GA/AB/3041

USE OF EXTERNAL SOURCES OF FINANCE TO SUPPLEMENT MEMBERS' CONTRIBUTIONS SHOULD BE EXAMINED, FIFTH COMMITTEE TOLD

10 November 1995


Press Release
GA/AB/3041


USE OF EXTERNAL SOURCES OF FINANCE TO SUPPLEMENT MEMBERS' CONTRIBUTIONS SHOULD BE EXAMINED, FIFTH COMMITTEE TOLD

19951110 The United Nations should examine options for supplementing contributions from Member States with external sources of finance, the Fifth Committee (Administrative and Budgetary) was told this morning as it discussed how to improve the Organization's financial situation.

Recalling such a suggestion by its Foreign Minister, Australia said that further research should be conducted into the technical accounting and legal issues associated with external financing.

A scheme of incentives and disincentives was needed to encourage Member States to pay up their dues on time and interest should be charged on late payments of dues, Singapore said. The payment of dues was a binding legal obligation which could not be abrogated by national laws. The International Court of Justice had ruled that a State could not plead the provisions of its municipal law as a valid reason for violating international law.

Innovative ways should be found to resolve the United Nations complex financial problems, according to the representative of Indonesia. He recalled his Foreign Minister's proposal that the question should be addressed at the highest political level and the suggestion for global taxation schemes.

A majority of speakers at the meeting this morning called on the major contributor to pay up its contributions to the United Nations regular budget without conditions. Unilateral decisions to cap peace-keeping assessment rates were unacceptable, they said.

The major contributor, had for political reasons, withheld large amounts of its dues to "force the Organization to reform according to its wish and act at its beck and call", China said. The United States had gained substantially from the United Nations presence and about 40 per cent of contracts for goods and services were awarded to American companies. Without multilateral operations, the United States would spend more to defend its interests. Of all Member States, it had the least reason to withhold huge portions of its dues.

The Russian Federation said that unjust distribution of United Nations costs among its Members remained. The method of calculating the scale of assessments of the regular budget and the peace-keeping operations should be

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improved. Russia had reduced its arrears to the United Nations in real terms and had decided to pay its arrears in full in seven years.

Belarus said that radical measures, such as the writing off of some of the accumulated arrears should be considered. Ukraine said it had contributed almost $30 million to the United Nations since its independence. It should be released from responsibility for all its arrears as it was unable to pay them.

Columbia, speaking also for the Non-Aligned Movement, said that the principle of the capacity to pay must remain the fundamental criterion for any review of how the Organization's expenses were sharing out. The peace-keeping scale of assessments should reflect the special responsibilities and economic situation of the Security Council's permanent members, as well as the economic conditions of different States or groups of countries.

The representatives of India, Brunei Darussalam, Malaysia, Japan, Burkina Faso, El Salvador, Thailand, Bangladesh, Pakistan and the Republic of Korea also spoke. The United States said it reserved its right to reply to statements made regarding it to a future date.

Algeria asked for clarifications regarding its omission from a list of countries which had paid up their dues, contained in a report of the Secretary-General.

Earlier, the United Nations Controller, Yukio Takasu, introduced the Secretary-General's report on the financing of the United Nations Interim Force in Lebanon (UNIFIL) and the United Nations Disengagement Force (UNDOF). The Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), C.S.M. Mselle, introduced his Committee's reports.

The Committee will meet again at 3 p.m., Tuesday, 14 November, to continue discussing financial statements and reports from the Board of Auditors.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to consider the financing of the United Nations Disengagement Force (UNDOF) and the United Nations Interim Force in Lebanon (UNIFIL). It was also expected to continue considering how to improve the financial situation of the United Nations.

Financing of UNDOF and UNIFIL

In a report on the financing of UNDOF (document A/50/386), the Secretary-General asks the General Assembly to appropriate $16.1 million gross ($15.6 million net) for the mission for 1 June to 30 November 1995, which had previously been authorized and assessed. He also seeks authorization to commit $2.7 million gross ($2.6 million net) monthly for the period beyond 30 November, should the Security Council renew UNDOF's mandate past that date.

In its report on UNDOF (document A/50/694), the Advisory Committee on Administrative and Budgetary Questions (ACABQ) approves those requests.

In his report on the financing of UNIFIL (document A/50/543), the Secretary-General requests that the Assembly authorize and assess $10.8 million gross ($10.5 million net) monthly for the Force from 1 February to 30 June 1996. That would depend on the Security Council renewing the mandate of UNIFIL beyond 31 January. He also asks the Assembly to appropriate $67.4 million gross ($65.2 million net) for the period 1 August 1995 to 31 January 1996 that had been previously authorized and billed to Member States.

The cost estimates for the five-month period February to June 1996 of about $53.9 million gross ($52.5 million net) reflects phased troop cuts from 5,015 to 4,513.

The ACABQ approves the requests for UNIFIL. It reiterates its request to the Secretary-General to reconsider the practice of using provisions for general temporary assistance to fund positions in peace-keeping budgets that are actually temporary posts. The Secretary-General should report to the fiftieth session of the Assembly, through the ACABQ, on what he has done to address its concerns regarding the use of funds for general temporary assistance.

Improving Organization's Financial Situation

For its consideration of the Organization's financial situation, the Committee had before it a note by the Secretary-General by which he transmits a 1993 report prepared by the Independent Advisory Group on United Nations Financing, sponsored by the Ford Foundation, under the co-chairmanship of Shijuro Ogata and Paul Volcker.

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The advisory group makes recommendations for improving Member States' payment of their contributions to the regular and the peace-keeping budgets. Among its recommendations, the Group proposes changes in the schedule for Member States' payment of their contributions and the charging of interest on late payments. It also recommends unifying the Organization's peace-keeping budgets and that they should be financed by a single annual assessment. In response to those recommendations, the Secretary-General agrees with a number of the Group's recommendations, but expresses reservations on others, such as the changes in the period of payment of dues. He also expressed disagreement with some proposals, such as the recommendation that the Organization should not be authorized to borrow. (For background on the United Nations financial situation, see Press Release GA/AB 3029, of 31 October).

Statements

YUKIO TAKASU, United Nations Controller, introduced the Secretary- General's reports on the financing of UNIFIL and UNDOF. He reviewed the history of UNDOF and UNIFIL and the report's contents.

The recruitment of temporary assistance for UNIFIL had provided flexibility and had great cost advantages, he said. They cost less than local staff. The view of the ACABQ on the matter had been noted and the issue would be reviewed. It should be noted that there were advantages in the current practice.

C.S.M. MSELLE, Chairman of the ACABQ, introduced and reviewed his Committee's report on the two missions.

AURELIO IRAGORRI (Colombia), speaking on behalf of the Non-Aligned Movement, reiterated its deep concern over the United Nations difficult financial situation -- an issue of grave financial and political implications. The dramatic increase in outstanding contributions by some Member States, especially the larger contributors, in the financing of the regular budget and peace-keeping operations and the international tribunals, as well as its negative consequences had motivated the heads of State of the Non-Aligned Movement meeting in Cartagena, Colombia, in October to consider the issue.

The heads of State had emphasized their concern over the United Nations financial situation, he said. They had also stressed that its fundamental cause was the failure of some developed States to pay their assessed contributions to the regular budget and the peace-keeping operations in full and on time. They had called upon those States to fulfil their responsibilities without any conditions whatsoever as a demonstration of their political will to honour their obligations under the Charter.

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He said the heads of State had also reiterated that the principle of the capacity to pay must remain the fundamental criterion underlying any review of the methodology for apportionment of the Organization's expenses. Any review of the methodology should be based on consensus and consultation and not on the basis of unilateral measures. They had also reaffirmed that the principles contained in the special scale of assessments for the apportionment of the expenses of the peace-keeping operation should be adopted in a permanent manner. They agreed on the need that the scale for the financing of such operations should clearly reflect the special responsibilities and the economic situation of the Security Council's permanent members as well as the economic situation faced by different countries or groups of countries.

WANG XUEXIAN (China) said the causes in the delays in the payment of assessments should be analyzed separately. Some developing countries had to put off paying assessments due to their economic conditions.

However, a certain major contributor had, for political reasons and in disregard of the United Nations Charter, withheld large amounts of its dues to force the Organization to reform according to its wish and act at its beck and call, he said. That country had decided unilaterally, on the excuse of its domestic legislation, to establish a ceiling in the assessments for peace- keeping operations to reduce its own rate and shift its financial obligations to other Member States, including the developing countries. That move violated the Charter and was unacceptable. The United States gained substantially from the presence of the United Nations as about 40 per cent of contracts for goods and services were awarded to American companies, according to incomplete statistics. In addition, the gains to New York City included $3.3 billion in spending yearly. Moreover, as the United States Secretary of State had stated, it would cost much more for the United States to defend its own interests, had there been no multilateral United Nations operations. Therefore, the United States had the least reason, among the United Nations 185 Members, to withhold huge amounts of its assessments.

He said the total peace-keeping spending had grown from $600 million in 1990 to more than $3 billion a year currently, three times the regular budget. The United Nations should act within its means in respect of peace-keeping missions. Also, financial discipline and rules should be improved, waste stopped and stringent economy practiced. That would allow the United Nations to effectively use every cent contributed by Member States. The way out of the current financial crisis was for Member States to pay up their dues on time. The scale of assessments was not the main reason for the crisis. It had been reached after repeated consultations and meticulous calculations. It was relatively equitable, rational and had basically reflected the capacity to pay. It was unacceptable to question its equitability and even go as far as to totally negate it.

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SURINDER KUMAR SINGLA (India) said all countries were faced with difficult financial situations, and from time to time had to readjust their payments to the availability of funds. However, that could neither be a continuing reason for non-payment or late payment of contributions, nor should it be a pretext for finding fault with the system. Member States' assessed contributions to the United Nations had been determined by the entire membership in a democratic and consensual manner in the General Assembly. He appreciated the different governmental and parliamentary processes and practices in different countries through which any demand for appropriations must pass for approval. India made considerable efforts to pay its contributions promptly and in full despite some difficulties. His Government was sensitive to the political and economic reasons for the inability of some Member States to make their full payments in time.

He said he hoped the recent tendency towards unilateral action would not be repeated and would not lead to a further worsening of the financial situation. Despite the obvious cause of the United Nations financial crisis, some were seeking to deflect the focus away from their failure to meet their obligations by focusing on other factors. Economic underdevelopment, political change and transition, and temporary financial problems for different reasons continued to hamper the ability of some countries to pay. But those factors did not detract from the fact that the Organization's capacity to serve Members would be crippled as long as prospects for assessed receipts from important contributors, and especially from the major contributor, remained uncertain. Any consensually agreed upon solution to the financial crisis still required that all Members jointly pledge to pay their assessed contributions in full and on time. Simultaneously, those in arrears must immediately announce a schedule for settlement. "There can be no progress in the on-going efforts for financial and other reforms if all of us are not willing to abide by our commitments to the United Nations."

JEMAT HAJI AMPAL (Brunei Darussalam) said the uncertainty in payment of dues to both the regular and peace-keeping budgets victimized troop- contributing countries. In addition, it curtailed activities designed to benefit Member States. The financial problems of the United Nations should be settled through consultations involving all Member States. Short-term measures that would place pressure on some countries would be inappropriate and unfair. Brunei would accept only measures that enjoyed consensual support. Proposals to reform the United Nations financial management should be accompanied by political commitment to implement them. Attempts to reduce mandatory contributions without consultations with other Member States was not helpful to the United Nations. His delegation welcomed the Secretary- General's proposal to hold a special meeting of the United Nations to discuss the financial problems.

He said solutions should be reached in the form of a comprehensive package of measures. Those should include measures to ensure full and timely

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payment of assessed contributions by all members and a new scale of assessments that was fair and equitable. They should also include steps to streamline the work of the United Nations and a clear prioritization and possibly reduction of activities that might have become obsolete. Efforts to eliminate duplication should not affect the implementation of mandated programmes. The capacity to pay should remain the fundamental criterion for assessing Member States. He was concerned at attempts to apply per capita income as a criterion in finding a new scale for apportioning peace-keeping costs. Such methods tended to be inaccurate and unfair as they discriminated against countries with small populations.

SERGEI V. LAVROV (Russian Federation) said the United Nations abnormal financial situation could be explained by a number of problems. Unjust distribution of expenditures for United Nations activities among its Members still remained. It was common knowledge that the method of calculating the scale of assessments of the regular budget and the peace-keeping operations should be improved. The time had come to adopt specific measures on the basis of several expert studies. The Organization's financial difficulties were also, in many respects, the result of the policy of some Member States. Undoubtedly, United Nations reform was long overdue in order to increase its efficiency, eliminate duplication and obsolete programmes, and reduce budget expenditures. Nevertheless, the reforms could only be carried out by collective rather than unilateral efforts, and not at the expense of international obligations.

Despite some economic difficulties, for the last two years, Russia had paid its full contributions to the regular budget and made its payments to the budgets of peace-keeping operations, exceeding current assessments, he said. In other words, Russia was reducing in real terms its arrears to the United Nations. This year, it had already contributed over $323 million, paying $120 million of that amount in October, the most difficult financial time for the Organization. Russia had decided to pay its arrears in full in seven years. That decision should give real support to current reform efforts based on collective endeavours by the Member States.

ZULKIFLI ADNAN (Malaysia) said any unilateral decision to reduce United Nations assessments was illegal and totally unacceptable. The United Nations Legal Counsel had stated in a legal opinion that Member States "would be legally obligated under Article 17 of the Charter to pay at the existing rate determined by the General Assembly". He also recalled that the economic benefits to New York from the United Nations presence were immense. The host country also gained in terms of the placement of staff in the professional category and above recruited to posts subject to geographical distribution. All Member States should honour their obligations in time and in full. He expressed the hope that the United States would meet its obligations as soon as possible. He supported the call for a special session of the United Nations to deal with the financial crisis.

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PRAYONO ATIYANTO (Indonesia) said many developing countries, including his own had responded positively to the Organization's critical financial situation. They had tried to become current with their outstanding contributions to the regular budget, despite increased internal demands on their limited resources. However, the reduction in such outstanding contributions had not had an impact on the Organization's regrettable cash flow. Member States, especially major contributors should initiate more concrete action regarding the financial situation. There must be innovative ways to resolve the complex problem. The Indonesian Foreign Minister had proposed that the question be addressed at the highest political level, including through the possible recourse to a global taxation schemes.

Noting a number of short-term steps by the Secretary-General to conserve cash, he said they in no way solved the Organization's basic financial problems and would only result in an unfair burden to the developing countries. The fundamental cause for the financial crisis was the failure of Member States, especially a major contributor to meet obligations to the Organization in time and in full. The financing of peace-keeping operations should take into account the ability of the economically more developed countries to make relatively larger contributions and the relatively limited capacity of the economically less developed countries to contribute to such operations. Therefore, any unilateral measures by a major contributor to limit its assessed contributions to 25 per cent were not justified.

YURI ORANGE (Belarus) said several Member States had insisted that among the chief reasons for the crisis was the non-observance of the principle of the capacity to pay and the fact that the United Nations was not living within its means. He supported the short-term measures taken to conserve the cash of the United Nations. Radical measures such as the writing off of some of the accumulated arrears should be considered. The Organization should also react quickly to changes in countries. Opportunities for savings existed in areas such as conference services and in the production of documents. Also, this was not the time to increase staff salaries.

FUMIAKI TOYA (Japan) said that his delegation fully shared the concerns in the declaration of the Presidency of the European Union and the statement of the foreign ministers of the Nordic countries on the current financial crisis. The adverse effect of non-payment on the reform process of the United Nations was a cause for concern. The refusal to pay up did not facilitate efforts to achieve a more efficient United Nations; all Member States should fulfil their financial obligations.

He said the high-level working group on the financial situation of the United Nations should resume its substantive discussions as soon as possible. Japan would cooperate to make it succeed.

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MAMADOU SERME (Burkina Faso) said there should be a decentralized procurement procedure for peace-keeping operations. The nature of purchasing should be attuned to the nature of an operation and goods should be bought from countries neighbouring an area of operation. Only redoubled efforts would get the Organization out of its troubles.

RICARDO G. CASTANEDA-CORNEJO (El Salvador) said financing the United Nations had obviously not been a priority matter for Members given that the financial crisis had grown year after year till it had reached the current level. The amount of arrears showed the gap between the declaration of States regarding the importance of the Organization's role and their practices. The United Nations was the only universal machinery to coordinate global efforts for peace and development. There had been a constant reiteration of those ideals and the need to give the Organization the resources to meet the demands placed upon it. However, evidenced by the profound crisis those declarations had not been translated into action which would enable the United Nations to meet the greater demands placed upon it.

He said the critical financial situation had become an obstacle to the Organization's ability to meet the increased demands placed upon it, had a serious effect on development efforts and would weaken confidence in the Organization. Members must ensure that the United Nations was not hamstrung by financial crisis and that it had a secure basis to continue its work without having to beg. Reform would not work if there was not a broader and more secure financial basis for its operations. If the world wanted the United Nations to be strong and capable of meeting future obligations, then nations, large and small, must pay up on time and in full. Debtor States particularly the largest contributors must abide by financial obligations in keeping with their obligations under the Charter.

NITYA PIBULSONGGRAM (Thailand) said his Government shared the concern of others that the increase in projected outstanding contributions was due in large part to the reduced payments expected from a major contributor. He emphasized the legal obligations of Member States to bear the expenses of the Organization as apportioned by the General Assembly. The reference to the requirement for Members to pay their assessed contributions in full and on time had been made so often that it had become a vacuous repetition of principle. A new approach was needed that would encourage Members to pay assessed contributions in full and on time, as well as to settle their arrears and keep down the expenses of the Organization, particularly peace-keeping expenses. If Member States were unable or unwilling to support peace-keeping operations by providing them with requisite resources then the international community should consider limiting the Organization's peace-keeping operations to the level of financial resources Member States were willing and able to provide.

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The problem was no longer merely a financial question but an urgent political one, he continued. The Committee's efforts to reform the process of peace-keeping budgets did not address the heart of the matter, namely the failure of a large number of Member States to meet their obligations under the Charter. Some Members were genuinely unable to meet obligations due to problems beyond their control and many, Thailand included, while paying in full, could not do so regularly on time due to national budgetary processes. But the current cash-flow problems were not directly linked to the existing system of assessments. No reform of the scale of assessment could address the Organization's financial difficulties if Member States did not assume their full responsibilities.

CHRISTIAN BENNETT (Australia) said his delegation rejected any action to unilaterally cut rates of assessments. Australia would not accept a situation whereby the largest contributor, by its failure to comply with the Charter, would destabilize the operation of the United Nations. Reforms of the scale of assessments should be undertaken in conjunction with measures to recoup outstanding arrears.

He said there should be efforts to examine options for supplementing Member States' contributions with external sources of finance. Australia would work with other delegations to consider how best to move the issue ahead. As a first step, further research into the technical accounting and legal issues associated with external financing should be conducted. Political dialogue should be started in the high-level working group on the financial situation of the United Nations. The issue should be examined seriously without any pre-judgements of the questions of principle or practicability involved.

Austerity measures announced by the United Nations should not harm the operations of the International Criminal Tribunal for the Former Yugoslavia, he continued. Its judges had expressed concern that financial restrictions on the travel of investigators, lawyers and witnesses could undermine its judicial processes. He expressed the hope that the restraints imposed by the Secretariat were not applied indiscriminately, so as not to undermine the Tribunal's mandate.

SYED RAFIQUL ALOM (Bangladesh) said financing of the United Nations had increasingly been made subject to certain conditionalities by some Member States while some had made it a habit to withhold their contributions. Examination of the Organization's financing was important because it was part of a broader debate about how to build a lawful and just world order, while there was still an opportunity to do so. Funding by Member States was based on a democratic and equitable principle which could not be diluted without eroding or endangering the whole United Nations system.

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Financing of the United Nations was apportioned according to Member States' capacity to pay. Underlying that principle was the notion that it was at least as difficult for poorer States to find and contribute a small sum of money as it was for rich ones to pay larger contributions.

He said it was an intrinsic obligation of United Nations membership for all governments to foster widespread understanding in their respective legislatures and among the wider public of the principle of capacity to pay. Yet, Member States who had taken the lead in that respect had often been uncommitted when it came to discharging their financial obligations. The experience of the last 50 years had shown that it was not healthy for the Organization to be largely dependent on the contributions of those whose assessed contributions provided such a large amount of its budgets.

HO TONG YEN (Singapore) said the payment of dues was a binding legal obligation which could not be abrogated by national laws. In the United Nations Headquarters Agreement Case of 1988, the International Court of Justice had ruled that a State could not plead the provisions of its municipal law as a valid reason for violating international law. Article 27 of the Vienna Convention on the Law of Treaties had provided for the same principle.

He said the main tool for getting dues paid was the provisions of Article 19 of the United Nations Charter. Exceptions should be granted with caution and only to countries suffering from genuine economic difficulties beyond their control, but which none the less intended to pay their dues eventually. A scheme of incentives and disincentives was needed to encourage Member States to pay up their dues on time. Interest should be charged on late payments of assessments. The current payment system rewarded late payers at the expense of those who paid up on time. Troop contributors that had paid up their dues should be given priority in reimbursements for peace-keeping expenses.

ANATOLI M. ZLENKO (Ukraine) said his country had accumulated arrears due to the outdated mode for assessing the expenses of the United Nations regular budget and peace-keeping operations. Ukraine had been penalized twice by the Organization. Its dues for peace-keeping operations had been increased by more than one and a half times since 1992 and those to the regular budget were three times higher than its current capacity to pay. Ukraine had asked to be placed in the group (C) of "economically less developed countries" of the scale of assessments for peace-keeping operations. Despite the fact that its per capita gross national product (GNP) had dropped to $1,500, as calculated by the World Bank, Ukraine continued to belong to the group of "economically developed countries" of that scale. A solution to the problem could not be postponed further. Since its independence, Ukraine had contributed almost $30 million to the United Nations and, so far in 1995, its contributions had reached $15 million. It would increase by another $2 million by the end of

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the year. Since it had been unable to pay its arrears, Ukraine should be released from the responsibility of those arrears.

SHAUKAT MAZARI (Pakistan) said the link between the political dictates and financial needs of the United Nations was inseparable. Its political mandate must be coupled with effective funding based on realistic considerations rather than short-term assessment that would further weaken emerging democracies or the struggling economies of developing countries. The lack of financial resources had already severely hampered the Organization's work and the situation called for immediate remedial action.

He expressed concern with the lack of resources for peace-keeping operations and said all Members must pay their assessed contributions on time and in full in accordance with the existing scale of assessment, which took into account the special responsibilities of the Security Council's permanent members as well as the other Members' capacity to pay. As a developing country, Pakistan was deeply concerned over the adverse effects that the deteriorating financial situation had on the reimbursements of troop contributors. If the present situation continued there was a danger that peace-keeping operations would suffer. It was important to undertake effective planning, budgeting and administration of peace-keeping operations to ensure they were put on a sound footing.

SHOONG CHULL SHIN (Republic of Korea) said his government was concerned that at a time when there were increased demands on the United Nations, its financial difficulties continued to deepen. It could not possibly continue to do its work without appropriate funding. It was high time for all Member States to make the utmost effort to build a solid financial basis for the Organization. His Government was concerned at the practice of borrowing from the peace-keeping budget to fund the activities covered by the regular budget. It was also troubled that peace-keeping activities had been seriously affected by cash deficits.

The Secretary-General's conservation measures were only a short-term response to the current cash crisis and they could not be a substitute for full payment of assessed contributions by Member States, he said. Reimbursements to troop contributors and payments of Letters of Assist to Governments were delayed. The magnitude of the amount owed placed an unfair burden on such countries and could undermine troop contributor's willingness to participate in peace-keeping operations. He urged Member States, especially major contributors to meet their Charter obligations by paying assessments on time, in full and without conditions.

LARBI DJACTA (Algeria) said that annex 2 of the Secretary-General's report which contained a list of names of countries which had paid their contributions had omitted Algeria. He stressed that Algeria had paid and asked for clarification from the Chairman.

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WILLIAM GRANT (United States) said that several delegations made statements about his Government's payment of its assessed contributions and he reserved the right to reply till a later date.

Mr. DJACTA (Algeria) said he wanted an answer to his question without waiting for the next meeting.

The Chairman, ERICH VILCHEZ ASHER (Nicaragua), said Algeria's request would be answered at the next meeting.

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For information media. Not an official record.