FAILURE TO REDUCE US ASSESSMENTS COULD SERIOUSLY DAMAGE ITS RELATIONSHIP WITH UN, FIFTH COMMITTEE IS TOLD

20 October 1997

Press Release
GA/AB/3170

FAILURE TO REDUCE US ASSESSMENTS COULD SERIOUSLY DAMAGE ITS RELATIONSHIP WITH UN, FIFTH COMMITTEE IS TOLD

19971020 Fourteen Speakers Take Part in First Day of Debate on Scale of Assessments

Failure to revise the regular budget scale of assessments could seriously damage the United States' relationship with the United Nations, that country's representative warned this afternoon as the Fifth Committee (Administrative and Budgetary) began debating how to share out the Organization's expenses.

The United States was seeking to reduce its regular budget dues to 22 per cent by 1998 and 20 per cent by the year 2000, as well as cuts in its peacekeeping rates to 25 per cent, he said. The adoption of its proposals would enable it to pay off the bulk of its arrears and firmly restore reliable financial and political support for the United Nations. A revision of the scale would help the Organization end its unhealthy overdependence on one nation.

But, the European Union and associated States, speaking through Belgium's representative, said any cut in the ceiling rate below its current 25 per cent would be "unreasonable and contrary to the principle of equity", as the current rate itself departed from the principle of capacity to pay. The floor rate should either be abolished or substantially lowered.

Major revisions to the methods used to determine the scale would neither solve the Organization's financial situation nor guarantee payment of dues promptly and in full, the representative of the United Republic of Tanzania said on behalf of the "Group of 77" developing countries and China. The cash crisis could be solved when States cleared their arrears and paid their future dues in full, on time and without benchmarks.

The representative of Paraguay, speaking for the Rio Group, said that both principal debt and interest payments should be used in granting adjustments for external debt. A further adjustment should be granted States with low per capita incomes.

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A longer base period would provide stability and avoid extreme variations in the scale of assessments, the representative of the Philippines said for the Association of South-East Asian Nations (ASEAN). In lowering the floor rate from 0.01 per cent to 0.001 per cent, the interest of other least developed countries that might be affected by such a reduction should be considered.

Since Japan's share in the world economy was about 17 per cent, the proposal to have its assessment exceed 20 per cent would create problems in terms of equity, its representative said. The concept of "responsibility to pay" of permanent members of the Security Council should be included in the scale method.

Also this afternoon, statements were made by the representatives of Latvia, also on behalf of Lithuania and Estonia; Australia, for Canada and New Zealand; Belarus; India; Colombia, for the Non-Aligned Movement; Malaysia, Kuwait and Bangladesh.

The report of the Committee on Contributions on the scale of assessments was introduced by the Chairman of that Committee, David Etuket (Uganda).

The Fifth Committee will meet again at 10 a.m. tomorrow, 21 October, to continue discussing the scale.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this afternoon to begin discussing the scale of assessments for the apportionment of the expenses of the United Nations. It had before it the report of the Committee on Contributions (document A/51/11 and Corr.1), containing eight proposed scales. One of the eight is currently in use, the other seven represent proposals put forth by States and groups of States during the fifty-first session of the General Assembly. (For background on the report, see press release GA/AB/3169 of 17 October.)

Statements

DAVID ETUKET (Uganda), Chairman of the Committee on Contributions, introduced the Committee's report on the work of its fifty-seventh session. In response to the Assembly's request for recommendations on eight proposals for scales of assessments, outlined in resolution 51/212 B, as well as its request that certain issues be kept under consideration, the Committee on Contributions had tried to formulate a ninth scale proposal. That ninth proposal was to have reflected consensus on all the major elements of the scale. Tentative agreements were reached on certain elements, but continued disagreement in some areas prevented the formulation of a ninth proposal.

Since the conclusion of the Committee's fifty-seventh session, 10 countries had made sufficient payments to avoid sanctions under Article 19 of the Charter, he said. Those countries were: Chad, Republic of the Congo, Dominica, Equatorial Guinea, Grenada, Guinea-Bissau, Kyrgyzstan, Republic of Moldova, Rwanda and Seychelles. In an earlier meeting, he recalled, the Assembly had decided to permit the Comoros, Liberia and Tajikistan to vote through its fifty-second session.

PETER MADDENS (Belgium), speaking for the European Union and Estonia, Hungary, Lithuania, Romania, Slovakia, Slovenia, Czech Republic and Cyprus, said that gross national product (GNP) should serve as the basis for calculating the scale of assessments. Shorter base periods would better reflect the current economic performance of countries. The Union had in the past proposed to reduce the current base period to three years, as recommended by the ad hoc intergovernmental working group on the capacity to pay. The Committee on Contributions had also agreed that the base period be shortened. The Union agreed with that Committee's recommendation on the currency conversion rates that should be used to calculate the scale.

Turning to debt-burden adjustment, he noted that the Committee on Contributions reaffirmed its recommendation that, should the Assembly decide to retain that element in the scale, the adjustments should be based on data of actual principal repayments. Foreign transfers to pay debt were considered in calculating GNP and net national income. Using GNP as the measure of income for the scale would mean that debt-burden adjustment had already been

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taken into account to some extent. That was why the European Union had not included debt-burden adjustment in its previous proposal on the criteria for calculating the scale.

He said the principles of capacity to pay and of fairness should also be considered, especially in the case of States with low per capita income. That could be done by determining a relief gradient, which would make the system progressive and help the poor countries. The need to find a balance between the capacity to pay and fairness had led the European Union to propose a gradient of 75 per cent.

The European Union had since January 1996 proposed that the floor rate should either be abolished or substantially lowered, he said. The Committee on Contributions' proposal to set the floor rate at 0.001 per cent was in agreement with the Union's approach. The existing ceiling rate was a significant exception to the principle of capacity to pay. From that point of view, it was clear that a ceiling for the regular budget scale that fell below the current 25 per cent would be "unreasonable and contrary to the principle of equity". The scheme of limits, which is a mechanism to slow down the rate by which a Member State's dues can vary between two successive scales, should be abolished immediately, as from the first year of the next scale.

DAUDI NGELAUTWA MWAKAWAGO (United Republic of Tanzania), speaking on behalf of the "Group of 77" developing countries and China, said the scale method it had previously proposed and which was one of those presented by the Committee on Contributions was a good basis for negotiations. The Group and China reaffirmed that the principle of capacity to pay remained the cardinal principle in sharing out the Organization's bills. It was democratic as well as equitable; deviation from that principle might have serious consequences for the Organization's well-being.

He said the Group and China maintained that the Organization's problems were due to the non-payment of substantial arrears and contributions by some major States. Viable solutions to the situation could emerge only when States took concrete actions to clear their arrears and pay their future assessments in full, on time and without conditions or benchmarks, in accordance with the Charter. The financial crisis could be solved only if Member States showed firm political will in fulfilling their legal Charter obligations. Since it was not linked to the scale, any revision of the methodology would not solve the financial situation of the Organization as it would neither change the levels of resources available nor guarantee payment of dues promptly and in full. To the contrary, such revisions might hurt the Organization's revenue.

Since decisions should be taken urgently on the scale before the end of this year, he said, the Group and China would negotiate constructively. All consultations should be open and transparent. Any proposal that was discriminatory against developing countries on any pretext was totally unacceptable.

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ULDIS BLUKIS (Latvia), on behalf of Estonia and Lithuania, reviewed recent events in negotiations on the scale. The current methodology was far from stable and ideal, but its reform should be a gradual process. It was important that the scheme of limits be eliminated. He said he placed great hope in the flexibility suggested by the previous two speakers.

Over the next two years, a realistic goal would be to develop a scale methodology that would not only improve equity, but would also be simpler, more transparent and stable, and based on more comparable and reliable data than at present. An improved scale was likely to carry with it indirect long-term benefits, such as better overall financial situation for the Organization, a shorter period needed for negotiations, and an improved image worldwide. Increased inequity in the next and following scales would negatively affect the Organization's functioning.

At present, many Member States carried the maximum arrears allowed under Article 19. Equitable assessments would be easier to pay in full and on time. In considering the scale, short-term benefits, such as the same or fewer basis points in the next scale, had been the focus for many States. Other matters must be considered as well. Decreased assessment rates must be examined against decreasing requirements for peacekeeping operations. Member States had a common interest in approaching the negotiations in a flexible manner.

HISASHI OWADA (Japan) said his country, as the Organization's second largest contributor, was ready to participate actively in the current discussion. The Organization's financial crisis was a cause for grave concern. Unpaid dues, as of the end of September, totaled $2.417 billion, including the regular, peacekeeping and International Tribunals' budgets. All Member States had a solemn obligation to pay their obligations. Concrete measures to compel Member States to make their payments should be considered. He hoped that the high-level open-ended working group on the financial situation of the United Nations would soon resume its work.

His Government was currently pursuing a drastic fiscal reform in order to reduce its deficit, he said. In order to garner national support for paying United Nations dues, all governments required support from their citizens. For that, the scale must be seen as fair. Japan's assessment was almost as great as the combined total assessments of four of the permanent members of the Security Council.

While Japan's GNP share in the world economy was about 17 per cent, some proposed scales would have Japan's assessment exceed 20 per cent, he said. Such a situation would be problematic in terms of equity. Japan had been advocating a concept of "responsibility to pay" to be incorporated with the principle of "capacity to pay". The concept would apply to the case of permanent members of the Council, in view of their special responsibilities under the Charter. Financial obligations should not exceed a State's responsibilities.

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His country's basic position on the methodology to be used in the scale was reflected in proposal "E" in the report of the Committee on Contributions, he said. It was characterized by a base period of six years, a reduction of the gradient to 75 per cent for the low per capita income adjustment, maintenance of the 25 per cent ceiling, and a gradual phasing out of the scheme of limits. Permanent members of the Security Council should not be eligible for a low per capita income adjustment. A gradient of 85 per cent would favour developing countries with larger economies.

The discussion on the scale, which would have widespread repercussions, should focus on the methodology as an integrated whole, he continued. A decision on the scale should be based on consensus, as well as the principle of fairness and equity.

BERNARDINO HUGO SAGUIER CABALLERO (Paraguay), also speaking for the Rio Group -- Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru, Uruguay, Venezuela, Honduras (for Central America) and Guyana (for the Caribbean) -- said that the principle of capacity to pay should remain the fundamental criterion for determining the scale of assessments. Any changes in the method that deviated from the final results of that concept should be minimized. The Rio Group was concerned that the adoption of political formulas could create inequalities in the Organization's distribution of expenses. Two scales presented to the Committee had coincided, indicating the general interest manifested by 133 Member States and majority tendencies. Constant changes to the criteria used for the scale were responsible for the distortions and injustices manifested in it. Measures should be established to ensure stability and equality in apportioning the Organization's bills, in order to avoid abrupt changes in the scale. The maintenance of a stable base period was a basic condition to reflect, with more accuracy, Member States' real capacity to pay.

The Rio Group recognized that the ceiling had been a constant element in the scale, he said. Nevertheless, it also recognized that the existence of a ceiling separated its only beneficiary from its real capacity to pay. A reduction of the ceiling would be an additional subsidy to the Organization's principal contributor by others. Adjustments for external debt must be maintained as an element of the scale, both in terms of principal debt burden and interest payments. Even with the use of GNP, such an adjustment was required. Low per capita income adjustment was essential to the scale and special attention should be given to countries whose situation would be jeopardized if they crossed the threshold for that adjustment. Eventually, the scale should be adopted without a vote.

MILAGROS LAUREL TRINIDAD (Philippines), speaking for the member States of the Association of South-East Asian Nations (ASEAN) -- (Brunei Darussalam, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam) -- said GNP should be used as a starting point for determining Member States' capacity to pay. Since the base period

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should reflect a country's capacity to pay in a realistic manner, a longer one would provide stability, predictability and avoid extreme variations. Debt-burden adjustment, based on the amount of loans held by a State, should be maintained, as should the low per capita income relief and the formula used to determine it.

Turning to the issue of floor rate, she said the Committee on Contributions' recommendation to lower it to 0.001 per cent would provide relief to many least developed and developing countries currently assessed at 0.01 per cent. At the same time, the interest of other least developed countries that might be affected by such a reduction should be taken into account. Individual rates for the least developed countries should not exceed 0.01 per cent. The ASEAN emphasized that any changes in the ceiling rate should not increase developing countries' assessment rates. The group favoured the gradual phasing out of the scheme of limits in the next scale period to avoid a sudden increase in the assessments of those affected by its abolition.

She said that the scale of assessments should be carried to three decimal points and market exchange rates used to convert currencies, except when they caused excessive fluctuations or distortions in Member States' incomes. In such circumstances, the price-adjusted rates of exchange (PAREs) should be used.

MILES ARMITAGE (Australia), on behalf of Canada and New Zealand, said the current scale did not accurately reflect economic conditions. Elements which distorted economic developments should be eliminated. While countries with income below the world average should be granted relief, the extent and distribution of that relief should be reviewed. Current beneficiaries of the low per capita income adjustment would receive a "windfall" if GNP was used as the income measure in the next scale. The principle of capacity to pay was also obscured by the ceiling or maximum rate. The ceiling benefited the wealthiest contributor; that benefit translated into additional burden for the rest of the Member States.

The question at hand was not what scale elements were preferred, but what scale was tolerable, he continued. Ways must be considered to bridge differences. The Committee on Contributions might have shown the way forward in its attempt to develop a ninth scale. That preliminary scale proposal should become a point of departure for the Fifth Committee in its negotiations.

ALYAKSANDR SYCHOU (Belarus) said the Organization's financial stability was largely dependent on the method used to apportion expenses. His country had experienced disproportionate assessment, resulting in its accumulating arrears to the United Nations. Since 1992, in the period of extended deployment of United Nations peacekeeping operations, his country's arrears had exceeded reasonable limits. The scheme of limits should be eliminated

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during the first year of the next scale period. Despite existing distortions of the principle of capacity to pay, his country intended to fulfil its obligations to the Organization.

Those countries experiencing real economic difficulties should not bear a disproportionate portion of the Organization's expenses, he said. While the floor should be reduced to 0.001 per cent, the ceiling should be maintained at the current level. The base period, which had come to obscure the principle of solvency, should not exceed six years. The scheme of limits should be eliminated in 1998. Improvement of the Organization's financial situation required political will.

P.J. KURIEN (India) said the Committee's first objective should be to ensure the clearance of financial backlog and the smooth flow of funds in the future. Some Member States were not able to pay their dues owing to economic underdevelopment, political change or transition and temporary financial problems. As for the criteria to be used for determining the scale of assessments, estimates of GNP should be used, as proposed by the Committee on Contributions. A consensus was emerging on the matter.

He expressed the hope that a compromise would emerge on the question of base period, taking into account the relative merit of having a shorter period and of a longer one. He agreed with the Committee on Contributions' recommendation on how to convert national currencies. Debt-burden adjustment should continue to be used in the scale method.

Welcoming the general consensus on the importance of maintaining the relief given to countries with low per capita incomes, he said such an adjustment was not a distortion, as was argued in some quarters. Rather, it was a moderating element in the current formula for determining how much each country should pay. It allowed the scale to reflect Member States' capacity to pay. The floor rate could be reduced while any consensual solution on changes to the ceiling rate must not shift burdens from developed to developing countries. The scale should be carried to three decimal points.

JUAN CARLOS LONDONO (Colombia), speaking for the Non-Aligned Movement, said the principle of capacity to pay should serve as the main criterion of the new scale. An inadequate modification of the method used in calculating the scale that was not in line with that criterion could cause difficulties. A reduction in the maximum rate of assessment which entrusted additional costs to developing and least developed countries would create major difficulties.

MARZUKI MOHAMMAD NOOR (Malaysia) associated himself with the statements made by the representatives of the United Republic of Tanzania and the Philippines. In the Assembly's general debate, Member States had called for the Organization to be put on a sound financial footing as a prerequisite of successful reform. Clearly, that would require adequate financing from Member States.

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Malaysia was among the 28 Member States that had paid its regular budget contributions in January, within the specified 30-day period, he continued. It also responded promptly to peacekeeping and other assessments. He appealed to all Member States, particularly the largest contributor, to pay in full and on time without conditions.

The Assembly's request that the Committee on Contributions consider eight scales had been unprecedented, he said. At the end of the Fifth Committee's current session, a new scale must be agreed upon. The Group of 77 and China had made great effort to develop a proposal to which all its members could agree. Several elements of that proposal had been supported by the Committee on Contributions, including the use of a six-year base period, a floor rate of 0.001 per cent and gradual elimination of the scheme of limits.

In light of the importance of stability, the new scale should not be recalculated annually, he said. An issue of utmost concern was the proposed reduction of the ceiling. If the ceiling were reduced to 20 per cent, the largest contributor would benefit in the amount of $64.5 million a year. That amount would then be absorbed by other Member States. Under that proposal, Malaysia's assessment would be almost doubled, from 0.14 per cent to 0.272 per cent, which would be contrary to the principle of avoiding excessive changes in countries' assessments. Reducing one State's assessment while unfairly imposing additional burdens on other countries, particularly those with a lesser capacity to pay, would be counter-productive.

ZIYAD MONAYAIR (Kuwait) said the report of the Committee on Contributions had revealed the Fifth Committee's failure to formulate a new scale. Now that the matter had reverted to the Fifth Committee within severe time constraints, consensus might be established. He endorsed the statement made by the representative of the United Republic of Tanzania.

The Organization's financial crisis was not due to the methodology for determining States' assessments, he said. The crisis was due, instead, to Member States' failures to pay their dues. The persistent existence of arrears deprived the Organization of the resources needed to accomplish its goals. The solution was to be found in political will. As an illustration of his country's commitment to the Organization, Kuwait made its payments promptly and in full.

Capacity to pay was the major principle underlying the discussion on the scale elements, he said. The special circumstances facing developing countries should be taken into account.

HUMAYUN KABIR (Bangladesh) said that the socio-economic factors of countries should be considered in calculating the scale of assessments. In view of the continued deterioration of the socio-economic condition of most of the least developed countries, consideration must be given to allow them to benefit from the lowering of the floor rate. He expressed satisfaction with

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the recommendation of the Committee on Contributions in that regard. Bangladesh had taken note of the suggestion to abolish the floor rate to make it compatible with the capacity to pay of the least developed and some small countries.

The low per capita income adjustment was another important element without which the scale method could not produce an equitable result, he said. Debt-burden adjustment should also be considered in setting the scale, especially when most of the least developed and small countries were overwhelmed by debt. The base period should be long enough to absorb fluctuations common in developing countries' economies. Six years was a reasonable compromise.

Any reform of the regular budget scale of assessments would significantly affect that used to finance peacekeeping budgets, he said. The peacekeeping scale should reflect the special responsibility of the Security Council's permanent members as well as their relative ability to contribute. But, it was ironic to note that some major contributors had not been paying their peacekeeping dues, delaying reimbursements to troop-contributing States that were mostly the developing countries that had paid up their assessments. Bangladesh was one of them. After the scale was decided upon, all States must make a solemn commitment to live up to their obligations. "Any unilateral disposition must be avoided, as this would damage the spirit of multilateralism and in the process render the United Nations ineffective."

Continuing, he said it was frustrating that some major contributors were trying to establish a linkage between the revision of the scale and the financial crisis, in order to justify their default. No such linkages existed.

BILL RICHARDSON (United States) said the scale of assessments was crucially important to the Organization and to the United States' engagement in the United Nations. The United States was seeking to cut its assessments to 22 per cent by 1998 and 20 per cent by the year 2000, as well as an immediate cut in its peacekeeping rates to 25 per cent. The passage of that proposal would allow it to pay off its dues and firmly restore reliable and consistent financial and political support for the United Nations. "Of course, I would be remiss if I did not point out that the failure to revise the scale of assessments for United Nations Member States could seriously damage the United States relationship with the United Nations."

Continuing, he said those were some of the choices the United Nations faced, a development that would be a regrettable and sad portent for the future of the United Nations, the United States and the international community. His goal as the United States representative to the United Nations and the goal of the Committee must be to prevent such a disaster.

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The United States' proposal had been introduced in accordance with the principle that the United Nations must not be dependent on a single State for money, he said. Significantly, it was the view long shared by the United Nations, too. In 1946, the Committee on Contributions chose to limit the maximum contribution of any Member State based on the principle that the equality of Member States might be jeopardized if one of them dominated the Organization's finances. The United States, for its part, strongly believed that the United Nations must end its unhealthy overdependence on one nation and adopt new scale of assessments for Member States that accurately reflected modern economic realities.

He said debates on the eight proposals before the Committee should be guided by the following four main principles: the Organization must not be overdependent on one State; the current scale was not tenable; changes in political boundaries and in a nation's economic position should be immediately reflected in that State's assessments; and the criteria used for the scale must be simple, direct, transparent and non-duplicative, with an acceptable minimum rate required for Members States. In addition, the special scale used to finance peacekeeping missions should be disposed of and a formal system developed to pay for their budgets.

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