In progress at UNHQ

GA/AB/3177

'RESPONSIBILITY TO PAY' CONCEPT VIOLATES PREVAILING PRINCIPLE TO DETERMINE ASSESSMENTS, CHINA TELLS FIFTH COMMITTEE

27 October 1997


Press Release
GA/AB/3177


'RESPONSIBILITY TO PAY' CONCEPT VIOLATES PREVAILING PRINCIPLE TO DETERMINE ASSESSMENTS, CHINA TELLS FIFTH COMMITTEE

19971027 The proposal to make the so-called concept of "responsibility to pay" a criterion for determining the scale of assessments violated the principle of capacity to pay currently in use and was untenable, China's representative said this morning as the Fifth Committee (Administrative and Budgetary) continued discussing the scale used to share out the United Nations expenses.

At a 20 October Committee meeting, the representative of Japan said that it was advocating the incorporation of the concept of "responsibility to pay" into the present method of determining the regular budget assessments of the Security Council's permanent members, owing to their special responsibilities under the Charter.

The representative of China also described as wishful thinking rumours that his country had agreed to consider lowering the dues of the largest contributor and raising its own assessments to over 4 per cent. No country could lower its assessments unilaterally or demand a raise in others' dues. Any unilateral move on assessments by placing one's domestic legislation above the international family would get nowhere.

Confrontational postures meant to intimidate the Organization into lowering dues were counterproductive, Ghana's representative said. States should consider not only what they put into the Organization but also what they got out of it -- in terms of procurement and employment of nationals, and as a forum for pursuing foreign policy objectives.

The reduction of the 25 per cent ceiling rate was unacceptable because its financial costs would be absorbed by developing countries, the representative of Uruguay said on behalf of the countries of the Common Market of the South (Mercosur) and associated States. The external debt-burden adjustment should be maintained, even after the use of gross national product (GNP) to determine the scale.

Ukraine's representative said the scheme of limits -- a mechanism to slow down the rate by which a Member State's dues could vary between successive scales -- should be phased out and the recommendation of the

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Committee on Contributions on the reduction of the floor rate implemented. The use of the current assessment rates for the forthcoming scale period (1998-2000), even temporarily, was unacceptable.

The scale's base period should be reduced to three years to better reflect a country's real capacity to pay, Kazakhstan's representative said. The scheme of limits should be phased out, with an accelerated pace in the second year of the new scale.

The representatives of Belgium, Pakistan, Uganda, Russian Federation, South Africa, Canada, Lebanon, Bulgaria, Jordan, Benin, Cuba, Libya, Syria, Republic of Moldova and Botswana also spoke.

The representatives of Mexico and Costa Rica spoke on procedural matters.

The Fifth Committee will meet again at 10 a.m., tomorrow, 28 October, to continue discussing the proposed 1998-1999 budget and the reports of the Joint Inspection Unit (JIU). It is also expected to begin discussing the Organization's pattern of conferences.

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to continue 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.) PETER MADDENS (Belgium) said the translation of the European Union text on the scale of assessments had included an error. AKMARAL KH. ARYSTANBEKOVA (Kazakhstan) said she supported the view that the work of the Organization should be assured a reliable financial basis, with timely payment of dues by all Member States. Her nation was taking all necessary action to fulfil its obligations to the United Nations. The transition from a centrally planned to a market economy and other factors were causing difficulties to her country, but it was trying to pay its dues. It had paid more than $2 million recently to the regular budget and peacekeeping operations. Kazakhstan had paid up its dues to five missions as of July 1997 and paid assessments to other operations and the International Criminal Tribunals. Since joining the United Nations in 1992, Kazakhstan had paid more than $16 million to the regular budget.

The failure of the scale of assessments to apportion costs fairly among Member States, was a fundamental cause of the Organization's current financial situation, she said. Despite the reduction in the assessment rate for Kazakhstan in the 1995-1997 scale, its rate for 1997 did not reflect her country's real capacity to pay. The scale's base period should be reduced to three years, to better reflect real capacity to pay. The scheme of limits, too, should be gradually phased out over the scale period, at an accelerated pace in the second year. Market exchange rates should be used to reflect that capacity.

The scheme of limits is a mechanism to slow down the rate by which a Member State's dues can vary between two successive scales.

AHMAD KAMAL (Pakistan) said the current financial situation of the United Nations was due mainly to the non-payment of dues by major contributors. That had crippled the Organization, endangered its mandates and programmes, and led to the non-reimbursement of many Member States' peacekeeping costs, particularly the developing countries. "We are witnesses in this matter to the most extraordinary situation in which money due to developing countries is being used to finance the situation created by the non-payment of assessed contributions by major contributors. An ironic situation indeed, which should make the defaulting States blush, if blush they can."

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He expressed regret that the working group on the financial situation had not been able to make recommendations to resolve the financial crisis. The proposals on incentives and disincentives considered by that group should be revived at an appropriate forum. The negotiations on the scale of assessments would not be easy. While there was a desire to maintain the principle of capacity to pay, there was also the view that no one nation should be allowed to have too preponderant an influence on the Organization. Important scale elements such as low per capita income adjustments and the consideration of debt should be addressed. He expressed the hope that reasonable solutions would be found by the end of this year, as different deadlines were likely to come into play. HAROLD ACEMAH (Uganda) associated himself with the statement made at an earlier meeting of the Committee by the representative of the United Republic of Tanzania on behalf of the "Group of 77" developing countries and China. No one set of adjustments to the scale methodology appealed to all States. Some of the current proposals would adversely affect developing countries. Measures were needed to redress such consequences. It was important that changes to the scale be undertaken in a manner that developing countries could handle. That was the basis for Uganda's support for the gradual phase-out of the scheme of limits. Anomalies existed in the current scale which affected negatively on the poorest Member States, he continued. The current floor rate was one such anomaly. It amounted to a surcharge to the Organization's poorest Members, and in effect subsidized its wealthiest Members. The Organization should not be dependent on a single Member State for its financial stability, he said. However, the largest contributor had assumed a major global leadership role. Leadership always came with a price. Those in leadership positions must be willing to pay the appropriate price, rather than seeking excuses to evade the responsibilities that were part of leadership. The largest contributor was already being subsidized by the Organization's Members, including the poorest. Lowering the ceiling would only exacerbate that inequity. The ceiling should reflect the largest contributor's real capacity to pay. If the ceiling were to be lowered, the resulting leftover points should be distributed among other developed countries. He urged all members of the Fifth Committee to focus on the Organization's greater interests, rather than particular elements. SERGEY V. LAVROV (Russian Federation) said the current discussion assumed particular importance in light of the Organization's financial crisis. The situation required States' political will to fulfil their obligations to the Organization, and also a fair scale, as that would strengthen Member States' trust in the Organization. The Russian Federation was prepared to contribute actively to the current discussion with the aim of achieving consensus. While he would prefer shortening the base period to three years, he said he was ready to agree to the six-year suggestion, with the three-year period to be considered again in the discussion of the next scale.

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The scheme of limits distorted Member States' capacity to pay, he continued. It should be eliminated in the first year of the new scale period, as had been suggested by the scale put forth by the European Union, which his country supported. The scale should also be recalculated annually. There was no technical justification for the calculation of the gradient, which was determined on the basis of political discussions. [Countries' assessable incomes are reduced by the proportion by which their per capita income falls below the world average -- the threshold -- multiplied by a percentage figure called the "gradient". Currently, the gradient is 85 per cent.]

Permanent members of the Security Council must be eligible for low per capita income adjustment relief, he said. The Russian Federation, a permanent member of the Council, met the additional financial obligations for peacekeeping operations. Regarding the regular budget, however, the principle of capacity to pay must remain the basis for determining assessments. The ceiling had been the result of a political decision by the General Assembly; it should not obscure a country's capacity to pay.

VOLODYMYR YU. YELCHENKO (Ukraine) said that the forty-seventh General Assembly session imposed an assessment on Ukraine by vote. As a result, the assessment was raised from 1.18 per cent to 1.87 per cent without justification. Though it was unacceptable, Ukraine had to vote against its approval and would never reconcile itself with the fact that its assessment rates for the years 1993-1994 had been increased by 58 per cent. The result of implementing that decision had made Ukraine the tenth major contributor to the regular budget. The considerable overassessment of Ukraine and its internal problems were among the reasons why the State owed substantial arrears to the United Nations. However, Ukraine was trying to pay its dues and had paid more than $57 million to the Organization since its independence. It had reduced its debts by about $20 million last year and paid about $7 million this year. Should its financial situation permit, it would pay in 1997 as much as it did in 1996.

Ukraine would negotiate on the basis of some principles, he said. For example, the scale should be based broadly on the capacity to pay and be adopted by consensus. The scheme of limits should be phased out. The recommendation of the Committee on Contributions regarding the reduction of the floor rate should be implemented. The use of the current assessment rates for the forthcoming scale period, even on a temporary basis was totally unacceptable. Such a decision did not coincide with the compromise that had been previously achieved on the matter and should not be considered as a way to consensus.

JORGE PEREZ-OTERMIN (Uruguay), speaking on behalf of the countries of the Common Market of the South (Mercosur) -- Argentina, Brazil, Paraguay and Uruguay -- and for Bolivia and Chile, said those delegations had supported the scale included in proposal "C" submitted by the Group of 77 and China contained in the report of the Committee on Contributions. That proposal

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reflected a fair balance among all the proposals being considered. Decisions on the scale should preferably be reached by consensus. Constant changes in the elements used to determine the scale, should be avoided and equitable distribution of the Organization's expenses, should be ensured for Member States.

Since the current ceiling rate of assessment had already moved its sole beneficiary from its real capacity to pay, its reduction would create further distortions in the scale, he said. The reduction of that ceiling was not acceptable, because the financial costs of such a cut would also be absorbed by developing countries. A situation like that would only increase the subsidies in favour of a developed country. The reduction would create for the Mercosur and associated States an effect similar to the loss of all the adjustments contemplated in the scale methodology, distancing them from their capacity to pay.

The Mercosur believed that the scheme of limits should be gradually eliminated in the next scale in a similar manner as was being done with the current scale, he said. The external debt-burden adjustment should be maintained, taking into account not only the payment of principal but also the interests. Even with the use of gross national product (GNP) in the scale, that adjustment was still required. The low per capita income adjustment too should be considered as an essential element in the scale.

PETER SOAL (South Africa) associated himself with the views expressed on behalf of the Group of 77 and China. The principle of capacity to pay must remain the essential criterion for determining a Member State's assessments. The scale, in its present form, required improvement. A revised, results- based methodology was essential. In recent years, the scale had been criticized as being opaque, distorting and contradictory. In particular, the ceiling rate provided a subsidy to the largest contributor while the least developed countries paid more than their capacity to pay. One of the suggested scales would reduce the ceiling to 20 per cent; that would provide the largest contributor with a discount of about $100 million per annum.

Although the current methodology was cumbersome, it had been developed to ensure equity and capacity to pay, he continued. Political dimensions continued to be the most important aspects of the scale. If political agreements were effected, technical parameters would be more easily determined. Revision should be initiated as a matter of urgency. To that end, all parties should unite in open and transparent consultations.

Non-payment of arrears was one of the main causes for the Organization's financial crisis, he said. South Africa accepted and fulfilled its legal obligations under the Charter and encouraged all Member States to do the same.

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SAMUEL HANSON (Canada) associated himself with the statement made at an earlier meeting of the Committee by the representative of Australia on behalf of Canada and New Zealand. Canada's proposed scale of assessments included a three-year base period, debt relief based on actual debt flows, and retention of the low per capita income adjustment. It also contained apportionment of the burden among Member States whose per capita income was above the world average. Canada's proposal also called for the elimination of the floor rate because even a floor rate of 0.001 per cent floor would create serious inequities.

The ceiling rate benefited the largest contributor at the expense of smaller and less wealthy countries, he continued. While inordinate dependence on any one Member State was unhealthy, none of the proposals would actually rectify such a condition. The principle of capacity to pay would be better served if there were no ceiling. Dozens of States -- mainly developing countries -- were assessed at a higher per capita rate than the largest contributor. To address that inequity, it might be necessary to return to a "per capita ceiling" which had been part of the Organization's scale from 1956 to 1974.

It was disturbing that some countries suggested a link between the scale of assessments and the Security Council's permanent membership, he said. Some 13 Member States were assessed at rates higher than at least one of the Council's permanent members. Clearly, financial contributions were not the criterion for permanent membership. The only criteria to be considered in deciding the Security Council's membership should be those stipulated in Article 23 of the United Nations Charter, namely, maintenance of peace and security and equitable geographical distribution.

Member States could not demand more of a system to which they contributed less, he continued. Effective leadership and moral authority were rooted in respect for obligations freely undertaken by Member States. All Members of the United Nations must pay their dues in full, on time and without conditions. Canada was prepared to discuss the merits in all scale proposals to adopt a new scale by the end of the current regular session. He called for flexibility, since frozen positions would only lead to a stalemate.

QIN HUASUN (China) said he concurred with the statement by the representative of United Republic of Tanzania, on behalf of the Group of 77. The prolonged financial crisis of the Organization resulted from the non- payment of arrears by some major contributors, particularly the largest one. "It is up to the one who ties the knot to untie it", he said. The largest debtor should pay up its dues without delay to solve the current crisis.

The current scale of assessments of was a fair and reasonable one that reflected the principle of capacity to pay, he said. But it could be adjusted to make it more in line with that principle. In recent years a certain country had brought up the concept of the so-called responsibility to pay, to

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which China had responded on various occasions. The proposal violated the principle of capacity to pay and was not tenable at all. "As we know, the United Nations is an intergovernmental international Organization composed of sovereign Member States. The United Nations is neither a shareholding company nor a club of the rich."

He described as someone's wishful thinking, words within the United Nations building to the effect that China had agreed to consider lowering the assessments for the largest contributor and raising China's assessments to over 4 per cent. There was no change in China's principled position on the scale. Adjustments to the scale should be settled through consultations by all Member States and not determined by one country or a few Member States in private. No country had the right to lower its assessments unilaterally or demand a raise in other countries' dues. Any unilateral move on assessments by placing one's domestic legislation above the international family would get nowhere.

China would not oppose appropriate adjustments to the scale of assessments for the next three years, he continued. The past decade had seen relatively rapid growth in China and a general improvement in its people's living standards. However, it remained a developing country with a weak economic foundation, a low starting point and a large population. Its per capita income was about $620 in 1995, which was not only far below the world average of $4,880 but also under the average of $1,090 of the developing countries. China also had a poverty-stricken population of 58 million. Even if it retained its current rate of growth, it would take several decades more for it to catch up with the moderately developed countries. The attempt to drastically raise China's assessments overnight or even double them was unacceptable.

HASSAN NAJEM (Lebanon) said the principle of capacity to pay should remain the main criteria used in determining the scale of assessments. The debt-burden adjustment should also be considered in the discussions of the scale. The procedures used to finance United Nations peacekeeping operations should be considered, with the special responsibility of the permanent members of the Security Council kept in mind.

NIKOLA TCHOLAKOV (Bulgaria) associated himself with the statement made for the European Union in the Committee recently. Adjustments for external debt should be maintained, both in terms of principal debt stock and interest payments, as had been outlined by the representative of Paraguay on behalf of the Rio Group. Bulgaria's national debt had become unmanageable in the last few years, in part because of the strict enforcement of various United Nations sanctions.

Bulgaria favoured a low per capita income adjustment as an arrangement for burden-sharing, he continued. Regarding the ceiling, his country was prepared to go along with any constructive arrangement with a view to

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achieving a breakthrough in settling arrears owed by the Organization's largest contributor. Bulgaria was currently implementing rigorous and decisive measures to institute free market standards of fiscal discipline. It was determined to gradually clear up its arrears to the Organization.

HASAN JAWARNEH (Jordan) associated himself with the statement made by the representative of United Republic of Tanzania for the Group of 77 and China. If adequate political will could be mustered, the Fifth Committee could undoubtedly arrive by consensus on a scale acceptable to the Organization's membership at large. The Organization's financial crisis was due to Member States' failure to discharge their obligations fully and on time. That had led in part to delays in reimbursing troop-contributing countries, including his own.

The scale should reflect Member States' real capacity to pay dues, he continued. The low per capita income adjustment should remain a major component of the methodology. Further, due regard should be granted to the enormous foreign debts of developing countries. The economic and social indicators affecting development should also be taken into consideration.

BRUNO RODRIGUEZ (Cuba) said he supported the statement made for the Group of 77 and China. The principles of fairness and equity must underlie the decisions on each element of the scale, in order to guarantee that developing countries were not to be adversely affected. He was gravely concerned by the use of pressure and even direct threats by one State in the current discussion. Such practices ignored the sovereignty of States, and amounted to attempts to hold the Organization hostage to obscure domestic practices.

Cuba supported certain provisional agreements that had been reached by the Committee on Contributions on some elements of the scale, he said. He agreed that the statistical base period should be six years. Low income per capita and debt adjustments should be retained as elements in the scale. The floor should be lowered to 0.001 per cent. That would benefit a large number of developing countries, which were currently assessed beyond their capacity to pay.

A reduction in the ceiling was unacceptable, he said. The ceiling represented a serious distortion in the principle of capacity to pay. The ceiling should be abolished. Under no circumstances would Cuba accept a reduction in the ceiling that would result in any increase in developing countries' assessments. Furthermore, Cuba would not accept any increase in its assessment resulting from a reduction in the ceiling. The principle of capacity to pay was the essential basis for the scale.

The Organization's grave financial situation did not have to do with its scale, he said. Many speakers in the current debate had emphasized that it was due to the failure of the Organization's main contributor to pay its

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obligations in full, on time and without conditions. Some countries had been unable to pay for reasons beyond their control. In such cases, consideration must be given on a case-by-case basis. Cuba was ready to comply with its obligations under the Charter with a view to contributing to the achievement of the Organization's lofty objectives.

ZACHARIE R. AKPLOGAN (Benin) said that the fundamental cause of the Organization's financial crisis was the non-payment of dues by some contributors, particularly the major one. He did not accept the proposal by a minority of Member States to change the scale simply to get others to meet their legal obligations. The capacity to pay should remain the main criterion for setting the scale. Any revisions that did not take that principle into account would cause difficulties for developing countries. The floor rate should be lowered to 0.001 per cent and the costs of any change in the ceiling rate should not be borne by developing countries. Member States should continue negotiating in a cooperative spirit, which would also help ensure progress of the organizational reforms proposed by the Secretary-General.

JACK WILMOT (Ghana) welcomed the tentative agreement reached in the Committee on Contributions on the base period, debt burden adjustment and the scheme of limits. Since the length of the base period would reflect changes in Member States' economies, Ghana endorsed a base period of six years. Debt burden adjustment was essential for many developing countries adversely affected by heavy debts and the attendant servicing. Since debt hampered the capacity to pay, adjustments for it should be maintained in determining the scale. The scheme of limits should be phased out gradually to avoid a sudden increase in the dues of States adversely affected by its abolition.

He said market exchange rates should be used in calculations, except when they caused excessive fluctuations in some Member States' income, in which case the price-adjusted rates of exchange (PARE) might be used. The GNP should continue to be used in future scales. All Member States whose share of adjusted world income was less than the current floor of 0.01 per cent should be assessed at their actual shares of adjusted income, subject to a minimum rate of 0.001 per cent. Such a floor rate would allay the concerns of small developing countries and reduce their burden.

If any Member State felt that its assessments must be revised, it should do so using data and other information to negotiate with other countries, he said. Confrontational postures calculated to coerce or intimidate the Organization were not only unhelpful but also counterproductive. In an increasingly interdependent world, the United Nations served the vital interests of all Member States -- big or small, strong or weak, rich or poor. It might not be out of place for Member States to consider not only what they put into the Organization but also what they got out of it -- in terms of procurement, employment of nationals, revenue from delegations' living expenses and as a forum for the pursuit of foreign policy objectives.

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IBRAHIM I. ELMONTASSER (Libya) associated himself with the statements made by the representative of the United Republic of Tanzania for the Group of 77 and China, and by Colombia's representative on behalf of the Non-Aligned Movement. The Committee on Contributions had been charged by the Assembly to study the eight proposals submitted by Member States and attempt to decide on a ninth proposal. He regretted that such a proposal had not been made, which might have assisted the Fifth Committee in its current work. Lack of political could mean failure to achieve a consensus text.

Member States were dissatisfied with the current scale, he said. From the wealthiest to the poorest, many countries were not paying their dues. The capacity to pay was an essential criterion in establishing the scale, yet it had not been applied fairly in previous years. In the Organization's early years, the United States had contributed around 39 per cent. After 1974, the rate had been changed to 25 per cent. There were dramatic inequities in assessments. He then cited numerous examples in which, when per capita incomes were compared, Member States had been unfairly assessed. The same held true if national income was used as a comparator, he said, and offered several such cases. Those countries unfairly assessed would have the right to demand reimbursement because the principle of capacity to pay had not been duly taken into account.

Some States had been exempted from the sanctions under Article 19 of the Charter, while others had not been permitted to vote, he said. Such decisions required clear and fair guidelines. He asked the Secretariat to notify those States who faced the possibility of sanctions under Article 19. He hoped an equitable scale would be determined that did not prejudice the rights of all peoples.

TAMMAM SULAIMAN (Syria) said he supported the statement made for the Group of 77 and China. He did not understand why Syria's assessment had increased in all the proposals under consideration. Its assessment had steadily increased over the past few years; it was 0.06 per cent in all proposals submitted. At the same time, a large number of States with better economic situations had seen their assessed contributions decline. Assessments of some developed countries had been reduced to the detriment of developing countries. Despite the increases in his country's assessments, Syria had discharged its responsibilities under the scale.

The Organization's precarious financial situation had nothing to do with the scale of assessments, he said. The crisis stemmed from arrears, particularly those owed by the largest contributor. If those arrears were not paid, the Organization's crisis would continue and even worsen. The principle of capacity to pay should remain the determining factor in drawing up a scale. How had that been implemented in the decision on Syria's assessment? he asked.

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Syria had always discharged its responsibilities under the regular budget as well as peacekeeping operations, he said. Developing countries' economic circumstances and indebtedness must be taken into account in considering the assessments. Also, countries suffering from occupation, such as his own, should also merit particular consideration. The Syrian Arab Golan, which was rich in economic resources, was still occupied by Israel. Instead of reflecting that reality, Syria's assessed charges were being increased. The current procedures in the budgeting of peacekeeping operations should continue. Permanent members of the Council shouldered an important responsibility in that regard.

IGOR CIOBANU (Republic of Moldova) said that, despite the problems of its transition to a market economy, his country was making all possible efforts to meet its financial obligations. It would not like to see assessments that were unfair on some States become an additional factor that would worsen the Organization's financial situation. At the same time, a considerable portion of many States' arrears was constituted by amounts that exceeded their real capacity to pay. Therefore, the principle of capacity to pay should remain the basic criterion for determining the scale.

He expressed support for the recommendation of the Committee on Contributions for the continued relevance of the principle of low per capita income adjustment. His country agreed with the Committee that future scales should be based on the use of GNP, one of the most effective means of determining capacity to pay. The best way of reflecting a country's economic situation was by using a shorter base period. Therefore, reducing that period to three years would reflect to a greater extent States' real national income and their real capacity to pay. But, realizing the need to reach a consensus on the issue, he could accept a longer period of not more than six years.

COLLEN V. KELAPILE (Botswana) expressed support for the position of the Group of 77 and China that the principle of capacity to pay should remain the cardinal principle in apportioning United Nations expenses. The Organization's financial crisis had nothing to do with the way the scale was determined, but was the direct result of the failure of some Member States to pay their dues. Those countries should pay their assessments in time, in full and without any conditions.

He pledged to engage in transparent and constructive dialogue to ensure that an urgent solution was found for the Organization's financial problems.

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For information media. Not an official record.