Airbus sales drive Q1 profits at parent company

PARIS (AP) — European aerospace company EADS said strong deliveries by airplane maker Airbus helped drive higher earnings in the first quarter and laid out the hope that the new A350 long-range aircraft should make its first flight this summer.

The Airbus parent company also reaffirmed Tuesday its forecast of lifting commercial aircraft deliveries this year to between 600 and 610, as demand from Middle Eastern and Asian carriers to expand their fleets continues to drive sales for one of Europe's largest exporters.

EADS made a net profit for the January-March quarter of 241 million euros ($314 million), nearly double last year's equivalent of 126 million euros.

EADS CEO Tom Enders said in a statement the company "had a rather good start into 2013" and remained focused on improving profitability further "in 2013 and beyond."

Airbus delivered 144 aircraft in the first quarter, up from 131 in the same period last year. Last year Airbus delivered 588 aircraft, including 30 of its A380 superjumbos.

Airbus's revenue from commercial aircraft sales jumped nearly 16 percent in the quarter thanks to rising deliveries. Airbus' orders also continued to rise, with 410 net commercial aircraft orders in the quarter.

Airbus, which expects to take in around 700 orders this year, is preparing for the first flight of its new A350 long-range aircraft that is aimed at rivaling Boeing's 777 and 787.

In a call with reporters Chief Financial Officer Harald Wilhelm said Airbus is "more and more confident" that the A350 will make its first flight sometime this summer, after two years of delays blamed partly on the aircraft's new design, which makes use of unprecedented amount of lightweight carbon-fiber material.

EADS' overall revenue rose 9 percent to 12.4 billion euros in the first quarter. The company targets "moderate" revenue growth in 2013 and operating profit of 3.5 billion euros, well above the 3 billion euros booked in 2012.

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Ex-officials urge renewed U.S. drive against North Korea crime income

WASHINGTON (Reuters) - The United States should revive a crackdown on drug trafficking, counterfeiting and other illicit business by North Korea that was succeeding before it was dropped to facilitate a nuclear deal with Pyongyang, architects of that policy said on Tuesday.

A renewal of the 2001-2006 North Korea Illicit Activities Initiative would deprive Pyongyang of funds to advance its nuclear and missile programs and could force it to return to disarmament negotiations, two former George W. Bush administration officials told a House of Representatives panel.

The officials said North Korea's deepening international isolation after the latest of its three nuclear tests makes its meager economy vulnerable to a renewed attack on illicit cash flows that sustain elite and military loyalty to the government.

The American-led initiative, which involved 14 U.S. government agencies and 15 foreign states, "drove North Korea out of a range of criminal businesses and cut the nation's illicit trading companies and leadership off from bank accounts around the world," said David Asher, coordinator of the program.

"I believe that if this leverage had been sustained and used effectively, North Korea's ability to defy international rules and norms could have been crippled, compelling Kim Jong-il to make a strategic choice toward denuclearization," he told the House Foreign Affairs Committee.

U.S. pressure on illicit activities was "prematurely lifted" to help seal a nuclear deal with the late North Korean leader Kim Jong-il that unraveled in 2008, said committee Chairman Ed Royce. Kim Jong-il died in December 2011 and was succeeded by his son, Kim Jong-un.

North Korea has earned its nickname, the "Soprano State," said Royce, a California Republican

"We must go after Kim Jong-un's illicit activities like we went after organized crime in the United States: identify the network, interdict shipments and disrupt the flow of money," he added.

With limited trade, Pyongyang's revenues are heavily reliant on schemes ranging from selling fake $100 bills to narcotics and illegal wildlife smuggling, according to Western governments. Pyongyang denies this, but its cash-strapped diplomats have been repeatedly caught with contraband since the 1970s.

EXPERTS SEE VULNERABILITY

Kim Jong-un has advanced his father's missile and nuclear programs, testing a long-range rocket in December and staging his country's largest nuclear test last month.

On Tuesday, Pyongyang threatened to scrap the armistice signed in 1953 that ended the three-year Korean war.

The young Kim has stepped up vitriolic rhetoric against the United States and South Korea and "escalated tension significantly over the past year," said Joseph DeTrani, a former CIA official and U.S. envoy to North Korea nuclear talks.

Despite North Korea's bluster and belligerence, DeTrani and other expert witnesses at Tuesday's House hearing said, the country is highly vulnerable to renewed international pressure.

"The sanctions are biting," DeTrani said of three sets of U.N. sanctions imposed over the North's missile and nuclear tests since 2006. On Tuesday, the United States and China, Pyongyang's closest friend, reached a deal to expand U.N. sanctions on North Korea for its third nuclear test.

Scholar Lee Sung-yoon of Tufts University's Fletcher School of Law and Diplomacy told the panel he estimated that North Korea derived between a third to 40 percent of its income from "criminal activities" and was thus vulnerable to pressure.

"Pyongyang's overdependence on its shadowy palace economy makes the Kim regime particularly vulnerable to tools designed to counter international money laundering," Lee told the panel.

The Obama administration should designate the entire North Korean government as a "primary money laundering concern," extend these sanctions to Chinese entities and other third-country partners, and use presidential executive orders to punish firms that abet Pyongyang's missile proliferation, said Lee.

Asher, now affiliated with the Center for a New American Security, recommended reviving the U.S. government efforts he once directed, reopening organized crime investigations into North Korean activities, and raising sanctions against Pyongyang to the level applied to Iran.

"Failure to effectively counter, contain, deter and disrupt North Korea's proliferation and regime threat could fundamentally jeopardize international security in the 21st century," he said.

(Editing by Mohammad Zargham)

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Reformer's drive to change Indonesia state firms hits roadblocks

JAKARTA (Reuters) - On an overcast Saturday in early January, the man in charge of modernizing Indonesia's state companies suddenly lost control of his prototype electric sports car and ploughed into the side of a mountain in East Java.

State-Owned Enterprises Minister Dahlan Iskan was unhurt, but the $300,000 bright red "Tucuxi", dubbed "Indonesia's Ferrari" by local media, was a write-off.

It looks like his chances of pulling off an ambitious reform of the bloated state sector are heading the same way.

More than a year after his appointment, most of Iskan's initiatives to fix state firms have either been revoked or blocked by parliament or remain stuck in ministries, according to government and parliamentary documents obtained by Reuters.

"The political challenge is still huge," said Iskan, who started his career as a journalist and still writes a regular column in his newspaper, in an interview. "Life is like that. It's difficult to make this country better."

Iskan has abandoned plans to start mass production of the privately funded Tucuxi, named after a type of dolphin.

But criticism over the crash -- he is being investigated by police for driving an unlicensed car on public roads, although no charges have been filed -- dented his reputation and further sapped his political capital, making it even tougher for him to battle powerful vested interests.

It is a frustration that, according to those close to him, is motivating the media mogul to consider standing as a candidate in next year's presidential election despite being viewed as a rank outsider.

"I would lie if I say I don't want to, I want to," Iskan said, when asked if he wanted the presidency.

He conceded he held only a small chance of winning, and declined to discuss his reasons for running because he was still a serving minister. But several people close to him said he saw the presidency as the only way to achieve change.

"Iskan is impatient over the lack of action just like any private sector guy. He's frustrated with the political pressure especially from the parliament," said a source close to Iskan who declined to be named due to the sensitivity of the issue.

REFORM PRIORITY

President Susilo Bambang Yudhoyono, two-thirds of the way through his second and final five-year term, has made reform of state companies a priority in developing the G20 economy.

Yudhoyono turned for help to Iskan, who made his reputation turning the near-bankrupt Jawa Pos Group into one of Indonesia's biggest media companies.

Just over a year since his appointment in late 2011, Iskan has struggled to implement any of his ambitious plans. On January 23, he announced that he might have to cancel all his planned initial public offerings (IPOs).

It is not the first time Yudhoyono has picked a reformist and then failed to give them protection. His highly respected finance minister, Sri Mulyani Indrawati, became so exhausted by relentless politically motivated criticism she left in 2010.

Indonesia's 140 state-controlled firms account for a huge chunk of Southeast Asia's biggest economy -- their total revenues are estimated to have hit 1,500 trillion ($155 billion) last year, or nearly a fifth of gross domestic product.

Several of the companies have complete or near control of key industries such as energy, power and agriculture that underpin Southeast Asia's biggest economy.

"There is an ownership fetish -- the state wants to act as a entrepreneur," said James Castle, chairman of CastleAsia, one of Indonesia's leading consultancies for foreign firms.

"They are everywhere, acting like private companies, and they crowd out the private sector."

ALL THE PRESIDENT'S MEN

Even Iskan's attempt to take control of the appointment of senior state company managers has largely failed.

In November 2009, Yudhoyono, criticized over repeated power cuts, gave Iskan the job of heading state electricity monopoly PT Perusahaan Listrik Negara (PLN) and agreed to allow him to choose his own board. The appointment was seen as a success.

As state-owned enterprises minister in 2011, he wanted similar freedom to make appointments free of political considerations. He discovered quickly that wasn't so easy.

Executives connected to political party chiefs and the presidential palace are on the board of more than half of the top 25 state firms, according to state-owned enterprises ministry data and the companies documents from 2012.

Two presidential decrees, issued in 2005 a year into Yudhoyono's first term, gave the authority to choose top managers of state firms to a "Final Assessment Team" (TPA) led by the president.

"These are, of course, assignments ... they are missions from the government," Firmanzah, a special advisor to the president with responsibility for administration and financial matters, said in defense of presidential staff appointments.

"This is to push for good governance."

ENEMY OF THE HOUSE

Iskan has also antagonized members of two parliamentary commissions with oversight of state companies.

"He is not an expert in bureaucracy, politics and lobbying. He's a businessman," said Muhammad Said Didu, chief commissioner of state planter PT Perkebunan Nusantara IV.

He faced a setback only a few months into the job when he was forced to revoke his first decree to give more flexibility to executives in state firms to take major business decisions.

Parliament warned Iskan the decree, which gave his ministry such powers as deciding share buy backs, was illegal.

"My questions are: Does he have the authority to do that? And is it in line with the state-firms law?" said Benny K. Harman, vice chairman of one of the parliamentary commissions overseeing state firms, who is from Yudhoyono's party.

Differences of interpretation and overlapping, sometimes conflicting, laws also hinder Iskan's attempts at major reform and can make executives afraid to act for fear of prosecution.

In 2012, he planned five state firm initial public offerings. Only one, builder PT Waskita Karya, went to the market and that had already been approved by parliament back in 2008, before he came into office.

Last month, he announced that all IPO and rights issue plans by state firms would probably be postponed because of technical and regulatory issues.

He declined to discuss a plan to create one of the world's largest palm-oil and rubber firms with $5.6 billion in assets, which had once been set for completion in March 2012.

"Changing the law in this country is like changing the Koran," senior Iskan aide Wahyu Hidayat told Reuters. "Next to impossible." ($1 = 9,680.5 rupiah)

(Additional Reporting by Fathiya Dahrul and Neil Chatterjee; Editing by Jonathan Thatcher and Alex Richardson)

(This story was refiled to correct the first name of parliamentarian in paragraph 31

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