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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British retailers start online sales early

British retailers have brought forward their Christmas clearance sales online in the hope that shoppers will log on to buy bargains and offset lackluster spending in stores.
Marks & Spencer launched its sale online at midday on Monday, it said on its website, while department store John Lewis said it would cut online prices when its stores close at 1700 GMT. Debenhams has already started its online sale.
Retailers in recent years have started sales online on Christmas Day, ahead of the clearances in stores from Boxing Day, but are increasingly launching their online offers before Christmas after delivery deadlines for the day have passed.
Hard-pressed shoppers have been leaving it later to buy presents in the hope that retailers would slash prices, the British Retail Consortium said.
It was forecasting that 5 billion pounds ($8.1 billion) would be spent in the shops on Saturday and Sunday combined, the last weekend before Christmas.
Richard Dodd, the BRC's head of Media and Campaigns, said weekend trading had met expectations.
"Christmas, ultimately once all the final sums are done, will turn out to be acceptable but not exceptional," he said.
He said the sector expected a modest increase in cash spending against a year go, but not necessarily any significant increase in real terms once inflation was stripped out.
Many British families' budgets are stretched, according to a survey from Markit that showed the biggest deterioration in household finances for seven months.
Analyst Howard Archer at IHS Global Insight said the weakening in household finances could not come at a worse time for retailers, and it highlighted why many people appeared to have been careful in their Christmas shopping this year.
"The suspicion has to be that consumers will be especially keen to take advantage of genuine major bargains in the sales to acquire items that they cannot otherwise afford or are reluctant to make at the moment," he said.
"However, we suspect that people will likely to be more careful in buying - or reluctant to buy - items that they don't really want or need in the sales."

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