ANNUAL RECALCULATION OF UNITED NATIONS SCALE OF ASSESSMENTS MIGHT BETTER REFLECT STATES' CAPACITY TO PAY, FIFTH COMMITTEE TOLD

26 October 1998

Press Release
GA/AB/3250

ANNUAL RECALCULATION OF UNITED NATIONS SCALE OF ASSESSMENTS MIGHT BETTER REFLECT STATES' CAPACITY TO PAY, FIFTH COMMITTEE TOLD

19981026 Speaking for European Union, Austria's Representative Also Suggests Contributions Committee Consider Semi-Annual Application of Article 19

Annual recalculation of the United Nations scale of assessments -- which is used to determine what proportion of the Organization's expenses paid by each State -- could better reflect States' capacity to pay, the Fifth Committee was told this afternoon as it began its consideration of the scale.

Speaking for the European Union and associated States, Austria's representative also suggested that the Committee on Contributions consider semi-annual calculation and application of Article 19 sanctions, by which States lose voting rights when their arrears equal or exceed two years' dues.

However, Belarus' representative said that applying Article 19 twice a year would result in the majority of States losing their voting rights and would negatively impact activities of the Organization. Therefore, the current mechanism should be preserved.

Exemptions to Article 19 on the other hand, could be considered twice a year, Japan's representative said. The Contributions Committee could hold an extraordinary meeting just to consider requests for exemption submitted after the convening of its regular session, he suggested. He noted that the Committee on Contributions advised the Assembly on actions to be taken under Article 19, according to the United Nations Rules of Procedure. The current procedure was clear and should be respected. Mexico's representative said that all such requests should be considered by the Committee on Contributions. Recent technological advances could assist in facilitating the timely response to requests, he added. The representative of the United States also spoke this afternoon. The Committee on Contributions report was introduced by that body's Chairman, David Etuket. The Committee will meet again at 3 p.m. on Wednesday, 28 October, at which time Secretary-General Kofi Annan is scheduled to address the Committee on human resources management reform. The Committee will also continue discussing the United Nations scale of assessments.

Committee Work Programme

The Fifth Committee met this afternoon to discuss the scale of assessments used to split the cost of United Nations expenses among its Member States. Various criteria -- including each country's debt burden and its gross national product (GNP) -- are considered in an effort to accurately reflect every Member State's "capacity to pay" for the Organization's continued functioning. Together, these criteria form the scale of assessments.

The Committee had before a report of the Committee on Contributions on its fifty-eighth session, held from 8 to 26 June 1998 (document A/53/11). The Committee on Contributions advises the Assembly on matters related to the scale of assessments and application of Article 19 of the Charter, by which Member States lose voting rights in the Assembly when their arrears equal or exceed the amount of contributions due for the preceding two years.

In its recent session, the Committee on Contributions -- 18 members selected by the General Assembly for renewable three-year terms -- reviewed applications and exemptions from Article 19 sanctions as well as elements of the scale of assessments.

In considering Article 19, the Committee looked at both the process and timing of requests for exemptions, the report states. While sanctions are applied from 1 January, the Committee does not normally meet until June, and Member States can lose their voting rights in the interim -- although to date that has not happened. Any change in the timing and application of Article 19 could have procedural implications, and the Committee agreed that these should be taken into account in any procedural review.

Regarding guidelines for requests for exemption, the Committee doubted these could be applied uniformly, according to the report. Instead, it urged States concerned to provide the fullest possible information on their situations, and decided to continue seeking information from the Secretariat.

The report states that the Committee also considered procedures for applying Article 19 to a State, in which three methodological elements are used: determining the amount of "arrears"; interpreting "the amount of contributions due from it for the preceding two full years"; and the use of "gross" and "net" amounts in determining arrears and contributions due. According to established practice, unpaid amounts are not considered arrears until the first day of the year after such contributions fell due, while amounts due for the preceding two full years are calculated in gross terms. A number of proposals were considered, including comparing "net" arrears with "net" assessments; and restricting access to recruitment and procurement for Member States in arrears. The Committee decided to continue its consideration of the matter at its next session.

Fifth Committee - 3 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

Regarding the scale of assessments, the Committee decided to continue considering many of its elements at its fifty-ninth session, with a view to making a consolidated set of recommendations to the Assembly at its fifty-fourth session, to be held from 7 to 25 June 1999, the report states. It will consider the period of time from which statistics are drawn, i.e., the base period; debt burden adjustment; low per capita income adjustment; the ceiling rate of assessment -- currently put at 25 per cent; conversion rates; and annual recalculation of the scale.

In reviewing proposals on income measures, the Committee noted that the availability and reliability of data for gross domestic product (GDP) was somewhat better than for GNP, which was conceptually superior as an approximation of the capacity to pay. It concluded that GNP remained the least unsatisfactory income measure for purposes of calculating assessment rates and reaffirmed its earlier recommendation that future scales should be based on estimates of GNP.

The Committee also considered issues, such as reintroducing a per capita assessment ceiling, and the concept of "responsibility to pay", by which Member States with special responsibilities in international peace and security -- such as permanent members of the Security Council -- would bear a commensurate share of the Organization's financial burden. It also discussed peacekeeping assessments and voluntary contributions, as well as flat annual fees for non-Member States: Nauru, Tonga, Tuvalu, Kiribati, Holy See and Switzerland. It decided, in this area, that the Holy See would be assessed at 10 per cent of 0.001 per cent of the scale, bringing that body's contribution to roughly $1,050 per year.

In addition, the Fifth Committee had before it three requests for exemption to Article 19 sanctions from Bosnia and Herzegovina, Republic of the Congo and Iraq (documents A/C.5/53/23, A/C.5/53/24 and A/C.5/53/28 respectively).

(For background on the requests, see Press Releases GA/AB/3244 of 14 October; GA/AB/3246 of 16 October and GA/AB/3249 of 23 October.)

Statements of Scale of Assessments

DAVID ETUKET, Chairman of the Committee on Contributions, introducing the Committee's report, said the report covered three main areas: the methodology for the preparation of future scales of assessment; the application of Article 19 of the Charter; and the assessment of non-Member States. The Committee had noted decisions by the General Assembly at its fifty-second session to respect the minimum assessment rate and the scheme of limits. Regarding the implications for using GDP rather than GNP, the Committee had noted that GNP was a conceptually superior estimate of ability to pay, although GDP was somewhat better in terms of availability of data and

Fifth Committee - 4 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

reliability. The Committee had remained of the view that GNP was the least unsatisfactory income measure for the purposes of the scale.

For other elements of the scale methodology, the Committee had noted that the General Assembly would not normally make decisions on this until 1999, so it had decided to consider those further and make recommendations to the fifty fourth session of the General Assembly.

A proposal on annual recalculation of the scale of assessments had been discussed before, he said. The practical implications of the proposal had not been fully explored, and so the Committee had reviewed it in the report. For the purpose of the review, it had been assumed the recalculation would be purely technical, but some people had felt the exercise would not remain a technical exercise, but would develop into a full scale review of assessments every year. The reactions of the Committee on this issue would be helpful for a further review next year.

The Committee had also considered the reintroduction of a ceiling on per capita assessments based on the per capita assessment of the Member State with the highest assessment, he said. This aspect had been abolished in 1974. The Committee considered that a reintroduction of such a ceiling would be contrary to the principle of capacity to pay.

On Article 19, the normal procedure was that the Committee on Contributions would advise the Assembly on action to be taken on Article 19, and it was in this context that the Assembly referred matters to the Committee, although it had also, in the past, taken action on its own advice, he said. The Committee on Contributions intended to consider the matter further at its fifty-ninth session and to submit its findings before the end of the fifty-third General Assembly.

On that matter, the Committee had focused on two key issues; the possibility of establishing guidelines for granting exemptions under Article 19, and the problem caused by the difference between timetables for application of Article 19 and the sessions of the Committee on Contributions, he said. On guidelines, the Committee had considered that each case had to be judged on its own merits, however review cases could be used and established precedents considered. The fullest possible information should be presented by Member States, the Committee had noted.

Regarding timing, Member States had about six months between notification by the Secretariat and consideration by the Committee on Contributions in June, he said. The Committee still received applications very late. In addition, sanctions might apply from 1 January, and a Member State might be deprived of its vote until the Committee on Contributions sat. All possible changes to timing had other complications.

Fifth Committee - 5 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

On the question of assessment of non-Member States, General Assembly resolution 44/197 B provided for a flat rate representing their level of involvement in the United Nations and the notional assessment that might be levied if they were members. The Committee had made recommendations for six non-Member States.

On payment in non-United States currencies, eight Member States had paid contributions in other currencies, he said.

On the collection of contributions, he said that since the conclusion of the fifty-eighth session, 14 of the 26 Member States listed in paragraph 110 of the report as actually or potentially falling under Article 19 had made the necessary payment to avoid the application of Article 19. In addition, two countries had been exempted for the fifty-third General Assembly session, and two for a period of three months from October 7.

THOMAS SCHLESINGER (Austria) spoke for the European Union, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Cyprus. In light of the Fifth Committee's recent decision on requests for exemption from the application of Article 19, the Union proposed that the Committee on Contributions meet as early as possible in 1999 to further review the practical implications of tightening the procedures for the application of that provision of the Charter. Such measures could include the semi-annual calculation and application of Article 19, as well as the comparison of arrears with the amount actually assessed and payable for the preceding two full years; and a "net" rather than a "gross" approach to better reflect the position of States' payment.

The Contributions Committee might also be asked to analyze the impact of the reduction in the minimum assessment or floor rate, he said. Further, it might examine the reasons why only a limited number of Member States with arrears under the terms of Article 19 due to conditions beyond their control actually addressed it during its regular session; as well as the frequent submission of incomplete information, and the possible need for more guidance by the Secretariat on the matter.

He drew attention to a list of the elements of the scale methodology the Union had proposed during the last session, which was attached to his statement. General Assembly resolution 52/215 on the scale had represented a delicate balance between the common interest and national interests. Much remained to be done to achieve the goal of a scale reflecting States' capacity to pay. For example, annual recalculation could better reflect capacity to pay for those States whose economies experienced considerable fluctuations. The Contributions Committee should continue its review of all elements.

He then reiterated the Union's proposal to revise the peacekeeping scale. The current arrangements for apportioning the costs of peacekeeping operations needed to be amended to better reflect the fundamental principle of

Fifth Committee - 6 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

capacity to pay. Given the importance of peacekeeping assessments, their volume and their link to the regular budget scale, the Committee on Contributions should review issues related to peacekeeping assessments.

VLADIMIR VANTSEVICH (Belarus) said the scale methodology had undergone changes reflecting the evolution of the global economy. Some of those, accepted for political reasons, led to deviation from the scale's underlying basic principle -- determining States' capacity to pay. This fact often resulted in financial obligations shifting unfairly from one group of Member States to another.

The present scale largely corresponded with the solvency of States with economies in transition and developing countries, he said. His delegation therefore supported the Committee on Contributions' approach according to which the methodology established at the beginning of the scale period would not be changed before the beginning of the next period, and would not be renegotiated annually. He welcomed efforts by the Committee on Contributions to perfect the methodology for the scale for 2001-2003. A new and improved scale could improve the Organization's financial situation.

While the Organization's financial crisis was due in part to States' failure to pay their assessed contributions in full and on time, there was also a link between the financial crisis and the scale, he said. The previous scale had not been just with regard to some States, and had prevented them from paying in full and on time. Belarus had experienced this. It was appropriate to accept decisions concerning States that had amassed debts due to circumstances beyond their control. Facing serious financial difficulties, Belarus did its best to fulfil its financial obligations. More than $6 million had been paid to the regular and peacekeeping budgets last year, and a payment of about $3 million was planned for this year.

Turning then to the scale itself, he said the principle of capacity to pay should be the main criterion for assessments. GNP was the least unsatisfactory income measure for calculating assessment rates, while the base period should reflect changes in countries' economic development. Market exchange rates should be used for the future scale, except where this would cause excessive fluctuations or distortions in the income of some Member States. The debt-burden adjustment should be preserved in the future scale, with total debt stocks being taken into account rather than actual principle repayments. Regarding the low per capita income adjustment, Belarus was ready to discuss using a sliding gradient.

His country had doubts about proposals to change procedures for the application of Article 19, he said. Application twice a year would result in the majority of States losing their voting rights and would negatively reflect in the activities of the Organization. Therefore, the current mechanism should be preserved. Any restrictions on cooperation between

Fifth Committee - 7 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

countries -- particularly debtors in the context of the United Nations procurement system -- were unacceptable.

KAZUO WATANABE (Japan) said the Committee on Contributions should continue its review and return to the Fifth Committee with clearer recommendations. The current methodology did not produce a fair sharing of financial responsibility. The Contributions Committee should further study the issue of low per capita income adjustment. Income data was affected by exchange rates, yet income measures and conversion rates were the starting point for calculating scale of assessments. The Contributions Committee should study that further in its next session, perhaps with the help of the Bretton Woods institutions, so that the scale methodology would reflect the real capacity of Member States.

The report indicated that the Contributions Committee had not taken up the question of peacekeeping assessments because it had not been so mandated by the Assembly, he said. Japan would support giving the Contributions Committee such a mandate. Regarding annual recalculation, he said there were financial implications. The Secretariat's statistical division would need staff to carry out the additional work. In addition, rule 160 of the Rules of Procedure would have to be addressed. For those reasons, the proposal should be approached carefully.

Turning then to Article 19, he said there were three problems: procedural aspects of consideration of request; procedures for application; and the recent problem the Fifth Committee was facing. Japan supported stricter application of Article 19, but the legal and technical aspects should be carefully studied. If the Assembly allowed exception frequently, Article 19 would lose its raison d'être. Also, according to resolution 14 A 3(i) of 1946, reflected in Rule 160, the Committee on Contributions was to advise the Assembly on action to be taken regarding Article 19. The procedure was clear and should be respected.

Based on the assumption that the Committee on Contributions would hold its sessions in June, the Assembly could set two deadlines for receiving request for exemption: the first would be in June, before that session began, and the second would be around 30 September, he said. Requests submitted before the first deadline would be discussed in the session, while those received by the second would be taken up in an extraordinary session in October, dedicated only to that subject. There should be no exception to those deadlines. While the convening of an extraordinary session would have financial implications, it was a cost necessary to maintain due process.

ERNESTO HERRERA (Mexico) said Mexico believed that the payment of assessments was a fundamental responsibility of all Member States. Assessments should be paid on time, in full and without reservations. The Committee on Contributions report would enrich future debate on the item. Mexico reaffirmed the role of Committee on Contributions in advising the

Fifth Committee - 8 - Press Release GA/AB/3250 13th Meeting (PM) 26 October 1998

General Assembly on requests for exemptions. All such requests should be considered by the Committee. The problem of timing should not be solved by establishing automatic procedures. No general rule should be established to deal with specific considerations. The Committee should reconsider timing, and should look at recent technological advances particularly in telecommunications, so that speedy responses to Member States' requests could be received. The General Assembly should review each request on its merits.

Mexico also noted that the Committee would continue to review other aspects of scale of assessments, he said. The critical international financial situation would make it difficult to reassess the apportionment for peacekeeping.

JAMES BOND (United States) said that he wanted to make a short report to the Fifth Committee on United States assessments. Last week, the United States had paid about $50 million for the regular budget and $115 million for peacekeeping, and processes were underway for an additional payment of approximately $200 million.

* *** *