UNITED STATES PLACES NEW CONDITIONS ON PAYMENT OF ARREARS, USG FOR ADMINISTRATION AND MANAGEMENT TELLS FIFTH COMMITTEE

9 October 1996

Press Release
GA/AB/3091

UNITED STATES PLACES NEW CONDITIONS ON PAYMENT OF ARREARS, USG FOR ADMINISTRATION AND MANAGEMENT TELLS FIFTH COMMITTEE

19961009 Demands Include Cost Reductions in UNCTAD, DPI, Regional Commissions and Conference Services; Also 10 Per Cent in Staff Cuts

The United Nations must reduce costs in the amount of $100 million from the United Nations Conference on Trade and Development (UNCTAD), the regional economic commissions, the Department of Public Information (DPI) and conference services, and cut staff by 10 per cent before the United States pays some of its arrears to the Organization, the Fifth Committee (Administrative and Budgetary) was told this morning.

The Under-Secretary-General for Administration and Management, Joseph E. Connor, provided that information to the Committee in an address on the state of United Nations finances. Those conditions were attached by the United States Congress to that country's payment of $50 million of its arrears to peace-keeping missions. Another condition, he said, would have the General Assembly adopt a 1998-1999 budget outline below $2.61 billion.

Mr. Connor added that the United States budget legislation, passed on 30 September, had appropriated $313 million as American regular budget dues for 1996, of which $213 million would be received by the end of the year. The remaining $100 million was not expected until late January 1997, subject to another condition: that the United Nations had taken no action in 1996 to exceed its 1996-1997 $2.61 billion budget.

The United Nations would end the year with an overall cash positive of $692 million, Mr. Connor forecast. That would be comprised of a $103 million deficit in the combined General Fund -- the regular budget, the Working Capital Fund and the Special Account -- and a $795 million positive balance in the peace-keeping accounts.

Reacting to the information on the conditionalities by the United States, the representative of Mexico expressed her "feeling of discomfort" on how that State would treat its financial obligations. The "Group of 77" developing countries and China did not accept the attachment of conditionalities to the payment of dues and arrears, said Costa Rica's

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representative on their behalf. The imposition of conditionalities could mean that the United Nations 185 Member States could also do so, Indonesia's representative said. China warned that the Organization would collapse if that happened.

The representative of Canada said that the Organization's treaties were legally binding and could not be nullified by one Member State and its legislature. The approach taken in presenting one Member State's decisions risked creating the impression that "those conditions enjoyed a legitimacy" in the Secretariat, he added.

Responding to those statements, the representative of the United States stressed that over $400 million of the United States dues would be paid without conditions. The United States had received the delegates' message but he could not change the requirements imposed on his delegation, which would convey those comments to his authorities.

Cuba's representative stressed that the Committee was discussing a matter of principle and, when Member States had obligations, they should meet them. The interests of all States should always be considered on the basis of equality, she added.

The representatives of India, Uganda, United Kingdom, Bangladesh, Colombia, Trinidad and Tobago, Malaysia, Ireland (on behalf of the European Union), Portugal and Uruguay also spoke on the matter.

Also this morning, speaking on the scale of assessments, the representative of Japan said that the concept of "responsibility to pay" should be introduced as a criterion for assessing permanent Security Council members, taking into account their special status. Uganda's representative said that Member States had to muster the necessary courage and political will to overcome their entrenched positions on the principle of capacity to pay. Only that would ensure consensus on the scale.

The Committee is scheduled to meet again at 10 a.m. on Friday, 11 October, to continue discussing the scale of assessments.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to continue its general debate on the scale of assessments for sharing United Nations expenses among Member States. Also this morning, the Under-Secretary- General for Administration and Management, Joseph E. Connor, was scheduled to make a statement on the state of the Organization's finances.

On the scale of assessments, the Committee had before it a report of the Committee on Contributions, which was set up to advise the General Assembly on the apportionment of United Nations expenses, the dues of new Members, appeals by Members for a change in their assessments and on the application of Article 19 of the Charter in cases of arrears in paying assessments. (For background on the scale of assessments, see Press Release GA/AB/3089 of 7 October.)

Statements on Scale of Assessments

MASAKI KONISHI (Japan) said that administrative, financial, economic, social and Security Council reforms should be carried out in a balanced manner. Addressing the administrative and financial problems alone would not accord with the original concept of United Nations reforms, which were intended to strengthen the Organization. A distinction should be made between the problem of cash flow and the systematic issue of financial reform. The problem of cash flow was the key to resolving the immediate cash crisis, and the only way forward was for all States to pay up their dues. Financial reforms should be comprehensive and include both a review of the current scale methodology and specific measures to ensure that States paid their dues.

The representative said that, in addition to the current use of the principle of capacity to pay, the concept of "responsibility to pay" should be introduced to take into account the special status of permanent members of the Security Council.

He said that discussions on the review of the methodology used to determine the scale of assessments should take into account the deliberations of the high-level working group of the General Assembly on the financial situation of the Organization, which would resume in January 1997. A rush towards a conclusion should be avoided. The issue of the scale of assessments could not be dealt with solely as a technical matter since it had political dimensions. Japan, for its part, was committed to meeting its financial obligations.

CHRIS KATSIGAZI, Permanent Secretary and Head of the Diplomatic Service of the Ministry of Foreign Affairs of Uganda, expressed support for the principle of capacity to pay. Support for that principle was critical to address the unfair burden that developing countries, and the least developed

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countries in particular, continue to shoulder because of the imperfections in the present scale methodology. Unless Member States overcame their conflicting positions on the principle, consensus on the scale in the Committee on Contributions and in the Assembly would remain unattainable. Member States had to muster the necessary courage and political will to overcome their entrenched positions. The issue of non-payment of contributions should be addressed separately in the context of the Fifth Committee's agenda item on the financial situation of the United Nations.

He said the scale's floor rate of 0.01 per cent -- the minimum rate -- was an unjustifiable assessment surcharge imposed on a majority of least developed countries and small island developing countries that had been arbitrarily imposed by the Assembly on purely political grounds. It provided relief to the wealthier developed countries and was an anomaly that should be addressed as a matter of priority. He, therefore, welcomed the Committee on Contribution's recommendation that the scale for poorer countries be based on the actual share of adjusted national income. The Committee's suggestion of a gradual reduction of the length of the base period offered a good basis for further deliberations on the scale.

While he agreed with the Committee that price adjustment rates of exchange or other conversion rates be used to determine the assessment rates, he shared many delegations' reservations on the use of purchasing power parities as conversion rates. The debt-burden adjustment was of continued relevance as a factor in the scale methodology. The maintenance of low per capita income adjustment was another important factor. The continued arbitrary fixing of a ceiling rate imposed undue burden on weaker countries. The largest contributor should appreciate the subsidy it currently enjoyed with a ceiling rate of 25 per cent. The Fifth Committee's debate on the scale of assessments should provide a good basis for subsequent negotiations so that Member States could agree on the issues and adopt specific guidelines to assist the Committee on Contributions in the preparation of the scale for 1998-2000.

Statements on United Nations Financial Situation

JOSEPH E. CONNOR, Under-Secretary-General for Administration and Management, provided the Committee some significant information on United States legislative developments and their effect on the United Nations current and projected year-end cash position. At the end of September, unpaid assessments due from all States totalled $2.7 billion. While it was a reduction of some $165 million from the position as of the end of August, it was too high for the financial health of the Organization.

On the regular budget's cash position, he said that, as of the end of September, the negative position had grown to $119 million. Outstanding dues then totalled $714 million, of which $398 million was for 1996 and

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$316 million for prior years. The United States owed 74 per cent of the total.

Turning to the issue of the United States, he said that following last April's approval of a national budget by that Member State for its 1995 fiscal year, the United Nations was advised to expect $304 million appropriated for the regular budget, by 30 September. The United Nations had received all the funds appropriated by the United States in its 1995 national legislation enacted last April. The recent United States law passed on 30 September had appropriated $313 million to pay for United States regular budget dues for 1996. The United Nations expected to receive $213 million of that by the end of December. The remaining $100 million was not expected until late January 1997, subject to certification by the United States Secretary of State that the United Nations had taken no action in 1996 to exceed its 1996-1997 budget of $2.61 billion.

On the projections of regular budget cash flow, the Under-Secretary- General said that the Organization would end the year with a minus $103 million balance, down from the previous forecast of minus $243 million. The new minus $103 million forecast compared favourably with the negative figure of $198 million at the end of 1995.

Unpaid dues for peace-keeping operations totalled just under $2 billion as of 30 September, he said. He projected that peace-keeping cash would be $795 million by 31 December, a reduction of $71 million. For peace-keeping, the new United States legislation had appropriated $282 million for current assessments and $50 million for arrears. But the payment of that $50 million would be subject to the United Nations meeting three conditions, any two of which must be met in order to obtain certification. They are as follows: further cost savings aggregating at least $100 million in the United Nations Conference on Trade and Development (UNCTAD), the regional economic commissions, the Department of Public Information (DPI) and in conference services; a cut in personnel by the end of 1997 that would at least equal 10 per cent of positions available on 1 January 1996; and the adoption of a 1998-1999 budget outline below $2.61 billion as part of a five-year programme to achieve major cost-saving reforms in the United Nations and specialized agencies.

Apart from the new United States legislation on peace-keeping assessments, no significant changes had been made in other forecasts, he said. The United Nations still intended to pay $350 million to troop providers in 1996, with $279 million already paid. It would also make a special year-end payment of $275 million to troop providers, contingent on the receipt by year- end of the full $400 million expected from the Russian Federation in 1996 of which that country had paid $210 million. The payments by the United Nations would reduce to $700 million the sums owed to Member States for troop and equipment costs at the end of 1996.

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Mr. Connor then forecast that the combined General Fund [a combined fund which includes the regular budget, the working capital fund and the special account] would end the year with a deficit of $103 million, while the peace- keeping accounts would have a positive balance of $795 million. The combined cash position of the Organization would thus be $692 million. Despite the relatively healthier outlook for the regular budget, the Organization had had to borrow from peace-keeping accounts to continue with its basic work. Such borrowing would continue in 1997. There was a clear danger that the financial crisis would continue diverting attention from and hampering efforts to reform the Secretariat. He said that $2.1 billion in dues would be owed to the United Nations at the end of the year, with some 65 per cent owed by the United States.

MARTA PEÑA (Mexico) welcomed the fact that the Secretariat had developed the practice of keeping delegations informed of the Organization's liquidity. However, it was "discomforting" that the Secretariat had informed about one Member State's legislation and how that State would act regarding its financial obligations to the United Nations. The onus was on that Member State to indicate what its approach would be regarding its outstanding assessments. She reiterated that she had to express her "feeling of discomfort".

SAM HANSON (Canada) said he shared Mexico's discomfort. The information provided was better news, including the payments that were about to be made. However, he continued to be concerned that the payments referred to did not represent full payment and continued to have conditions attached. He stressed that all assessed contributions must be paid in full, on time and without conditions.

ANA SILVIA RODRIGUEZ ABASCAL (Cuba) said she supported fully Canada's statement regarding the mandatory nature of payments. Assessed contributions should be made without conditions. The Secretariat should confine itself to reporting on the Organization's current financial situation and not be the spokesman for Member States' internal legislation. If it continued to do so, it would never finish its work.

VIJAY GOKHALE (India) sought additional information on the amount of the United States' unpaid dues. Referring to the United States arrears for peace- keeping, he asked if the arrears quoted were to be paid on certification or if they were also contingent on certification.

NESTER ODAGO-JALAMAYO (Uganda) said he would echo the points made by Canada, Mexico and Cuba. He would also express his "disquiet" on the issue. The Assembly had already approved a budget and assessments. Therefore, it was very disturbing to hear of new conditions regarding those issues. Was it going to become a practice for Member States to give conditions after they had accepted their assessment? he asked. Any report on the Organization's

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financial situation should not be based on what Member States would like to be done.

NICK THORNE (United Kingdom) said he shared the discomfort expressed by the representative of Mexico regarding the attachment of conditionalities to the payment of dues by the United States. He said he appreciated the updates from the Under-Secretary-General and that he was still waiting for the latest figures on what was owed to those who had contributed troops and equipment to peace-keeping missions.

SYED RAFIQUL ALOM (Bangladesh) said that the Under-Secretary-General should clarify what he had said regarding chart 17 on the financial situation of the Organization, that was distributed by Mr. Connor to Committee members, and his statement in relation to that chart that there was a clear danger that the financial crisis would continue to divert attention from and hurt efforts to reform and renew the Secretariat.

AURELIO IRAGORRI (Colombia) said that the conditions attached by the United States for paying its dues had been received with discomfort by some delegations. While some working groups had been deliberating tirelessly to solve the United Nations financial situation, the situation was being exacerbated by one Member State. All it would take to solve the problem of cash flow would be for the country that owed 75 per cent of the debt to the United Nations to pay up its dues.

The representative suggested that all delegations could be asked to meet with the United States, listen to its conditionalities and then decide whether they would be ready to accept them or not. The fact that working groups and other bodies met throughout the year to discuss how to solve the financial crisis only to be informed that one State was placing conditions for the payment of its dues was one of the reasons why there was inefficiency in the United Nations.

ZHANG WANHAI (China) said that it was an obligation for all Member States to pay their dues in full, on time and without conditions. China was not comfortable with hearing that one Member State had attached some conditions for the payment of its arrears. If all Member States did the same thing, the United Nations would collapse. He expressed hope that the Member State in question would change its position and pay up its arrears on time and without conditions.

NAZARETH INCERA (Costa Rica), speaking on behalf of the "Group of 77" developing countries and China, said she did not accept the attachment of conditionalities to the payment of dues and arrears.

RAJIV RAMLAL (Trinidad and Tobago) said he shared the concerns expressed by other delegations regarding the preconditions for payment of dues. He

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informed the Committee that his country had adopted a three-year payment schedule to clear up its dues. The period would start in 1997, and the Government of Trinidad and Tobago would continue to meet its obligations. It would pay up its dues to the regular budget and the International Criminal Tribunals for Rwanda and the former Yugoslavia by early 1997, but those to peace-keeping would be paid throughout that year. Trinidad and Tobago would clear up its arrears before the end of its three-year payment schedule. It had paid more than 5 million Trinidad and Tobago dollars (about $810,000) to the United Nations this year, more than its entire 1996 assessments for both the regular budget and peace-keeping operations.

ADNAN ZULKIFLI (Malaysia) associated himself with the statements that had expressed concerns about unilateral decisions made by the major contributor on conditions for payment of its assessed contributions and on reducing its peace-keeping assessment. The Organization's assessments were mandatory and should be paid without conditions. He asked what was the outstanding amount of the United States peace-keeping assessments.

PATRICK KELLY (Ireland), speaking on behalf of the European Union, reiterated the Union's strong view that all payments assessed on Member States must be paid in full, on time and without conditions. He also requested updated information on the amounts owed to troop-contributing States.

Mr. HANSON (Canada) said he shared Colombia's concern about the need to find a solution to the financial crisis. However, he was not comfortable with the idea of unilateral conditions imposed by one Member State. Solutions to the financial crisis must be based on the United Nations Charter. The Organization's treaties were legally binding and could not be nullified by a single Member State and its legislature. Neither could unilateral conditions be accepted by the Secretariat or the Member States. Reiterating his "discomfort", he said he welcomed prompt and full briefings on the financial crisis. However, the approach taken in the presentation ran the risk of presenting Member States' decisions and creating the impression that "those conditions enjoyed a legitimacy" in the Secretariat -- which they did not have.

REGINA EMERSON (Portugal) raised a technical point about the unpaid regular budget assessments of $700 million and the $2,000 million in peace- keeping assessments (as at 30 September 1996). Although that situation would improve by year end, the large gap in the amounts owed and the Organization's cash needs were of concern. She wondered how the Organization could survive when the amount of unpaid assessments was so large and how the Secretariat managed its affairs when faced with that enormous gap in its cash flow.

PRAYONO ATIYANTO (Indonesia) said he welcomed the updated information. Mr. Connor's inclusion of the information on the United States' national legislation could help other Member States to understand developments in that

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country. He was more convinced now that the Organization's biggest problem was the non-payment of assessments by Member States. It was not necessary or proper to reflect on one Member State's national legislation to the discomfort of other Member States. No conditionalities should be imposed on the Organization. Such action would mean that 185 Member States could impose their own conditionalities. He asked for more information on the United States share of peace-keeping assessments and on the gap between paid assessments and the cash available to the Organization.

HERBERT GELBER (United States), referring to Member States comments, said he was "disquieted by their disquiet". However, he could not subscribe any cures for his colleagues who were disquieted. He stressed that the over $400 million of the United States assessments were not subject to conditions. "We have had not paid in full, but neither have half of the United Nations Member States." The conditions that were stated were constraints which affected his Government and which permitted the President and others to make certain payments.

The United States had gotten the delegations' message, but he could not change the requirements imposed on his delegation, he said. It was important for the Fifth Committee to know those requirements and, in turn, he could only convey their comments to his authorities. "Beating up on me for the rest of the session would only waste our collective time." He expressed interest in seeing the information on the amounts owed to troop contributors and urged the Committee to deal with the conditions that impacted on the United States with realism. The United States delegation would try to be helpful. It had limited powers which included conveying Member States messages. "Let us move beyond the mantras" to lasting solutions for resolving the Organization's financial situation in order to move forward in the months ahead, he concluded.

BERNARDO GREIVER (Uruguay) shared the concerns that had been raised by some delegations on conditionalities. He expressed profound concern at the continued delays in reimbursement for troops and equipment to countries that supplied them. Due to the non-reimbursement of their costs, the troop-and equipment-contributing States ended up subsidizing the regular budget deficit. He sought more information on the reimbursement to troop contributors.

NORMA GOICOCHEA ESTENOZ (Cuba) said, "While some States might talk of Mylanta, in Cuba we believe in alternative medicine. So, we could recommend tea or mint tea." The point, however, was that the Fifth Committee was discussing a matter of principle and, when Member States had obligations, they should meet them. The United Nations was not the congress of any country. The information that would be provided to the Fifth Committee by the Under- Secretary-General should not include references to developments in the United States Congress. While Cuba had not paid up all of its dues, that was because it was facing a tough economic situation, as many observers could readily

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affirm. It was, however, committed to paying its debts to the United Nations. She thanked the delegation of Trinidad and Tobago for the information it had provided on how it would reduce its debts.

The representative recalled that "a certain Group of 18" and other measures had been introduced by the General Assembly in response to a group of congressional amendments, such as the [United States Senator Nancy Landon] Kassebaum amendment, in relation to payment of United Nations assessments. The Assembly had adopted such resolutions as 41/213 in order to find a way of resolving the United Nations financial problems. The interests of all Member States should always be considered on the basis of equality.

Replying to statements by delegations, Mr. CONNOR said that the United States owed $906 million to peace-keeping missions. Some $45 million was expected soon from that country. The $906 million would be owed even after the United Nations had received nearly $150 million from the United States. The three conditions he had spoken of were attached to the payment of $50 million arrears owed to peace-keeping missions. One condition was attached to the payment of regular budget dues: the United Nations should not go beyond its budget of $2.608 billion. The Secretariat did not intend to confer legitimacy to conditionalities. It only intended to provide information on their existence and impact on the preparation and revision of forecasts. The United Nations owed some $1 billion to troop and equipment contributors. It financed itself by withholding reimbursements when it did not receive Member States' dues.

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