UNITED STATES MAY NOT BE ABLE TO MEET FINANCIAL OBLIGATIONS TO INTERNATIONAL ORGANIZATIONS, FIFTH COMMITTEE TOLD

20 October 1995

Press Release
GA/AB/3025

UNITED STATES MAY NOT BE ABLE TO MEET FINANCIAL OBLIGATIONS TO INTERNATIONAL ORGANIZATIONS, FIFTH COMMITTEE TOLD

19951020 Additional $100 Million May Be Paid to Troop Contributors

The United States might not be able to pay $923 million in dues to international organizations, including the United Nations, this year because its House of Representatives had only approved $858 million and its Senate, only $550 million, the Fifth Committee (Administrative and Budgetary) was told this morning. The Committee heard that information as it concluded its general debate on the proposed $2.69 billion United Nations budget for 1996- 1997 and the scale of assessments.

As a result of the two legislative chambers' actions, the United States representative explained, her country's Administration would have $70 million to $370 million less than what it had sought to pay such bodies. That excluded $672 million peace-keeping arrears that had been denied by the Congress. The United States would this week pay $150 million to the regular and peace-keeping budgets, but would not support a regular budget of more than $2.51 billion for 1996 and 1997.

Trinidad and Tobago, also speaking for other members of the Caribbean Community (CARICOM), which were members of the United Nations -- Antigua and Barbuda, Barbados, Belize, Bahamas, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines and Suriname -- said members of the Community were not yet convinced that adequate provisions had been made in the budget to implement the commitments of global conferences. Allocations for development should be increased to fulfil commitments.

The current emphasis on peace-keeping and humanitarian assistance, Egypt said, should not divert the United Nations from achieving economic development, environmental protection and combatting drugs. Its representative was concerned about the real cuts in resources allocated to Africa, when efforts were being made there to overcome problems on various fronts.

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The proposed cuts in the budget should not be at the expense of development activities such as those of the United Nations Conference on Trade and Development (UNCTAD) and regional commissions, Iran said. Cost-efficiency should not deprive economic development activities of resources.

Speaking on the scale of assessments, the United States said the scale for peace-keeping operations should be reformed comprehensively, as its system of country categories had too many anomalies. There should be a ceiling and floor for permanent Security Council members so that none of them was assessed too much or too little.

Bahamas, also speaking for CARICOM's United Nations members, expressed concern at the negative impact the floor rate had on developing countries. Since it made most CARICOM countries pay above their capacity, it should be changed. The Committee on Contributions should address the concerns of small island developing States by formulating a vulnerability index, for instance.

The specific economic conditions of developing countries should be considered before their dues were raised, Oman said. The oil producing countries' present economic plight had hurt their capacity to pay, and there should be a more equitable scale method, based on the capacity to pay.

Speaking on the United Nations financial situation, Joseph E. Connor, Under-Secretary-General for Administration and Management said that, since the end of September, about $135 million had been received by the United Nations, including $95 million from the major contributor. The Secretary-General would consider repaying $100 million more to troop contributors, in addition to the $150 million announced earlier, he added. Despite that, the United Nations financial condition was extremely grave.

The representatives of Libya, Paraguay, Benin and Colombia also spoke on the proposed budget. Singapore, Libya, Kuwait, Iraq, Iran, Samoa and Algeria spoke on the scale of assessments.

The Chairman of the Committee on Contributions, David Etuket (Uganda), responding to comments of Member States, asked them to reach political agreement on the scale that would provide his Committee with a basis for its advisory role. The Contributions Committee would address the issues of the base period, low per capita income and debt burden adjustments at its next session. It would consider the abolition of the floor rate and the situation of the former centrally planned economies.

The Committee is due to meet again at 3 p.m. on Friday, 27 October, to hear remarks on the proposed budget from the Advisory Committee on Administrative and Budgetary Questions (ACABQ) and the Secretariat, and to conclude its general debate on pattern of conferences and programme planning.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to conclude its general debate on the proposed United Nations budget for 1996- 1997 and the scale of assessments.

The Committee has been considering the Secretary-General's proposal for a 1996-1997 budget of $2.69 billion, after adjustment for inflation and currency fluctuations (document A/50/6/Rev.1, vols. I and II); the first report of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), which trims his proposal to an adjusted $2.67 billion (document A/50/7); and a related report from the Committee for Programme and Coordination (CPC) (document A/50/16). (For background, see Press Release GA/AB/3017 of 4 October.)

Regarding the scale of assessments, the Committee has been discussing how to implement the principle of the capacity to pay as the fundamental criterion for determining the scale. It had before it the report of the ad hoc intergovernmental working group on the matter (document A/49/897) and another by the Committee on Contributions (document A/50/11).

The working group's report contains the conclusions and recommendations of the 25 experts appointed by the General Assembly to advise on how to implement the principle of the capacity to pay as the fundamental criterion for determining the assessment scale for setting Member States' contributions to the regular budget. The Committee on Contributions' report contains the conclusions for the first part of its comprehensive review of the method of assessment which it began during the Assembly's last session.

(For background on scale of assessments, see Press Release GA/AB/3019 of 10 October.)

Statements on Scale of Assessments

HO TENG YEN (Singapore) said national income figures had been volatile and incomes of over a short period of two to three years would not reflect true capacity to pay. Therefore, a longer period should be used to reflect that capacity better. The use of low per capita income adjustment had led to the largest reallocation of points in the scale methodology. The use of per capita income discriminated against countries with small populations. The current method to grant low per capita income allowance should be reconsidered in the next scale, with a view to reducing the overemphasis on per capita income. He said the floor rate should be maintained but lowered to reduce the overassessment of less developed countries. Increasing the number of decimal points in which the scale was expressed from the current two would help in that process and would express more precisely the capacity of Members to pay.

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The scheme of limits should be phased-out gradually to avoid excessive hikes in assessments.

IBRAHIM I. ELMONTASSER (Libya) said the scale of assessments was one of the most important and sensitive questions on the Assembly's agenda. He welcomed the action of the Committee on Contributions in carrying out a comprehensive review of the scale. The principle of capacity to pay remained the fundamental criterion for determining the scale. He expressed the hope that all elements relating to the scale would be examined. He expressed the hope that the ceiling rate and the scheme of limits would be eliminated.

HARCOURT TURNQUEST (Bahamas), speaking also for other member States of the Caribbean Community (CARICOM) -- Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago -- said views differed on the method of determining the scale. However, he was pleased that the high-level working group on the financial situation of the United Nations and the ad hoc working group on capacity to work had reaffirmed the principle of capacity to pay.

Regarding the anomalies in the current scale, he said the scale had not been arrived at in a hasty manner; it was based on a consensus which all Member States should recognize. The CARICOM could not accept the notion that the anomalies were the cause of the Organization's current financial crisis. Member States must pay their contributions in full and in time if the Organization was to be on a good financial footing. States of CARICOM had always endeavoured to meet their obligations in spite of their economic difficulties.

The scale must be equitable and transparent and based on reliable data, he continued. However, it must be recognized that many Member States faced problems in supplying the required data for determining their capacity to pay. The CARICOM looked forward to receiving technical assistance to improve its data collection. The negative impact of the floor rate on developing countries was a cause for concern. Most CARICOM countries paid well above their capacity to pay; he expressed support for the call for a change in the floor rate.

He called on the Committee on Contributions to address the concerns of small island developing States, such as the need for the development of a vulnerability index. He noted the distortions arising from the use of per capita gross national product (GNP). Decisions on changes to the scale must be made only after a comprehensive review had been undertaken. Changes to the peace-keeping scale must be based on consensus.

ZIYAD MONAYAIR (Kuwait) said Member States should be committed to paying their contributions in full and on time to allow the Organization to continue

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its functions. The non-commitment to payment of assessments was the main reason for the current financial crisis. Changing the method of determining the scale of assessments would have a limited effect. Kuwait paid its contributions in full and on time.

He said the capacity to pay principle was the main criterion setting assessments. The use of GNP and the shortening of the base period were some of the recommendations that had been made on the subject. Kuwait endorsed the statement made on behalf of the "Group of 77" developing countries. The assessments of the developing countries should not be increased, and the requirements for development should also be considered when assessments were being determined. The scale should be more stable, transparent and based on reliable data, as requested by the Assembly. Kuwait would study all the suggestion made on the scale.

DAVID BIRENBAUM (United States) said the scale needed some revisions as part of the process of resolving the United Nations current financial crisis. It should be made more transparent and better reflect the current economic realities. The proposals that the GNP was the best income measure, that the base period be cut to three years and that there should be annual recalculations were persuasive. Careful consideration should be given types of conversion rates that were not currently being used, such as the purchasing power parity, as a means of addressing the problems and anomalies that emerged from the use of the market exchange rates. Debt burden adjustment had been based on the theoretical assumption that debt was repaid over a period of eight years. If the debt burden adjustment was retained, it should take into account actual debt repayments. The low per capital income adjustment could be revised to improve the balance between States that received a subsidy and those that paid for it. The reduction of the floor rate should only benefit Member States whose rates fell below the relevant economic criteria. The scheme of limits should be phased as quickly as possible.

He said that the scale of assessments for peace-keeping operations should be reformed comprehensively. The system of groups, as currently structured, had created too many anomalies. The differences between groupings were too large and there were no objective criteria for assignment to the groups. There should be a ceiling and floor for permanent members of the Security Council so that none of them was assessed at too high or too low a rate.

AHMAD HAMZAH (Iraq) said the increase in his country's assessment rate was irrational and unjustifiable; it ignored the harsh economic conditions Iraq was facing such as the economic embargo imposed by the Security Council. Those conditions had prevented Iraq from meeting its obligations. It had proposed that $300,000 be released from its frozen assets to pay its dues or

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that Iraqi currency be used for that purpose, as was the case until 1992. None of those proposals was accepted.

Iraq had informed the Committee on Contributions that his country was facing circumstances beyond its control, such as sanctions and the freezing of its assets, and was seeking exclusion from the provisions of Article 19 of the Charter. That Committee had held divergent views; some Members stated that the Committee should recommend to the General Assembly the waiver of Article 19 for Iraq since the actual situation there prevented it from paying its assessments. Others had stated that the Committee did not have adequate data on Iraq's current economic and financial situation and could not support its request. Yet others had stated that the issue involved political questions outside the mandate of the Committee. The issue should be given its due attention because it involved political questions.

MORTEZA MIRMOHAMMAD (Iran) said national income and per capita income would not truly represent the real capacity to pay of countries at different levels of development. It was unjustifiable to put both developing and developed countries on an equal footing when determining their share of the United Nations expenses. The "clean slate" approach would not help solve the imperfections of the scale.

Other elements should be considered in the scale methodology, such as natural and man-made disasters, the problems of refugees in host countries, debt burden and low per capita income. His country's assessments was many more times than its capacity to pay in the last four scale periods. He supported the proposal for the complete phase-out of the remaining scheme of limits. The base period should be three years. The Organization's serious financial situation, especially the withholding of assessments by larger contributors, was a cause for concern.

SAID ALI NASIR AL-AMRI (Oman) said the grave financial situation of the Organization was the result of an accumulation of arrears. The various remedies for resolving it did not enjoy consensus. As a first step to solve the financial problem, all Member States in arrears must fulfil their obligations. Noting that his country's rate of assessment had increased, he proposed that any increases in the rates for developing countries should take account of their specific economic conditions. The present economic conditions of the oil producing countries had negatively affected their capacity to pay. Oman wanted a more equitable methodology which would be based on the capacity to pay. It had tried to pay its contributions in full and on time. However, its specific economic conditions should be taken into account.

ANDREA WILLIAMS-STEWART (Samoa) said many smaller developing countries had been overtaxed beyond their capacity to pay. The floor rate had led to discrepancy and a condition in which the poorest and smallest nations paid a

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much greater proportional rate of contributions than the wealthier member of the Organization. That anomaly and the floor rate must be addressed. The floor rate should be eliminated or reduced in both the regular and peace- keeping operation budget scales. That would enabled some small countries to join the United Nations. All aspects in calculating the scale should be looked at carefully and measures adopted by consensus.

LARBI DJACTA (Algeria) said that while national income was a central feature of the capacity to pay principle, it should be considered together with debts that countries had to pay. Three years as a base period would help remove the current distortions in the scale. The shorter period, taking into account the most recent data, would better reflect capacity to pay. Despite its problems and the growth of rates of assessment, Algeria had discharged its obligations fuller and ahead of time.

DAVID ETUKET (Uganda) Chairman of the Committee on Contributions, responding to Member States, said the detailed comments of delegates on the scale of assessments would be helpful to the Committee in finalizing its review, The delegations' candidness illustrated the continuing importance that Member States attached to the scale and the challenges that the Committee faced in developing a scale that upheld the principle of capacity to pay, as well as a stable, simpler and more transparent scale based on reliable, verifiable and comparable data. He noted that a number of Member States had reaffirmed the principle as the fundamental criterion for determining Member States' contributions and that they attached importance to honouring their financial obligations to the Organization.

The scale reflected a mix of technical and political considerations, he continued. He hoped that Member States would agree on the political aspects which would provide his Committee with the basis for its advisory role. Further discussion was needed on the appropriate base period to be used in the assessment rate. The use of market exchange rates could be a starting point for currency conversion. General interest had been expressed in a review on other measures of national income to determine capacity to pay. Further measures were needed on low per capita income adjustments and the debt burden adjustment. The Committee on Contributions would address those questions again at it next session. On the scheme of limits, concern had been expressed about its adverse impact on a number of Member States and the need to address the issue in the context of the next scale.

The Committee would follow up on the recommendations pertaining to the former centrally planned economies made by the ad hoc working group on the capacity to pay, he said. The abolition of the floor rate would also be addressed. The Committee shared the concerns of those Member States who faced a loss of voting rights under Article 19 of the Charter or were threatened with a loss of those rights in due course. It would try to respond expeditiously on that issue.

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Statement on Proposed Programme Budget

MADELEINE K. ALBRIGHT (United States) said she welcomed the valuable initiatives instituted by the Secretary-General to pursue reforms in the Organization. The Secretary-General had taken some credible first steps towards the goals of maximizing efficiency gains without negatively affecting the mandates. A number of key questions had to be kept in mind in the examination of the proposed budget, such as how closely it conformed to the basic purposes of the Organization; was a high standard of efficiency being demanded in selecting the means to achieve the Organizations objectives; and had Member States achieved a balance between their expectation of the United Nations and their collective willingness financially to support the Organization.

In that connection, Member States must at least begin to address the confusion of purpose reflected in the multiplicity of agencies and programmes with overlapping mandates that now existed within the United Nations system and the continuation of obsolete committees and organizations, she said. If the Organization was to be rationalized it must depart from business as usual and the adoption of a zero based approach to budgeting. Progress towards achieving efficiency must continue. Although that was the responsibility of the Organization's managers, real reform depended on what Member States demanded. Hence in considering the budget they needed to give the Secretariat a clear mandate for reform.

She referred to a number of proposals for reducing operating costs, such as the reduction in the ratio of General Service staff to Professional staff. Such action could save tens of millions of dollars over the next biennium. The Organization must eliminate duplicative activities, such as the Department of Development Support and Management Services with a budget of more that $25 million which did work that overlapped with some agencies. A hard look should be taken at the Decolonization Committee. Resources for travel, general temporary assistance and consultancies could be rationalized. Her Government would also oppose the 9 per cent pay rise proposed by the International Civil Service Commission (ICSC) which was not justified on merit and could not be absorbed in the budget without compromising important United Nations programmes. She proposed a number of other areas for reduction of expenditure, such as a scaling back of the cost and size of the Department of Public Information.

Continuing, she said the Clinton Administration had asked the United States Congress to appropriate $923 million this year to meet its assessments to international organizations including the United Nations. However, it was clear that the full request would not be granted. The House of Representatives had approved $858 million; the Senate $550 million. That meant that the United States would be $70 million to $370 million below its

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funding request for international organizations. That figure did not include $672 million in arrears for peace-keeping that had been requested.

Under its democratic system of government, the Executive could not pay any money on its own, she said. However, the present administration was committed to meeting its obligations to the Organization. In that connection, it had paid a total of $150 million towards the peace-keeping and regular budgets assessments for this year. She stressed that the Organization's priorities could be fully implemented within a budget ceiling of $2.51 billion for the next biennium and added that the United States would not support a budget in excess of that figure.

Continuing, she said reform must be the number one job in the Assembly this year. She appealed to Member States not to let their understandable frustrations cloud the goal of reform. Nations did not need more United Nations bureaucrats, they needed hands-on technical assistance, access to credit and help in connecting to regional and non-governmental organizations working for the same goals. "We need a United Nations that talks less and produces more, a United Nations that spends less on salaries, stationery and ceremonies and more of services that save and enrich peoples' lives."

ANNETTE DES ILES (Trinidad and Tobago), also speaking for members of CARICOM, said those nations attached importance to the ACABQ comment that the Secretary-General should make the relevant proposals to the General Assembly on activities that should no longer be carried out or should be modified. Future reporting measures to enhance the performance of the Organization should be more specific and contain clearer information. While supporting efforts to strengthen the United Nations, rationalization should not prevent the implementation of mandated activities due to lack of resources.

She said CARICOM countries attached importance to the ongoing discussions in the working group on the Agenda for Development. It was an ideal medium through which the United Nations system could implement the development commitments made at the series of global conferences. Despite assurances from the Secretary-General that the proposed budget contained measures related to those conferences, CARICOM nations were not yet convinced that adequate provisions had been made in it to implement the agreed outcomes. The fact that the budget had a cut of some 4 per cent in resources for international development was a cause for concern. A balance should be restored between peace-keeping operations and development activities by increasing allocations for development to fulfil outstanding commitments. Also the increase of resources to the Office for Internal Oversight Services, such as 18 per cent of new professional posts and 60 per cent of those in general service, was very disturbing and must not be at the expense of mandated activities.

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NABIL ELARABY (Egypt) said that the present emphasis on peace-keeping and humanitarian assistance should not divert the United Nations from assisting developing countries, pushing ahead with economic revitalization programmes in Africa, and from efforts to protect the environment and to combat narcotics. It was disappointing that attempts were being made to cut the potential of the United Nations and its ability to respond to the needs of the majority of its membership. The budget proposals had emanated from such attempts.

He said he did not share the view that the Secretariat should be constantly "reformed" to a point that it would affect its ability to serve the majority of its members. It was unfair for Member States to blame the Secretariat for their common failures. The Secretariat was working in difficult circumstances and as long as the current financial crisis persisted, the Secretariat could not be blamed for not fulfilling its mandates. Member States should pay their dues without conditions by the end of the year. The budget must help the Secretariat fulfil its mandates rather than cut the capacity to do so. It was a matter of concern that the proposed budget was below the budget outline approved by consensus a few months ago. Engaging in arbitrary cuts without clear analysis would harm the Organization's future and were not to be accepted. The accepted procedures should be followed.

He expressed concern that areas of interest to the developing countries were lumped together under one cluster despite the numerous mandates and the demands of international conferences. He was similarly concerned with the cuts in real terms in the resources allocated to Africa at a time when efforts were being made at the regional and subregional levels to overcome problems on various fronts. Egypt would work with other African delegations to redress the matter.

Mr. MIRMOHAMMAD (Iran) said that the cuts in the budget should not come at the expense of some development activities such as the United Nations Conference on Trade and Development (UNCTAD) and regional commissions which were important to many States. Cost-efficiency should not stop activities in support of economic development of developing countries from getting adequate resources. The budget should be balanced, in accordance with priorities set in the medium-term plan for 1992-1997. That balance was lacking. Some programmes had been accorded higher priority over more important ones. It was a matter of concern that the activities for international economic development had not been treated as being equal to other areas. Iran did not support the transfer of 26 posts from the support account for peace-keeping operations to the regular budget.

IBRAHIM IM. ELMONTASSER (Libya) expressed the hope that the reduction in the budget would not affect the development programmes on which poor and developing countries depended. He expected more of a reduction in the size of the budget document, rationalization of expenses, and determination of

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disbursement priorities within approved resources. He regretted the delayed payments of some Member States and the cash shortage suffered by the Organization. Payment in full and on time must be made especially by States which were capable of paying. Member States which were faced with payment problems should present their cases to the Assembly for consideration.

His country had paid its contributions in spite of its difficult economic circumstances, he said. Its situation had been worsened by the economic embargo imposed on it by the Security Council. The sanctions had harmed the Libyan people and had resulted in material damage that exceeded $10 billion. He called for the immediate lifting of the sanctions.

Continuing he said, "The budget was like a body without a soul." Its adoption should be deferred until all Member States committed themselves to the payment of their assessed contributions and their arrears until the end of 1995 and until a clear solution was devised to overcome that problem. The proposed budget should start with a clean slate with no accumulations and no arrears.

TERESA AGUILERA de LATERZA (Paraguay) said it was regrettable that on its fiftieth anniversary, the United Nations was facing a financial crisis which prevented it from carrying out its mandates. The failure of economically powerful States to pay their contributions was hard to understand. Her country had succeeded in paying its arrears and was up to date in its contributions. All Member States should pay their debts to the Organization.

She understood the priority given to the peace-keeping Department in the proposed budget but it must not be to the detriment of development programmes especially since most Member States were developing countries. Certain regions had not received equitable treatment: the allocation of resources was unbalanced, especially regarding Latin America. With a shortage of resources internationally and donor fatigue, the use of United Nations resources should be rationalized.

She expressed the hope that the decrease in posts would not affect geographical representation, especially for underrepresented States such as Paraguay, which had only one national on the staff. She expressed dissatisfaction at the rejection of two Paraguayan observers for the Guatemalan mission. Resources for language teaching should not adversely affect the Spanish teaching staff. Reductions would mean a failure to respect the principle of equality among the official languages.

ZACHARIE-RICHARD AKPLOGAN (Benin) expressed concern that the proposed budget was under the level set out in the budget outline adopted by the General Assembly. The resources for development and those for implementing activities related to Africa's critical situation and recovery should be

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increased. The UNCTAD and other agencies, especially those related to following-up the commitments of international conferences, should be granted adequate resources. Those follow-up activities were important and must be well funded. The proposed cut in posts in the budget should not compromise the ability of the United Nations to achieve its goals.

Urging Member States to pay their dues, he said, Benin had taken special measures to be current with its regular budget dues and was trying to pay its arrears to peace-keeping operation.

ALEJANDRO BORDA (Colombia) said the budget should implement priorities set out in the medium-term plan. The needs of the international community and programmes that had been defined as priorities should be accorded sufficient importance. The apportionment of resources in the budget must conform with legislative mandates. Colombia was concerned that areas of interest to developing countries had been grouped together. The role of the United Nations in economic and social affairs must be maintained. The negative growth of resources for economic development seemed to mark the progressive dismantling of some of the programmes that were important to many countries.

JOSEPH CONNOR, Under-Secretary-General for Administration and Management, said a comprehensive report on the financial situation of the Organization would be available to Member States next week. Some Member States have responded positively to the Secretary-General's appeals and since the end of September, about $135 million had been received for the regular budget, including $95 million from the major contributor. Those were within the amount anticipated in the cash-flow projections for the last quarter of this year.

Despite the consequent reduction in outstanding contributions for the regular budget, he continued, some $240 million would have to be borrowed by year-end from peace-keeping operations. Only the receipt of contributions to the regular budget in excess of the current forecast or the continuing impact of cash-saving measures could contain the expected increase in borrowing from peace-keeping.

Additional payments totalling $227.8 million have also been received during October for peace-keeping operations, thus reducing the amounts outstanding to some $2.29 billion, he said. In addition to payments made earlier, the Russian Federation had paid $12 million. Additional payments were expected next week. The Secretary-General would consider making further payments totalling $100 million to troop-contributing countries by the end of October, in addition to the payments of $150 million announced earlier.

However, even after those payments, the Organization would still owe troop-contributors some $800 million by the end of October, and some $1 billion by the end of this year, and $240 million would have been borrowed

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from peace-keeping funds for the regular budget. The financial position of the Organization was still extremely grave.