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UPDATE 1-Sharp to start shipping iPhone screens to Apple this month

* Next iPhone expected to have larger screens

* Sharp declines to give specific date for shipments

TOKYO Aug 2 (Reuters) - Japan's Sharp Corp. will start shipping screens destined for a new Apple iPhone that is widely expected to be released in October ahead of the pre-Christmas shopping season.

"Shipments will start in August," Sharp's new president, Takashi Okuda, said at a press briefing in Tokyo on Thursday after the company released its latest quarterly earnings.

He declined to give a more specific date for shipments beyond this month.

Apple is planning a major product launch on Sept 12, stoking speculation that the world's most valuable technology company will announce the sale of its redesigned iPhone. Sharp, identified as a supplier by Apple last year, is one of three companies expected to build the screens for the latest Apple offering.

Sharp does not comment on its relationship with Apple, but the screens set to start shipping in August are widely known to be headed for the new iPhone.

The other two suppliers of the panels are LG Display Co Ltd and Japan Display Inc.

Apple is equipping the next iPhone with a larger screen after Samsung Electronics unveiled its latest Galaxy smartphone with a 4.8-inch touch-screen.

Sources earlier told Reuters that the panels will be 4 inches corner to corner -- 30 percent bigger than current iPhones.

Samsung last month posted a record operating profit of $5.9 billion for the quarter ended June, helped by sales of its latest handset.

The iPhone screens will also be thinner than their previous incarnations with the use of so-called in-cell panels. The new technology embeds touch sensors into the liquid crystal display, eliminating the touch-screen layer found in current iPhones.

Samsung and Apple on Tuesday faced off at the start of a high-stakes patent trial, where Apple has accused Samsung of stealing iPhone features like scrolling and multi-touch.


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Senate fails to move cybersecurity bill forward

A computer keyboard is seen in Bucharest April 3, 2012.

Credit: Reuters/Bogdan Cristel

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UPDATE 4-Sony slashes profit outlook, Sharp cuts jobs first time in 60 years

* Sony Q1 operating profit tumbles 77 pct on year
* Quarterly net loss swells, cites FX, weak economies
* Cuts unit sales forecast for PSP, PS Vita, TVs
* Maintains outlook for PlayStation sales
* Sharp reports operating loss, plans first job cuts since WW2
By Tim Kelly
TOKYO, Aug 2 (Reuters) - Sony Corp slashed its forecast for 2012/13 operating profit and lowered its sales expectations for key products including its handheld PSP and PS Vita devices as new boss Kazuo Hirai battles to revive the fortunes of the electronics giant.
Sony said April-June operating profit fell a much steeper-than-expected 77 percent to 6.28 billion yen ($80 million) compared with a year earlier, blaming a strong yen and weak economies. Analysts had pencilled in a 36 percent fall.
Rival Sharp Corp announced a 94 billion yen operating loss ($1.2 billion) for the June quarter and plans its first job cuts in more than 60 years as Japan's electronics industry scrambles to keep up with foreign competitors.
Sony shares hit a 32-year low in July on waning investor confidence it will be able to close the gap with the likes of Apple Inc, Samsung Electronics Co Ltd and Microsoft Corp.
"I think they're in a pretty difficult position," said Yuuki Sakurai, CEO of Fukoku Capital Management, the asset management unit of Japan's Fukoku Mutual Life Insurance.
"If they don't clearly show what is going to change under the new management I think the market will crush the stock again."
In the latest sign of that struggle, Sony cut some projections for product sales for the year to March 2013.
The firm said it expected to shift 15.5 million TVs, down from a May projection of 17.5 million. It projected PSP and PS Vita handheld device sales of 12 million, down from 16 million, but maintained a forecast of 16 million sales for the PlayStation games console.
Sony hacked its 2012/13 operating profit forecast back to 130 billion yen from a previous forecast of 180 billion yen, moving more into line with market thinking. The consensus forecast of 18 analysts surveyed by Thomson Reuters is for annual operating profit of 139 billion yen.
Taking the helm at Sony in April, Hirai vowed to revive the fortunes of the maker of the Walkman music player after years of competition from foreign rivals overturned its dominance in consumer electronics. The steady slide in Sony shares has left the Japanese firm with a market capitalisation of $12.4 billion, about a 15th of the size of Samsung.
After Sony returned a record net loss of 455 billion yen for the last fiscal year to March 31, Hirai promised 10,000 job cuts and big cost reductions in the TV unit that has produced losses amounting to about $12 billion in the past decade.
It took an 11.3 billion yen restructuring charge in the June quarter. In April, Hirai projected total restructuring charges of some 75 billion yen for 2012/13.
Hirai now faces the added challenge of steering his limping corporation through a euro zone debt crisis that is denting global demand for consumer electronics and eroding the profitability of Sony products.
The corporation said the U.S. economy was also sluggish and that growth in the so-called BRICS -- Brazil, Russia, India, China and South Africa -- had been slower than expected.
YEN WOES
Like other Japanese exporters, including Nissan Motor Corp , Sony cited the strength of the yen as a factor weighing on its results. The currency has become a safe-haven for many investors as debt concerns undermine confidence in both the euro and the dollar.
The evaporating value of the euro hurts all Japanese companies that sell their goods and services in Europe, but Sony is more sensitive to yen swings against the common currency than its local peers.
Sony's European sales account for a fifth of all revenue compared with a tenth at both Panasonic Corp and Sharp.
A one-yen gain in the exchange rate against the euro cuts 6 billion yen off of Sony's operating profit. For Panasonic, a similar change would cut only 2.5 billion yen, and for Sharp, no more than 500 million yen.
The average against the dollar during the first quarter was 80.1 yen with the euro at 102.9 yen. The euro since has eroded in value to its lowest in more than a decade to around 95 yen.
Sony said it was now assuming a yen rate of 100 per euro in its foreign exchange projections for the year, against a May view that the rate would be around 105 yen.
It kept to a dollar/yen assumption of 80 yen.
AMBITIONS
In April, Hirai outlined a revival plan that stakes Sony's future on mobile devices such as the Xperia smartphone, gaming and digital imaging, while developing new businesses, including a medical unit.
So far, however, he has failed to convince investors a turnaround is imminent for the company behind the Bravia TV and Vaio laptop brands. Since he moved into the CEO office, Sony's shares have tanked by more than two-fifths.
However, Tetsuro Ii, CEO of Commons Asset Management, said it will take time for Hirai to start turning Sony around.
"He has to really revolutionise the company and although I recognise the importance of speed, you can't have a revolution in a day," Ii said.
The loss posted by Sharp, Japan's last big maker of liquid crystal displays for TVs, was much deeper than the 44.4 billion yen shortfall that had been expected by analysts.
The maker of the Aquos TV brand said it would cut about 5,000 people -- about one-tenth of its workforce -- as it struggles, like Sony, with weakening global demand for TVs and competition from rivals led by Samsung.
Sharp President Takashi Okuda said they would be the firm's first job cuts since the economic confusion that followed Japan's defeat in World War Two, adding to several announcements this year from Japanese companies reducing the size of its workforce.
"We are in a really tough situation," Okuda said at a press briefing in Tokyo. "We will restructure and speed up our decision making."

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ECB gearing up to buy euro zone bonds

European Central Bank (ECB) President Mario Draghi speaks during the monthly news conference in Frankfurt June 6, 2012. REUTERS/Alex Domanski/Files

1 of 2. European Central Bank (ECB) President Mario Draghi speaks during the monthly news conference in Frankfurt June 6, 2012.

Credit: Reuters/Alex Domanski/Files

By Sakari Suoninen

FRANKFURT | Thu Aug 2, 2012 11:37am EDT

FRANKFURT (Reuters) - The European Central Bank will gear up to buy Italian and Spanish bonds on the open market but would only act after euro zone governments have activated bailout funds to do the same, ECB President Mario Draghi said on Thursday.

Draghi indicated that any ECB intervention would start at the earliest in September and would depend on countries in trouble on bond markets making a request and accepting strict conditions and supervision.

He also indicated that German central bank chief Jens Weidmann had expressed reservations about bond-buying and further efforts would be needed to persuade the Bundesbank before a final vote to take action.

At a news conference following the central bank's monthly meeting, Draghi said the bank would consider other "non-standard" measures to rein in the euro zone crisis.

"The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective," Draghi said after the bank kept euro zone interest rates at a record low 0.75 percent.

The bank has already spent 210 billion euros buying bonds under its now dormant Securities Markets Programme (SMP) since May 2010, with limited impact, but Draghi said the new effort would be different in scope and conditionality.

Any new ECB action was conditional on euro zone governments using their EFSF and ESM bailout funds first, he said.

"Governments must stand ready to activate the ESM/EFSF in the bond market when exceptional financial market circumstances and risks to financial stability exist," he said.

Financial markets seemed underwhelmed by the announcements, with some investors having interpreted Draghi's comments last week as a sign of imminent rather than future and conditional action.

"It is quite disappointing ... There is a lack of any action so he has basically passed the buck back on to politicians," said Ioan Smith, strategist at Knight Capital.

German bund futures extended gains, a sign of investors seeking safety, and the euro fell by more than one cent to below $1.22 at 1330 GMT.

Draghi was under intense pressure from investors, European leaders and even the United States to deliver on Thursday on his pledge to do whatever it takes to save the euro by bringing high borrowing costs down and salving the debt crisis.

His comments in London last Thursday that the ECB would do whatever it takes within its mandate to protect the currency bloc from collapse - "and believe me, it will be enough" - had already eased tensions on the debt markets.

PRESSURE

Other countries, especially the United States, have raised pressure on the ECB to act as the two-and-a-half year old euro zone crisis weighs on global growth.

The U.S. Federal Reserve dashed expectations among some investors on Wednesday by taking no immediate new measures to revive the economy.

The Fed stopped short of offering new monetary stimulus, though it signaled more strongly that further bond buying could be in store to help a U.S. economic recovery that it said had lost momentum this year.

ECB action, meanwhile, is hamstrung by EU rules forbidding it from financing governments. The ECB issued a legal opinion in March 2011 ruling out perhaps the biggest gun, giving the ESM bailout fund rights to tap the ECB for funds to increase its firepower.

The ECB also has to find a way to get any measures past Germany, the euro zone's largest economy and its principal paymaster. The Bundesbank issues regular reminders of inflationary dangers stemming from non-standard measures such as bond purchases and the limits central banks face.

Draghi said all members of the Governing Council endorsed Thursday's statement with one exception - a reference to Bundsbank president Jens Weidmann.

"The decision to do whatever it takes to preserve the euro as a stable currency has been unanimous," Draghi said.

"It's clear and it's known that (Germany's) Bundesbank have their reservations about the programme of buying bonds. The idea is we now have the guidance, the monetary policy committee, the risk committee and the markets committee will work on this guidance and then (we) will take a final decision and the votes will be counted."

His wording suggested he was prepared to outvote the German central banker if necessary.

(Reporting by Sakari Suoninen; Editing by Paul Taylor/Jeremy Gaunt)


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BoE policy on hold for now as UK economy worsens

By David Milliken

LONDON | Thu Aug 2, 2012 11:24am EDT

LONDON (Reuters) - The Bank of England decided it was too soon on Thursday to step up efforts to bolster Britain's recession-hit economy, although future action looks increasingly likely as growth shows little sign of rebounding after a dismal few months.

Britain's economy tipped into its second recession in four years at the end of 2011, and a multi-year austerity program to close the country's vast budget deficit is weighing both on consumer morale and the government's popularity.

The BoE restarted its asset purchase program, which aims to lower big companies' capital costs, last month, and Wednesday marked the start of a joint scheme with the finance ministry to reduce the cost of bank loans for home-buyers and businesses.

As a result, almost all economists polled by Reuters had expected the BoE to make no change on Thursday to its plan to buy 50 billion pounds of British government bonds, which will take total purchases to 375 billion pounds by early November.

Interest rates likewise stayed at a record low 0.5 percent.

But if economic data continues to disappoint in the way it has in recent weeks, the central bank may not have the luxury of waiting long before deciding on its next policy move.

"While the unchanged decision isn't a surprise there is a question mark as to whether current policy settings are appropriate," said David Tinsley, UK economist at BNP Paribas.

"It is probably not the sort of macroeconomic environment where policymakers want to be doing too little."

European Central Bank President Mario Draghi discovered the danger of disappointing market expectations on Thursday when he said the ECB was merely considering - rather than immediately implementing - a new program to buy euro zone debt.

Stocks and the euro fell and Spanish and Italian bond yields rose after the ECB's monthly meeting brought no bold new moves, partially reversing a rally in riskier assets since Draghi surprised markets last week with a pledge to save the euro.

British economic output shrank by 0.7 percent in the second quarter, a much bigger fall than economists had expected, even taking into account the effect of an extra public holiday and months of unusually wet weather.

Both the BoE and Britain's coalition government blame the euro zone crisis for the fact that Britain has been in recession since late 2011. But Germany and France, which are at least as heavily exposed to the debt troubles on the euro currency bloc's periphery, have seen stronger growth over the same period.

Moreover, there is little sign so far of a hoped-for rebound in the third quarter from London's hosting of the Olympics.

Manufacturing activity fell at its fastest pace in more than three years in July, according to a survey of purchasing managers, and while construction improved, builders warned of disruption to deliveries from the Games.

The one bright spot is strong job creation since the start of the year, which has pushed unemployment down to 8.1 percent.

FURTHER STIMULUS SEEN

Most economists polled by Reuters before Thursday's decision expect further asset purchases with freshly created money, also known as quantitative easing, later this year.

The BoE might even lower interest rates again - something it has steadfastly resisted since its last rate cut in March 2009.

At July's meeting, MPC members said they may reconsider a rate cut in a few months time, once they have assessed the impact of the new Funding for Lending Scheme that offers cheap financing to banks which lend to businesses and home-buyers.

A clearer insight into the central bank's outlook will come on August 8, when BoE Governor Mervyn King presents the central bank's quarterly forecast update.

"King will stress - as he has for the past year - the damage from the euro zone crisis and the impact of that on the growth and inflation forecasts," said Brian Hilliard, an economist at Societe Generale.

As well as weak growth, inflation has fallen much faster than the BoE predicted in May to hit a 2-1/2 year low of 2.4 percent in June - close to the central bank's 2 percent target - and some economists now fear it may substantially undershoot.

"It would be a surprise if the (BoE) were expecting an inflation rate in two years time that was close to their target. More likely it will fall short by some margin. That would imply there was 'room' for more monetary easing," said BNP's Tinsley.

Further easing would be welcomed by finance minister George Osborne, who lost a reputation for political sure-footedness after a Budget that seemed to fund tax cuts for the very rich with higher taxes for pensioners and poorer Britons.

Last month the International Monetary Fund said Osborne may need to reconsider how to reduce Britain's budget deficit - the centerpiece of the coalition government's policy program - if BoE and other measures do not boost growth by early next year.

But for now, the focus remains on the central bank.

(Additional reporting by Sven Egenter and Olesya Dmitracova; Editing by Catherine Evans)


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Sony cuts TV sales forecast for 2012/13 to 15.5 mln

TOKYO | Thu Aug 2, 2012 2:11am EDT

TOKYO Aug 2 (Reuters) - Sony cut its forecast for TV sales on Thursday, saying it now expects to sell 15.5 million televisions in the business year to next March compared with its forecast in May of 17.5 million.

In the April-June quarter it sold 3.6 million TVs compared with 4.9 million in the same period last year.

Sony forecast sales of its PlayStation games console this business year would reach 16 million, unchanged from its May forecast, but combined sales of its handheld PSP an PS Vita devices would be 12 million, down form its May forecast of 16 million.

The company said it still expects an average dollar-yen rate for the business term of 80 yen, the same as its assumption in May. But it predicts a yen-euro rate of 100 yen compared with its assumption of 105 yen three months ago.


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RIM launches new line of PlayBook tablets

TORONTO | Thu Aug 2, 2012 9:04am EDT

TORONTO Aug 2 (Reuters) - Research In Motion chose its home country to launch a PlayBook tablet with built-in support for cellular networks, a crucial feature that its initial models lacked.

The BlackBerry maker said on Thursday that the new tablets will be launched in Canada next week and rolled out in coming months in the United States, Europe, South Africa, Latin America and the Caribbean.

The PlayBook tablet, launched more than a year ago, is strategically important for RIM as it is the first product to use the QNX operating system RIM will move onto a new generation of BlackBerry phones designed to compete with sexier devices already on the market.

But the PlayBook was widely criticized at launch for lacking basic features such as email, and it has failed to wow consumers despite sharply discounted pricing and a major software upgrade.


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RPT-Typhoons shut down most of Taiwan, China on alert

(Repeats to more subscribers, no change to text)

TAIPEI Aug 2 (Reuters) - Torrential rain and strong winds triggered landslides and flooding, forcing financial markets to shut and disrupting transport, after Typhoon Saola made landfall in eastern Taiwan on Thursday, authorities said.

At least one person was killed in a landslide and eight injured in the storm.

While some major companies remained open, Taiwanese authorities ordered other businesses and schools to close. Financial markets were also shut, with normal operations expected to resume on Friday.

Most domestic flights were cancelled, along with some international services. Train services were also stopped as the typhoon made its way up Taiwan's less populated and mountainous east coast.

Taiwan's National Fire Agency said one person had been killed in a landslide in the central region of Chiayi. Eight people were injured, most in falls from motorcycles.

The agency also said a policeman had died of a heart attack.

Three of Taiwan's top technology exporters, chipmakers TSMC and Nanya Tech and LCD panel maker AU Optronics, said none of their facilities were affected and were running as normal.

Saola is currently rated a category 2 typhoon on a scale of five and was expected to weaken to a category 1 within 12 hours as it passed Taiwan and headed for southeast China, meteorologists said.

A separate system, Typhoon Damrey , has not affected Taiwan a nd is expected to pass north of China's financial hub of Shanghai on Friday but will weaken to a tropical storm.

China's meteorological agency issued typhoon warnings on Thursday for the southern and eastern provinces of Fujian and Jiangsu. On Tuesday, China's Premier Wen Jiabao told authorities to be on the highest alert.

Wen, who usually leaves more junior leaders to oversee arrangements before storms, told authorities to step up preparations and "put people's lives first", the official Xinhua news agency said. (Reporting by Jonathan Standing, Clare Jim and Faith Hung in TAIPEI and Sui-lee Wee in BEIJING; Editing by Paul Tait)


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Knight seeks financing after $440 million loss; shares drop

A trader works at the Knight Capital kiosk on the floor of the New York Stock Exchange August 1, 2012. REUTERS/Brendan McDermid

A trader works at the Knight Capital kiosk on the floor of the New York Stock Exchange August 1, 2012.

Credit: Reuters/Brendan McDermid

By Edward Krudy

NEW YORK | Thu Aug 2, 2012 11:12am EDT

NEW YORK (Reuters) - Knight Capital Group Inc is being forced to raise money after an erroneous trading position wiped out $440 million of its capital, the firm said on Thursday, causing its shares to shed half of their value.

Problems at Knight, one of the largest firms that buys and sells stocks to provide liquidity to the markets, emerged at the beginning of trading on Wednesday.

"The company is actively pursuing its strategic and financing alternatives to strengthen its capital base," Knight said in a statement. Its shares were down 49.7 percent at $3.49 in morning trading after hitting an all-time low of $3.15.

Knight has already approached JPMorgan Chase & Co for financing, according to a report on Fox Business Network. But it was unclear if that financing would be granted. A spokesman for JPMorgan declined to comment.

Wednesday's technology breakdown roiled the prices of some 140 stocks listed on the New York Stock Exchange, undermining fragile investor confidence in the stability of U.S. stock markets.

Speaking on Bloomberg Television, Knight Capital Chief Executive Officer Tom Joyce said the firm had "excess capital right now." On Tuesday night, it had put in new software that had a bug, he said.

The firm said it was in compliance with capital requirements and that it had traded out of the entire position.

"This issue was related to Knight's installation of trading software and resulted in Knight sending numerous erroneous orders in NYSE-listed securities into the market," Knight said. "This software has been removed from the company's systems."

The trading glitches are the latest in a series of market snafus that have eroded retail investors' confidence.

Others include the botched Facebook Inc initial public offering, the 2010 "flash crash" in which nearly $1 trillion in market value disappeared in minutes, and the failed public offering of BATS Global Markets, a rival to the NYSE and the Nasdaq.

Specialists in securities industry operations issues said the wave of recent problems pointed to an unsettling reliance on automated trading facilities that is robbing investors of confidence in the markets.

"We're losing the human control in our business," said Joe Anastasio, a founding partner of financial services consulting firm Capco who specializes in stock trading issues. "We've been so focused on automated throughput of orders and high-volume execution with no human intervention that we have lost the human logic factor when things go wrong."

One of the problems, he said, is that millions of orders stack up overnight for automatic execution at the opening of trading, with a single error potentially creating a deluge of bad trades.

Knight said its principal broker-dealer subsidiaries were fully compliant with their net capital requirements despite the pretax loss of about $440 million that has "severely impacted" the parent company's capital base.

The U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority are looking into Knight's trading error, according to William Brodsky, CEO of top U.S. options market CBOE Holdings Inc.

"It's obvious that it appears that there was a technology glitch in the trading algorithm," Brodsky told analysts on Thursday. "All markets have rules to address these types of situations."

On July 18, Knight reported second-quarter earnings of $3.3 million, down 81 percent from a year earlier after recording a $35.4 million pretax trading loss from the Facebook initial public offering. The company has not yet filed its second-quarter report with regulators.

Knight's average daily U.S. equities market-making volume has fallen from a year ago as trading volumes have declined across the stock market. Daily market-making volume was $19.5 billion in June, a 12 percent decline from a year earlier.

More than 83 million shares of Knight stock have changed hands on Thursday, making it the most actively traded issue on U.S. exchanges.

(Additional reporting by Jed Horowitz, Sam Forgione, John McCrank, Ann Saphir and David Henry; Editing by James Dalgleish and Lisa Von Ahn)


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Thirsty South Asia’s river rifts threaten “water wars”

As the silver waters of the Kishanganga rush through this north Kashmir valley, Indian labourers are hard at work on a hydropower project that will dam the river just before it flows across one of the world’s most militarised borders into Pakistan.

The loud hum of excavators echoes through the pine-covered valley, clearing masses of soil and boulders.

The 330-MW dam shows India’s growing focus on hydropower but also highlights how water is a growing source of tension with downstream Pakistan, which depends on the snow-fed Himalayan rivers for everything from drinking water to agriculture.

Islamabad has complained to an international court that the dam in the Gurez valley, one of dozens planned by India, will affect river flows and is illegal. The court has halted any permanent work on the river for the moment, although India can still continue tunneling and other associated projects.

In the years since their partition from British India in 1947, land disputes have led the two nuclear-armed neighbours to two of their three wars. The next flashpoint could well be water.

“There is definitely potential for conflict based on water, particularly if we are looking to the year 2050, when there could be considerable water scarcity in India and Pakistan,” says Michael Kugelman, South Asia Associate at the Woodrow Wilson International Center for Scholars in Washington.

“Populations will continue to grow. There will be more pressure on supply. Factor in climate change and faster glacial melt … That means much more will be at stake. So you could have a perfect storm which conceivably could be some sort of trigger.”

============================================

============================================

It’s not just South Asia — water disputes are a global phenomenon, sparked by growing populations, rapid urbanisation, increased irrigation and a rising demand for alternative power such as hydroelectricity.

Turkey, Syria, Iran and Iraq quarrel over the waters of the Tigris and Euphrates. The Jordan river divides Israel, Jordan, Lebanon and the West Bank, while 10 African countries begrudgingly share the Nile.

In Southeast Asia, China and Laos are building dams over the mighty Mekong, raising tensions with downstream nations.

A U.S. intelligence report in February warned fresh water supplies are unlikely to keep up with global demand by 2040, increasing political instability, hobbling economic growth and endangering world food markets.

A “water war” is unlikely in the next decade, it said, but beyond that rising demand and scarcities due to climate change and poor management will increase the risk of conflict.

MAJOR THREAT

That threat is possibly nowhere more apparent than in South Asia, home to a fifth of humanity and rife with historical tensions, mistrust and regional rivalries.

The region’s three major river systems – the Indus, the Ganges and the Brahmaputra – sustain India and Pakistan’s breadbasket states and many of their major cities including New Delhi and Islamabad, as well as Bangladesh.

“South Asia is symbolic of what we are seeing in terms of water stress and tensions across the world,” says B.G. Verghese, author and analyst at New Delhi’s Centre for Policy Research.

The region is one of the world’s most water-stressed, yet the population is adding an extra 25 million people a year – South Asia’s per capita water availability has dropped by 70 percent since 1950, says the Asian Development Bank.

The effect of climate change on glaciers and rainfall patterns may be crucial.

“Most of the water that is used in Pakistan comes from glacial melt or the monsoon,” says Rafay Alam, an environmental lawyer and coordinator of the water programme at Lahore University of Management Sciences.

The dry months of June-July offer a snapshot of the extreme water crisis in the region.

Hospitals in New Delhi this year cancelled surgeries because they had no water to sterilse instruments, clean operating theatres or even wash hands. Swanky malls selling luxury brands were forced to switch off air conditioners and shut toilets.

In Pakistan, the port town of Gwadar ran out of water entirely, forcing the government to send two naval water tankers. Some government flats in the garrison city of Rawalpindi have not had water for weeks, said the local press.

India, as both an upper and lower riparian nation, finds itself at the centre of water disputes with its eastern and western downstream neighbours — Bangladesh and Pakistan — which accuse New Delhi of monopolising water flows.

To the north and northeast, India fears the same of upstream China, with which it fought a brief border war in 1962. Beijing plans a series of dams over the Tsangpo river, called the Brahmaputra as it flows into eastern India.

DAM DISPUTES

For India, damming its Himalayan rivers is key to generating electricity, as well as managing irrigation and flood control. Hydropower is a critical part of India’s energy security strategy and New Delhi plans to use it to reach about 40 percent of people who are currently off the grid.

A severe power shortage is hitting factory output and rolling outages are routine, further stifling an economy which is growing at its slowest in years.

India’s plans have also riled Bangladesh, which it helped gain freedom from Pakistan in 1971. Relations cooled partly over the construction of the Farakka Barrage (dam) on the Ganges River which Dhaka complained to the United Nations about in 1976. The issue remains a sore point even now.

More recently, Bangladesh has opposed India’s plans to dam the Teesta and Barak rivers in its remote northeast.

But India’s hydropower plans are most worrying for Pakistan.

Water has long been a source of stress between the two countries. The line that divided them in 1947 also cleaved the province of Punjab, literally the land of five rivers – the Sutlej, Beas, Ravi, Chenab and Jhelum, all tributaries of the Indus – breaking up millenniums-old irrigation systems.

India’s latest hydro plans have fanned new tensions.

“Pakistan is extremely worried that India is planning to build a whole sequence of projects on both the Chenab and Jhelum rivers … and the extent to which India then becomes capable of controlling water flows,” says Feisal Naqvi, a lawyer who works on water issues.

In recent years, political rhetoric over water has been on the rise in Islamabad, and militant groups such as the Lashkar-e-Taiba have sought to use the issue to whip up anti-India sentiments – accusing New Delhi of “stealing water”.

India brushes off such fears as paranoia and argues the dams  won’t consume or store water but just delay flows, in line with a 1960 treaty that governs the sharing of Indus waters between the two countries.

SINK OR SWIM

South Asia’s water woes may have little to do with cross-border disputes, however. Shortages appear to be rooted in  wasteful and inefficient water management practices, with India and Pakistan the worst culprits, experts say.

“All these countries are badly managing their water resources, yet they are experts in blaming other countries outside,” says Sundeep Waslekar, president of Strategic Foresight Group, a Mumbai-based think-tank.

“It would be more constructive if they looked at what they are doing at home, than across their borders.”

Their water infrastructure systems, such as canals and pipes used to irrigate farm lands, are falling apart from neglect. Millions of gallons of water are lost to leakages every day.

The strain on groundwater is the most disturbing. In India, more than 60 percent of irrigated agriculture and 85 percent of drinking water depend on it, says the World Bank. Yet in 20 years, most of its aquifers will be in a critical condition.

Countries must improve water management, say experts, and share information such as river flows as well as joint ventures on dam projects such as those India is doing with Bhutan.

“Populations are growing, demand is increasing, climate change is taking its toll and we are getting into deeper and deeper waters,” says Verghese, author of ‘Waters of Hope: Himalayan-Ganga cooperation for a billion people’.

“You can’t wait and watch. You have to get savvy and do something about it. Why get locked into rhetoric? We need to cooperate. Unless you learn to swim, you are dead.”

This blog is part of AlertNet’s “The Battle for Water” multimedia report. Find out more here.

(Additional reporting by Rebecca Conway and Qasim Nauman in Islamabad and Sheikh Mustaq in Srinagar; Editing by Raju Gopalakrishnan and Sonya Hepinstall)

Picture credit: Engineers and workers work at the tunnels of Kishanganga power project in Gurez, 160 km (99 miles) north of Srinagar, Indian-administered Kashmir, June 21, 2012. REUTERS/Fayaz Kabli


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