Bombardier Provides Preliminary Fourth Quarter and Full Year 2019 Financial Results and Updates on Accelerating Deleveraging Phase of Turnaround Plan

  • Financial results expected to be below guidance, driven largely by actions at Transportation to resolve challenging projects
  • Aviation financial results largely on track
  • Company actively pursuing strategic options to accelerate deleveraging
  • Bombardier reassessing future participation in Airbus Canada Limited Partnership

All amounts in this press release are in U.S. dollars unless otherwise indicated.

MONTREAL, Jan. 16, 2020 (GLOBE NEWSWIRE) — Bombardier (TSX: BBD.B) today announced its preliminary results for the fourth quarter and full year 2019. The Company now expects lower than previously guided financial performance, mainly as a result of actions taken to resolve challenging rail projects, the timing of milestone payments and new orders at Transportation, and the delivery of four Global 7500 aircraft slipping into the first quarter of 2020.

Preliminary Results for the Fourth Quarter and Full Year 2019

Fourth Quarter 2019
Expected Results
Full Year 2019
Expected Results
Consolidated Revenues ~$4.2B ~$15.8B
Aviation ~$2.4B ~$7.5B
Transportation ~$1.8B ~$8.3B
Consolidated Adjusted EBIT1,2 ~$(130)M ~$400M
Aviation ~6% ~7%
Transportation ~(13)% ~1%
Consolidated Adjusted EBITDA1,2 ~$0M ~$830M
Free Cash Flow1 ~$1.0B ~$(1.2)B
Aircraft deliveries (in units) 58 175
Business Aircraft 52
Incl. 6 Global 7500
142
Incl. 11 Global 7500
Commercial Aircraft 6 33

Backlog as at December 31, 2019
Business aircraft ~$14.4B
Transportation ~$35.7B

1 Non–GAAP financial measures. Refer to the Caution regarding Non–GAAP financial measures below for definitions of these metrics.

2 Excludes Airbus Canada Limited Partnership (ACLP) equity pick–up.

Aviation deliveries were strong in the quarter, totalling 58 aircraft in the fourth quarter for a total of 175 aircraft for the full year. This included 11 Global 7500, six of which were delivered in the fourth quarter. The remaining Global 7500 aircraft originally scheduled for delivery in the final days of 2019 are now expected to be delivered in the first quarter of 2020. As Aviation made good progress ramping up the Global 7500, its full year adjusted EBIT margin is still expected to be approximately 7.0%, in line with full year guidance.

At Transportation, the fourth quarter adjusted EBIT loss is anticipated to be approximately $230 million. This includes a charge of approximately $350 million related to certain projects in the UK (the Aventra platform), commercial negotiations with Swiss Federal Railways (SBB), and increased production and manufacturing costs for projects in Germany.

Delays in achieving technical milestones, including multi–unit software homologation for the London Overground's LoTrain project (an Aventra project), and execution of production ramp–up required the Company to re–align certain delivery schedules with customers and absorb additional costs. Having achieved these milestones in the fourth quarter, Bombardier has entered into commercial negotiations with customers "" to reset schedules, resolve late delivery penalties, and address related provisions and costs.

Consolidated free cash flow for the fourth quarter is estimated at approximately $1.0 billion, approximately $650 million lower than anticipated. This is largely due to the timing of cash inflows from milestone payments on large Transportation projects, and the later–than–anticipated closing of certain orders and call–offs. While the free cash flow shortfall is largely expected to be recovered in 2020, the recovery will be offset by the cash flow impact of the incremental costs recognized in the fourth quarter adjustments at Transportation.

While fourth quarter financial performance at Transportation was lower than expected, the Company continues to make significant progress completing legacy projects and to take the right actions to position the business for long–term success.

Airbus Canada Limited Partnership Update (ACLP)
With its exit from Commercial Aerospace, Bombardier is reassessing its ongoing participation in ACLP.

While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from ACLP calls for additional cash investments to support production ramp–up, pushes out the break–even timeline, and generates a lower return over the life of the program. This may significantly impact the joint venture value. Bombardier will disclose the amount of any write–down when we complete our analysis and report our final fourth quarter and 2019 financial results.

Acceleration of Deleveraging Phase of Turnaround

Liquidity remains strong, with year–end cash on hand of approximately $2.6 billion. The CRJ program sale to Mitsubishi Heavy Industries, Ltd (MHI) and Aerostructures sale to Spirit AeroSystems Holding, Inc., both of which are still tracking to close by mid–year, will provide an additional $1.1 billion of cash subject to customary closing adjustments. The Company has received most of the regulatory approvals required for closing of the CRJ sale.

Consistent with Bombardier's five–year turnaround plan, and following a comprehensive review of strategic alternatives, the Company is actively pursuing options to strengthen its balance sheet and enhance shareholder value.

"Since launching our turnaround plan, we have addressed our underperforming aerospace assets, completed our heavy investment cycle, and put the Company on a solid path toward organic growth and margin expansion while prudently managing our liquidity and heavy debt load," said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. "The final step in our turnaround is to de–lever and solve our capital structure. We are actively pursuing alternatives that would allow us to accelerate our debt paydown. The objective is to position the business for long–term success with greater operating and financial flexibility."

The Company will provide additional information when it reports its fourth quarter and full year 2019 financial results on February 13, 2020.

About Bombardier
With over 68,000 employees, Bombardier is a global leader in the transportation industry, creating innovative and game–changing planes and trains. Our products and services provide world–class transportation experiences that set new standards in passenger comfort, energy efficiency, reliability and safety.

Headquartered in Montreal, Canada, Bombardier has production and engineering sites in 28 countries as well as a broad portfolio of products and services for the business aviation, commercial aviation and rail transportation markets. Bombardier shares are traded on the Toronto Stock Exchange (BBD). In the fiscal year ended December 31, 2018, Bombardier posted revenues of $16.2 billion US. The company is recognized on the 2019 Global 100 Most Sustainable Corporations in the World Index. News and information are available at bombardier.com or follow us on Twitter @Bombardier.

Bombardier, CRJ and Global 7500 are trademarks of Bombardier Inc. or its subsidiaries.

For information
Jessica McDonald
Advisor, Media Relations and Public Affairs
Bombardier Inc.
+514 861 9481

Patrick Ghoche
Vice President, Corporate Strategy
and Investor Relations
Bombardier Inc.
+514 861 5727

FORWARD–LOOKING STATEMENTS

This press release includes forward–looking statements, which may involve, but are not limited to: statements with respect to the Corporation's objectives, anticipations and guidance in respect of various financial and global metrics and sources of contribution thereto; targets, goals, priorities, market and strategies, financial position, market position, capabilities, competitive strengths, credit ratings, beliefs, prospects, plans, expectations, anticipations, estimates and intentions; general economic and business outlook, prospects and trends of an industry; expected growth in demand for products and services; growth strategy, including in the business aircraft aftermarket business; product development, including projected design, characteristics, capacity or performance; expected or scheduled entry–into–service of products and services, orders, deliveries, testing, lead times, certifications and project execution in general; competitive position; expectations regarding working capital recovery across late–stage Transportation projects; expectations regarding revenue and backlog mix; the expected impact of the legislative and regulatory environment and legal proceedings on the Corporation's business and operations; strength of capital profile and balance sheet, creditworthiness, available liquidities and capital resources, expected financial requirements and ongoing review of strategic and financial alternatives; the introduction of productivity enhancements, operational efficiencies and restructuring initiatives and anticipated costs, intended benefits and timing thereof; the expected objectives and financial targets underlying our transformation plan and the timing and progress in execution thereof, including the anticipated business transition to growth cycle and cash generation; expectations and objectives regarding debt repayments, expectations and timing regarding an opportunistic redemption of CDPQ's investment in BT Holdco; intentions and objectives for the Corporation's programs, assets and operations; the funding and liquidity of Airbus Canada Limited Partnership (ACLP); the pursuit of any strategic option to strengthen the Corporation's balance sheet and enhance shareholder value, the anticipated benefits of any transaction resulting therefrom and the expected impact on the Corporation's operations, infrastructure, opportunities, financial condition, business plan and overall strategy. As it relates to the sale of the CRJ aircraft program (the Pending Transaction) and the disposition of the Aerostructures operations, this press release also contains forward–looking statements with respect to: the expected terms, conditions, and timing for completion thereof; the respective anticipated proceeds and use thereof and/or consideration therefor, related costs and expenses, as well as the anticipated benefits of such actions and transactions and their expected impact on the Corporation's guidance and targets; and the fact that closing of these transactions will be conditioned on certain events occurring, including the receipt of necessary regulatory approval.

Forward–looking statements can generally be identified by the use of forward–looking terminology such as "may", "will", "shall", "can", "expect", "estimate", "intend", "anticipate", "plan", "foresee", "believe", "continue", "maintain" or "align", the negative of these terms, variations of them or similar terminology. Forward–looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Corporation's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of our business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

By their nature, forward–looking statements require management to make assumptions and are subject to important known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecast results set forth in forward–looking statements. While management considers these assumptions to be reasonable and appropriate based on information currently available, there is risk that they may not be accurate. For additional information with respect to the assumptions underlying the forward–looking statements made in this press release, refer to the Strategic Priorities and Guidance and forward–looking statements sections in Overview, Business Aircraft, Commercial Aircraft, Aerostructures and Engineering Services and Transportation in the MD&A of the Corporation's financial report for the fiscal year ended December 31, 2018.

Certain factors that could cause actual results to differ materially from those anticipated in the forward–looking statements include, but are not limited to, risks associated with general economic conditions, risks associated with our business environment (such as risks associated with "Brexit"); the financial condition of the airline industry, business aircraft customers, and the rail industry; trade policy; increased competition; political instability and force majeure events or global climate change), operational risks (such as risks related to developing new products and services; development of new business and awarding of new contracts; book–to–bill ratio and order backlog; the certification and homologation of products and services; fixed–price and fixed–term commitments and production and project execution, including challenges associated with certain Transportation's legacy projects and the release of working capital therefrom; pressures on cash flows and capital expenditures based on project–cycle fluctuations and seasonality; risks associated with our ability to successfully implement and execute our strategy, transformation plan, productivity enhancements, operational efficiencies and restructuring initiatives; doing business with partners; risks associated with the Corporation's partnership with Airbus and investment in ACLP; risks associated with the Corporation's ability to continue with its funding plan of ACLP and to fund, if required, the cash shortfalls; inadequacy of cash planning and management and project funding; product performance warranty and casualty claim losses; regulatory and legal proceedings; environmental, health and safety risks; dependence on certain customers, contracts and suppliers; supply chain risks; human resources; reliance on information systems; reliance on and protection of intellectual property rights; reputation risks; risk management; tax matters; and adequacy of insurance coverage), financing risks (such as risks related to liquidity and access to capital markets; retirement benefit plan risk; exposure to credit risk; substantial existing debt and interest payment requirements; certain restrictive debt covenants and minimum cash levels; financing support provided for the benefit of certain customers; and reliance on government support), market risks (such as risks related to foreign currency fluctuations; changing interest rates; decreases in residual values; increases in commodity prices; and inflation rate fluctuations). For more details, see the Risks and uncertainties section in Other in the MD&A of the Corporation's financial report for the fiscal year ended December 31, 2018.

With respect to the divestiture of the Corporation's Aerostructures operations discussed herein specifically, certain factors that could cause actual results to differ materially from those anticipated in the forward–looking statements include, but are not limited to: the failure to complete any divestiture or other transaction resulting therefrom within the expected time frame, on commercially satisfactory terms or at all; all or part of the intended benefits therefrom not being realized within the anticipated timeframe, or at all; and the incurrence of related costs and expenses; and negative effects of the announcement or pendency of any such divestiture or other transaction. With respect to the Pending Transaction discussed herein specifically, certain factors that could cause actual results to differ materially from those anticipated in the forward–looking statements include, but are not limited to: the failure to receive or delay in receiving regulatory approvals, or otherwise satisfy the conditions to the completion of the transaction or delay in completing and uncertainty regarding the length of time required to complete such transactions, and the funds and benefits thereof not being available to Bombardier in the time frame anticipated or at all; alternate sources of funding that would be used to replace the anticipated proceeds and savings from such strategic actions and transactions, as the case may be, may not be available when needed, or on desirable terms. Accordingly, there can be no assurance that any divestiture relating to the Corporation's Aerostructures operations, or the Pending Transaction will be undertaken or occur, or of the timing or successful completion thereof, or the amount and use of proceeds therefrom, or that the anticipated benefits will be realized in their entirety, in part or at all. There can also be no assurance as to the completion, the form, or the timing of any BT Holdco buy–back or any other transaction in connection with the pursuit of any strategic option to strengthen the Corporation's balance sheet and enhance shareholder value. For more details, see the Risks and uncertainties section in Other in the MD&A of the Corporation's financial report for the fiscal year ended December 31, 2018.

Readers are cautioned that the foregoing list of factors that may affect future growth, results and performance is not exhaustive and undue reliance should not be placed on forward–looking statements. Other risks and uncertainties not presently known to us or that we presently believe are not material could also cause actual results or events to differ materially from those expressed or implied in the Corporation's forward–looking statements. The forward–looking statements set forth herein reflect management's expectations as at the date of this press release and are subject to change after such date. Unless otherwise required by applicable securities laws, the Corporation expressly disclaims any intention, and assumes no obligation to update or revise any forward–looking statements, whether as a result of new information, future events or otherwise. The forward–looking statements contained in this press release are expressly qualified by this cautionary statement.

CAUTION REGARDING NON–GAAP FINANCIAL MEASURES
This press release is based on reported earnings in accordance with IFRS and on the following non–GAAP financial measures:

Non–GAAP financial measures
Adjusted EBIT EBIT excluding special items. Special items comprise items which do not reflect the Corporation's core performance or where their separate presentation will assist users of the consolidated financial statements in understanding the Corporation's results for the period. Such items include, among others, the impact of restructuring charges and significant impairment charges and reversals.
Adjusted EBITDA Adjusted EBIT plus amortization and impairment charges on PP&E and intangible assets.
Free cash flow (usage) Cash flows from operating activities less net additions to PP&E and intangible assets.

Non–GAAP financial measures are mainly derived from the consolidated financial statements but do not have standardized meanings prescribed by IFRS. The exclusion of certain items from non–GAAP performance measures does not imply that these items are necessarily non–recurring. Other entities in our industry may define the above measures differently than we do. In those cases, it may be difficult to compare the performance of those entities to ours based on these similarly–named non–GAAP measures.

Prior to the first quarter of fiscal year 2019, the Corporation reported non–GAAP measures labelled "EBIT before special items" and "EBITDA before special items". Beginning in the first quarter of fiscal year 2019, the Corporation changed the label of these non–GAAP measures to “adjusted EBIT” and “adjusted EBITDA”, respectively, without making any change to the composition of these non–GAAP measures. The Corporation believes that this new label aligns better with broad market practice in its industry and better distinguishes these measures from the IFRS measurement “EBIT”.

Adjusted EBIT and adjusted EBITDA
Management uses adjusted EBIT and adjusted EBITDA for purposes of evaluating underlying business performance. Management believes these non–GAAP earnings measures in addition to IFRS measures provide readers with enhanced understanding of our results and related trends and increases the transparency and clarity of the core results of our business. Adjusted EBIT and adjusted EBITDA exclude items that do not reflect our core performance or where their exclusion will assist users in understanding our results for the period. For these reasons, a significant number readers analyze our results based on these financial measures. Management believes these measures help readers to better analyze results, enabling better comparability of our results from one period to another and with peers.

Free cash flow (usage)
Free cash flow is defined as cash flows from operating activities, less net additions to PP&E and intangible assets. Management believes that this non–GAAP cash flow measure provides investors with an important perspective on the Corporation's generation of cash available for shareholders, debt repayment, and acquisitions after making the capital investments required to support ongoing business operations and long–term value creation. This non–GAAP cash flow measure does not represent the residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. Management uses free cash flow as a measure to assess both business performance and overall liquidity generation.

Genuine Reform Culture Lacking in Zimbabwe

Zimbabwe needs urgent economic and political reforms to transform its economy amidst a growing national crisis, researchers say as more than 7 million Zimbabwean are food insecure owing to a projected 50 percent fall in the 2019 cereal harvest. Credit: Jeffrey Moyo/IPS

By Busani Bafana
BULAWAYO, Jan 16 2020 (IPS)

Zimbabwe needs urgent economic and political reforms to transform its economy amidst a growing national crisis, researchers say in a new study that urges swift policy changes and a sound financial framework to attract investment.

The country has been reeling from one of the worst droughts in decades, with the United Nation’s World Food Programme (WFP) identifying Zimbabwe as one of the 15 critical emergencies around the world at risk of crisis without rapid intervention.

But the study, G20 Compact with Africa: No Reformers, No Compact- The Zimbabwean Case Study,  states that the G20 Compact with Africa (CwA) investment framework, initiated by the G20 countries in 2017, could support Zimbabwe’s economic transformation only if Zimbabwe was committed to undertaking reforms.

  • The voluntary compact has been signed by 12 African countries to date, including Benin, Burkina Faso, Côte d’Ivoire, Ethiopia, Rwanda, Senegal, Togo and Tunisia. Zimbabwe is not a signatory.
  • The compact seeks to stimulate economic growth, create employment and nurture investment. Through this partnership, African governments are responsible for spearheading reforms that will make their countries attractive to international investors.
  • The focus of the CwA is to promote a sustainable development framework in those African countries that accepted the invitation to be part of the initiative, in an attempt to attract private investors. The framework is a three-tiered approach to reforming three economic fundamentals – macroeconomics, business and finance.

“As a reform strategy, the CwA framework has the potential to support Zimbabwe’s economic transformation agenda,” the study published last week by the South African Institute of International Affairs (SAIIA), an independent public policy think tank, stated. It further noted that the compact was relevant to Zimbabwe’s re-engagement agenda and the Transitional Stabilisation Programme (TSP), which was introduced in 2018 as a blue print to turn around the economy.

But a crisis of governance and financial stewardship has long been stalking Zimbabwe, a Southern African nation that was once a model of economic success and democracy in Africa. Life has become difficult for its citizens who have to battle with a high cost of living and many things are in short supply from water to electricity to monetary currency, jobs, food and even political freedoms.  

The report pointed out that Zimbabwe’s economic woes are multi-faceted — a result of a combination of factors, including economic mismanagement, chaotic land reform, indigenisation policies, political instability and fiscal mismanagement driven by corruption.

Cold reception for compact

Yet despite its relevance, the compact has failed to raise enthusiasm among Zimbabwean policymakers, and few economic stakeholders are aware of it, the study found, pointing out that the Zimbabwe government is desperate and preoccupied with finding a quick solution to the economic crisis.

The study also made a note that there is no reform culture among the custodians of reforms in Zimbabwe.

Besides, the country’s multilateral debt, estimated at over $8,2 billion, has prevented any potential inroads with the international organisations involved with the compact.

“Clearance of multilateral debt arrears: the sanctions rhetoric seems to have taken the centre
stage ahead of reform implementation,” noted the study, adding that, “This behaviour has promoted corruption and stands in the way of reforms; hence there is no CwA for Zimbabwe.”

Economic analyst, John Robertson, said nobody agrees with the government on the point of economic sanctions imposed by the Western countries on individuals accused of human rights abuses in Zimbabwe.

“The sanctions are not applied to the country; the sanctions did not cause the country’s failure. The failure is caused by our decision to close down our biggest industries,” Robertson told IPS, referring to the destruction of the agriculture sector and the collapse of the manufacturing sector.

Poor policy choices

“The policy choices that we made have caused so much damage to our productive sectors starting with agriculture,” said Robertson, adding, “We imposed upon ourselves a serious handicap when we said the land in the country no longer has market value land so [people with] land can no longer borrow against ownership rights to that land because the land is now the property of the state.”

David Moore, researcher and political economist at the University of Johannesburg, told IPS that if the ruling Zimbabwe African National Union – Patriotic Front (ZANU PF) party had maintained its neo-liberal and white-farmer-friendly economic promises it might have kept the “west” on its side.

But cabals and corruption cannot be dismantled – they are the pillars of the party, he said. And so the military-party complex so tight that it cannot be untied: they are integral parts of the country’s political economy.

Academic and social commentator, Rudo Gaidzanwa, concurred saying it will take pushing to get ZANU (PF) ruling party and its military allies to undertake political and social reforms.

“The types of political and economic reforms that the civilians want will undermine the interests of the militarist elements in the state and the security sector,” Gaidzanwa, a Sociology Professor at the University of Zimbabwe, told IPS.

“ZANU won’t stand for anything that undermines their hold over the state and the society. It is not likely that any meaningful reform will occur unless dramatic social and political changes occur in Zimbabwe,” she said, adding that the ZANU PF led-government and elites have used economic sanctions as a convenient excuse to evade responsibility for economic and social crises.

Sanctions have not prevented the president and his cohorts from pillaging mineral resources. The current chaos was ideal for pillaging resources and undermining the rule of law and democracy, she said.

“Rigged elections are an issue because they prevent the will of the people from prevailing,” Gaidzanwa told IPS. “The present situation over contested presidential elections between (Nelson) Chamisa and (Emerson) Mnangagwa is symptomatic of that struggle…These issues have dogged our elections for decades and remain unresolved hence our dire economic and political situation.”

  • After Mugabe was ousted from power Zimbabweans went to the polls in July 2018 to elect a new leader, with Mnangagwa winning 50.8 percent of the voted compared to Chamisa’s 44.3 percent.
  • The results were disputed.

Economist and former parliamentarian, Eddie Cross sees the situation differently, saying Zimbabwe, despite its current challenges, has a good start to turn around its economic fortunes.

“We have a fiscal surplus, government salaries are down to a third of the budget from over 95 percent, we have a balance of payments surplus and nearly $1 billion in bank accounts,” Cross said, adding that Zimbabwe’s domestic debt has been devalued and exports are highly profitable.

“[Political] Stability is no longer an issue – it’s a done deal, what is a problem is financing and this is going to be a challenge because we really have to look after ourselves,” Cross, a member of the Reserve Bank of Zimbabwe’s Monetary Committee, told IPS in an interview. “A couple of billion dollars would be useful. Perhaps we can persuade Mrs. [Grace] Mugabe to bring some money back from abroad.”

Cross believes Zimbabwe can benefit from the G20 CwA even though the country is a pariah state.

“I think Brexit is important and also the IMF and if we play our cards right and get on with reforms I see no reason why we cannot be in a very different place in 2021.”

Climate Change and Financial Risk

By Pierpaolo Grippa, Jochen Schmittmann, and Felix Suntheim
WASHINGTON DC, Jan 16 2020 – Climate change is already a reality. Ever-more-ferocious cyclones and extended droughts lead to the destruction of infrastructure and the disruption of livelihoods and contribute to mass migration.

Actions to combat rising temperatures, inadequate though they may have been so far, have the potential to drive dislocation in the business world as fossil fuel giants awaken to the need for renewable sources of energy and automakers accelerate investments in cleaner vehicles.

But measuring economic costs of climate change remains a work in progress. We can assess the immediate costs of changing weather patterns and more frequent and intense natural disasters, but most of the potential costs lie beyond the horizon of the typical economic analysis.

The economic impact of climate change will likely accelerate, though not smoothly. Crucially for the coming generations, the extent of the damage will depend on policy choices that we make today.

Policymakers and investors increasingly recognize climate change’s important implications for the financial sector. Climate change affects the financial system through two main channels (see Chart 1).

The first involves physical risks, arising from damage to property, infrastructure, and land. The second, transition risk, results from changes in climate policy, technology, and consumer and market sentiment during the adjustment to a lower-carbon economy.

Exposures can vary significantly from country to country. Lower- and middle-income economies are typically more vulnerable to physical risks.

For financial institutions, physical risks can materialize directly, through their exposures to corporations, households, and countries that experience climate shocks, or indirectly, through the effects of climate change on the wider economy and feedback effects within the financial system.

Exposures manifest themselves through increased default risk of loan portfolios or lower values of assets. For example, rising sea levels and a higher incidence of extreme weather events can cause losses for homeowners and diminish property values, leading to greater risks in mortgage portfolios. Corporate credit portfolios are also at risk, as highlighted by the bankruptcy of California’s largest utility, Pacific Gas and Electric.

In what The Wall Street Journal called the first “climate-change bankruptcy” (Gold 2019), rapid climatic changes caused prolonged droughts in California that dramatically increased the risk of fires from Pacific Gas and Electric’s operations.

Tighter financial conditions might follow if banks reduce lending, in particular when climate shocks affect many institutions simultaneously.

For insurers and reinsurers, physical risks are important on the asset side, but risks also arise from the liability side as insurance policies generate claims with a higher frequency and severity than originally expected.

There is evidence that losses from natural disasters are already increasing. As a result, insurance is likely to become more expensive or even unavailable in at-risk areas of the world.

Climate change can make banks, insurers, and reinsurers less diversified, because it can increase the likelihood or impact of events previously considered uncorrelated, such as droughts and floods.

Transition risks materialize on the asset side of financial institutions, which could incur losses on exposure to firms with business models not built around the economics of low carbon emissions.

Fossil fuel companies could find themselves saddled with reserves that are, in the words of Bank of England Governor Mark Carney (2015), “literally unburnable” in a world moving toward a low-carbon global economy.

These firms could see their earnings decline, businesses disrupted, and funding costs increase because of policy action, technological change, and consumer and investor demands for alignment with policies to tackle climate change.

Coal producers, for example, already grapple with new or expected policies curbing carbon emissions, and a number of large banks have pledged not to provide financing for new coal facilities.

The share prices of US coal mining companies reflect this “carbon discount” as well as higher financing costs and have been underperforming relative to those of companies holding clean energy assets.

Risks can also materialize through the economy at large, especially if the shift to a low-carbon economy proves abrupt (as a consequence of prior inaction), poorly designed, or difficult to coordinate globally (with consequent disruptions to international trade).

Financial stability concerns arise when asset prices adjust rapidly to reflect unexpected realizations of transition or physical risks. There is some evidence that markets are partly pricing in climate change risks, but asset prices may not fully reflect the extent of potential damage and policy action required to limit global warming to 2˚C or less.

Central banks and financial regulators increasingly acknowledge the financial stability implications of climate change. For example, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), an expanding group that currently comprises 42 members, has embarked on the task of integrating climate-related risks into supervision and financial stability monitoring.

Given the large shifts in asset prices and catastrophic weather-related losses that climate change may cause, prudential policies should adapt to recognize systemic climate risk—for example, by requiring financial institutions to incorporate climate risk scenarios into their stress tests.

In the United Kingdom, prudential regulators have incorporated climate change scenarios into stress tests of insurance firms that cover both physical and transition risks.

Efforts to incorporate climate-related risks into regulatory frameworks face important challenges, however. Capturing climate risk properly requires assessing it over long horizons and using new methodological approaches, so that prudential frameworks adequately reflect actual risks.

It is crucial to ensure that the efforts to bring in climate risk strengthen, rather than weaken, prudential regulation. Policies such as allowing financial institutions to hold less capital against debt simply because the debt is labeled as green could easily backfire—through increased leverage and financial instability—if the underlying risks in that debt have not been adequately understood and measured.

Climate change will affect monetary policy, too, by slowing productivity growth (for example, through damage to health and infrastructure) and heightening uncertainty and inflation volatility.

This can justify the adaptation of monetary policy to the new challenges, within the limits of central bank mandates. Central banks should revise the frameworks for their refinancing operations to incorporate climate risk analytics, possibly applying larger haircuts to assets materially exposed to physical or transition risks.

Central banks can also lead by example by integrating sustainability considerations into the investment decisions for the portfolios under their management (i.e., their own funds, pension funds and, to the extent possible, international reserves), as recommended by the NGFS (2019) in its first comprehensive report.

Carbon pricing and other fiscal policies have a primary role in reducing emissions and mobilizing revenues (see “Putting a Price on Pollution” in this issue of F&D), but the financial sector has an important complementary role.

Financial institutions and markets already provide financial protection through insurance and other risk-sharing mechanisms, such as catastrophe bonds, to partly absorb the cost of disasters.

But the financial system can play an even more fundamental role, by mobilizing the resources needed for investments in climate mitigation (reducing greenhouse gas emissions) and adaptation (building resilience to climate change) in response to price signals, such as carbon prices.

In other words, if policymakers implement policies to price in externalities and provide incentives for the transition to a low-carbon economy, the financial system can help achieve these goals efficiently.

Global investment requirements for addressing climate change are estimated in the trillions of US dollars, with investments in infrastructure alone requiring about $6 trillion per year up to 2030 (OECD 2017). Most of these investments are likely to be intermediated through the financial system.

From this point of view, climate change represents for the financial sector as much a source of opportunity as a source of risk.

The growth of sustainable finance (the integration of environmental, social, and governance criteria into investment decisions) across all asset classes shows the increasing importance that investors attribute to climate change, among other nonfinancial considerations.

Estimates of the global asset size of sustainable finance range from $3 trillion to $31 trillion. While sustainable investing started in equities, strong investor demand and policy support spurred issuance of green bonds, growing the stock to an estimated $590 billion in August 2019 from $78 billion in 2015.

Banks are also beginning to adjust their lending policies by, for example, giving discounts on loans for sustainable projects.

Sustainable finance can contribute to climate change mitigation by providing incentives for firms to adopt less carbon-intensive technologies and specifically financing the development of new technologies.

Channels through which investors can achieve this goal include engaging with company management, advocating for low-carbon strategies as investor activists, and lending to firms that are leading in regard to sustainability. All these actions send price signals, directly and indirectly, in the allocation of capital.

However, measuring the impact that sustainable investments have on their environmental targets remains challenging. There are concerns over unsubstantiated claims of assets’ green-compliant nature, known as “greenwashing.”

There is a risk that investors may become reluctant to invest at the scale necessary to counter or mitigate climate change, especially if policy action to address climate change is lagging or insufficient.

The analysis of risks and vulnerabilities—and advising its members on macro-financial policies—are at the core of the IMF’s mandate. The integration of climate change risks into these activities is critical given the magnitude and global nature of the risks climate change is posing to the world.

An area where the IMF can especially contribute is understanding the macro-financial transmission of climate risks. One aspect of this is further improving stress tests, such as those within the Financial Sector Assessment Program, the IMF’s comprehensive and in-depth analysis of member countries’ financial sectors.

Stress testing is a key component of the program, with these stress tests often capturing the physical risks related to disasters, such as insurance losses and nonperforming loans associated with natural disasters.

Assessments for The Bahamas and Jamaica are recently published examples, with a scenario-based stress test analyzing the macroeconomic impact of a severe hurricane in the former and a massive natural disaster in the latter.

More assessments of this kind are in progress or planned for other countries. The IMF is also conducting an analysis of financial system exposure to transition risk in an oil-producing country.

The IMF has recently joined the NGFS and is collaborating with its members to develop an analytical framework for assessing climate-related risks.

Closing data gaps is also crucial. Only with accurate and adequately standardized reporting of climate risks in financial statements can investors discern companies’ actual exposures to climate-related financial risks. There are promising efforts to support private sector disclosures of such risks.

But these disclosures are often voluntary and uneven across countries and asset classes. Comprehensive climate stress testing by central banks and supervisors would require much better data.

The IMF supports public and private sector efforts to further spread the adoption of climate disclosures across markets and jurisdictions, particularly by following the recommendations of the Task Force on Climate-related Financial Disclosures (2017). Greater standardization would also improve the comparability of information in financial statements on climate risks.

The potential impact of climate change compels us to think through, in an empirical fashion, the economic costs of climate change. Each destructive hurricane and every unnaturally parched landscape will chip away at global output, just as the road to a low-carbon economy will escalate the cost of energy sources as externalities are no longer ignored and old assets are rendered worthless.

On the other hand, carbon taxes and energy-saving measures that reduce the emission of greenhouse gases will drive the creation of new technologies. Finance will have to play an important role in managing this transition, for the benefit of future generations.

*This article draws on Chapter 6 of the October 2019 Global Financial Stability Report and was prepared under the guidance of Martin Čihák and Evan Papageorgiou of the IMF’s Monetary and Capital Markets Department.

Your Arrow Can Pierce the Sky, But Ours Has Gone into Orbit

Yu Youhan, We Will Be Better, 1995.

By Vijay Prashad
Jan 16 2020 (IPS-Partners)

On Wednesday, 15 January, China and the United States agreed to suspend their full-scale trade war. From February 2018, the United States placed tariffs on Chinese goods that entered the US market, and then China retaliated. This tit-for-tat game continued for almost two years, causing massive disruption in the global value chain. In October 2019, the International Monetary Fund’s G-20 Surveillance Note reported that the global GDP suffered by a 0.8% drop merely because of the tariffs on goods such as aluminium, steel, soybeans, and car parts between the United States and China. Western attacks on Chinese 5G technology – and on the tech firm Huawei – are part of the pressure on China to buckle before the US-led order. But China did not bend. As a prelude to the ‘phase one’ deal, the United State Treasury Department stopped calling China a ‘currency manipulator’, a term that has haunted China’s for decades.

The suspension of the trade war comes with a ‘phase one’ deal whose text includes nine chapters on topics such as intellectual property rights to financial services. Most significantly, China has agreed to stop asking firms that invest in China to share their technology; this is a major departure for the Chinese model of development. The ‘phase one’ deal is merely the first stage in an ongoing process of negotiations and confrontations, which will be expected to continue for a long time yet. If ‘phase one’ goes well, and if the implementation and dialogue mechanisms work, then the two countries will move to ‘phase two’. Chinese diplomats say that they do not anticipate an immediate return to the pre-confrontation period, namely before the trade war began in February 2018.

News of a potential trade deal immediately moved the International Monetary Fund to revise its 2020 growth forecast for China from 5.8% to 6%. US Treasury Secretary Steven Mnuchin said that the GDP numbers for the United States would be boosted to 2.5% for 2020 (though the IMF continues to predict a 1.9% GDP for the United States). It is likely that the low expectations for the global economy (at 2.5% GDP growth for 2020) might also be revised upwards for the year, although predictions for a severe global contraction remain intact; Deloitte’s CFO Signals for the fourth quarter of 2019 suggests that US companies have begun to further constrain investment in anticipation of a serious downturn – but not a recession – of the economy. US firms lost at least $46 billion as a consequence of the trade war started by US President Donald Trump in February 2018. Pressure from US firms on the White House and Trump’s need to make his ‘victory’ in the trade war an election issue drove the US to the table. By the fourth quarter of 2018, China’s economic growth rate was the slowest it has been since 1990, which is why China had been willing to discuss outstanding issues since February 2018.

Shi Guorui, The Yangtze River, 2013.

In the Tricontinental: Institute for Social Research Dossier no. 24The World Oscillates Between Crises and Protests – there is an important section on the new ‘bipolar world’. It is widely recognised that US power has dwindled since the illegal attack on Iraq in 2003 and since the world financial crisis of 2007-08; at the same time, it is hard to deny the rapid growth of China’s economy and of China’s growing importance on the world stage. A decade ago, when China and Russia joined Brazil, India, and South Africa to form the BRICS, it appeared as if the global architecture was shifting from US unipolarity (with its allies as the spokes around the US hub) to multipolarity; but, with the deepening crisis in countries like Brazil and India, the new global architecture – according to Tsinghua University’s Institute for International Relations – will be one of bipolarity, with the US and China as the two poles of the global order.

China’s growth rates since the reform era began in 1978 remain perplexing. The attempt to explain this has spawned an enormous literature, some of it only partially explanatory but most of it petrified in clichés. Professor Wang Hui of Tsinghua University suggests that China’s policy framework is not along orthodox neoliberal lines, but that it has emerged out of the Chinese Communist Party’s commitment to sovereignty, out of the immense advances in health and education in the first decades of the revolutionary period, out of the enhancement of China’s economy by the socialist commodity economy of that period, out of the sustained struggles in the countryside to transform land relations, and out of the deep pragmatism of the Communists (‘cross the river by feeling for the stones’). Professor Hui warns that the stresses of market society have begun to engender new – and dangerous – contradictions for China. One of the overwhelming contradictions is the threats from the United States.

Zhang Xiaogang, Bloodline – Big Family no. 4, 1995.

The United States – which has the habit of dominance – tried its best to both manage and to prevent the growing global role of China. To manage China means to intimidate it to remain subordinate to US economic interests: Washington accused Beijing of currency manipulation and tried to get China to revise its currency to the benefit of the United States; this did not happen, and its failure to happen is a sign that China will not bow to US authority.

Accusations about the currency were quickly followed by claims that China had forced technology transfers or had stolen intellectual property, that China prevented access to financial services, and that it would not cut its industrial subsidies. Each US President over the course of the past decade – George W. Bush, Barack Obama, and Donald Trump – has accelerated the accusations against China and portrayed China as having advanced entirely by deceit.

When China refused to accept the US’ demands, and when it continued to develop its economic project – the Belt and Road Initiative – the United States moved to politically and militarily threaten China along several axes, some of these developed by Wu Xinbo, Dean of the Institute of International Studies at Fudan University.

Indo-Pacific Strategy. In 2017, the United States and India began to develop an ‘Indo-Pacific’ strategy that would bring these two countries together against China’s Belt and Road Initiative (along the land of Eurasia) and its String of Pearls Initiative (in the Indian Ocean). The first Indo-Pacific Strategy document, produced by the US Department of Defence in June 2019, points its finger at China, which it says ‘seeks to reorder the region to its advantage by leveraging military modernisation, influence operations, and predatory economics to coerce other nations’. The United States and India – alongside Japan and other smaller states – are to create a bloc to prevent the emergence of China as a continental and global power. It is with no irony that the US defence department complains about ‘influence operations’ and ‘predatory economics’, both of which are closely understood to be US policies (including the Indo-Pacific Strategy itself).

The Use of Taiwan. The Indo-Pacific document promotes the defence of Taiwan as an essential pillar in US strategy. China has long insisted on pushing for the diplomatic isolation of Taiwan and for its eventual incorporation into China. Since it does not have an embassy in Washington, Taiwan has had – since 1971 – a Coordination Council for North American Affairs and then the Taipei Economic and Cultural Representative Office; Trump changed it to the Taiwan Council for US Affairs, a name that has incensed Beijing. Not only have Trump and his officials said that they would like to increase US-Taiwan relations; the US has sold Taiwan F-16 fighters and fully backed the re-election of Tsai Ing-wen of the Democratic Progressive Party – which asserts Taiwan’s independence from China – in the January 2020 presidential elections.

Liu Bolin, Hiding in New York No. 9 – Gun Rack, 2013.

Hong Kong and Xinjiang. The Indo-Pacific document of the US Defence Department says that the US – and India – express ‘deep concern’ about the fate of the Muslim population in China; at the same time, the US has said that it stands with the protest movement in Hong Kong. The concern about Chinese Muslims is not credible coming from the US, where Trump’s Muslim Ban defines his own attitude, and from India, where Prime Minister Narendra Modi has driven a citizenship and refugee policy that is clearly anti-Muslim. The United States and its allies use the Hong Kong and Xinjiang cases to put pressure on China; people in Hong Kong and Xinjiang would be delusional if they believe that the US actually cares about democracy and Muslims.

In 1965, at the urging of several national liberation movements and governments in eastern Africa, the People’s Republic of China began to work with them to build the Tanzam Railway or the Great Uhuru Railway. This railway cut through old colonial boundaries that isolated Zambia and kept Tanzania from the interior of the continent. Mao told Tanzania’s Julius Nyerere that – despite China’s own poverty – as a national liberation project, the Chinese Revolution was ‘duty bound’ to assist their comrades in Africa to build the longest railroad on the continent. This is what they did.

China in Africa. For the past decade, the US and the Europeans have complained that China is the new colonial power in Africa. It is true that Chinese investment into Africa has increased astronomically, but in many countries the main economic partner remains the old colonial adversary. Nonetheless, this narrative of China as a colonial power is not about facts, but it is to serve a purpose – to disparage China’s commercial strategy in the Global South and the challenge that it poses to the hegemony of the US and its allies. The actual procedure from China is well-described in the 2013 Human Development Report: ‘China is providing preferential loans and setting up training programmes to modernize the garment and textile sectors in African countries. China has encouraged its mature industries such as leather to move closer to the supply chain in Africa and its modern firms in telecommunications, pharmaceuticals, electronics and construction to enter joint ventures with African businesses’. A few years ago, I asked Tanzania’s former Foreign Minister Ibrahim Kaduma what he thought of Chinese commercial interests in Africa. ‘African states need to come up with their own assessment of their path forward’, he said; they should not be guided by Western fearmongering.

Ta Men, Snow, 2016.

From February 2018, various dispute settlement mechanisms – including the Strategic Economic Dialogue – set up by the US and China have failed to operate. The most recent ‘phase one’ deal creates new platforms for discussion and debate and provides a roadmap to settle the chaos unleashed by this trade war. But this agreement is a ceasefire – not a peace treaty. The contests will continue; instability will remain. ‘Chaos and disorder’, as the Tsinghua University scholars write, will be the way ahead.

UN expresses deep distress over terror attacks

Students at Iftin Primary School in Garissa. Credit: Fredrick Nzwili

By PRESS RELEASE
NAIROBI, Kenya, Jan 16 2020 (IPS-Partners)

The United Nations Country Team in Kenya is deeply distressed by the rising cases of terrorist attacks on schools, teachers and learners, especially in the north-eastern regions of Kenya. While we stand in solidarity with the affected communities, we reiterate that acts of terror and hate are even more egregious when they target innocent, unarmed civilians including children.

The bombings of schools and the killing of civilians violate international humanitarian law. We wish to remind all armed groups that whatever their grievances, they must uphold their obligations and cease targeting civilians and civilian infrastructure, including schools. Key services and programmes, delivered by the government and other partners, for children and communities should not be targets of armed combat.

It is especially troubling that the most affected regions are already lagging behind in school attendance rates. We recognize that school staff who are traumatised by such incidents face the agonising dilemma of whether they should continue in the job under such threats. Acts of terrorism should not be another reason for the children in those regions to slip further behind.

As the UN Country Team in Kenya, we are determined to entrench our engagement with National and County Governments to implement the pillars of the UN Global Counter-Terrorism Strategy, including addressing the conditions conducive to the spread of terrorism, building capacity to prevent and combat terrorism and ensuring respect for human rights and the rule of law as the fundamental basis for the fight against terrorism.”

We commit to working with other stakeholders as we pursue the UN value of making children’s human and civil rights a lived reality for all children in Kenya.

Terror Attack

By PRESS RELEASE
NAIROBI, Kenya, Jan 16 2020 (IPS-Partners)

The United Nations Country Team in Kenya is deeply distressed by the rising cases of terrorist attacks on schools, teachers and learners, especially in the north-eastern regions of Kenya. While we stand in solidarity with the affected communities, we reiterate that acts of terror and hate are even more egregious when they target innocent, unarmed civilians including children.

The bombings of schools and the killing of civilians violate international humanitarian law. We wish to remind all armed groups that whatever their grievances, they must uphold their obligations and cease targeting civilians and civilian infrastructure, including schools. Key services and programmes, delivered by the government and other partners, for children and communities should not be targets of armed combat.

It is especially troubling that the most affected regions are already lagging behind in school attendance rates. We recognize that school staff who are traumatised by such incidents face the agonising dilemma of whether they should continue in the job under such threats. Acts of terrorism should not be another reason for the children in those regions to slip further behind.

As the UN Country Team in Kenya, we are determined to entrench our engagement with National and County Governments to implement the pillars of the UN Global Counter-Terrorism Strategy, including addressing the conditions conducive to the spread of terrorism, building capacity to prevent and combat terrorism and ensuring respect for human rights and the rule of law as the fundamental basis for the fight against terrorism.”

We commit to working with other stakeholders as we pursue the UN value of making children’s human and civil rights a lived reality for all children in Kenya.

MRO Middle East, the gulf region’s largest event for commercial aircraft maintenance, returns to Dubai, February 24-26

NEW YORK, Jan. 15, 2020 (GLOBE NEWSWIRE) — MRO Middle East (#MROME) summit and exhibition will be held February 24–26 in Dubai, UAE. The combined summit and trade show, co–located with Aircraft Interiors Middle East (AIME), is the Gulf region's leading conference and exhibition for commercial aviation maintenance.

Gathering over 5,000 attendees from the entire airline supply chain, more than 83 countries are represented at the event, offering networking among industry leaders representing airlines, regulators, suppliers, and service providers.

According to Aviation Week 2020 Commercial Fleet & MRO Forecast, fleets in the Middle East are expected to nearly double, growing from 1,760 aircraft in 2020 to 3,670 aircraft by 2029, a CAGR of 8.5%. MRO demand in the Middle East is projected to double in the next 10 years and could reach $16.5 billion by 2029.

The MRO Middle East Exhibition (February 25–26), with more than 300 solution providers, is taking place at the Dubai World Trade Center (Za'abeel Halls 2–3). The event is free to attend to industry professionals and showcases the latest technologies and suppliers that are changing the way the MRO industry operates. The exhibition hours are Tuesday, Feb. 25 from 10 a.m. to 5:30 p.m. and Wednesday, Feb. 26 from 10 a.m. to 4 p.m. Click here to see who is exhibiting.

The MRO Middle East Summit takes place the day before the main exhibition, on Monday, February 24 at the Conrad Dubai. The one–day conference attracts 150+ senior attendees from the aviation aftermarket to network, explore the landscape, and discuss emerging opportunities in the Middle East. The sessions will be followed by a networking reception for delegates.

Summit speakers include:

MRO Middle East Platinum Sponsors are HEICO, Lufthansa Technik, Satair and StandardAero, and Gold Sponsors are Atitech, Collins Aerospace, Embraer, and Turkish Technic.

"With a presence in five continents, Middle Eastern airlines have spearheaded air traffic growth in this region twice as fast as the rest of the world, and the global MRO industry will soon reach $100 billion," said Lydia Janow, Managing Director/Events, Aviation Week Network. "Professionals involved in any aspect of aviation maintenance, repair, and overhaul will have the opportunity to network with those who are fostering growth in the region, developing cutting–edge technology, and pushing the industry forward."

Additional 2020 MRO events include: MRO Australasia, March 11–12, Brisbane, Australia; MRO Americas, April 28–30, Dallas, Texas; ap&m Europe, May 19–21, Manchester, UK; Engine Leasing, Trading & Finance Europe, June 10–11, London; Aero Engines Europe, September 16–17, Stavanger, Norway; MRO Asia–Pacific/Aero Engines Asia–Pacific, September 22–24, Singapore; and MRO Europe, October 27–29, Barcelona, Spain.

ABOUT AVIATION WEEK NETWORK
Aviation Week Network is the largest multimedia information and services provider for the global aviation, aerospace, and defense industries, serving 1.7 million professionals around the world. Industry professionals rely on Aviation Week Network to help them understand the market, make decisions, predict trends, and connect with people and business opportunities. Customers include the world's leading aerospace manufacturers and suppliers, airlines, airports, business aviation operators, militaries, governments and other organizations that serve this worldwide marketplace. Aviation Week Network's portfolio delivers award–winning journalism, data, intelligence and analytical resources, world–class tradeshows and conferences, and results–driven marketing services and advertising.

Aviation Week Network is part of Informa Markets, a division of Informa PLC.

ABOUT INFORMA MARKETS
Informa Markets creates platforms for industries and specialist markets to trade, innovate and grow. Our portfolio is comprised of more than 550 international B2B events and brands in markets including Healthcare & Pharmaceuticals, Infrastructure, Construction & Real Estate, Fashion & Apparel, Hospitality, Food & Beverage, and Health & Nutrition, among others. We provide customers and partners around the globe with opportunities to engage, experience and do business through face–to–face exhibitions, specialist digital content and actionable data solutions. As the world's leading exhibitions organiser, we bring a diverse range of specialist markets to life, unlocking opportunities and helping them to thrive 365 days of the year. For more information, please visit www.informamarkets.com.

About Tarsus F&E LLC Middle East
Tarsus F&E LLC Middle East is one of the most influential names in the aerospace industry's events sector, and which launched the very first Dubai Airshow in 1989, in conjunction with Dubai Civil Aviation Authority, Dubai Airports and the UAE Armed Forces.

Covering all aerospace–related events in the Tarsus portfolio, Tarsus F&E LLC Middle East has a long–standing relationship with the global aerospace industry, an in–depth knowledge of the market and a hard–earned reputation for delivering event excellence. Tarsus F&E LLC Middle East maintains offices in Dubai and London.

CONTACT: Elizabeth Kelley Grace
+1–561–702–7471
Elizabeth@thebuzzagency.net

Human Rights Watch Blasts China for Rights Violations at Home and Abroad

Protesters forming the Hong Kong Way hold up their cell phone lights while standing on a busy road in Sham Shui Po, where double decker buses often passed through, on Aug. 23. Human Rights Watch has blasted China’s government for undermining global interests and interventions with regards to human rights issues. Credit: Laurel Chor/IPS

By Samira Sadeque
UNITED NATIONS, Jan 16 2020 – China is currently under heavy scrutiny for its massive human rights violations across different sections, Human Rights Watch (HRW) head Kenneth Roth said on Wednesday. 

At the launch of World Report 2020, which focuses largely on China’s record of violating human rights for both its citizens domestically as well as abroad, Roth blasted the country’s government for undermining global interests and interventions with regards to human rights issues.

Roth, who was denied access to Hong Kong over the weekend, said at the launch that China is “using diplomatic clout to silence global institutions”. He also heavily criticised the United Nations Secretary General for not holding China accountable for its human rights abuses. 

“At the U.N. headquarters, a major Chinese government priority has been avoiding discussion of its conduct in Xinjiang,” he said. “U.N. Secretary General António Guterres has been unwilling to publicly demand an end to China’s mass detention of its Muslims.”

On Wednesday, Stéphane Dujarric, Guterres’ spokesperson told reporters during a briefing that the Secretary General had previously spoken out on this issue on a number of occasions and raised a number of issues with his Chinese counterparts. He reiterated the Secretary General’s position which is based on principles surrounding “full respect for the unity and territorial integrity of China,” protection of human rights in the “fight against terrorism” and the importance of “each community to “feel that its identity is fully respected.”  

He was unable to respond to specific allegations by Roth that China continues to “avoid discussion of its conduct in Xinjiang” at the U.N.  In September HRW released a report of the “Chinese government’s mass arbitrary detention, torture, and mistreatment of Turkic Muslims”

Suu Kyi’s ‘appalling’ efforts 

Meanwhile, Roth also echoed thoughts from experts who have previously said that one of the reasons the Security Council had not been able to take steps against Myanmar is because of pressure from China. 

In November, on the heels of a lawsuit being filed against Myanmar by the Gambia, Akila Radhakrishnan of the Global Justice Center expressed similar concerns to IPS.

“Security council has consistently failed to act because of China — there’s no possibility of any strong action,” Radhakrishnan had said, reiterating why it’s important for states to directly take action against Myanmar.  

In that regard, especially with Roth’s concerns about China “intimidation of other governments” with threats, one issue of concern would be China’s relations with the Gambia, which has grown in the past few years. 

When asked, Roth told IPS he wasn’t aware if the Gambia was going to suffer any threats from China given its actions against Myanmar, but he said Aung San Suu Kyi leading the defence in the case is “appalling.” 

“One element of this that is not generally appreciated is the initial hearing that took place a few weeks ago was actually not about the merits of the genocide case, it was about the provisional measures,” he said. 

Provisional measures in the case of international law ensures that the main concern at the centre of the suite is not destroyed while the case is pending, which in this case would mean Myanmar imposes measures to refrain from any acts of genocide against the Rohingya community, and would ensure protecting the Rohingya community still in Myanmar. 

“It was about protecting the roughly 450,000 Rohingyas who are still in Rakhine state, still within Myanmar,” Roth said. “So these are the people who are living terrified, displaced…unable to move. They are extremely at risk of the same violence that sent 730,000 compatriots fleeing to Bangladesh a couple years ago.”

He said Suu Kyi’s move implies that she isn’t just defending the past atrocities of Myanmar against Rohingya people. 

“It’s not just defending past action that she was there for,” he said, “she was defending the future.”