FIFTH COMMITTEE CONCLUDES CONSIDERATION OF SCALE OF ASSESSMENTS

Press Release
GA/AB/3179

FIFTH COMMITTEE CONCLUDES CONSIDERATION OF SCALE OF ASSESSMENTS

Reduction of the ceiling rate of the scale of assessments from 25 to 20 per cent held no guarantee that the United States would honour its financial obligations to the United Nations, the representative of Singapore said this morning, as the Fifth Committee (Administrative and Budgetary) concluded its debate on the scale used to share the Organization's expenses.

"What if it does not?" she asked. "Will we revert to a ceiling of 25 per cent?" Had the scale been based strictly on national income, the United States would be assessed at more than the current ceiling which gave it a significant discount. For any agreement on the scale to be meaningful, it must be matched by a commitment from all States to pay their dues in full and on time.

The ceiling rate conferred a benefit on the wealthiest contributor while imposing undue burdens on countries with weaker economies, Mozambique's representative said. The scale emerging from the current session should address the concerns of developing and least developed countries and of the small island States, he said.

Only a minority of countries might be able to vote in the General Assembly in future if the scale did not adequately reflect developing countries' ability to pay the representative of Guatemala told the Committee. He was referring to the application of Article 19 of the Charter, which suspended a States' voting right in the Assembly if it accumulated two years of arrears.

The economic situation of Member States should be improved to enable them to assume greater responsibility for the Organization's finances the representative of the Bahamas said. Such economic development would create a more balanced situation and keep the Organization from being overly dependent on one contributor.

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Statements were also made by the representatives of Norway, Costa Rica, Egypt, Trinidad and Tobago, Kyrgyzstan, The former Yugoslav Republic of Macedonia, Oman, Togo, Iran, Dominican Republic, United Arab Emirates, Czech Republic, Mali and Croatia. The Chairman of the Committee on Contributions also spoke.

Also this morning, the Chairman announced that the Assembly had allocated an additional item to the Committee, on the financing of the United Nations Observer Mission in Angola (MONUA).

The Fifth Committee will meet again at 10 a.m. tomorrow, 30 October, to take action on draft texts on the financing of the United Nations Observer Mission in Liberia (UNOMIL), the United Nations Angola Verification Mission (UNAVEM III), and other issues. It is also expected to continue discussing the proposed 1998-1999 budget and the reports of the Joint Inspection Unit (JIU).

Committee Work Programme

The Fifth Committee (Administrative and Budgetary) met this morning to continue its consideration of the scale of assessments and the pattern of conferences. (For background on the scale, see Press Release GA/AB 3169 of 17 October; on conferences, see GA/AB 3178 of 28 October.)

Budgetary Implications of Draft Resolutions

ANWARUL KARIM CHOWDHURY (Bangladesh), Fifth Committee Chairman, read out a letter he sent to the President of the General Assembly for transmission to the other Main Committees, concerning the programme budget implications of draft resolutions. The letter refers to several Assembly resolutions which reaffirm that the Fifth Committee is entrusted with responsibility for administrative and budgetary matters.

The letter also recalls the Assembly's rules and procedures, which state that no draft resolution involving expenditures shall be recommended by a Committee for adoption without an estimate of those costs. When a Main Committee was about to approve a draft resolution involving expenditures, the Secretary-General must submit a statement of programme budget implications (PBIs). The financial aspects of any proposal should be left aside for decision by the Fifth Committee.

Scale of Assessments

TRYGGVE GJESDAL (Norway) said he supported the statement made on behalf of the European Union concerning the scale of assessments. While fundamental reform of the scale's methodology was needed, the scale, arrears and contributions should be addressed as a package. The present discussion followed the process begun last year, at which time tentative agreement was reached on the base period, low per capita income gradient, and the ceiling.

Certain realities had changed since last year's discussion, he said. New national accounts statistics affected the impact of low per capita income adjustments. Debt stock information was more reliable. The Organization's need for a scale by the end of the year gave more urgency to the discussion. There was a new realism in many of the statements made during the current session. The ceiling rate of 25 per cent should be carefully considered, but only in the context of an overall financial settlement in which arrears were addressed.

[Note: "Base period" refers to the length of time over which a country's economic statistics should be drawn. Special provisions are made for countries with per capita income below the world coverage -- called the

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"threshold." Their assessable incomes are reduced by the proportion by which their per capita income falls below the threshold, multiplied by a percentage figure called the "gradient". Currently, the gradient is 85 per cent.]

DAWN YIP LI-YAN (Singapore) said the discussions on the scale of assessments suggested that agreement was near on many aspects of its methodology, such as the proposals to lower the floor rate, to use the gross national product (GNP), and to phase out the scheme of limits between now and the year 2000. On the base period, six years had been identified by most countries as the most plausible middle ground. [Note: The "scheme of limits" is a mechanism to slow down the rate by which a Member States's dues can vary between two successive scale periods.]

She applauded States that had shown pragmatism and urged the remaining few to forego their maximalist positions and accept reasonable compromise. Agreement was also near on the issue of low per capita income adjustments, for which the current amount should be retained. The effect of that adjustment was not significant, but its retention was politically important for developing countries, especially those suffering under international debt.

The most contentious element for discussions would be the question of the ceiling, she said. Having listened to the grim 20 October statement by the United States representative, she said it would be regrettable if the United States relationship with the United Nations were seriously damaged by disagreement over the scale. The United States should be paying more than 26 per cent if the scale was based strictly on national income. Even though that country already received a significant discount from the current ceiling, it was still asking for more. The United States was assessed at the highest rate because it had the world's largest economy. "Should the 184 members of the United Nations grant the largest and richest contributor a further discount just because it says we should and might be unhappy if we don't?

The argument that the United Nations should not be overdependent on one or two States for its dues was disingenuous, she said. Unless the United Nations abandoned the principle of capacity to pay and lowered the ceiling to 10 or 15 per cent, it would continue to depend on one or two economic super- powers for the majority of its funds. That political reality could not be changed just by lowering the ceiling from 25 per cent to 20 per cent, unless its proponent's intention was that the lowering of the ceiling to 20 per cent would be the first in a series of steps to lower it even further. Should the Assembly lower the ceiling to 20 per cent, would there be any assurances that the United States would honour its financial obligations? "What if it does not -- will we revert to a ceiling of 25 per cent?"

Singapore would consider any scale that could command a consensus within the Committee, she said. However, for any agreement to be meaningful, it must be matched by a commitment from all Member States to pay their dues in full

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and on time. Sadly, the continued reluctance of the United States to pay its arrears gave little room for optimism that it would honour its assessments for the period 1998-2000.

FERNANDO BERROCAL SOTO (Costa Rica) said the current discussions in the Fifth Committee were fundamental to the future of the United Nations. What it decided on the scale of assessments would be an essential part of the reform programme embarked upon in the current session. The issue should be resolved as a reality and necessity, without conditions and without undue haste. However, it must be also resolved as a matter of priority. Costa Rica endorsed the statement by United Republic of Tanzania on behalf of the Group of 77 developing countries and China that the United Nations financial crisis was due to the non-payment of dues on time, especially by some majors contributors.

The principle of capacity to pay was the cardinal element that should be considered in determining the scale of assessments, he said. Those with large arrears should make further efforts to clear their debts, as the Organization's crisis could only be resolved by the payment of the debts owed to the regular and peacekeeping budgets. The United Nations should embark on a transparent, realistic and honest series of negotiations based on criteria that reflected the reality of the world and with a commitment towards solidarity.

Addressing the concept of responsibility to pay, he said the role played by some Member States -- such as those which had veto power in the Security Council -- was not matched by their financial assessments. Why there was a need to have a ceiling rate in the scale of assessments in the first place? For the least developed countries, the floor should be set at 0.001 per cent. The rate of other States should be based on their real capacity to pay. His country might accept a reasonable upward adjustment to its assessments. Agreement should be reached on the scale before the end of the year.

BRENDA MERCEDES CASTELLANOS GONZALES (Guatemala) said that the scale of assessment had no relation to the Organization's current financial crisis, which could only be resolved by all States paying their dues. The capacity to pay must remain the fundamental basis for negotiations. Lowering the ceiling might result in an unfair increase in the assessments of developing countries to the benefit of developed countries. In the future, only a minority of countries might be able to exercise their right to vote, should sanctions under Article 19 of the Charter for non-payment of dues come into play.

She said that modification of the elements in the scale should be gradual, to avoid drastic changes in Member States' assessments, particularly the developing countries. Guatemala felt that its assessment for the period 1995-1997 did not reflect its real capacity to pay. There were great disparities in the assessments of certain countries having similar economies.

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The assessment of a Member State should not be increased at a rate higher than the growth of its gross national product (GNP), she said. That fundamental premise should be borne in mind to honour the importance of capacity to pay. Guatemala favoured a longer base period, but supported the six-year proposal as a fair compromise between different interests. Her country was ready to participate constructively in discussions on the new scale and to contribute to the United Nations.

AHMED DARWISH (Egypt) said that while it was regrettable that the Committee on Contributions had been unable to develop a ninth proposed scale, its work had provided the Fifth Committee with some useful starting points. The Organization's fiscal crisis had to do only with the lack of payment by some Member States, not the scale used to determine dues. Payments of arrears were not acts of charity or concessions by Member States -- they were the fulfilment of legal obligations. He associated himself with the statements made for the Group of 77 and the Non-Aligned Movement.

The existing floor rate contradicted the principle of capacity to pay for small Member States, he said. Egypt supported the reduction of that rate to 0.001 per cent. While the current ceiling rate might lead to over- dependence on one State, its reduction contradicted the principle of capacity to pay. If it were reduced, the assessments of developing countries should not be increased as a result.

He said he supported the tentative agreement on a six-year base period. The debt-burden adjustment and the low per capita income adjustment should be maintained. Egypt favoured a gradient of 80 per cent. The scheme of limits should be phased out.

RAJIV RAMLAL (Trinidad and Tobago) said that in addition to the principle of capacity to pay, his small country attached particular importance to the process by which the scale was set. Determination of the scale should remain the prerogative of the General Assembly, with any distortions in the current scale to be handled in a gradual manner. Specifically, he supported the Committee on Contribution's view that future scales should be based on estimates of gross national product (GNP).

He said he expected a compromise to emerge on the question of the base period, once the merits of short or long periods were considered. His country supported the view of the Committee on Contributions on conversion rates, including the need to temper the use of market rates with the price-adjusted rates of exchanges (PAREs) or other appropriate methods whenever there were excessive fluctuations in the income of Member States. Stressing that debt often overwhelmed developing countries' economies and which was a handicap to the development efforts of small island States in particular, he said that debt-burden adjustment must remain as an element of the scale. The floor rate should be lowered to 0.001 per cent.

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ZAMIRA B. ESHMAMBETOVA (Kyrgyzstan) said the gross national product (GNP) should continue to be used and that the floor rates should be lowered to 0.001. However, she would accept a compromise that would call for the use of six years as the statistical base period. Kyrgyzstan supported the retention of adjustments to account for debt burden and for low per capita income, including for members of the Security Council. There was also a need to reach political decisions on other factors concerning the scale.

PETAR DIMOVSKI (The former Yugoslav Republic of Macedonia) said the Organization's financial problems should be solved through negotiations based on the Organization's objectives as espoused in the Charter. The discussion of the Organization's scale of assessments had both political and practical aspects. While it would not be overly difficult to arrive at a solution approved by the majority of the States, it would be less easy to satisfy the preferences of the largest contributors. He stressed the importance of a practical approach in negotiations on the scale. His country had been meeting its obligations under the Charter and would continue to do so in the future.

SAID ALI NASIR AL-AMRI (Oman) said he supported the statement made for the Group of 77 developing countries and China. The current crisis was the result of years of non-payment by some States. He appealed to all Member States to pay their arrears. Oman's assessment had doubled in the 1995-1997 scale, while other States with similar economies had not faced such a situation. Why had the Committee on Contributions not taken the economic situation of developing countries into consideration in its determination of assessments? He looked forward to a simplified and flexible scale methodology that would be more transparent and more just.

KOFFI A. ASSAH (Togo) said he was prepared to work in an open-minded manner to develop a fair scale and associated his country with the statement made on behalf of the Group of 77 and China. One of the Organization's most important priorities was development. If the scale did not reflect States's real capacity to pay, some Member States might become eternal debtors. The floor rate should be reduced to 0.001 per cent, if not eliminated completely. Any reduction of the ceiling -- which even at its present level violated the principle of capacity to pay -- would create a distortion by which the rich countries would be subsidized by the poor.

He expressed concern about those countries whose arrears fell below the amount specified under Article 19 of the Charter [by which they lost their voting privileges in the Assembly]. Consistent and binding measures should be imposed to ensure that countries paid their arrears. Deliberate non-payment by a number of countries had forced the Organization to resort to borrowing money and to reducing its staff. Each Member State must participate in making the United Nations a strong and credible organization, capable of meeting the challenges of the next century. The current crisis was not due to any failure of the Organization's scale. He called upon all Member States to show greater will and commitment for a better United Nations for the entire world.

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BAGHER ASADI (Iran) said the issue of the scale of assessments should not be dealt with as part of a package for resolving the Organization's financial crisis. Improving that situation was not related to the method used in determining the scale. Rather, it was the direct result of the policy of the major contributor towards its substantial arrears. The principle of capacity to pay should remain the fundamental criterion for determining the scale. The notion of a ceiling rate departed from that principle and would affect the assessments of others, including the developing countries. Any further reduction in the ceiling would increase the existing gap between the major contributor's real capacity to pay and its assessments, and was therefore unacceptable. Member States should not pay floor rates they could not afford either.

Determining the capacity to pay solely on income data would not truly reflect Member States' ability to pay, since they were at different levels of development, he said. The present economic realities in many countries, particularly in view of the ever-widening gap between the developed and the developing States, made it unjust to put both categories of nations on an equal footing in determining their share of the United Nations expenses. Such elements as the low per capita income adjustment should, therefore, be considered. The remaining effects of the scheme of limits should be phased out and a three-year base period used.

CARLOS DOS SANTOS (Mozambique) said his country had paid its dues in full to the Organization and related entities. Despite Mozambique's efforts to pay its dues, its assessment at the floor rate was beyond its true means. The floor rate of 0.01 per cent represented an unacceptable surcharge imposed on many developing countries for political considerations and should be lowered to 0.001 per cent. The scale should be carried to three decimal point and based on adjusted national income. The base period should reflect the need for stability and not exceed six years. The use of market exchange rate would be more realistic in determining the incomes of Member States, except when market fluctuations prevailed. The debt burden adjustment was indispensable for developing countries, especially the least developed one. The formula used in granting low per capita income adjustments should be maintained.

Like the floor rate, the ceiling bore no relation to the principle of capacity to pay, he said. It conferred a benefit on the wealthiest contributor and imposed undue burdens on countries with weaker economies. He could not see how the ceiling could be adjusted without affecting the developing and least developed countries. The scale that came out of the current session should address the concerns of developing and least developed countries, as well as of the small island States.

RUFAT NOVRUZOV (Azerbaijan) said the United Nations represented a variety of interests and agendas. The new reform package signalled the fact that the old Organization was gone. The new United Nations must be based on

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sound finances. An entirely new concept of financing for the Organization and other international organizations was now needed.

Azerbaijan was among those Member States whose assessment rates were unfairly calculated in 1992, he said. At a time when 20 per cent of its territory was occupied, when over 1 million refugees flooded the country and one fourth of its national wealth was lost, Azerbaijan had been assessed as a financially successful country. For years, his country had struggled to avoid sanctions under Article 19. He said his country had been caught without protection between the new and the old ages of the world's history, and he wanted to be certain that it would be protected from arbitrary decisions in the future. Countries struggling with poverty caused by war, natural disasters and the problems of economic transition should not be faced with decisions on the scale which would affect them negatively. While many countries were achieving their goals, that should not come at the expense of small economies.

MAURICE E. MOORE (Bahamas) associated his country with the statement made for the Group of 77 and China. While the method for calculating the scale of assessments should be further refined, such efforts must be made in a fair and transparent manner. The spirit of consensus must underlie any revision. The Organization's financial constraints were the result of non-payment of contributions. It was immoral to link willingness to pay with reforms affecting the scale. All outstanding contributions must be paid in full, on time, and without conditions.

Changes in the scale should aim at reducing discrepancies and inequities, he said. The burden imposed on the poorest countries by the floor rate was particularly objectionable. The floor should be abolished or at least substantially lowered. His country supported the retention of relief adjustments for debt and low per capita income, as well as the phasing out of the scheme of limits over the next three years.

The Organization should not be overly dependent on one contributor, he said. An appropriate balance of contributors should be established. That balance should be created by improving Member States' economic situations, which would enable them to assume greater responsibility for the Organization's finances. States should not be forced to take on greater financial burdens until they were ready to do so. At its present rate, the ceiling provided a subsidy to the largest contributor, with the resulting burden being borne by other States.

CRISTINA AGUIAR (Dominican Republic) said the scale of assessments could be amended, taking into account the need for more equitable assessments which would not hamper Member States' efforts to pursue their economic development. The Organization's financial crisis was not significantly related to the scale. Despite its external debts, the Dominican Republic was trying to ensure that its citizen could look towards a better future. While the

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Republic was showing one of the best growth rates in the region, such developments were based on service industries, which were not reliable. The scale of assessments should take into account the various special characteristics of Member States, try to find a balanced way to handle the Organization's finances, and enable countries to meet their financial obligations.

AHMAD HATAM AL-MENHALI (United Arab Emirates) said the Committee should come up with a commonly agreed formula for the scale, based on Member States' capacity to pay. He supports the statement made at a previous meeting by the representative of the United Republic of Tanzania, on behalf of the Group of 77 and China. The use of credits in the United Nations peacekeeping budgets to pay for regular budget functions had worsened the United Nations financial situation. It also hampered the implementation of peacekeeping missions and of development programmes. The United Arab Emirates had paid its dues and would insist that the principle of capacity to pay be retained as the central criterion for determining the scale.

Financial and other reforms of the United Nations should not be ends in themselves, he said. Rather, they should as intends to improve the Organization he said. The United Arab Emirates rejected attempts to tie approval of the reforms to the payment of dues by Member States which should pay their arrears unconditionally and on time. Such action would ensure that the Organization had the resources it needed to carry out its mandates.

JAN KINST (Czech Republic) associated his country with the statement made for the European Union. He supported the Committee on Contributions' suggestion that GNP be used as the primary statistical basis for the scale. While the base period should be shortened to bring the statistical base period closer to a country's real economic condition, the six-year period represented a viable compromise.

Application of the debt burden adjustment only to those countries with incomes below the threshold distorted the principle of capacity to pay, he said. However, the Czech Republic was flexible with respect to that adjustment. The low per capita income criterion was of great significance. His country supported a 75 per cent gradient as a reasonable compromise between divergent interests. Any floor or ceiling rate distorted the principle of the capacity to pay. The scheme of limits should be phased out at the earliest possible date. Arrears could not be excused by objections to the scale; Member States must fulfil their financial obligations. The Czech Republic paid its contributions in full and on time.

ALIOU ZACKARIOU TOURE (Mali) associated his country with the statement made for the Group of 77 and China. The principle of capacity to pay remained the fairest basis for determining a country's assessment. Mali supported relief formulas for the least developed countries, as well as the proposal to

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assess countries according to their income rather than an arbitrarily determined floor rate. The proposals for relief -- the low-income adjustment and debt-burden adjustment -- promoted fairness in the scale. Retention of the six-year base period was an acceptable compromise between those who supported longer and shorter periods.

JASMINKA DINIC (Croatia) said her country was trying to pay its arrears, which had been caused by economic rather than political factors. The principle of capacity to pay should remain the main consideration in sharing United Nations expenses. A short base period of between three and six years would accurately reflect the current state of Member States' economies. For the same reason, GNP should serve as the basis for calculating the scale.

Some delegations had stated that the current financial situation was not linked to the scale of assessments and that a new one would not in itself solve the crisis, she said. Nevertheless, some changes could relieve some of the problems which small nations like her own faced in paying their dues. The floor rate should be reduced to 0.001 per cent or less for some least developed countries, to properly reflect their capacity to pay. However, the ceiling should not be reduced if it would increase developing countries' dues and affect the proper application of the principle of capacity to pay.

DAVID ETUKET (Uganda), Chairman of the Committee on Contributions, drew attention to Syria's questions regarding the increase in its assessments rate in the scale proposals transmitted by the Committee on Contributions. He said the increase resulted from elimination of the remaining 50 per cent of the effect of the scheme of limits in the period 1998-2000. Syria had gained from the effect of that scheme.

He said that Libya's reference to the provisions of Article 19 -- which stripped Member States of their General Assembly votes when they accumulated two years' worth of arrears -- had been addressed in the Committee's report. The Assembly had already acted on its recommendation on the granting of exemptions under Article 19 for the Comoros, Liberia and Tajikistan. Togo, for its part, had paid the minimum sum necessary to avoid being subject to the application of Article 19 for the rest of 1997.

The Committee on Contributions would welcome the Assembly's guidance on the procedures to be used in considering requests for exemption from the provisions of Article 19, he said.

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