Moody’s: Turkey Needs Credible Economic Plan to Avoid Downgrade

Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating, a senior Moody’s sovereign analyst said on Thursday.

New analysis from the rating agency shows Turkey’s recession, the slump in the lira, upcoming refinancing pressures and dwindling reserves have pushed it to right near the top of its worldwide external vulnerability index.

“Failure to put forward a credible broad-based plan to address the structural issues, and in the near-term dampen the market volatility pressure on the lira…that would be a pressure point from a rating perspective,” Moody’s Managing Director of Sovereign Risk, Yves Lemay, told Reuters.

Moody’s downgraded Turkey to Ba3 – three rungs into junk territory – last August, but it also kept it on a ‘negative’ outlook which is a warning that another cut could happen in 12-18 months.

It gives it some time and one of Turkey’s main plusses is that it has a low debt-to-GDP level of about 30 percent, but the likelihood is that an economic plan would be laid out after Istanbul’s mayoral elections have been re-run on June 23.

“For us, the critical issue is whether this administration has the capacity to move aside the political issues and focus on the economic needs of the country,” Lemay said, adding that the repeat of the Istanbul vote had underscored concerns.

“It is another manifestation of the domestic political risk in this instance, and the weakening of the institutions of the country.”

With regards to the drop in currency reserves, he added: “When we look at the size of what [sovereign and bank debt] is coming due in the next year against the size of the reserves, it is a signal of significant vulnerability.”

“The amount of reserves is very much insufficient to refinance the external obligations.”

Moody’s calculates the Turkish government’s interest payments rose 30.4% in nominal terms last year and almost 50% in the first three months of 2019 due to the weak lira and a rise in payments.

As a result it expects interest payments to increase to around 8.2% of the government’s revenue in 2019 from only 5.9% in 2017, “eroding” the government’s fiscal strength.

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Huawei Warns US Over Ban on Rollout of 5G Technology

Joyce Huang contributed to this report.

SHENZHEN, CHINA — One day after the United States effectively banned Chinese telecom titan Huawei from building next-generation “5G” mobile networks in the United States, the company warned the move would harm American workers.

“It will do significant harm to the American companies with which Huawei does business,” the company said, and “affect tens of thousands of American jobs.”

The company added it would quickly “find a resolution” to the ban and work to “mitigate” its impact.

On Wednesday, U.S. President Donald Trump signed an executive order that bars American companies from using telecommunications equipment made by companies that pose a national security risk.

The order, which declares a national emergency, is the first step toward formalizing a ban on doing business with Huawei. The United States also warned other countries about Huawei’s national security risks.

Huawei has been making extraordinary pledges to win over its critics and dispel allegations that it is a security threat. The company has said it will quit its business if forced to spy on its customers and its company chairman Liang Hua has offered to sign “no spy” agreements as well.

Speaking through an interpreter during a visit to London, Liang said Huawei is willing “to commit ourselves to making our equipment meet the no-spy, no-backdoors standard.”

It is unclear what Liang means by “no-spy, no-backdoors” since Huawei, like all technology companies, requires users to sign agreements acknowledging that the company may share their personal information if required by local authorities.

Most technology companies, such as Google and Facebook, disclose these government information requests in regular public reports. The companies explain when they comply with the government requests and when they challenge them in court.

Sharing data with Beijing?

There is no information about what data Huawei hands over to Beijing authorities. If Chinese officials determine a matter involves “state secrets” or a criminal investigation, officials can legally justify intercepting any communication. Critics say Beijing defines “state secrets” so loosely that it can cover virtually anything.

In his comments to reporters, Liang says Huawei does not act on behalf of China’s government in any international market.

According to Reuters, he also denies that China’s laws require companies to “collect foreign intelligence for the government or plant back doors for the government.” Liang added that Huawei is also committed to following the laws and regulations of every country where it does business.

​Independent business or state organ?

Huawei says it has signed 40 contracts to build 5G networks, more than 20 of which are in Europe. It has already shipped 70,000 base stations for installation, all to locations outside of China. Base stations are a key component of the infrastructure needed to build the new network.

Huawei spokesperson Joe Kelly that maintaining the trust of its customers is key to the company’s continued success.

“Today, with 4 billion people around the world [using our products], at the scale at which we operate, if we were installing back doors and taking data, our carriers would be aware, they would see it for themselves and then they would stop doing business with us,” he said.

In the 5G debate, Huawei has voiced its willingness to stake the company’s continued success on its commitment to security.

U.S. officials have suggested that if countries choose to trust Huawei for their 5G network, Washington may reassess sharing information with them.

 

The executive order that was signed by President Trump on Wednesday not only paves the way for a formal ban on Huawei from building networks in the United States.

According to the Commerce Department, Huawei and 70 other affiliates will be added to what is called an “Entity List,” which will make it more difficult for the company and other entities to buy parts and components from U.S. businesses.

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Acting FAA Chief Defends Agency’s Safety Certification Process     

The acting head of the Federal Aviation Administration defended the way his agency certifies airline safety after two deadly crashes of the now-grounded Boeing 737 Max jet.

Daniel Elwell called the system in which FAA-approved employees at plane manufacturers inspect the aircraft they built themselves “a good system.”

But skeptical Democrats on the House Transportation Committee questioned the agency’s credibility.

They told Elwell that the closeness between Boeing and the FAA may be one of the reasons it took the agency a relatively long time to ground the Boeing jets.

“The public perception is you were in bed with those you were supposed to be regulating,” Nevada’s Dina Titus said, while committee chairman Peter DeFazio wanted to know “How can we have a single point of failure on a modern aircraft?”

A Boeing 737 Max crashed off the coast of Indonesia in October and another 737 Max crashed in Ethiopia in March, killing a total of 346 people.

Both planes were equipped with a system designed to push the nose downward to prevent a midair stall.

Faulty sensor readings kept pushing the planes down while the pilots struggled to regain control.

The pilots did not know the planes were equipped with the anti-stall system and their manuals had no explicit information.

Elwell defended the FAA’s approval of the system on the Boeing jets, but admitted the system should have been better explained in the pilots’ operational and flight manuals.

He also faulted Boeing for failing to inform airlines and the FAA that a light that is supposed to flash when there is a faulty reading from the sensors did not work.

But Elwell said pilot error may have also contributed to the Indonesian and Ethiopian disasters.

The Justice Department has opened a criminal investigation of Boeing, and Congress is looking into the relationship between Boeing and federal regulators.

Boeing plans to submit changes to the 737 Max software to the FAA, which will study the new software and carry out tests flights. Boeing will train pilots before allowing the planes to fly again.

 

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Lawmakers Seek Probe on US Hacking Services Sold Globally

U.S. lawmakers are pushing legislation that would force the State Department to report what it is doing to control the spread of U.S. hacking tools around the world.

A bill passed in a House of Representatives’ appropriations subcommittee on Tuesday said Congress is “concerned” about the State Department’s ability to supervise U.S. companies that sell offensive cybersecurity products and know-how to other countries.

The proposed legislation, released on Wednesday, would direct the State Department to report to Congress how it decides whether to approve the sale of cyber capabilities abroad and to disclose any action it has taken to punish companies for violating its policies in the past year.

National security experts have grown increasingly concerned about the proliferation of U.S. hacking tools and technology.

The legislation follows a Reuters report in January which showed a U.S. defense contractor provided staff to a United Arab Emirates hacking unit called Project Raven. The UAE program utilized former U.S. intelligence operatives to target militants, human rights activists and journalists.

State Department officials granted permission to the U.S. contractor, Maryland-based CyberPoint International, to assist an Emirate intelligence agency in surveillance operations, but it is unclear how much they knew about its activities in the UAE.

Under U.S. law, companies selling cyber offensive products or services to foreign governments must first obtain permission from the State Department.The new measure was added to a State Department spending bill by Dutch Ruppersberger, a Democrat from Maryland and member of the House Appropriations Committee.

Ruppersberger said in an emailed statement he had been “particularly troubled by recent media reports” about the State Department’s approval process for the sale of cyberweapons and services.

CyberPoint’s Chief Executive Officer Karl Gumtow did not respond to a request for comment. He previously told Reuters that to his knowledge, CyberPoint employees never conducted hacking operations and always complied with U.S. laws.

The State Department has declined to comment on CyberPoint, but said in an emailed statement on Wednesday that it is “firmly committed to the robust and smart regulation of defense articles and services export” and before granting export licenses it weighs “political, military, economic, human rights, and arms control considerations.”

Robert Chesney, a national security law professor at the University of Texas, said the Reuters report raised an alarm over how Washington supervises the export of U.S. cyber capabilities.

“The Project Raven (story) perfectly well documents that there is reason to be concerned and it is Congress’ job to get to the bottom of it,” he said.

The bill is expected to be voted on by the full appropriations committee in the coming weeks before going onto the full House.

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China Fully Blocks All Versions of Wikipedia

Beijing has broadened its block of online encyclopedia Wikipedia to include all language editions, an internet censorship research group reported just weeks ahead of China’s most politically explosive anniversary.

According to a report by the Open Observatory of Network Interference (OONI), China started blocking all language editions of Wikipedia last month.

Previously, most editions of Wikipedia — besides the Chinese language version, which was reportedly blocked in 2015 — were available, OONI said in their report.

AFP could not open any of Wikipedia’s versions in China on Wednesday.

“At the end of the day, the content that really matters is Chinese-language content,” said Charlie Smith, the pseudonym of one of the co-founders of Greatfire.org, which tracks online censorship in China.

“Blocking access to all language versions of Wikipedia for internet users in China is just symbolic,” he told AFP. “It symbolises the fear that the Chinese authorities have of the truth.”

Wikimedia Foundation, the non-profit organisation that operates Wikipedia, said it had not received any notices explaining the latest block.

According to the organisation, Wikipedia has been blocked intermittently in China since 2004.

“With the expansion of this block, millions of readers and volunteer editors, writers, academics, and researchers within China cannot access this resource or share their knowledge and achievements with the world,” Samantha Lien, communications manager at Wikimedia Foundation, told AFP over email.

“When one country, region, or culture cannot join the global conversation on Wikipedia, the entire world is poorer,” she said.

China’s online censorship apparatus — dubbed the “Great Firewall” — blocks a large number of foreign sites in the country, such as Google, Facebook, VOA, and The New York Times.

Topics that are deemed too “sensitive” are also scrubbed, such as the 1989 crackdown on Tiananmen pro-democracy protesters which will mark its 30th anniversary on June 4.

The expanded block of Wikipedia comes as Chinese authorities under Chinese President Xi Jinping ramp up online controls and crack down on Great Firewall circumvention tools, such as virtual private network (VPN) software.

In November, China’s cyberspace authority said it had “cleaned up” 9,800 accounts on Chinese social media platforms like messaging app WeChat and the Twitter-like Weibo that it accused of spreading “politically harmful” information and rumours.

Chinese Twitter users have also told AFP that they have experienced intimidation from local authorities — and even detention — for their tweets.

The latest move to block all versions of Wikipedia could be linked to online translation tools, which make it easy for Chinese users to read anything on Wikipedia, Smith said.

Images can also be considered taboo, he said.

“A picture is worth a thousand words, and there is no dearth of Tiananmen-related imagery on the Wikipedia website,” Smith added.

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Ford: More Lincolns to Be Built for Chinese Market Locally

Ford Motor Co plans to start production of new luxury Lincoln models in China for that market as they are launched, starting with the new Corsair later this year, to benefit from lower costs and avoid the risk of tariffs, a top executive said Monday.

“It’s a huge, huge opportunity for Lincoln because we see China as ground zero for Lincoln given the size of the market and how well the brand has been received,” Chief Financial Officer Bob Shanks said at a Goldman Sachs conference in New York.

Ford has lower levels of localized production than rivals General Motors Co or Volkswagen AG, who make more vehicles in China for Chinese consumers, benefiting from lower labor and material costs, and avoiding tariffs in the burgeoning trade war between the United States and China.

Shanks said all new Lincoln models, with the exception of the Navigator assembled in Louisville, Kentucky, will also be produced in China.

He declined to say how much Ford will save through localized production.

Ford has been struggling to revive sales in China, the automaker’s second-biggest market. Ford sales slumped 37 percent in 2018, after a 6 percent decline in 2017.

Shanks said that all of the problems the automaker experienced in China last year were related to the Ford brand, not Lincoln, which is popular with Chinese customers.

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