1 of 4. The U.S. Marine Corps version of Lockheed Martin's F35 Joint Strike Fighter, F-35B test aircraft BF-2 flies with external weapons for the first time over the Atlantic test range at Patuxent River Naval Air Systems Command in Maryland in a February 22, 2012 file photo.

WASHINGTON (Reuters) - It's called the "death spiral," and America's newest warplane, the F-35 Joint Strike Fighter, is in danger of falling into it before the plane has even gone into service.

The term - recently invoked by top brass involved in the F-35 program - refers to a budgeting Catch-22 that plagues the defense industry. To keep the cost per airplane low, you need to build and sell a lot of planes. But in tough economic times, governments cut orders to save money. That pushes up the cost per plane, leading to more cancellations, pushing up the cost, leading to more cancellations. And so on.

The U.S. military is in the process of making tough decisions due to mandatory budget cuts from sequestration which went into effect March 1 and could lop off $46 billion of Pentagon spending this fiscal year.

Earlier this year, Pentagon budgeteers crunched the numbers on Lockheed Martin Corp's F-35 in an exercise that spoke volumes about the troubles facing the world's most expensive weapons system and the Navy's uncertain commitment to it.

Postponing orders for about 40 of the 260 Navy models of the plane, which will take off from and land on aircraft carriers, would save money in the short-term, according to several defense officials familiar with the analysis, which has not been made public.

But it would also add from $1 billion to $4 billion to the eventual price of the F-35 program, already at a record-setting $396 billion.

Seven years behind schedule and 70 percent over early cost estimates, the stealthy F-35 "Lightning II" appears to have overcome myriad early technical problems only to face a daunting new question: is it affordable in an era of shrinking defense budgets?

According to a congressional watchdog agency, the average price per plane has already almost doubled from $69 million to as much as $137 million since the F-35 program began in 2001. Any further price rise could scare off potential buyers -including vital foreign customers.

"It's a house of cards," said one senior defense official who is familiar with the F-35 program, but was not authorized to speak publicly. "We have finally started improving performance on the program and efficiency in testing, and bang, we get this budget challenge."

Steve O'Bryan, one of Lockheed's top F-35 executives, says the company has already cut F-35 production costs by 50 percent, and is making progress on flight tests and software development.

"While there are still challenges and room for improvement, the program is heading in the right direction and we see no insurmountable obstacles to delivering the F-35 and its unprecedented 5th generation capability to our three U.S. service and international customers," he said.

BULLET PROOF?

Built by Lockheed and designed to be the next-generation fighter jet for decades to come for the U.S. Air Force, Navy and Marines, as well as key U.S. allies in Asia and Europe, the F-35 appears bullet-proofed against cancellation.

There are no other new fighter jets in the pipeline; the U.S. military's fleet of warplanes is aging; and 10 allies including Britain, Japan and Israel are deeply invested.

Manufacturing - and jobs - spread across 46 states ensure a vital layer of political protection as well.

With 10 million lines of software code onboard, and another 10 million lines in its logistics and ground systems, the F-35 is a flying computer with radars and other sensors that can see enemy threats 200 miles away in any direction.

In what was meant to be a money-saving move, U.S. officials designed the F-35 as one basic fighter (with three variants) to replace a dozen warplanes flown by the U.S. Air Force, Navy and Marine Corps, as well as U.S. allies worldwide.

The U.S. armed forces currently plan to buy 2,443 F-35s in total, comprising 1,763 A-models for the Air Force, 420 B- and C-models for the Marines, and 260 C-models for the Navy. Foreign orders are now slated to total 721.

The Marine Corps, under pressure to replace its aging fleet of Harrier AV-8B "jump jets", Boeing Co F/A-18 Hornets, and EA-6B Prowlers, is scheduled to be the first U.S. military service to use the jet, by late 2015.

Given the tight schedule and huge cost of keeping its aging current fleet flying, top Marine Corps officials are vigilant about the program and the budgetary risks it faces.

"Any delay in fielding the F-35 brings added risk to the Marine Corps' ability to execute our mission as the nation's crisis response force and it affects our ability to augment U.S. Navy carrier air wings," Lieutenant General Robert Schmidle, Deputy Commandant of Aviation, said in a statement to Reuters.

Schmidle and other planners at the Pentagon are desperate to avert the "death spiral" that gutted the Air Force's plan to buy 750 F-22 Raptor stealth fighters down to just 187 jets.

Behind closed doors, some U.S. officials fret that sequestration budget cuts could trigger a similar dynamic on the F-35, which has already seen 410 orders pushed back beyond 2017.

Depending on how the cuts are implemented, the purchase of up to nine F-35s could be deferred in fiscal 2013 alone, Navy and Air Force officials have said. That might not seem like much out of more than 3,100 destined for U.S. and foreign clients.

But initial calculations show that while cutting nine jets would save about $1.3 billion, it would also raise the cost of the remaining aircraft by nearly $800 million, said one defense official, who was not authorized to speak publicly.

The Pentagon budget analysis, which Reuters is reporting for the first time, found that postponing the 40 Navy C-model jets would raise the cost of the Navy version by about $4.5 million per plane, and add between $1.5 million to $2.6 million to the per-plane cost of the Air Force and Marine Corps versions, according to several defense officials familiar with the study.

"Cutting tails to pay bills is inefficient. Whether it's nine planes in one year, or 40 across the (future years defense plan), you're going to pay later," said one of the officials. This official and others cautioned that the studies were hypothetical for now.

Air Force Lieutenant General Christopher Bogdan, the often blunt F-35 program chief, invoked the dreaded "death spiral" this week as he pounded on the need to cut costs and keep foreign orders - which will account for half of all F-35s produced through 2017 - on track.

"The one thing that our partners care most about is how much this airplane is going to cost," he said. "If ... we want to sell the 600-plus airplanes to our partners and a couple hundred more projected to our (foreign military) customers, we better be darned sure we keep reducing the price on this airplane."

Even a two-year delay in Turkey's initial order of two jets had added $1 million to the cost of each of the remaining planes in the original order year, Bogdan told a defense conference.

No one knows exactly how much of a price tag will be too much to bear for countries like Australia and Canada, whose F-35 orders are already on shaky ground. "The tipping point will be different for each country," said one U.S. official.

In Australia, defense contractors involved in building the new jets are worried that $5.5 billion in expected orders will be in jeopardy if Canberra cuts its plans to buy 100 jets by 30 to 50 jets, as many experts expect.

Lockheed remains optimistic that international orders will hold up and even grow. South Korea is expected to choose the F-35 as the winner of a 60-jet competition to be decided this summer, and U.S. officials this week said Singapore may order more than a dozen F-35s in coming weeks.

Other allies, like Japan, see no going back on the fighter.

A senior official at Japan's Defense Ministry said it was keeping a close eye on cost and schedule risks, but there were no plans to change Tokyo's order for 42 planes: "If we don't buy until all the glitches are eliminated, it would be too late."

NAVY IS WARY

The Air Force is considering a slightly less capable version of the plane for its initial use, but the Navy is reconsidering the size of its order.

Chief of Naval Operations Admiral Jonathan Greenert this week ruled out scrapping the Navy's entire F-35C order, but said the Navy was thinking about how many jets it really needs.

Greenert last year ordered a study on equipping each aircraft carrier air wing with just one squadron of F-35s instead of two, according to defense analyst Loren Thompson. The Navy is also developing several unmanned planes, although military officials insist they will never completely replace manned fighters on carriers.

Bogdan said cutting the Navy's order too far would have serious consequences. "There is actually a 'do not go below' type of calculation, which says, if you get below the minimum production quantity on one of these variants, the price starts shooting up tremendously," he told the conference.

The Pentagon's Cost Analysis and Program Evaluation office recently forecast that the F-35's cost would rise by 9 percent if Washington only bought 1,500 jets and foreign partners stuck to their orders, according to a Government Accountability Office study, first reported by Reuters. The cost would surge 19 percent if Washington bought 1,500 jets and the partners none.

"If you cut any of these aircraft, the cost of each remaining one goes up," consultant Thompson said. "At some point soon, you're at risk of undermining the whole business case for the F-35 as an affordable new fighter."

The F-35's worsening fiscal challenges come just as advocates, and some independent analysts, say the often-troubled fighter development project is getting back on track after years of setbacks - which included two engine-related groundings this year - and expensive retrofits.

The F-35 "is now moving in the right direction after a long, expensive and arduous learning process," the GAO study concluded, although it said long-term affordability remained a big concern.

Top Pentagon officials are vowing to shelter the F-35 from the latest budget crisis, if they can.

"We'll try to protect the F-35," the Pentagon's chief weapons buyer, Frank Kendall, said this week. "There's no question about its priority.

(Additional reporting by Kiyoshi Takenaka in Tokyo and John O'Callaghan in Singapore; Editing By Warren Strobel, Claudia Parsons and Leslie Gevirtz)

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1 of 3. CEO of Dow Jones, Lex Fenwick speaks during an interview in his New York offices July 20, 2012.

(Advisory: this article contains profanity in the fourth, 27th and 41st paragraphs.)

NEW YORK (Reuters) - He's tearing down walls. He's tossing out old business models. And he's dressing down people, publicly and profanely, in the once-buttoned-down halls of Dow Jones & Co., publisher of the august Wall Street Journal.

Lex Fenwick (pronounced FEN-nick), a long-time Bloomberg LP executive, is making his mark on Dow Jones, the News Corp subsidiary where he became chief executive officer earlier this year.

Fenwick quickly dismantled the offices in the executive suite, emulating the open-floor plan of his previous employer. He works from a desk in a corner of the seventh floor of News Corp's headquarters in midtown Manhattan, and his conversations - often expletive-laced - can be widely heard.

"This is not what I wanted! Are you a f---ing idiot?" one employee heard Fenwick screaming at a colleague not long ago. Others inside the company say they have often heard Fenwick yelling profanities and shouting at underlings.

Fenwick has been called a master salesman and business builder whose hard-charging style often runs roughshod over colleagues and subordinates. His makeover of Dow Jones comes at a crucial time for Rupert Murdoch's media empire as News Corp prepares to split off its global publishing assets from its entertainment businesses.

Murdoch needs Fenwick's shock treatment to succeed so that Dow Jones, with about $2 billion in annual revenue, can be the growth engine for the new publishing company, analysts said.

Most of News Corp's newspapers are grappling with industry-wide problems of declining readership and print advertising sales, plus the fallout from the hacking scandal at its British publications. One bright spot is Dow Jones' Wall Street Journal, the top U.S. newspaper by circulation, which also boasts one of publishing's most successful digital strategies.

For Dow Jones, Fenwick's arrival in February has been more of a jolt than when News Corp bought the company in 2007. The executives Murdoch brought in, including seasoned newspaperman Les Hinton as CEO, were seen as evolutionary and, mostly, respectful of colleagues.

Former Bloomberg colleagues say Fenwick, 53, has superb sales skills. During his seven years as chief executive at the financial information and news company, revenue doubled to $6 billion.

But the British executive is erratic - charming and smooth one minute but loud and belligerent the next, according to interviews with more than 20 people who have worked with him.

Fenwick's aggressive approach helped him rise to the top of Bloomberg, but also led to his downfall just a few years later, said these people, who spoke on condition of anonymity.

Fenwick declined to be interviewed for this article and a spokeswoman for Dow Jones declined to comment.

In his first eight months at Dow Jones, Fenwick has swept aside several senior managers and replaced them with former Bloomberg colleagues. He plans to raise prices for Dow Jones Newswires and reduce discounts, a strategy that could backfire at a time when banks are under pressure to cut costs.

Fenwick also wants to transform the way Dow Jones sells its news and information to financial institutions by introducing a new Web-based platform for all its products before the end of the year, aiming to win market share from Bloomberg, Thomson Reuters Corp and other rivals.

As part of a stand-alone publishing company, Dow Jones will be critical. In the 2012 fiscal year ended June 30, Dow Jones contributed $180 million in earnings before interest, tax, depreciation and amortization - that is 30 percent of EBITDA from News Corp's newspaper properties, estimated Gabelli & Co analyst Brett Harriss.

"If anything is going to have lasting power it's going to be something like Dow Jones where you have a niche audience, specialized reporting and the willingness of consumers to pay for the product," Harriss said.

News Corp has not said who will run the new publishing company. Media watchers view Dow Jones Editor-in-Chief Robert Thomson a long-time Murdoch confidante who currently reports to Fenwick, as one of the front runners. News Corp declined to comment.

It is unclear what role Fenwick will play in the new structure. In an interview last July, he spoke of some nervousness about joining Dow Jones after 25 years at Bloomberg.

"It's quite strange to only know one thing and to go to a different thing," he said then. "With trepidation you step into this thing and say you know this could be really scary."

A PAGE FROM BLOOMBERG

Fenwick started as one of Bloomberg's first sales employees in London in 1987, when the company was an upstart in European financial markets against Reuters. He eventually became head of European sales and turned the region into one of Bloomberg's best, at times even outperforming the United States.

He wears purple (yes, purple) suits from the Savile Row designer Ozwald Boateng. He also favors leather pants, pork pie hats atop his bald pate, a pierced ear and modern art.

At Bloomberg, Fenwick was fond of marketing antics and extravagant office parties. One infamous Christmas party in London was based on the Seven Deadly Sins. It featured drag queens, a huge bed covered in purple satin and entertainers waving cash and shouting "Money, ain't it gorgeous!"

"He's irascible, opinionated and can be incredibly demanding," said TheStreet Editor-in-Chief William Inman, who worked for 17 years at Bloomberg and used to run its publishing unit. "He trusts his instincts and 90 percent of the time he is dead-on right."

Still, many colleagues were surprised when Fenwick was promoted to chief executive in 2001 as founder Michael Bloomberg, now mayor of New York City, stepped down to focus on politics. The strength of the European division and Fenwick's creativity won him the job, say people with knowledge of the matter. Bloomberg LP declined to comment for this article.

As CEO, Fenwick ramped up what had already been put in place: a strong brand and first-rate customer support. His desk sat in the middle of customer service, and he ordered every new member of the sales staff to rotate through that department.

But he also ran into legal trouble. In 2007, the Equal Employment Opportunity Commission filed a high-profile class action lawsuit that accused Michael Bloomberg, Fenwick and other top executives of discrimination against pregnant women.

One of the complaints alleged that Fenwick had instructed another executive to fire two women who were pregnant and said "I'm not having any pregnant bitches working for me." Bloomberg LP has denied the allegation.

U.S. District Judge Loretta Preska last year threw out the suit, saying there was insufficient evidence presented to show discrimination was the company's standard operating procedure, even if there were several isolated instances of discrimination. Some of the women are still pursuing individual claims.

Bloomberg insiders say Fenwick used fear as a tactic to motivate people.

"He would go into the office in his purple suit and stand there like a peacock and scream at people," said one former Bloomberg veteran. "He felt that he was keeping people off balance constantly... so they would look at things differently."

For his part, Fenwick has talked about the tough love he experienced from his parents. He once told a colleague that when he turned 21, his father gave him a one-way ticket to Australia to force the party-loving youth to learn to fend for himself. Fenwick wanted to refund the ticket and pocket the cash, but his father followed him to the airport to watch him board the plane.

Fenwick's take-no-prisoners attitude led him to butt heads with other Bloomberg executives and ultimately led to his downfall there, people with knowledge of the situation said.

By 2005, he was stripped of some major responsibilities though he held on to the CEO title until 2008, when he was demoted to lead Bloomberg Ventures.

REVAMPING DOW JONES

Fenwick began to explore other opportunities. His chance came when Hinton, a long-time Murdoch lieutenant, resigned as Dow Jones CEO in July 2011 at the height of the hacking scandal at the British newspapers, which Hinton had once overseen. In finding a successor, News Corp wanted to address the Newswires business since Murdoch had primarily focused on the Wall Street Journal.

A source close to the company said Fenwick is supposed to concentrate on the business and leave Thomson to run an autonomous newsroom. News Corp management knew Fenwick could be combustible, but felt he was worth the risk, the source said.

Fenwick brings new energy and drive to Dow Jones, his supporters say. They contend that the company had become too cautious.

"The history of Dow Jones is a series of opportunities lost," said Peter Appert, an analyst who covered the company when it was controlled by the Bancroft family and is currently with Piper Jaffray. "The hegemony of Dow Jones is significantly diminished in all parts of the financial information sector."

Fenwick has told employees he has Bloomberg and Thomson Reuters in his sights. He plans to create a Web-based platform to house all Dow Jones content, so he can better control the customer experience and be less dependent on third-party distributors like Bloomberg, Thomson Reuters, FactSet Research Systems Inc and International Data Corp.

He has also brought some of Bloomberg's focus on customer service to Dow Jones. He has shortened the customer service department's email response time to four hours from 24 hours. The company also plans to launch in November a 24-hour, seven-day-a-week online chat system to address customer issues.

VEXED COLLEAGUES

Fenwick has rattled Dow Jones employees used to a more genteel style.

In a meeting with dozens of Dow Jones sales people and senior managers last spring, Fenwick was asked if he would seek customer advice on his changes. "F--- the customer," Fenwick replied, adding that he only cared about Dow Jones, according to four people who heard, or heard about, the outburst.

And Fenwick has backpedaled over some decisions.

After a presentation about Factiva, a news database that draws upon roughly 35,000 sources, Fenwick was surprised to learn that a default search ranked stories by relevance and did not give prominence to Dow Jones content. He pressed for changes to make Dow Jones articles pop up first, but had to undo them after customers reacted badly.

Some Dow Jones employees have reached out to Murdoch and News Corp President Chase Carey to complain about Fenwick, said another source. It is not clear how Murdoch and his lieutenants viewed the complaints.

At least a dozen high-level executives at Dow Jones have left since Fenwick joined. Many others are discreetly looking for new jobs. Some insiders fear layoffs are in store, partly because Fenwick is expected to consolidate journalists from Dow Jones Newswires into one newsroom under the Wall Street Journal moniker.

Several Dow Jones clients said they were impressed with the new CEO. One senior banker said Fenwick was smart and direct, adding, "He is what they need over there." Other clients said they were concerned about his plans to raise prices, which could affect decisions to renew contracts.

Ultimately, Fenwick's ability to boost Dow Jones's bottom line will determine his success or failure. "I would love to tell you we are making so much money here that we could lose a few million," Fenwick said in the July interview with Reuters. "I can't really say that. We need every dollar."

(Additional reporting by Miranda Maxwell in Melbourne; Editing by Tiffany Wu and David Gregorio)

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1 of 4. Men chat as they drink beer at a sheeben (bar) in Soweto, southwest of Johannesburg August 8, 2012.

WORCESTER, South Africa | Wed Aug 8, 2012 10:08am EDT

WORCESTER, South Africa (Reuters) - On a bitterly cold Saturday afternoon in Worcester, a forlorn rural community near South Africa's southern tip, the queue at the liquor store is the longest in town.

It's a scene constantly repeated across South Africa and a number of other nations on the continent: the prelude to a weekend of binge drinking.

After years of turning a blind eye to alcohol abuse, politicians from South Africa to Kenya and Zambia are under pressure to tackle a problem that is adding to Africa's burden of HIV, birth defects, road accidents and violent crime.

Africa has the world's highest proportion of binge drinkers, even though its large populations of Muslims and evangelical Christians generally abstain from alcohol. As incomes rise, it has become a boom market for international brewers and distillers whose sales are often flagging in the wealthy world.

"It's true that most people in Africa don't drink for cultural, religious and economic reasons but those who drink, drink a lot," said Dr Vladimir Poznyak of the World Health Organisation (WHO) in Geneva.

If governments finally crack down effectively, companies such as SABMiller, Diageo Plc and Heineken NV may find Africa no longer allows the spectacular sales growth they have achieved there in recent years.

The drinks firms say Africans are better off consuming their products than popular but sometimes lethal home concoctions.

However, the effects in Worcester of drinkers rapidly consuming dangerous - sometimes even fatal - quantities of alcohol are obvious. The liquor store queue snakes past a drunken man crumpled on the ground in a pool of vomit and in the evening drinkers cram into Worcester's numerous run-down bars.

"They drink and drink and drink. They don't stop when it is necessary to stop drinking liquor," said Berita Jones, a police captain in the town of about 130,000.

"Worcester's crime is almost entirely alcohol-related," said Jones, whose time is spent checking that its 166 licensed bars outlets comply with the law, and making regular raids of its more than 300 shebeens, or informal taverns.

UNQUENCHABLE THIRST

Home to some of the world's fastest growing economies, Africa's thirst for beer and spirits is almost unquenchable: analysts estimate beer volumes rose around 7 percent last year. Excluding the mature South African market, growth reached more than 10 percent.

Drinks companies want to keep up the momentum. SABMiller is investing up to $2.5 billion over the next five years to build and renovate breweries on the continent. Rival Diageo's African sales have risen by an average 15 percent in each of the last five years, and now account for 14 percent of the group's total.

But some public health officials say regulation of alcohol consumption and education about its abuse have failed to keep pace. "In parallel to this increase in commercial alcohol availability, the infrastructure and regulation for effective alcohol control have no strong tradition in many African countries," said Poznyak.

NEW LAWS

On average an African drinks about 6.15 liters of pure alcohol each year, about half of what a European consumes. However, more than 25 percent of Africans are binge drinkers, the highest proportion in the world, according to a WHO report.

Most African countries already have laws that prohibit underage drinking and drink driving, but critics say these are poorly enforced and often completely ignored.

South Africa is crafting a new law to restrict alcohol advertising, raise the minimum drinking age to 21 from 18 and get tougher on drink driving, Minister of Social Development Bathabile Dlamini has said.

The bill would also propose warning labels on alcohol containers, raising taxes and stricter licensing laws for alcohol outlets, said a government official who declined to be identified because the bill has not yet been made public.

The bill will be discussed in South Africa's cabinet in the next few weeks before its release for public comment, the official said.

In Kenya authorities are also looking to raise the legal drinking age to 21 from 18, following on from a 2010 law that banned alcohol sales in grocery stores and in bars before 5 p.m.

The Mututho law, named after the legislator who crafted it, John Mututho, is credited for a 90 percent drop in alcohol-related deaths in Kenya.

"Even when we say we have succeeded up to that level, we are also saying we have failed 10 percent, so the age of drinking will be 21. We are amending the law," Mututho said.

Earlier this year, Zambia banned the manufacture and sale of spirits in relatively cheap small plastic sachets, which it blamed for increasing alcohol abuse by young people. Zambia's health department secretary told Reuters that alcohol-related road accidents and health problems are increasingly a concern.

In Nigeria, Africa's most populous nation and a huge beer market, alcohol regulation does exist but critics say it is loosely enforced.

Adeline Osakwe, deputy director at the Nigeria Food and Drug Administration, said the country ensures consumers are aware of alcohol content through product labeling. It also regulates alcohol advertising.

"For TV commercials, as long as it will not lead people to abuse alcohol, we give approvals," Osakwe said.

HOME-BREW TO HEINEKEN

For years poor Africans were limited to home-brew sorghum or maize beer, sometimes made with dangerous ingredients such as battery acid to increase the potency.

Commercial alcohol is now widely available in most African states and premium brands such as Johnny Walker whisky or Heineken beer are increasingly in reach of the average drinker.

Rising incomes have also encouraged conspicuous consumption of premium brands. Even in Worcester's gritty nightclubs, some tables are weighed down by bottles of pricey spirits such Scotch whiskies Chivas Regal and Glenfiddich.

Drinks companies say commercially produced alcohol is safer than home-brews. "The alternative is that lower income people who wish to consume liquor will buy illicit and potentially dangerous alcohol," said Vincent Maphai, executive director of Corporate Affairs at SABMiller's South African unit.

SABMiller is already offering lower priced beer in order to win over drinkers from the home-brew market, which it says is about four times the $11 billion commercial market.

Higher alcohol taxes, which the South African bill is likely to impose, risk of pushing the poor back to potentially lethal home-brews. Nevertheless, public health officials say governments need to do more to warn about the dangers of alcohol abuse.

BIRTH DEFECTS

Even several months into pregnancy, Johannesburg resident Martha regularly drank until she passed out. She never worried about the effect until her son was born with a hole in his heart. "I would have stopped if I knew that it would harm my baby like this," said Martha, who declined to give her family name.

Her son, now 12 years old, was diagnosed with fetal alcohol syndrome, an incurable birth defect that has left him with the brain and body of a four-year old.

South Africa has the highest reported number of children with such birth defects: about 122 out of every 1,000 are born with the syndrome, compared with about 8 per 1,000 in the United States, according to South Africa's Foundation for Alcohol Related Research.

But experts say many Africans, like Martha, don't get proper education about the dangers of alcohol, especially in rural areas where access to hospitals and clinics is limited.

Alcohol also heightens the danger on a continent where driving is already perilous. Kenya's Kenyatta National Hospital treats up to 40 victims of road accidents, mostly caused by drunk drivers and pedestrians, on some Saturday nights.

But with little to do beyond drinking for entertainment in many parts of rural Africa, health officials face a tough battle.

"In spite of all economic benefits that increased investments in alcohol production and sales can bring, the health of the population should be properly protected and this should be a priority," the WHO's Poznyak said. "Health is the best investment, also from an economic point of view, in any society." ($1 = 0.6401 British pounds)

(Additional reporting by Duncan Miriri in Nairobi, Chris Mfula in Lusaka, Chijioke Ohuocha in Lagos; editing by David Dolan and David Stamp)

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Malaysian soldiers prepare their protective gear prior to the slaughter of pigs at a farm in Sungai Nipah, 60 miles southwest of Kuala Lumpur, after an outbreak of the virus that later came to be known as Nipah virus. March 20, 1999.

HONG KONG | Fri Aug 3, 2012 5:47pm EDT

HONG KONG (Reuters) - A virus that is very similar to the deadly Nipah and Hendra viruses has been discovered in fruit bats in Australia and researchers are hoping it can help them find ways to fight those highly dangerous cousins.

The Nipah virus kills 40-75 percent of the people it infects while the Hendra virus, which normally affects horses, kills more than 50 percent of the people it infects.

But the newly discovered Cedar virus, with 90 percent of its genes identical to those of Hendra and Nipah, failed to cause any disease when researchers injected it into rats, guinea pigs and ferrets, they wrote in a paper published on Friday in the journal PLoS Pathogens (Public Library of Science).

They are now comparing the DNA of all three viruses to tease out genes that are responsible for the deadliness of the Nipah and Hendra, said lead author Gary Crameri, at the Commonwealth Scientific and Industrial Research Organisation's Australian Animal Health Laboratory.

"We have already done genetic analyses and identified those things that are different between Hendra/Nipah and the Cedar," Crameri said in a telephone interview.

"Our plan now is to genetically engineer these viruses so we can take some parts of the Hendra genome that don't appear in Cedar but play some role in how deadly they are, put them into Cedar and then do infection trials with the new hybrid virus and see if it is as deadly."

Researchers hope to home in on the rogue genes to find cures for Nipah and Hendra, which are also found in bats.

"There is no secret that the pathogenicity of the Hendra and Nipah lie in their genes and this will help us narrow down some of the options. From there, we can start to think about therapeutic approaches, new drugs that we can use to target these viruses so that when people get infected, we can treat them, something we don't have now," Crameri said.

Bats are a natural reservoir for many viruses, including highly pathogenic ones like rabies, Ebola, SARS, Hendra and Nipah. Although Cedar appears not to cause any disease in the few animal species that researchers tested the virus on, it is not known if it causes disease in people.

A Nipah outbreak in 1998 killed at least 105 pig farmers in Malaysia and one abattoir worker in Singapore. There have been numerous outbreaks since in Bangladesh and India.

While the cases in Malaysia and Singapore were due to contact with infected pigs, the South Asian outbreaks were mostly due to consumption of raw date palm juice that had been contaminated with urine or droppings from infected fruit bats.

The Hendra virus kills 75 percent of the horses it infects. While it rarely jumps from horse to people, four of the 7 human cases recorded since 1994 in Australia have resulted in death.

(Editing by Robert Birsel)

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