-to-positive guidance by S&P 500 companies for the fourth quarter was 3.6 to 1, the second worst since the third quarter of 2001, according to Thomson Reuters data.
U.S. lawmakers narrowly averted the "fiscal cliff" by coming to a last-minute agreement on a bill to avoid steep tax hikes this weeks -- driving the rally in stocks -- but the battle over further spending cuts is expected to resume in two months.
Investors also have seen a revival of worries about Europe's sovereign debt problems, with Moody's in November downgrading France's credit rating and debt crises looming for Spain and other countries.
"You have a recession in Europe as a base case. Europe is still the biggest trading partner with a lot of U.S. companies, and it's still a big chunk of global capital spending," said Adam Parker, chief U.S. equity strategist at Morgan Stanley in New York.
Among companies citing worries about Europe was eBay , whose chief financial officer, Bob Swan, spoke of "macro pressures from Europe" in the company's October earnings conference call.
REVENUE WORRIES
One of the biggest worries voiced about earnings has been whether companies will be able to continue to boost profit growth despite relatively weak revenue growth.
S&P 500 revenue fell 0.8 percent in the third quarter for the first decline since the third quarter of 2009, Thomson Reuters data showed. Earnings growth for the quarter was a paltry 0.1 percent after briefly dipping into negative territory.
On top of that, just 40 percent of S&P 500 companies beat revenue expectations in the third quarter, while 64.2 percent beat earnings estimates, the Thomson Reuters data showed.
For the fourth quarter, estimates are slightly better but are well off estimates for the quarter from just a few months earlier. S&P 500 earnings are expected to have risen 2.8 percent while revenue is expected to have gone up 1.9 percent.
Back in October, earnings growth for the fourth quarter was forecast up 9.9 percent.
In spite of the cautious outlooks, some analysts still see a good chance for earnings beats this reporting period.
"The thinking is you need top line growth for earnings to continue to expand, and we've seen the market defy that," said Mike Jackson, founder of Denver-based investment firm T3 Equity Labs.
Based on his analysis, energy, industrials and consumer discretionary are the S&P sectors most likely to beat earnings expectations in the upcoming season, while consumer staples, materials and utilities are the least likely to beat, Jackson said.
Sounding a positive note on Friday, drugmaker Eli Lilly and Co said it expects profit in 2013 to increase by more than Wall Street had been forecasting, primarily due to cost controls and improved productivity.

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For Egypt's satirists, Morsi's power is no joke

There are few things dictators hate more than satirists, with their uncomfortable habit of piercing hypocrisy and self-importance with just a few well-placed verbal or written barbs.
Under Hosni Mubarak, the Egyptian public's rich horde of satirical memes was an underground phenomenon, the province of cafe talk and SMS messages. That former President Mubarak was commonly called La Vache qui rit ("The Laughing Cow") after the processed cheese brand's mascot, which Egyptian wags insisted Mubarak bore a resemblance to, was something you would never learn from turning on local television and rarely, if ever, from newspapers. You picked it up from friends or acquaintances.
All that changed overnight with the Egyptian uprising against Mubarak in early 2011. The posters of protesters at Tahrir Square relentlessly mocked the president, the themes were quickly taken up on television and newspapers, and it was at this point that Bassem Youssef, a relentlessly genial cardiologist and ardent fan of Jon Stewart's Daily Show, smelled his opportunity.
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Working on a shoestring budget, he began posting a satirical news program on YouTube that quickly caught fire with its irreverent willingness to skewer all comers, members of the old authoritarian regime and emerging political factions like the Muslim Brotherhood alike.
A TV contract soon followed, and his success was in many ways a symbol of the best promises of the Egyptian revolution: A country where freedom of expression was tolerated, energizing local politics and culture after decades of being shut in by a military-backed dictatorship. Mr. Youssef, who I knew years ago when he was focused on his medical career, quickly established a major following. It was clear on the ride in from the airport the other day: Over one of Cairo's busiest highways is a billboard plastered with Youssef's face in a spot where just a few years ago advertisements for the low-quality slapstick comedies of the Mubarak era would have been placed. Recently Youssef even got to meet his hero Jon Stewart (video of Youssef and Stewart above).
But while Egypt remains far more open than it was before the revolution, President Mohamed Morsi and the Muslim Brotherhood that propelled him to power have shown a worrying willingness to try to silence citizens like Youssef with means similar to those used in the past. Yesterday local media reported that Egypt Prosecutor General Talaat Abdallah recommended that Youssef be investigated for the crime of insulting President Morsi and other government figures.
He's just the latest public figure to be targeted, with Islamist lawyers bringing a string of lawsuits against government critics for the crime of "defamation" or threatening national "stability." Ramadan Abdel Hamid al-Oksory, the Islamist lawyer who filed the initial complaint against Youssef, also started proceedings against Coptic Christian tycoon Naquib Sawiris last year for "insulting Islam."
In Egypt, almost anyone can make a legal complaint against private and public figures for insulting religion or individuals, whether or not they have personal standing in the matter. The new Egyptian constitution outlaws, specifically, both defaming religion and "insulting" individuals. But it's up to the general prosecutor to decide whether investigations will go forward. Mr. Abdallah, a Morsi appointee, has been inclined to accept such cases. With the broad, vaguely defined articles in the constitution, convictions that stick are a real threat for the targets.
Over the weekend, Morsi filed a complaint against leading newspaper al-Masry al-Youm for "circulating false news likely to disturb public peace and public security" after the paper reported, apparently incorrectly, that Morsi was planning to visit a military hospital in a Cairo suburb where Mubarak is currently undergoing treatment. Journalist Yousry al-Badry was summoned for interrogation over the incident by the prosecutor's office.
In November, an Egyptian court sentenced seven Egyptian Copts and Florida preacher Terry Jones to death in absentia for their involvement with a YouTube clip that was deemed insulting to Islam and the prophet Mohammed. Such death sentences were unheard of in Mubarak's day. In October, controversial and conspiratorial talk show host Tawfiq Okasha, often described as the Glenn Beck of Egypt, was sentenced to four months in prison for defaming Morsi after a member of the Muslim Brotherhood's Freedom and Justice Party filed a lawsuit against him. Mr. Okasha is appealing.
The growing use of the courts to silence critics, comedians, and dissenters is a clear trend in Egypt, and Egypt's new constitution will make such prosecutions easier than they were under the old one. President Morsi has shown little willingness to stop the suits.
One of the clear gains of Egypt's revolution is under threat. And many of those in power now seem quite comfortable with that.

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Taiwan undersea oil plans raise neighbors' eyebrows

Taiwan, a normally quiet claimant to portions of the disputed South China Sea, plans to explore for undersea oil there, a move likely to test fragile relations with China and upset major Southeast Asian nations.
Ringed by China, Vietnam, the Philippines, Indonesia and others, the waters are believed to hold as many as 213 billion barrels of oil but competing claims from the six bordering nations have fueled tensions, prompting US officials to step in last year to urge calm.
Taiwan’s Bureau of Mines and its top energy company plan to explore this year for some of that oil near an islet that the government holds in the Spratly archipelago, a spokesman for the company said.
Taiwan’s search for oil would remind five competing nations that it still has clout, despite old foe China. The more powerful Beijing forbids its allies around Asia from talking to Taipei and has its own ambitions in the disputed 3.5 million-square-kilometer (1.4 million-square-mile) sea.
“Taiwan seems to be seeking ways to remind other nations of its sovereignty claims,” says Bonnie Glaser, senior Asia adviser with the Washington-based think tank Center for Strategic and International Studies. “Taiwan doesn’t want to be ignored or forgotten.”
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China has considered self-ruled Taiwan part of its territory since the Chinese civil war of the 1940s, chilling ties until 2008 when the two sides put aside political differences to discuss trade and economic links.
But new incidents have challenged the fragile détente, and Taiwan is already angry about last year’s Chinese passports that claim two Taiwanese landmarks. Oil could be next, as Taiwan says it has no plans to share its search with China.
Vietnam and the Philippines also staked claims in the sea. Vessels from China and the Philippines were locked in a standoff last year, and 70 Vietnamese sailors died in a clash in 1988.
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But even as both countries periodically make what's thought of as aggressive moves in the region, both would stop short of forcing Taiwan out from the waters near Spratly where it already has an airstrip, analysts say. Too much bluster might push Taiwan closer to China, which wants more economic ties with Taiwan and which Southeast Asian claimants see as a bigger threat to their maritime interests.
“Lacking much naval power, Manila would have a hard time actually physically preventing any oil exploration by Taiwan,” says Scott Harold, associate political scientist at the RAND Corp., a policy research nonprofit in the United States.
“Hanoi would have a better prospect of reacting militarily, but any stand-off would potentially put them on the wrong side of both Washington and Beijing,” he says.
But much of the oil is already spoken for. China’s state-owned CNOOC Ltd. began drilling undersea last year, and its peer in Hanoi, PetroVietnam, has started surveying. The Philippines is also contracting out other exploration tracts.
Fellow claimant Malaysia currently produces about half the South China Sea’s oil, which is estimated at 1.3 million barrels per day. Brunei also claims parts of the ocean.
Taiwan’s Bureau of Mines will draw up a budget this year and hire CPC Corp. Taiwan to look for oil, CPC spokesman Chen Ming-hui says. Officials told parliament that exploration would cost at least $562,000.
Taiwan needs the oil as 99 percent of energy sources are now imported, Mr. Chen says. “The South China Sea is a place where Vietnam and others have sighted oil, so we think the opportunities there are good,” he says.

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US drone strike in Pakistan kills influential Taliban commander

Key Pakistani Taliban commander Maulvi Nazir – considered a "good" Taliban by some among the Pakistani military – died in a US drone strike that left at least six dead on Thursday, according to local reports.
According to Pakistan's Dawn newspaper, Taliban and local government officials confirm that Mr. Nazir and at least two of his deputies were killed when a US drone hit their vehicle in South Waziristan, a Pakistani tribal region along the Afghan border. The commander's truck had reportedly broken down at the time.
The Guardian notes that neither the Pakistani government nor the Taliban has made an official statement on the reports, and that details remain murky.
Because journalists are usually prevented by militants from visiting places hit by drones, the exact details of what happened and who was killed in such attacks are often extremely hard to verify.
Residents and an intelligence official in South Waziristan who spoke to a local journalist said the total number of people killed in the first attack was either six or 10. The intelligence source said all the men killed were "top leaders" of the Mullah Nazir group, the leading militant group in South Waziristan.
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Maulvi Nazir was the primary militant commander in South Waziristan and a key figure in Pakistan's Taliban, having maintained a complex set of relationships among the region's players.
Unlike some of Pakistan's domestic militants, Nazir chose to focus his efforts fully on Afghanistan and the NATO and US forces stationed there, and according to the US “had a clear collaboration” with Afghanistan's powerful Haqqani network, a primary foe of US and NATO troops in Afghanistan. The Washington Post notes that he was accused of regularly sending troops into Afghanistan to fight alongside the country's own Taliban against the US-led forces there.
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His Afghan focus on targeting foreign troops earned him a reputation with parts of the Pakistani military as a "good" Taliban, and he negotiated a deal with the Islamabad to stay out of its battle with domestic militants in the region. His militants have also aided Pakistani troops in attacking members of Tehrik-e-Taliban Pakistan (TTP), an anti-Islamabad faction of the Taliban.
But that also earned him the hostility of some of his domestic Taliban peers. Nazir was wounded in November during a suicide attack on his convoy. Rival Taliban commanders were believed to have been behind the attack, which was said to have caused some fracturing of the Pakistani Taliban in the region.
Security analyst Imtiaz Gul told the Guardian that Nazir's death will likely be welcomed by both the US and Pakistan – despite the latter's peace deal with the late militant.
"Both the US and Pakistan will be happy because they now have one less enemy," he said. "Although he was in an undeclared peace deal with the government, he was also subverting the stated goals of that agreement by providing support and shelter to al-Qaida people whose leaders have pleaded with the rank and file of the Pakistani army to rebel against the state.

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Russia plans biggest war games since Soviet era

The Russian navy has announced that it will hold its biggest war games since Soviet times in the Mediterranean and Black seas later this month.
The ambitious exercises, which will involve ships from all four major Russian fleets, are a sign of growing confidence on the part of Russia's military as it begins to enjoy the benefits of President Vladimir Putin's huge budget allocations for renewing and re-equipping all branches of the armed forces.
The purpose of the war games will be to strengthen integration between different types of forces and gain practice with major military deployments outside Russia's immediate neighborhood, the Defense Ministry said in a statement Tuesday.
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As part of the maneuvers, naval ships will arrive at an "unprepared" coast in the Russian northern Caucasus region to take amphibious troops onto transport vessels.
"The primary goal of the exercise is to train issues regarding formation of a battle group consisting of troops of different branches outside of the Russian Federation, planning its deployment and managing a coordinated action of a joint Navy group in accordance with a common plan," the ministry's statement said.
The participating ships, it said, will be drawn from all of Russia's four major naval formations: the Northern, Baltic, Pacific, and Black Sea fleets.
Some experts suggest the war games may be cover for an increasingly nervous Moscow's preparations to evacuate Russian citizens and their dependents from war-torn Syria.
About 9,000 Russians are registered with the Russian embassy in Damascus, but some experts say the full number may be 30,000 or more. Over the nearly half a century that Moscow has enjoyed good relations with Syria, thousands of Russian women have married Syrian men and moved to the country. Many of them may urgently demand to return with their children to Russia if the situation turns critical.
This week the Russian navy refreshed a fleet, including several huge amphibious assault ships capable of carrying thousands of people, which it had deployed to the eastern Mediterranean last summer.
Experts say the replacement fleet dispatched this week is of similar makeup, with at least five huge troop-transport ships at its core.
As part of Russia's 8-year, $659-billion rearmament program, the navy is slated to receive 50 new warships by 2016, including new Borey-class nuclear-powered ballistic-missile submarines – the third of which entered service last weekend – 18 major surface warships, and dozens of special purpose and support vessels.

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Gerard Depardieu's latest drama: a Russian passport

Vladimir Putin flourished his pen Thursday morning and signed what must be the oddest decree of his long years in power: an order granting a Russian passport to French actor and tax exile Gerard Depardieu.
A terse announcement posted on the Kremlin website noted that Mr. Putin acted "to satisfy an application for citizenship of the Russian Federation by Gerard Xavier Depardieu, who was born in 1948 in France."
Mr. Depardieu, star of over 170 films and possessing what is often politely referred to as a "colorful" public personality, has been locked in a high profile battle with France's new socialist government over an emergency tax that would levy a 75 percent rate on people earning more than $1.3 million. He recently renounced his French citizenship and took up residence in Belgium, which offers a friendlier tax regime for the super-rich.
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France's high court struck down the law last week as "unconstitutional," but the government announced it will soon reintroduce the measure after taking the court's concerns into account.
It's not clear whether Depardieu actually applied for residence in Russia, which has a 13 percent flat income tax for all, but in a far-ranging press conference last month Putin declared "If Gérard really wants to have a residence permit or a Russian passport, you can consider it done, the issue solved positively."
Putin also said that he has long enjoyed "kind, friendly, personal relations" with the French actor.
COME TO CHECHNYA
Depardieu is no stranger to Russia. He has appeared in several ad campaigns and filmed the 2011 movie Rasputin in St. Petersburg. He is also rumored to be close to Chechen strongman Ramzan Kadyrov, and was guest of honor at the pro-Kremlin leader's birthday party in Grozny last October.
Mr. Kadyrov has said that he would happily invite Depardieu to come and live permanently in Chechnya if he wanted to. "If the country's leadership decides in favor of granting Depardieu Russian citizenship, we will be glad to create deserved conditions for the great cultural figure in our republic," Kadyrov said last week.
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Russia's blogosphere erupted in derision and sarcastic comment Thursday, with some people writing painfully of their own troubles with Russia's notoriously bureaucratic passport department.
One man posted on Facebook his own tale of trying for years to repatriate his own Russian-born elderly mother from next-door Belarus, but he has so far failed to move Russian authorities because her Belarussian documents show a slightly different spelling of her name than appears on her Russian birth certificate.
PART OF SPAT WITH WEST?
Sergei Strokan, a foreign affairs columnist with the liberal Moscow daily Kommersant, says the granting of citizenship to Depardieu should be seen in context with the escalating war of words between Russia and the West. Last month President Barack Obama signed the Magnitsky Act, which aims to punish corrupt Russian officials, and Moscow responded by enacting the Dima Yakovlev Act, whose main feature is a ban on US citizens adopting Russian orphans.
"Russia is very much on the defensive right now. The vindictive nature of Russia's adoption ban has shocked not only the US, but also many in Europe and here in Russia as well," Mr. Strokan says.
"We seem to be entering into a cold war-like battle of images, in which Russia is trying to show that it offers a better life, has higher ideals, and is more friendly to humanity than the West.... So this may be seen as a calculated PR move, an effort to demonstrate that we understand and care for the beloved French actor more than his own homeland does," he adds.
"I can't imagine that Depardieu would actually want to live here and experience the life of Russians, though. Let's see how it goes the first time he attempts to travel with that new Russian passport.

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Lending to businesses still weak in Europe

FRANKFURT, Germany (AP) — Bank loans to companies fell again in Europe, another sign that the economy remains slack in the 17 European Union countries that use the euro.
The European Central Bank said Thursday that loans to non-financial corporations fell by 1.4 percent in November from the year before.
It's a sign that businesses remain reluctant to take on risk and borrow, despite the ECB's record low benchmark interest rate of 0.75 percent. The ECB expects the eurozone economy to shrink 0.3 percent in 2013 and only start to recover in the later part of the year.
Howard Archer, an analyst at IHS Global Insight, said the figures indicate "households and firms are reluctant to take on new debt amid weak economic activity levels and still appreciable uncertainty regarding the economic outlook."

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German jobless rate up to 6.7 percent

Germany's unemployment rate crept up to 6.7 percent in December due to seasonal factors and a more sluggish economy, but the labor market remained robust and the average number of people out of work last year was the lowest in more than two decades.
The unadjusted jobless rate rose from 6.5 percent in November, the Federal Labor Agency said Thursday. Some 2.84 million people were registered unemployed in Germany, Europe's biggest economy — 80,000 more than the previous month and 60,000 higher than a year earlier.
Germany's economy has enjoyed robust growth that kept down unemployment even as many debt-troubled European partners have seen output shrink and joblessness soar — to about 25 percent in the cases of Spain and Greece.
Still, the economy saw slower growth in 2012 than in previous years. Official growth figures for 2012 are due on Jan. 15; the government has forecast growth of 0.8 percent.
Excluding seasonal factors such as the Christmas holidays, Germany's unemployment rate was static at 6.9 percent in December, while the number of jobless was a modest 3,000 higher than the previous month.
Germany's labor market remains healthier than that of most other European countries, but "ramifications of the eurozone debt crisis ... have at least halted any further improvement for the time being," said Timo Klein, an economist at IHS Global Insight in Frankfurt.
Still, he noted that the upturn in unemployment figures "remains extremely subdued" and in fact slowed in the final months of 2012. German business confidence has rebounded lately, and Klein said he doesn't expect "any major deterioration with large increases in joblessness during the coming months."
The labor agency said that the number of people out of work averaged just under 2.9 million last year — 79,000 lower than in 2011 and the lowest figure since 1991, shortly after German reunification. The average unadjusted unemployment rate was 6.8 percent, down from 7.1 percent the previous year.

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Japan's finance minister in Myanmar with development pledges

NAYPYITAW, Myanmar (Reuters) - Japan's new government confirmed its support for the emerging democracy in Myanmar on Thursday when Finance Minister Taro Aso visited the country to reaffirm Japan's intention to cancel debt and help develop a big industrial zone.
Myanmar has implemented rapid economic and political reforms since President Thein Sein's quasi-civilian government took over from a long-ruling military junta in March 2011 and Japan has moved quickly to cement business ties.
Aso, also deputy prime minister, had already arranged the visit, prior to his ministerial appointment after an election last month, in his capacity as a senior member of the Japan-Myanmar Association, a lobby group set up to advance Japanese business interests in the Southeast Asian country.
"Following the change of government in Japan, just like the previous government, we want to maintain a good relationship with Myanmar," Aso told reporters after meeting the president at his palace in the new capital, Naypyitaw.
Senior members of the association with established ties to the former junta have been central to securing a debt waiver and fresh loans for the Thilawa industrial zone.
Thein Sein told Aso his government was delighted a "long-standing and sincere friend of Myanmar" has taken key posts in the cabinet.
Aso reaffirmed Japan's intention to waive part of the 500 billion yen ($5.74 billion) Myanmar owes it in debt.
About 300 billion yen would be waived in two stages in 2013 while a consortium of private Japanese banks led by Mitsubishi UFJ Financial Group was working on a bridging loan for the remaining 200 billion, sources familiar with the matter said.
On top of these pledges, Japan's government-linked Bank for International Cooperation will provide a $900 million bridge loan to clear Myanmar's debt arrears with the World Bank and the Asian Development Bank in January, allowing them to restart lending.
Myanmar owes nearly $400 million to the Washington-based World Bank and almost $500 million to the Manila-based ADB.
STRATEGIC INVESTMENT
Japan is Myanmar's largest creditor and the arrears of 300 billion yen had to be cleared before a fresh 50 billion yen loan could be given to develop the planned 2,400-hectare (5,930-acre) Thilawa special economic zone, renovate the country's ailing power plants and develop its regions.
With a land mass as large as Britain and France combined, Myanmar lies in a strategic location, sharing borders with 40 percent of the world's population in India, China, Bangladesh and Thailand.
Thilawa has grown into a flagship project for both Japan and Myanmar and could become a magnet for Japanese manufacturers that have started rethinking investment plans in China after a flare-up in a territorial dispute between Tokyo and Beijing.
A chunk of the 50 billion yen loan, which Japan hopes to implement by the end of March, is likely to mark the first tranche of its lending for infrastructure in Thilawa, which is to be developed by Japanese construction companies.
Over several years Tokyo's lending may add up to $12.6 billion, according to officials familiar with the project.
Mitsubishi Corp., Marubeni Corp. and Sumitomo Corp. form the Japanese side of the joint venture developing the industrial park. The plan is to build the first 400 hectares of the park by 2015 and start luring Japanese and global manufacturers.
Aso will visit Thilawa on Friday.
This is the first overseas trip by a member of the Japanese government that took office last month. Prime Minister Shinzo Abe plans to visit Washington around the end of January. ($1 = 87.1700 yen)

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Uganda holds key rate with eye on growth, inflation

KAMPALA (Reuters) - Uganda's central bank held interest rates on Thursday, treading a path between managing inflation and supporting an economic upturn it said would likely lead it to cut borrowing costs in the coming year.
With the country's currency under pressure, traders and analysts had mostly expected the Central Bank of Uganda to leave the key lending rate at 12 percent - ending a run of growth-boosting cuts that began last June when the base rate was 21 percent.
The bank said leaving rates unchanged would allow it to encourage economic growth while keeping inflation - which ticked up in December - around its medium-term target of 5 percent.
The bank also said the economy had grown faster than projected since the first quarter of 2012.
The Ugandan shilling weakened slightly after the rate announcement, falling 0.1 percent to 2697/2707 per dollar, a day after the central bank intervened to prop it up after it fell to a five-week low against the dollar.
Annual inflation rose last month to 5.5 percent from 4.9 percent in November, which the bank said was due to seasonal demand.
The bank's policy stance was "accommodative and supportive of economic growth as well as anchoring inflation expectations around the medium-term target," its acting deputy governor Justine Bagyenda told a news conference.
It had cut rates by 50 basis points in early December, citing sluggish economic growth.
Bagyenda said on Thursday that annualised economic growth in the last three quarters of 2012 had, at 5.2 percent, been "much higher than previously projected".
However, private sector credit growth remained subdued partly on account of the high lending rates on shilling loans, he said.
With rates of economic and credit growth likely to pick up later in 2013, "I expect a further reduction in lending rates," he added.
Analysts also saw room for further easing, and said the decision to hold rates this time was not surprising.
"The decision was in line with our expectations," said Mark Bohlund, a senior economist for IHS Global Insight.
"We still see potential for further monetary easing in the first half of 2013 as we are forecasting inflation to dip again amid sluggish domestic demand and limited pressure from food and energy prices."

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Botswana GDP growth at 1.1 pct q/q in Q3 2012

JOHANNESBURG (Reuters) - Botswana's economy grew by 1.1 percent quarter-on-quarter in the third quarter of 2012 after rising by a revised 0.3 percent in the second quarter, data from the Central Statistics Office showed on Thursday.
On a year-on-year basis growth was at 5.7 percent in the third quarter compared with a revised 8.5 percent in the previous quarter.

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Benazir Bhutto's son takes up the family trade in Pakistan

Five years after the assassination of Pakistan’s former Prime Minister Benazir Bhutto, her son Bilawal Bhutto Zardari made his first major speech today aimed at galvanizing supporters of the Bhutto family-led Pakistan Peoples Party.
The speech, delivered in the family’s hometown of Garhi Khuda Bux in Pakistan’s Sindh Province, was attended by thousands of party supporters gathered to mark the anniversary of Benazir Bhutto’s death. Days after her 2007 assassination, the then 19-year-old Bilawal was elected as the party’s chairperson, though his role has been largely symbolic until now.
As Mr. Bhutto Zardari takes a more active role in his party, it is a reminder that Pakistani politics have long been dominated by influential families and that one's position in government is often determined by family ties.
While many of the Pakistan Peoples Party's voters, particularly in rural areas, are happy that the party is led by Benazir's son, nepotism in politics and government has increasingly become a sore point for urban, middle class voters who are less supportive of the PPP. Of late, most political scandals in Pakistan have involved family members of leading politicians, including the Chief Justice's son, who is accused of taking money from a prominent businessman.
“If you look at any mainstream political party in Pakistan, it is seen as a family business at every level, passed down from father to son – and occasionally daughter – to grandson,” says Cyril Almeida, an assistant editor at Pakistan’s leading daily Dawn. “It is the nature of politics out here. Society puts a premium on personality rather than performance; and so last names matter.”
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The Pakistan Peoples Party was founded in 1967 by Zulfikar Ali Bhutto, a charismatic yet controversial leader, who was deposed in a military coup and executed on charges of abetting murder. After he was imprisoned, his widow Nusrat Bhutto led the party, followed by his daughter Benazir, who chaired the party until her death. Though grandson Bilawal was elected to lead the Pakistan Peoples Party, his father Asif Ali Zardari was also elected co-chairperson before he became president of Pakistan in 2008, and has largely run party affairs.
The trend of family-dominated politics is prevalent across the subcontinent.
In India, members of the Gandhi/Nehru dynasty have led the Congress Party and the country as prime ministers for decades. Sheikh Hasina, the twice-elected prime minister of Bangladesh, is the daughter of the country’s founder, and her leading rival Khaleda Zia is the widow of a former president. The other leading political party in Pakistan, the Pakistan Muslim League, features a number of members of the Sharif family in prominent positions, and many major politicians in Pakistan have a similarly strong lineage.
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Mr. Almeida points out that in the case of Sindh Province, where the Pakistan Peoples Party has long held sway, there is a “cult of personality and a client-patron relationship in politics,” and Bilawal leading the party was a “a connection to the original person who energized political support.” In some way, he says, the parties are just trying to capture that original energy the name still garners to affect political change.
In his speech, Bhutto Zardari did mention his bloodline, but also reaffirmed the party’s vision, including providing basic needs to every citizen and opposition to terrorist groups. He recalled the assassinations of prominent party leaders such as Punjab Governor Salmaan Taseer and Federal Minister for Minorities Affairs Shahbaz Bhatti, who were killed in 2011 for their opposition to misuse of the country’s controversial blasphemy laws.
Still, says journalist Sohail Warraich, the author of an extensive tome on the assassination of Benazir Bhutto and who was on stage as Bhutto Zardari spoke on Thursday, “You have to know how to handle people. Both Zulfikar Ali Bhutto and Benazir Bhutto made their way [in] politics” by proving they had what it took to govern, he says.
Mr. Warraich acknowledges there are many challenges ahead for the aspiring politician, despite his name and because of his name: He still has to answer for the PPP-led government’s failures in governance.
“Even abroad, you see the Kennedy family etc, people do have these feelings of attachment toward them [family names]. But the real test is in politics. Benazir, after 1988 [when she became prime minister], was assessed on how she conducted politics, not just because of Zulfikar Ali Bhutto,” he says. “Bilawal will also be tested on the same.

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India gang rape spurs national dialogue

The Indian government’s crackdown on the anti-rape protests that have continued for nearly two weeks in New Delhi has only aggravated public anger and concern about women’s safety.
The protests were sparked by the gang rape and brutal assault of a 23-year-old student on a bus in the elite South Delhi district on Dec. 16.
As the girl battles for her life in a Singapore hospital, Indians are debating how to make the country safer for women. Ten days after the incident, it dominates newspaper headlines and op-ed pages, pushing to the margins stories like the retirement of cricketer Sachin Tendulkar, the popular Indian sportsperson, highlighting just how much the case has affected people.
Sexual harassment is rampant in India, and the public has been largely apathetic to women’s plight, but many are hoping the attack could be a turning point in the way India treats women.
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Calls for capital punishment, including the chemical castration of rapists, have died down, with various women’s groups decrying them. Given that in 94 percent of rape cases the rapist is known to the victim, Nilanjana S. Roy, writing in the Hindu, she wonders if the protestors would be okay with death penalty for fathers, uncles, neighbors, and Indian security forces in conflict zones.
The Monitor reported that India is considering a fast-track court process to expedite rape cases and step up punishment for sexual violence on the heels of the bus rape incident.
Beyond the law, what needs to happen, writes Shilpa Phadke, author of a book on women’s safety in Mumbai, has to do with how Indians use their streets: “We are safer when there are more women (and more men) on the streets. When shops are open, when restaurants are open, when there are hawkers and yes, even sex workers on the street, the street is a safer space for us all.”
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The outrage that this case has spurred might finally bring about a cultural change in India, Stephanie Nolen of The Globe and Mail suggests in a report:
Women assaulted leaving bars or late at night or while wearing Western clothes have been chastised by police, judges and politicians for bringing their misfortune on themselves. This time, however, there is a current of defiance in the protests, noted Subhashini Ali of the All India Democratic Women’s Association. A young woman in central Delhi on Tuesday carried a sign saying, “Stop telling me how to dress, start telling your sons not to rape.”
But rape is still not seen as a men’s issue, Ms. Ali said. “I don’t think many people are asking that question yet [of how men are being brought up and how it shapes their attitude toward rape].”
“But that’s where we have to go.”
And that should start with using sexual education in schools as a means to counter systemic patriarchal attitudes, writes Ketaki Chowkhani in Kafila, a collaborative blog that I work with.
That need for an emphasis on social change rather than law enforcement was also highlighted by Praveen Swami in The Hindu newspaper. India could learn a lot from the United States, he writes, where the incidence of rapes have fallen:
“The decline in rape in the U.S. has mainly come about not because policing has become god-like in its deterrent value, but because of hard political and cultural battles to teach men that when a woman says no, she means no.”
Meanwhile, the crackdown on the protests in Delhi has drawn sharp reactions and much anger across the Internet. On Facebook, graphic designer Sangeeta Das narrated her experience of the protests on Dec. 23, republished on the Kafila blog:
“There were many volunteers distributing biscuits and water to every protestor. We were talking ... on how to tackle the violence on women and children starting from ourselves, our homes, and communities. We were simply talking ... when the police, hundreds of them ... charged at us from behind, without any warning.”
Meanwhile, the media have drawn the government’s ire. On Sunday, the same day one journalist was killed in Manipur when police opened fire on protestors, the government issued an advisory to news channels to show “maturity and responsibility” in their coverage of protests:
No programme should be carried in the cable service which is likely to encourage or incite violence or contains anything against maintenance of law and order or which promotes anti-national attitude.

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Putin signs antiadoption law, throwing pending adoptions into confusion

President Vladimir Putin signed the Dima Yakovlev Act into law Friday, banning all adoptions of Russian orphans by US citizens as of Jan. 1 and throwing dozens of currently ongoing adoptions into confusion.
The mood among workers in the almost 40 Russia-accredited adoption agencies, which have survived repeated bouts of political tensions and ever-tightening regulations over the years, was near despair Friday.
"We have two cases of adoption in court and we're just asking ourselves the same question, what will be next?" says Lyudmila Babich, of the Cold Spring, New York-based Happy Families Center.
"We have no text of this law, nor any explanations of what's supposed to happen now. So, we're waiting," she says.
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Any hope that Mr. Putin might impose some restraint upon a measure that even members of his own cabinet have criticized as possibly illegal and diplomatically disruptive were dashed Thursday when Putin explicitly endorsed the adoption ban and other tough measures against US citizens working in Russia in televised remarks.
"I see no reason not to sign the law," Putin said.
He added that he would also sign a presidential decree to improve procedures for adopting Russian orphans and abandoned children domestically, and also boost measures to help children with serious disabilities and health problems – who were previously the major pool of orphans made available for foreign adoption.
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About 1,000 Russian children were adopted by US families in 2011, down from the annual average of 3,000 or so in the past decade, and only a small portion of the 120,000 Russian children who are considered eligible for adoption. Under Russian law, a child can be offered to prospective foreign parents only after having been rejected three times by Russian families.
FRAMED AS 'SELLING' CHILDREN
Russian nationalists argue that it's a shame for Russian children to be "sold" abroad, and several of the lawmakers who championed the Dima Yakovlev bill argued they will sponsor further efforts to ease the plight of Russia's huge numbers of institutionalized children.
Putin lent his support to the harshest critics of international adoption Thursday, by casually likening Russian children taken into US families to economic refugees.
"There are probably many places in the world where living standards are higher than ours. So what, are we going to send all our children there?" Putin said with sarcasm. "Maybe we should move there ourselves?"
The new law is a sudden about face from Russia's previous position. Russia's foreign ministry spent years negotiating a detailed US-Russia adoption accord, which regulates virtually all aspects of the adoption process, and came into effect just last month.
"I just don't understand how they can completely change the whole system for international adoptions, suddenly, all at once like this," says Svetlana Pronina, head of Child's Right, a Russian nongovernmental group that works for children's rights.
"It looks to me like children have become hostages to the political situation, and this is not a wise way to approach the needs of Russian children," she adds.
"How is it that our authorities were able to ratify a major agreement with the US about adoptions just a few months ago, and now they decided to abolish it? What sense is there in this?" she says.
ONE YEAR'S WARNING IGNORED
The law is slated to come into effect on Jan. 1, though the US-Russia bilateral accord stipulates that either side must give one year's warning before withdrawing from the deal.
The original idea of the Dima Yakovlev law was to frame a symmetrical response to the US Magnitsky Act, which targets sanctions at about 60 Russian officials allegedly involved in the 2009 prison death of whistleblowing anticorruption lawyer Sergei Magnitsky.
That law would have levied visa and financial penalties on alleged US human rights violators, such as CIA officials involved in "black site" secret prisons, Guantanamo prison guards as well as US adoptive parents who abused their Russian-born children.
But after a series of amendments last week, the adoption ban was put front-and-center, along with measures that may lead to the closure of any NGO that receives US funding and stiff restrictions on US passport-holders (including thousands of dual US-Russia citizens) engaging in activities deemed "political" by authorities.
PENDING ADOPTIONS A QUESTION
No one is sure what will happen with the approximately 50 cases of US-Russia adoption that are currently at various stages of completion.
Pavel Astakhov, the Kremlin's ombudsman for children's rights, who has been a strong supporter of the ban, says all current adoptions will be halted and the children re-assigned.
"There are 52 such children," Mr. Astakhov told the independent Interfax agency Friday.
"I believe they must be adopted in Russia, with the regional governors taking personal responsibility for them," he added.
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Ilya Ponomaryov, the lone Duma deputy who voted against the Dima Yakovlev bill in all three readings, says there should now be absolutely no doubt about who was behind the adoption ban from the outset.
"The Duma has no independent will, it simply does what the executive branch tells it to," Mr. Ponomaryov says. "Now it's clear that this was Putin's initiative all along."

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US embassy evacuated as rebels surge in Cental African Republic

Rebels are closing in on the capital of the impoverished Central African Republic, threatening to topple the weak government and push yet another African nation into civil war, failure, or outright collapse, The Associated Press and other news outlets are reporting.
The former French colony joins a string of countries stretching from Mali and the Ivory Coast to Congo and South Sudan where war and turmoil have created waves of refugees and power vacuums for warlords or criminal groups to exploit. Several of the countries are former French colonies, raising questions for Paris about whether to get involved in the conflicts.
The United States evacuated its embassy in the CAR capital Bangui overnight, sending the ambassador and around 40 other staff to Kenya due to the deteriorating security situation, the AP reports. The United Nations has also ordered around 200 non-essential staff to depart, as well.
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A day earlier, President François Bozizé, who seized power in a 2003 coup, urged the US and France to intervene, according to Radio French International. Hundreds of demonstrators pelted the French Embassy with stones earlier this week, demanding that France intervene militarily to halt the rebel advance, Reuters reports.
“We ask our French cousins and the United States of America, the great powers, to help us to push back the rebels … to allow for dialogue in Libreville [Gabon] to resolve the current crisis,” President Bozize said.
“There is no question of allowing them to kill Central Africans, of letting them destroy houses and pillage, and holding a knife to our throats to demand dialogue,” he said.
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The rebel fighters are a coalition known as Seleka that have captured four regional cities and towns, including a diamond mining hub, since taking up arms on Dec. 10. They accuse Bozizé of not upholding peace deals meant to end several regional uprisings.
The conflict has posed yet another challenge to French foreign policy, particularly in its former African colonies. There are around 250 French military advisers in the CAR, but French President François Hollande said yesterday that troops wouldn’t get involved. "If we are present, it is not to protect a regime, it is to protect our nationals and our interests, and in no way to intervene in the internal affairs of a country," President Hollande was quoted by AFP as saying. "Those days are gone."
That’s a contrast from Hollande’s predecessor, Nicholas Sarkozy, who took a more aggressive approach, sending French military troops, for example, to help oust Ivory Coast leader Laurent Gbagbo amid fighting that followed a disputed presidential election. French jets played a major role in the air campaign in Libya that ultimately led to Col. Muammar Qaddafi’s defeat.
Landlocked and poor despite substantial mineral wealth, including uranium, the CAR has been unstable for most of its 52 years of independence. It is also sandwiched between countries that have been roiled by war for years, often fueled by access to mineral and natural resources. The Democratic Republic of Congo has seen on- and off-again war involving as many as nine other countries and other armed groups for nearly two decades. The fighting in South Sudan predates its independence in 2011, a struggle involving oil resources, among other things.
Also fueling the turmoil is Joseph Kony, the notorious leader of the Uganda-based Lord’s Resistance Army, who is believed to be hiding in southeastern Central African Republic. Mr. Kony, indicted by the International Criminal Court for his role in the brutal fight in Uganda, is the focus of a global manhunt. US military advisers have been dispatched to Uganda to help search for him.
Further west, France has been resisting calls for greater involvement in civil war in Mali, where Islamist rebels have seized the northern part of the former colony, and imposed harsh sharia law. That has raised fears of a power vacuum, allowing Al-Qaeda-linked terror groups a base for operations.
The United Nations Security Council last week approved a resolution that authorizes a US- and European-backed African force to rebuild Mali's military and to prepare it for a possible offensive against the separatists and extremists. The French-sponsored resolution also authorized military intervention by a 3,300-strong force of soldiers from the Economic Community of West African States, under the training and command of Gen. Francois Lecointre, who has experience in Africa and Bosnia.

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In 2013, possibilities for stability from Somalia to South China Sea

The international news of any year is a disparate affair, a global chronicle of courage, calamity, and close calls. The interconnectedness of events is not always clear.
But looking ahead to 2013, whether in Syria, South America, or the South China Sea, policymakers have a common New Year's wish: for unity to usher in and consolidate political and economic stability.
EUROPE TURNS TOWARD INTEGRATION
After another year in the depths of a debt crisis that has tested the viability of the European Union, leaders made a major step forward at the end of the year: agreeing to give the European Central Bank oversight of the biggest banks in the Union.
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Skeptics dismiss the agreement as a watered-down initiative of common-denominator compromises and delays. But it paves the way for an eventual banking union, and caps off a year of expressed commitments to deeper integration.
"The decision of European heads of state to create a banking union and a fiscal union still needs to be implemented. But that was a genuine game changer in a sense," says Jan Techau, director of Carnegie Europe at the Carnegie Endowment for International Peace in Brussels. "It is by no means perfect and is not seen in action yet; but if this comes, that will create momentum for more political integration."
IN AFRICA, A NEW DAWN FOR SOMALIA?
In Somalia, Al Qaeda was on the run in 2012 after four years in control of the country's south, pushed out of all of its major urban strongholds by African Union military offensives.
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Somalia's Western allies – also its financiers – have begun proclaiming a new dawn. International commercial flights now land regularly at Mogadishu's refurbished airport. Investors from the large Somali diaspora are returning home. Aid workers have ever-greater access to the millions of people still in grave need.
But analysts are wary. A large number of rank-and-file fighters may have deserted Al Shabab, but hard-line commanders remain. Many of them, trained in Pakistan with Al Qaeda, are regrouping in Somalia's north.
"The Somali government is going to need very quickly to show that it brings dividends, health, education, road repairs, to the population, or they may well turn back to supporting Shabab," one Western diplomat focused on Somalia says in an e-mail. "There is a very narrow window to prove the government is the better option. Probably less than nine months. The early part of 2013 will be crucial."
Meanwhile, across the continent in Mali, events moved in the opposite direction in 2012. An ethnic Taureg rebellion spiraled into a takeover of the north by Islamist militants, while the army ousted Mali’s democratically elected president. Malians hope that in 2013 their country can reunite and that democracy will be restored. If not, Western and African leaders fear Mali could become a failed state.
Some Malians say only force can dislodge the Islamists, while others place hope in dialogue. Meanwhile, worry is growing that ethnic grudges might transform a possible intervention into a tragedy of unintended consequences.
“Families affected by crisis may seek vengeance,” says Mohamed Ag Ossad, the director of Tumast, a Tuareg cultural center in Bamako. “The state should take things in hand before there’s an ethnic war.”
This month soldiers loyal to coup leader Captain Amadou Sanogo removed Mali’s interim prime minister – a brazen show of force that the US said endangered national dialogue and delayed a government recapture of the north, according to a statement on Dec. 11. Members of the security forces are also accused of beating, detaining, and killing critics of the army, as well as Tuareg and Arab men, said a December 20 report by Human Rights Watch.
For Moussa Mara, an accountant and district mayor in Bamako, such problems underline the need to reestablish democratic rule by holding presidential elections that were derailed by this year’s coup. “Crisis can be an opportunity for our country,” he says. “If we’re intelligent.”
MIDDLE EAST: TO THE VICTORS, MORE DIVISIONS?
As pressure has mounted against Syria's embattled president, Bashar al-Assad, many are starting to ask what will come of the opposition Free Syrian Army should the regime fall.
A number of Syria experts warn that without a plan to disarm opposition groups, they risk destabilizing the country.
"What do you do with the men with guns? The men who don't have jobs.... We've seen this in Libya, and we also saw it in Iraq," says Aram Nerguizian, a Syria expert at the Center for Strategic and International Studies.
The vast majority of Free Syrian Army units in Syria say they will put down their weapons and let democracy determine their future after Mr. Assad. Still, a number of observers worry that there is a possibility armed groups may want an undue stake in Syria's government, and the challenge for 2013 will be to incorporate them into civilian life.
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In Israel and the Palestinian territories, positions on both sides hardened as the window for a two-state solution rapidly closed. Israel moved further to the right heading into January elections, while Palestinians became more assertive with a perceived victory against Israel in the November Gaza conflict and an overwhelming vote recognizing Palestine as a state at the United Nations.
Israeli Prime Minister Benjamin Netanyahu has repeatedly invited the Palestinians to return to the negotiating table without preconditions at any time and indicated that the Palestinians’ failure to do so shows they are not serious about peace. But Palestinians say they cannot afford to negotiate while Israel steadily expands settlements in the West Bank. Nearly 10 percent of Israeli Jews now live over the 1967 borders, which the recent UN resolution recognized as the basis for a future Palestinian state.
In 2013, Palestinians want to see an end to settlement expansion before it is too late to implement a two-state solution. “We are witnessing today a very crucial moment … a moment of irreversibility,” says Mustapha Barghouthi, a former Palestinian presidential candidate and democracy activist.
Israelis, for their part, seek Palestinian recognition of Israel as a Jewish state, as well as assurances that a peace deal will mark the end to the conflict and not merely a stepping stone to regaining all of historic Palestine.
EAST ASIA'S SYMBIOTIC TIES
In a year when China made several neighbors nervous over its territorial claims, Beijing's most alarming spat was with Japan over a handful of uninhabited islands known in China as the Diaoyu and in Japan as the Senkaku. Although a war over the issue is highly unlikely, it has come to be seen as not altogether impossible, as tensions have risen in recent months.
But it is the economic fallout already under way that analysts say the two must address immediately. "China is Japan's biggest market, and Japan is a very important source for China to learn new science and technology," says Zhou Weihong, a Japan expert at Beijing Foreign Studies University. If the second-largest economy in the world [China] and the third-largest [Japan] are not getting along, "that is bad news for the rest of the world," Professor Zhou says. "There are big enough motives for both sides to want to improve their relationship."
THE REACH OF CHáVEZ
The biggest story of 2012 in Venezuela was the reelection of President Hugo Chávez in October, despite significant gains made by the opposition. But now, facing illness, Mr. Chávez might not be able to stand for his Jan. 10 inauguration – and may have to step down.
Venezuela is holding its breath – as is the region that sees Chávez as a beacon of the left, some of whose members, like Cuba, depend heavily on his largess. Within the oil-rich country, political tensions will flare in 2013 until a new leader is selected, while daily problems such as crime and inflation mount, says Caracas-based political analyst Jose Vicente Carrasquero. "Over time, we will adjust under a new government," he says, "and surely after this process of transition we will discover a new way of doing politics in Venezuela, something that we need."
* Also contributing: staff writers Peter Ford in Beijing and Christa Case Bryant in Jerusalem; correspondents John Thorne in Mali, Tom Peter in Aleppo, Syria, and Mike Pflanz in Somalia.

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China academics warn of "violent revolution" if no political reform

A prominent group of Chinese academics has warned in a bold open letter that the country risks "violent revolution" if the government does not respond to public pressure and allow long-stalled political reforms.
The 73 scholars, including well-known current and retired legal experts at top universities and lawyers, said political reform had not matched the quick pace of economic expansion.
"If reforms to the system urgently needed by Chinese society keep being frustrated and stagnate without progress, then official corruption and dissatisfaction in society will boil up to a crisis point and China will once again miss the opportunity for peaceful reform, and slip into the turbulence and chaos of violent revolution," they wrote.
The letter began being circulated on the Internet earlier this month, but online references to it in Chinese media reports have now been removed.
The government, which since 1949 has been controlled by the Communist Party, needed to push democracy and independence of the judiciary as well as deepen market reforms, the letter said.
He Weifang, a law professor at Peking University and one of the signatories, told Reuters he believed the demands were rather moderate, but that now was the time to make them as President Hu Jintao prepared to hand over the reins of state power to Xi Jinping, who was made party chief in November.
"We have come to that period again when the leadership is changing. People expect continuing advances when it comes to reform of the political system," he said.
"The Chinese people, including intellectuals, have been talking about this for a while, but little has happened. So I think we have the opportunity now to push it again."
Other signatories include Zhang Sizhi, defense lawyer for Mao Zedong's widow, Jiang Qing, leader of the "Gang of Four" that wielded supreme power during the 1966-76 Cultural Revolution. She was given a suspended death sentence in 1981 for the deaths of tens of thousands during that period of chaos.
About 65 Chinese academics, lawyers and human rights activists have signed a similar letter demanding top party members reveal their financial assets, saying it is the most fundamental way to end corruption.
Analysts have been searching for signs that China's new leaders might steer a path of political reform, whether by allowing freer expression on the Internet, greater experimentation with grassroots democracy or releasing jailed dissidents.
But the party, which brooks no dissent to its rule and values stability above all else, has so far shown little sign of wanting to go down this path, despite Xi trying to project a softer and more open image than his predecessor.
However, Xi himself warned shortly after becoming party boss that if corruption were allowed to run wild, the party risked major unrest and the collapse of its rule.
The letter said democracy, rule of law and respect of human rights were "a global trend that could not be stopped".
"China's 100 years of bloody and violent history - especially the painful and tragic lesson of the decade-long Cultural Revolution - show that once we go against the tide of democracy, human rights, rule of law and constitutional government, the people will suffer disaster and social and political stability will be impossible," the letter said.

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Gold ticks higher; on track for 12th annual gain

 Gold ticked up to around $1,660 an ounce on Monday after the euro firmed against the dollar, but wary investors stayed on the sidelines as last-ditch attempts by U.S. lawmakers to resolve a fiscal crisis seemed to be getting nowhere.
Lawmakers pushed the United States to the edge of the "fiscal cliff" as they struggled to reach a last-minute deal that could prevent the world's largest economy from plunging into recession. After adjourning for the day, the Senate will reconvene at 1600 GMT on Monday.
"Maybe a bit of cooling off is good. Well, they have a few hours to sort themselves," said CIMB regional economist Song Seng Wun. "I think Asian equities are probably, at this moment, positioning themselves for a possibility that there may not a be last minute compromise of sorts."
Gold added $5.12 an ounce to $1,660.02 by 0310 GMT. It is up around 6 percent for the year, heading for a 12th straight year of gains on rock-bottom interest rates, concerns over the financial stability of the euro zone, and diversification into bullion by central banks.
A failure to clinch a deal would likely spur safe-haven buying of gold, but since many investors have both equities and gold in their portfolios, the metal may also track stock markets higher if the White House and Congress finally reach an agreement.
U.S. gold for February rose $5.20 an ounce to $1,661.10.
Market holidays were in force in Japan, South Korea, Taiwan, Indonesia, Thailand, the Philippines and Vietnam, with half-day trading in Australia, New Zealand, Hong Kong and Singapore.
MSCI's broadest index of Asia-Pacific shares outside Japan was little changed. It has gained about 18 percent this year, a sharp turnaround from an 18 percent plunge in 2011.
"I have nothing to share today. I guess the market in the Middle East will still be trading a little bit. But that's a about it," said a physical gold dealer in Singapore.
"Premiums are unchanged at $1 to $1.20."
Spot gold drew support from the euro that edged up 0.1 percent to $1.3231, but hovered below an 8-month high of $1.33085 hit on December 19.
An agreement on the U.S. budget would be viewed as a positive for riskier currencies such as the euro and Australian dollar, while a deadlock would be deemed positive for the safe-haven and highly liquid dollar.
A softer dollar boosts commodities priced in the greenback by making them cheaper for holders of other currencies.
"There's nothing at all in Asia. It's very quiet. We don't expect surprises until the talks resume," said a dealer in Singapore.
Buoyed by his re-election in November, President Barack Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income for the less affluent has stalled.

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Zambia extends deadline for new bank capital rules

Zambia's central bank has extended a deadline for commercial banks to meet new minimum capital requirements by a year to December 31, 2013, saying it was satisfied with progress made so far.
Zambia raised its capital requirements for foreign banks to $100 million from $2 million this year to insulate its banking sector from the effects of a weak global economy.
The capital requirement for local banks was raised to $20 million from $2 million.
The central bank said on Monday most banks had requested an extension of the deadline. "All banks that requested for dispensation against the initial December 31, 2012 deadline have been granted permission in this regards," it said.
"The extension is intended to enable banks to mobilise additional capital to meet the legal and administrative requirements associated with the new shareholding structures."
Nigerian group United Bank of Africa said in July it would turn its Zambian operation into a local bank and might issue shares to meet new capital rules in Africa's top copper producer..
Foreign banks operating in Zambia include Standard Bank and Standard Chartered Bank.

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S.Africa stocks up 22 pct in 2012 on retail surge

 South African stocks ended the year near record highs on Monday, after a 22 percent surge that marks their best annual return since 2009, lifted by a runaway performance from the booming retailing industry.
Equities in Africa's biggest economy have confounded market watchers this year, as shares largely shrugged off lacklustre economic growth and three months of crippling strikes in the crucial mining sector that sparked credit downgrades.
"It surprised everybody. If you look back at the consensus forecasts, even the optimists were not even close," said Abri du Plessis, chief investment officer at Gryphon Asset Management in Cape Town.
"Our market is running ahead and it is already discounting the commodities cycle picking up again, and I still cannot see that with what's happening in Europe... For that reason, I'm a bit negative on our market in the first half."
The benchmark Top-40 index finished the half day of trade down 0.39 percent at 34,795.50, just off its record high hit last week and up 22.22 percent for the year.
That was the Top-40's best annual performance since 2009, when it rose nearly 29 percent.
The broader All-share index finished the session 0.34 percent lower at 39,250.24, also near a record high and up 22.71 percent for the year.
Shares of Assore surged 94 percent in 2012, making the base mineral mining company the top performer on the blue-chip index.
Retailers have been the real standout in Johannesburg this year, lifted by optimism that government grants to the poor and the growth of a middle class will translate into stronger consumer spending.
SUB-SAHARAN EXPANSION
Woolworths, a clothing and high-end food retailer that is expanding its sub-Saharan presence beyond South Africa, rose 82 percent in 2012.
Mr Price, which targets money-conscious consumers, gained 76 percent, while grocer Shoprite gained 51 percent.
Some investors have cautioned that retailers were now too expensive after this year's steep gains. Eight of South Africa's largest retailers were trading at an average price-to-earnings ratio of 21, well above the average of 14 for the Top-40.
Like other emerging markets, South Africa was helped this year by global monetary stimulus that increased demand for riskier assets.
"It's the emerging markets story again. As global sentiment started to ease and got a bit more positive... emerging markets are one of the first that investors pick," du Plessis said.
In local currency terms, South Africa was the tenth best performer among 31 emerging stock markets tracked by Thomson Reuters.
The best performing emerging market this year was Venezuela, where the benchmark index has quadrupled in value.
In dollar terms, however, the Top-40 managed a more modest 16 percent return, putting South Africa in 18th place among the emerging market indices.
The rand currency has been hit this year by concerns about the outlook for Africa's top economy, which is saddled with high unemployment, slow growth and labour unrest.
Ratings agencies Moody's and Standard & Poor's have both downgraded South Africa's credit rating this year. Analysts expect Fitch will cut its rating at its next annual review in January.

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China to keep prudent monetary policy in 2013: central bank

 China will stick to a prudent monetary policy next year and keep consumer prices stable, its outgoing central bank governor, Zhou Xiaochuan, said on Monday, in fresh sign that Beijing won't be changing direction when the new government takes over in 2013.
Reiterating China's long-stated vow to reduce the level of central planning in its economy and make room for more market forces, Zhou also said China will deepen reforms in its financial sector in 2013.
"In 2013, we will continue to implement prudent monetary policy and make policies more pre-emptive, targeted and flexible," Zhou said in a brief new year address.
"We will keep overall price levels basically stable and promote healthy and sustainable growth of the economy," he said. "We will also further deepen financial reforms and the opening up of financial markets."
Zhou's remarks follows similar comments from China's soon-to-be-retired president, Hu Jintao, who promised that reform of China's economic growth model would be a crucial theme next year.
Hu said in a separate new year address broadcast nationally that China's economy will grow at a balanced and sustainable pace in 2013, whilst noting the challenge from sluggish growth for the world economy.
"Transforming the economic growth model will be a main theme," Hu said, without giving further details. "The trend of weak global economic growth will continue."
China's leaders have repeatedly promised to encourage domestic consumption and reduce the nation's heavy reliance on exports for growth, a task that has become more pressing due to expectations of prolonged weak demand in developed nations.
Most analysts and academics agree China needs to transform its growth model to allow consumption, not exports and investment, to drive activity.
But there is no clear agreement on how or when China can pursue such changes.
Zhou, who has been head of the central bank since 2003, is set to retire in coming months.
Hu will relinquish office March 5 when China starts its annual parliament meeting, to make room for his successor Xi Jinping.

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