SECRETARY-GENERAL AND UNDER-SECRETARY-GENERAL FOR MANAGEMENT ADDRESS FIFTH COMMITTEE AS IT TAKES UP IMPROVING UN FINANCIAL SITUATION

Press Release
GA/AB/3310

SECRETARY-GENERAL AND UNDER-SECRETARY-GENERAL FOR MANAGEMENT ADDRESS FIFTH COMMITTEE AS IT TAKES UP IMPROVING UN FINANCIAL SITUATION

Whether the matter under discussion was finance, human resources or delivery of mandated programmes, the Organization was over- administrated, United Nations Secretary-General, Kofi Annan, told the Fifth Committee (Administrative and Budgetary) this morning, as it commenced its discussion of ways to improve the financial situation of the Organization. Reforms had not yet provided it with the flexibility to respond to new and urgent challenges, and the Organization was not yet on a firm financial footing. These concerns should be the next frontier of fundamental change in the Organization.

There were too many rules and too many steps, he continued. For an Organization that must respond to crisis, that was a sure path to frustration, failure and irrelevance. Whilst some of this over- administration was within his power to fix, some stemmed from layer upon layer of resolutions and responsibilities handed down by the Member States. The Secretariat respected the General Assembly’s right to legislate, but Member States must respect the Secretariat's responsibility to administer and manage the Organization. Managers must be able to manage, he stressed.

The Under-Secretary-General for Management, Joseph E. Connor, summarized the Organization’s financial situation. He said real costs had been reduced to produce a United Nations regular budget total today lower than in 1994. However, the reductions that characterized 1995 to 1998 would be replaced by increases for 1999, 2000 and beyond. Money owed to the United Nations by Member States totalled $2,510 million -- slightly more than last year. Much of the increase related to peacekeeping. The magnitude of unpaid assessments effectively eliminated the financial base of the Organization.

At the end of 1998, he continued, the Organization had had a cash deficit of $40 million for the regular budget. A negative regular budget cash balance of $60 million was likely at 31 October and that would increase to $162 million for November. The cash situation at year-end would depend almost exclusively on how much the United States paid between now and then.

The representative of Guyana, speaking on behalf of the “Group of 77” developing countries and China, said the primary cause of the

Fifth Committee - 1a - Press Release GA/AB/3310 5th Meeting (AM) 5 October 1999

financial problems continued to be the failure of certain Member States, in particular the United States, to pay what they owed. The financial problems clouded the confidence and cooperation on which the United Nations depended. In the interest of multilateralism, that cloud must be removed by prompt payment by defaulting States.

The representative of Finland, speaking on behalf of the European Union and associated States, said new peacekeeping mandates made it imperative that Member States fulfil their financial commitments to the United Nations. As a permanent Security Council member, the United States had a special responsibility. It was also the sole beneficiary of the ceiling on assessments. The principle of capacity to pay must remain the cornerstone of the scale of assessments.

The United States representative said his Government was proud to be the largest contributor to the United Nations, and it remained committed to paying its fair share. But efforts to solve the United States arrears issue was linked to meaningful reform of the Organization. Budget restraint must be observed and it was vital that there be zero nominal growth in the United Nations budget for 2000-2001. The scale of assessments [by which each country’s financial obligations to the Organization were determined] must be made more equitable by reducing the ceiling for the regular budget and creating a peacekeeping ceiling. The United Nations should reduce its reliance on any single member or group of members.

The representative of the Russian Federation said the financial situation was in part due to the persistent discrepancy between the scale of assessments and the true capacity of Member States to pay. Zero nominal growth for the 2000-2001 budget was a realistic aim. Ongoing reform and improved management would enable the United Nations to maintain expenditure for the years 2000-2001 at the current level.

The representative of the United Kingdom said his country was really the United Nations’ largest creditor, as the United States had muffled its voice and stained its reputation by also being the largest debtor. He welcomed the United States commitment to change that, but said it did not have much time to do so. The United Kingdom would reluctantly tolerate the United Nations debt to it, because the health of the Organization was a higher priority.

The debilitating impact of the financial situation was visible in all aspects of the Organization’s work, the representative of Pakistan told the Committee. The situation had not improved despite major reform. A cash-strapped Organization could not be effective or efficient, and financial uncertainties must be removed if the reform process was to be successful.

The representatives of China, the Philippines (on behalf of the Association of South-East Asian Nations), New Zealand (also on behalf

Fifth Committee - 1b - Press Release GA/AB/3310 5th Meeting (AM) 5 October 1999

of Australia and Canada), Singapore, Malaysia, Norway, Egypt, Uganda (also on behalf of Kenya and Tanzania), Cuba, Botswana and Belarus also spoke.

The Committee will meet again at 3 p.m. this afternoon to continue its consideration of its agenda item on improving the financial situation of the United Nations, and to conclude its consideration of issues relating to the financing of the United Nations Angola Verification Mission (UNAVEM) and the United Nations Observer Mission in Angola (MONUA), and of issues related to the financing of the United Nations Iraq-Kuwait Observation Mission (UNIKOM).

Programme of Work

The Fifth Committee (Administrative and Budgetary) met this morning to commence its consideration of its agenda item on improving the financial situation of the United Nations, to continue its consideration of the financing of the United Nations Angola Verification Mission (UNAVEM) and the United Nations Observer Mission in Angola (MONUA) and to conclude its consideration of issues related to the financing of United Nations Iraq-Kuwait Observation Mission (UNIKOM).

Presentations concerning the financial situation were to be made by the Secretary-General, Kofi Annan, and the Under-Secretary-General for Management, Joseph E. Connor.

(For background on the financing of UNAVEM and MONUA and on the financing of UNIKOM see press release GA/AB/3308 of 4 October 1999).

Statement by Under-Secretary-General for Management

JOSEPH E. CONNOR, Under-Secretary-General for Management, said aggregate assessment levels, comprising the regular budget, peacekeeping and the tribunals, had peaked at over $4 billion in 1995, fallen to some $2 billion in 1998 and now risen to $2.4 billion in 1999, with a further rise proposed for 2000-2001 to $2.8 billion. Regular budget assessment levels had been flat since 1995 as a consequence of simplified structures and a leaner, more efficient Secretariat. Real costs had been reduced to produce a regular budget total today that was lower than it had been in 1994.

Peacekeeping assessment levels had fallen since 1995 to a low of $907 million in 1998, he said. Projected levels for 1999 included the start-up phase of new missions. Higher amounts would be needed for these missions in 2000-2001. Tribunal assessment levels had increased significantly so that budget levels in 2000 were expected to approach $200 million. Overall, he said, the assessment reductions that characterized 1995 to 1998 would be replaced by increases for 1999, 2000 and beyond.

He said three indicators were key to assessing the financial situation -- unpaid assessments, available cash and amounts due to Member States.

At 30 September 1999, unpaid assessments totalled $2,510 million. Unpaid peacekeeping assessments had remained high for the past four years. There had been movement within a narrow range for unpaid regular assessments over the last 10 years. Unpaid Tribunal assessments had increased each year.

Prompt collection of assessments was the bedrock of United Nations financial stability, as there were no other funds to maintain the Organization, or to carry out its mandates, he said. The United Nations had no capital and limited reserves. It could not borrow money. Prompt collection must be maintained to achieve a firm financial base, and the Organization had failed to achieve that objective.

Thus far in 1999, the United States had paid $264 million, but it still accounted for 65 per cent of the total owed at 30 September 1999, he noted. Other large contributors accounted for 17 per cent, with the remaining Member States accounting for 18 per cent.

At 30 September, $644 million owed was for the regular budget, $1,831 million was owed for peacekeeping and $35 million was owed for the Tribunals -- the total of $2,510 million. This was slightly more than last year and considerably more than two years ago. Much of the increase related to peacekeeping arrears.

While the absolute amount of uncollected assessments was of great concern, he said, in relative terms the picture was worse. Uncollected assessments represented about 12 months of assessments. The situation had grown worse since 1998. Normally unpaid regular assessments at 30 September would be higher than amounts owed at 31 December, as the major contributor's payments usually began with the United States' budget year on 1 October. Thus there should be a decrease in the remaining three months of the year.

However, at 30 September 1999, the United States owed 81 per cent of the regular budget aggregate, he said, with two other principal contributors owing a further 9 per cent. It was expected that those three would make additional regular budget payments by 31 December 1999. Seventy-eight Member States owed the remaining 10 per cent of the uncollected regular budget total.

The good news was that at 30 September, 104 Member States had paid their regular budget contributions in full for 1999 and all prior years, he said, which was an improvement. By the end of 1999, he expected more than 117 would be paid in full.

The total regular budget contributions received in 1999, including money owed from previous years, was lower than in 1998 -- $857 million, Mr. Connor added. This was 79 per cent of the $1,084 million assessed for 1999, down from 80 per cent for 1998 and 88 per cent for 1997.

Uncollected peacekeeping assessments had risen steadily since 1990, he said. At 30 September 1999, unpaid peacekeeping assessments were higher than the 1995 level, despite the decrease in peacekeeping activity. Member States had been expected to take advantage of lower levels of assessments to “pay down” peacekeeping arrears, but that had not happened. The total amount outstanding at 30 September was $1,831 million.

The United States owed 60 per cent of that total, he said. Ukraine owed 11 per cent and the Russian Federation owed six. Unpaid United States assessments had increased from a year ago, while Ukraine's level was flat and Russian Federation arrears had decreased by more than 80 per cent in the past five years.

He said unpaid Tribunal assessments could be summarised in one word -- "increasing". In 1999, the unpaid balance had increased by $13 million from 1998.

The magnitude of unpaid assessments effectively eliminated the financial base of the Organization, he went on. Financial flexibility had been lost, which endangered the Organization's very existence, as the Organization did not have predictable, assured financial support of its Members.

Turning to the subject of available cash, he said that at the end 1998 there had been a cash deficit of $40 million for the regular budget -- a situation he described as significant but an improvement over larger cash deficits at year end 1997 and 1996. The improvement was mostly due to a significant United States payment in late November 1998.

By 31 January 1999, cash inflows from timely payments of 1999 regular assessments had permitted repayment of amounts borrowed from peacekeeping funds and had eliminated the regular budget cash deficit, he said. However a negative regular budget cash balance of $60 million was likely at 31 October and that would increase to $162 million at 30 November.

The situation at year-end would depend almost exclusively on how much the United States paid in December, he said. If it made no payment, year-end regular budget cash would be minus $248 million. Experience suggested the United States would pay late in the year, but the lack of enabling national legislation meant that it could not give definitive assurances about levels of payment.

If the United States paid the equivalent to what it had paid in the last weeks of 1998 the regular budget cash would be about $48 million, he said. If it paid sufficient regular and peacekeeping assessments to reduce its obligations to the equivalent of the most recent two year assessments the regular budget cash balance would go into a positive amount -- a "razor thin" $2 million. There would then be no need, for the first time since 1993, to cross-borrow peacekeeping funds at year-end.

Peacekeeping cash levels had peaked twice during 1999 at $825 million in March and $869 million in September, he said. It was forecast at $749 million at 31 December 1999, compared to $768 million at 1 January 1999. This meant that the impact of new missions would be felt only marginally until close to year-end. With this caveat, the Secretariat forecast a peacekeeping cash balance of $749 million at 31 December 1999. That amount did not reflect any United States’ arrearage peacekeeping payments. If the United States paid $100 million, peacekeeping cash would rise to $849 million -- the highest amount in a long time.

At year-end 1998, total combined cash balances had been higher than in 1997 and 1996 due to increased year-end payments in 1998 by the United States, he said. If it paid the same amount as in 1998, combined cash would total $727 million. Cross-borrowing from peacekeeping funds would still be necessary to cover the regular budget cash deficit of $48 million. If additional payments of approximately $150 million were made, combined cash would rise to $877 million, and no cross-borrowing would be needed. The Organization continued to have no cash reserves and limited cash to begin new missions.

Without adequate cash, debts to Member States for troops and contingent-owned equipment could not be paid in full, he said. At year-end the United Nations would probably owe $729 million to troop and equipment contributors, down from over $800 million owed during the past few years. The decrease was largely caused by revaluations of the debt, not by payments made.

Over several months, payments totalling $80 million had been made, he said, and additional payments were expected in the weeks ahead. The total reimbursement amount for 1999 would reach $157 million.

At the start of 1999 Member States had been owed $872 million, he continued, but every effort had been made to pay this year's incurred costs. Obligations incurred in 1999 for troops and equipment would total $141 million and reimbursements of that amount would be made. The Russian Federation had made an arrears contribution of $16 million, he added, which would be passed on to creditors.

The Organization had negotiated a revaluation of equipment that reduced the debt to a Member State by some $127 million, he said, but even with the 1999 downward revaluation, the Organization's debt remained high and unliquidable. Future liquidation of these obligations was dependent on the collection of peacekeeping assessments now long in arrears.

One group of Members States was financing another group -- with no relief in sight, he said. That was a condition of potential destabilization. The United States, the United Kingdom, India, the Netherlands and Pakistan led the list of some 70 creditors, and the United Nations could only offer its appreciation to those waiting for relief.

On balance, the overall situation was a little better than a year ago, he concluded.

Statement by Secretary-General

KOFI ANNAN, United Nations Secretary-General, said that the Fifth Committee was central to the administrative, financial and institutional health of the Organization. The Secretariat depended on it to provide the practical basis and the resources that enabled the United Nations to carry out its vital work. When there were concerns about progress, about priorities or about meeting peoples' expectations, the Fifth Committee had a key voice in addressing those concerns and setting the Organization on an effective course. In that context, he wished to share some of his concerns with the Committee.

In 1997, the United Nations had embarked upon a major programme of reorganization and revitalization aimed at transforming the Organization -- its leadership, its structures and its performance, he said. From top-to-bottom, the aim was nothing less than to bring the Organization greater unity of purpose, greater coherence of efforts and greater agility and flexibility in responding to an increasingly dynamic and complex world.

The United Nations had come a long way, he said. Nearly three years later, it was fair to say that good and determined progress had been made. Coordination among the far-flung entities had improved, and cabinet-style management was now the norm. Budget and staff had been subjected to new and rigorous discipline. There was a Deputy-Secretary-General, a Development Group and a system of Development Assistance Frameworks that had not existed before and which were leaving positive, lasting imprints on the Organization. He remained firmly committed to this course of action. The search for excellence was an ongoing struggle.

But it was equally fair to say that there was a long way to go before the Organization could pronounce itself satisfied, he said. The transformation of the United Nations had yet to attack what he saw as an overly burdensome and overly intrusive approach to administration. It had yet to provide the necessary flexibility with which to respond to new and urgent challenges, and it had yet to put the Organization on a firm financial footing. These concerns should be the next frontier of fundamental change at the Organization.

Whether the matter under discussion was finance, human resources or delivery of mandated programmes, the Organization was over-administrated, he said. There were too many rules and too many steps. Too many things that should be simple were needlessly complex. Too many things that should happen quickly occurred with painful sluggishness. For an Organization that must respond regularly to crisis, this was a sure path to frustration, failure and irrelevance.

Some of this over-administration could be attributed to the Secretariat, which meant that at least some of it was within his power to fix, he said. He was trying his best to do so. The recruitment process, for example, still took too long but it was getting shorter and simpler.

But some of the over-administration stemmed from a plethora of resolutions and responsibilities handed down by the Member States over the years, layer upon layer, he said. The United Nations needed to become more results-based, measuring success not by fulfilling endless administrative requirements, but by responding effectively to real problems and to the needs of real people.

That was why he had proposed that there be time limits or "sunset provisions" for initiatives involving new organizational structures or major commitments of funds, he said. And that was why he had proposed a shift to results-based budgeting.

He wished to stress that the focus on results was not merely a budget exercise, he said. It was one of many tools designed to create a United Nations that could focus on the services it delivered to the Member States. Greater clarity about the results and performance that were expected of the Organization would also make it easier to define the respective responsibilities of the Member States and the Secretariat.

The Secretariat respected the right of the General Assembly and the Fifth Committee to legislate, he said. He asked only that Member States in turn respect the Secretariat's responsibility to administer and manage the Organization. Managers must be able to manage. The Secretariat would always do everything possible to implement the mandate entrusted to it. It wanted to be held accountable. But just as important, it was eager to perform at its unencumbered best.

Along with a surplus of rules, there was a severe deficit in what he referred to as a "surge capacity" -- the financial and operational flexibility to respond promptly and effectively to new challenges, he said. No one would have thought that, in the past year alone, the United Nations would undertake new operations in Kosovo and East Timor and be on the verge of new missions in Sierra Leone and the Democratic Republic of the Congo. No one knew what the year ahead held in store, but the United Nations must be prepared. Ad hoc solutions would not do. Capacity and flexibility must be built in to the way it operated.

At present, however, they were not, as had been seen in the case of financing the Kosovo operation, he said. He had asked for $200 million for the first year of operations. The Assembly had authorized $125 million. To date just $35 million had been received. This had meant a slow start in financing a high-profile, high- stakes mission. The Organization must do better, especially since the early days were so critical in establishing the tone of, and confidence in, an operation.

Part of the answer lay in giving the United Nations adequate reserve provisions through the Working Capital Fund and the Peacekeeping Reserve Fund, he said. The former was effectively depleted and the latter was under-funded. He hoped the General Assembly would now consider ways in which the levels and cash resources of these funds could be raised to more fully handle the contingencies for which they had been created.

The answer was also linked to the question of gratis personnel, he said. The decision to phase out such personnel had been taken for good reasons. He had hoped, however, that alternative solutions would provide the useful hiring flexibility that those arrangements provided.

Mention of the reserve funds brought him to the larger question of financing the Organization in general, he said. Even with streamlined structures and mechanisms, with simpler ways of carrying out the work, and with an improved "surge capacity", without the necessary funding the United Nations would be handicapped in its ability to fulfil the mandates entrusted to it by the Member States.

In 1997, he had said that success in strengthening the United Nations would depend to no small extent on a change in attitude on the part of the Member States, he continued. Today, for all the fine words of affirmation heard, and for all the new tasks the Member States have given, the bottom line had been woefully neglected.

At the end of December 1996, unpaid peacekeeping and regular budget assessments had stood at $2.15 billion, he said, and it had remained more or less at that level, and would likely be there at the end of 1999. Although more Member States had paid their assessments, that good news was overshadowed by the fact that overall arrears were greater than the year's assessments for the first time in his recollection.

Under these circumstances, he could not rationally manage the United Nations, he said. The Organization could not meet its obligations to Member States that volunteered personnel for peacekeeping operations, which ran into hundreds of millions of dollars. This was an unacceptable burden on countries, often developing nations, that had demonstrated their commitment to the United Nations by committing their personnel to difficult and dangerous operations throughout the world.

Over the long term, the only solution was that all Member States must honour their legal and moral obligations under the Charter and pay their dues in full, on time and without conditions, he said. Meanwhile, he would ask the General Assembly to consider temporarily suspending the provisions of the financial regulations requiring the return of surpluses to the Member States. Though not an answer, at step would help to improve the chronic cash shortage.

The international community continued to turn to the United Nations for unique services, he said. The public continued to place faith in it as an agent of peace and progress. Everyone wanted a United Nations that worked. He believed that such a United Nations was possible. But to reach these shared goals, there needed to be a better way of doing business in the house.

His millennium wish was that a better way be found, past the serious obstacles, to a more effective Organization, a more responsive Organization -- to a United Nations that was the best it could be, he concluded.

Statements

ANNA-MAIJA KORPI (Finland), speaking on behalf of the European Union, Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Cyprus, Malta, Iceland and Liechtenstein, said the new peacekeeping mandates made it all the more imperative that Member States fulfil their financial commitments to the United Nations. It was incumbent on all States to take rapid and responsible decisions to provide the necessary resources, while giving due care and attention to scrutinizing each proposed peacekeeping budget. She said that as a permanent member of the Security Council the United States had a special responsibility toward the Organization. It was also the sole beneficiary of the 25 percent ceiling on contributions. The principle of capacity to pay must be the cornerstone of the scale of assessments.

On the eve of the new millennium, the European Union reiterated the urgent need to put the United Nations back on a secure footing, she said. In that connection, she wished to recall the set of provisions presented by the European Union in 1996 and regretted that the package as a whole had never been discussed.

SAMUEL R. INSANALLY (Guyana), speaking on behalf of the “Group of 77” developing countries and China, said the Secretary-General’s presence demonstrated his commitment to addressing the critical financial situation which now faced the United Nations. The Group had always attached the highest importance to preserving the financial integrity of the Organization, a commitment reiterated by expressions of concern at the twenty-third Group Ministers’ meeting several weeks ago. At that meeting, the Ministers had reaffirmed that the primary cause of the financial problems continued to be the failure of certain Member States, in particular the major contributor, to pay their assessments in full, on time and without conditions.

Payments were a legal obligation, he said, although the Group recognized the need for understanding for developing countries temporarily unable to meet them. The practice of cross-borrowing from the peacekeeping budget, caused by cash-flow deficiencies, placed undue financial difficulties on troop- and equipment- contributing developing countries, which must wait indefinitely for reimbursement. That form of subsidy could not continue.

Because of difficulties arising from lack of financial liquidity, he said, confidence and cooperation, on which the United Nations depended, had been clouded. In the interest of multilateralism, that cloud must be removed. The only practical and definitive solution was the prompt payment of assessed contributions and arrears. He urged defaulting States to take all steps to honour their obligations and restore the United Nations health.

RICHARD HOLBROOKE (United States) said his Government was proud to have been the largest contributor to the United Nations in every year since its inception, and it remained committed to paying its fair share. Addressing the issue of United States arrears, he said he had worked hard with the United States Congress on the issue and had had numerous meetings with key congressional leaders -- but the effort to solve the arrears issue was linked to meaningful reform of the Organization.

The United States placed the highest importance on two sets of issues. First, it believed that the United Nations must observe budget discipline and make its budgeting process and programme evaluation process more streamlined and sensible. A budget based on discipline and sound management principles would produce a better Organization for all Member States. It was therefore vital that the United Nations budget for 2000-2001 be based on zero nominal growth.

Second, the United States was calling on the United Nations to make its scale of assessments more equitable, as the current approach to the scale had been adopted 25 years ago when there were only 147 Member States. That meant reducing the regular scale’s ceiling from 25 percent to 22 percent and establishing a peacekeeping ceiling at 25 percent. The United Nations should reduce its reliance on any single member or group of members.

Nothing less than the United Nations continued financial stability and ability to carry out its mandated activities were at stake, he stressed. The United States would be there to help, and that meant doing all it could to pay its fair share to the United Nations.

He said the United States’ delegation had noted speakers calling for the settling of the United States’ arrears issue, and pledged his continued support for all efforts to settle the question.

SHEN GUOFANG (China) said a strong and stable financial basis was the basic condition for the United Nations to fulfil its mandates and complete its tasks. The United Nations had been stuck in a quagmire of severe financial problems. The major cause was non-payment of assessed contributions. Most Member States had strived to overcome difficulties and fulfil their financial obligations to the letter. However, in open defiance of the Charter and relevant General Assembly stipulations, the big contributor had been in huge arrears for a long time. That was the result of political motivations or domestic party politics.

Shunning legal obligations was not acceptable, he said. Nor was the imposition of pressures on the United Nations by not paying assessed contributions. He wished the United States representative success in speaking to his Congress.

The current scale of assessment for the peacekeeping and regular budgets had been blamed by some for the financial difficulties, he continued. Some technical aspects of the scale needed to be improved, but it was not acceptable to challenge the impartiality of the scale or unilaterally set ceilings and floors for oneself.

He said the financial crisis had interfered with the implementation of mandated activities, and that was disturbing. With the crisis hanging over the Organization’s head, the Secretariat must formulate even more stringent rules and regulations, tighten management, put an end to spending and squandering, practice economy, and make the most of every penny of Member States’ contributions. At the end of the millenium, China called on all Member States to seriously fulfil, with good political will, their financial obligations.

FELIPE MABILANGAN (Philippines), speaking on behalf of the Member States of the Association of South-East Asian Nations (ASEAN), supported the statement made by Guyana on behalf of the Group of 77 and China. The ASEAN was concerned that the financial crisis within the United Nations was undermining its ability to implement fully, efficiently and effectively the programmes and activities mandated by Member States. The ASEAN remained of the view that this was principally due to the late or non-payment of assessed contributions by some Member States –- in particular by the major contributor, he said. It did not share the view that the scale of assessments had caused this crisis. The ASEAN had taken its Charter obligations seriously by trying to pay its assessed dues promptly, and regretted that the United Nations had had to borrow from peacekeeping funds to finance regular budget activities. It found unacceptable the practice of imposing conditionalities in the payment of assessed dues.

INAM UL HAQUE (Pakistan) said the debilitating impact of the critical financial situation was visible in all aspects of the work of the Organization -– in its inability to respond to people’s requirements, in the low morale of staff, in its reduced capacity to carry out mandated programmes and therefore in the difficulties faced by Member States. It was disturbing that the situation had not improved despite major reform undertaken at the fifty-second Assembly session. Reform was ongoing, but a cash-strapped Organization could not be effective or efficient. Financial uncertainties must be removed if the reform process was to be successful.

Cross-borrowing of peacekeeping funds for temporary relief of financial problems was no longer feasible, he said, and the United Nations role in maintaining peace and security was in jeopardy. That practice had caused particular difficulties for developing countries; however, Pakistan had always responded to the United Nations call to maintain peace and security and would continue to do so. He regretted that Pakistan’s commitment and that of the overwhelming number of developing States had not encouraged the richest State to fulfil its obligations. Major contributors risked losing respect, influence and prestige in the eyes of the international community. Palliatives thrown at the symptom, without addressing the problem of non-payment would not work.

The Secretariat should work harder to restore the confidence of Member States by scrupulously carrying out the decisions of legislative bodies, he said. He supported the Secretary-General in the discharge of his responsibilities, and He regretted that no substantive resolution had been adopted on the financial situation since the forty-eighth Assembly session. As Pakistan had previously proposed, the Fifth Committee should consider the critical financial situation of the Organization in all its aspects, since the High-Level Working group on the Financial Situation of the United Nations could not make recommendations to the Assembly. Sufficient time should be allocated for that.

MICHAEL JOHN POWLES (New Zealand), speaking also on behalf of Australia and Canada, said that, as in previous years, the United Nations had been obliged to scrape through this year. It was running on empty with many miles still to travel. That was no way to run an international Organization. The United Nations needed an adequate and predictable source of funding. The Secretary-General’s proposals for improvement were welcome, but the real problem was delinquent States. The delegations he spoke for were not among them. The debt to the Organization must be lowered. When Member States had established the Organization, they had agreed to share its expenses -- in accord with methods determined by the Assembly -- unconditionally. There could be no argument against the payment of contributions.

An impact of the financial crisis was the increasing delays in reimbursement to troop contributors, he said. That affected all Member States, and constrained developing Member States from meeting the Organization’s peacekeeping needs. It was depressing that this long shadow continued to be cast.

He was concerned about the increased reliance on voluntary funding of peacekeeping missions, he said. That method of funding missions was not acceptable. Urgent needs for resources at the beginning of a mission might be met by voluntary funding, but he could not support ongoing voluntary funding of missions. That posed a threat to the work of the Organization in a key area of its responsibilities. It also meant that regions that could not attract donor aid might fall outside the multilateral security system. All operations should be put on an equal footing, regarding their source of funding, he stressed.

If all Member States paid now, he said, the United Nations would have the base it required to fully implement the tasks given to it by the Assembly. Article 19 -– the section of the United Nations Charter that dealt with payment of assessments -- needed to be reviewed. While the wording suggested that sanctions would apply to Member States that fell two years behind in the payment of their assessments, the current interpretation allowed them to be three years behind. Assessments should be classified as in arrears if 30 days had passed since the receipt of letter of notification. More measures to discourage non-payment were also required. The suggestion that Member States in arrears should not be eligible for election to posts under the General Assembly’s purview merited serious study.

KISHORE MAHBUBANI (Singapore) said the United Nations reminded him of a building with unreasonable tenants, some of whom were always late with their rent and others who did not pay at all. Yet they continued to demand that the landlord provide services and maintenance as usual.

In reality, little, if any, improvement in the financial situation of the United Nations had taken place, he said. That had not only constrained the Organization in its duties, but had also affected the morale of the United Nations and its members. Singapore disagreed with the view that the scale of assessments had affected the ability of any Member State to pay its contribution. The scales of assessment were not the cause of the financial crisis.

The real cause of the financial crisis was the late or non-payment of the assessed contributions of some Member States, in particular the major contributor, he said. There was no excuse for a State that had been doing well economically not to fulfill its obligations.

A culture of transparency and accountability had been taking hold in the United Nations, he continued. There was better budget discipline and utilization of resources. Peacekeeping operations had grown more professional. Those were positive signs. The United Nations could only be as effective as the Member States allowed it to be. It was their responsibility to provide sufficient resources for the Organization to carry out the role assigned to it. Singapore welcomed the comments made by the United States Permanent Representative that the arrears issue would be one of his main priorities.

HASMY AGAM (Malaysia) said his country was seriously concerned over the worsening financial situation of the Organization, and noted that the primary cause of the financial difficulty continued to be the failure, on the part of certain Member States, particularly the major contributor, to pay their regular and peacekeeping assessments. Malaysia did not share the view that the scale of assessments had in any way caused the inability by some members to meet their obligations to the United Nations.

The amount owed by the major contributor was insignificant compared to the size of its economy, status and influence within the Organization, he said. It was patently unfair for the developing countries to have to bear the financial burden of the Organization. Malaysia was supportive of the notion of imposing penalties to late payers. Considerable progress had been made in the area of reform, but without adequate funding the Secretary-General would not be able to pursue reform and serve Member States effectively. He added that Malaysia also welcomed the statement made by the United States Permanent Representative this morning.

OLE PETER KOLBY (Norway) said it remained a fact that only the goodwill and patience of troop-contributing countries kept the United Nations afloat financially. The United Nations had little, if any, flexibility. Unless there was a significant payment of arrears by Member States, debts to the United Nations’s many troop-contributing nations would remain at the current high level. The principles of sound financial management continued to be disregarded, he said. In this day and age, no other association or organization could accept the rules under which the United Nations operated and survived. The Secretariat worked wonders with the meagre and fluctuating funds at its disposal. Norway had given its full support to the European Union’s proposal for a comprehensive package in order to reform the financial system. And it approached the financial situation of the United Nations from the perspective that the United Nations should be strengthened as well as more efficient.

Real budget growth should also be allowed when necessary, to fund priority activities and meet new challenges, he continued. Following the principle of zero nominal growth was no longer a necessary incentive for reform.

JEREMY GREENSTOCK (United Kingdom) said he spoke today as the representative of the United Nations largest creditor. The United States was the largest creditor, but it had muffled its voice and stained its reputation by also being the largest debtor. He welcomed the United States representative’s statement of his intention to change that, but the representative did not have much time. The United Kingdom would tolerate the current situation with great reluctance, with the health of the United Nations as its higher priority.

The presence of so many permanent representatives at the Fifth Committee today testified to their support for the Secretary-General and Under-Secretary- General Connor, to their worry about the situation the Organization found itself in, and to their concern that the Fifth Committee should be equal to its responsibilities. Many permanent representatives made contributions to the work of the Organization in other Committees and organs, but rarely came to the Fifth Committee. Perhaps they had let the Fifth Committee down by not attending its meetings more often.

The European Union permanent representatives would support their interest in an effective United Nations, he said. The statement made on behalf of the Union had properly focussed on macro issues. The Union rightly assigned to the Secretary-General, once he had the necessary resources, the responsibility for managing the Organization effectively and transparently. The Fifth Committee must not say this, and then act differently. The United Kingdom would work hard to ensure that this understanding was implemented in practice and that the Secretary- General’s stated position was addressed and the problems he identified were corrected.

AHMED ABOUL GHEIT (Egypt) said the deteriorating financial situation of the United Nations resulted mainly from the non-payment of assessed contributions by some Member States. That had had a major negative effect on the overall functioning of the Organization. The Egyptian delegation wanted to emphasize that all Member States should pay their assessed contributions in full, on time and without imposing conditions.

He said it was ironic that the developing countries that contributed troops and equipment to the United Nations, and were determined to shoulder the responsibility for the maintenance of international peace and security, were not only denied reimbursement but were forced to finance the Organization due to the non-payment of financially capable members. Among other consequences, that situation hampered the ambitious reform programme which had been initiated by the Secretary-General.

GENADI GATILOV (Russian Federation) said the financial situation of the United Nations continued to be extremely serious. Once again the cash flow problem had become critical, and the financing of peacekeeping activities required cross- borrowing from various accounts. At the same time the reform process was continuing.

The reasons for that were, first, the failure of some Member States to fulfill their obligations, and, second, the persistent discrepancy between the scale of assessments and the true capacity of Member States to pay. The Russian Federation had fully paid its contributions and for six consecutive years had been making contributions to the peacekeeping budgets in excess of its assessment.

It was fully realistic to plan for zero nominal growth in the coming budget, he said. It was to be hoped that ongoing reform and improved management would enable the United Nations to maintain expenditure for the years 2000-2001 at the current level.

ELLY KARUHANGA (Uganda), speaking also on behalf of Tanzania and Kenya, said that at the fiftieth anniversary celebrations of the United Nations, Heads of State and Government had pledged to have a well-equipped, financed and structured United Nations for the twenty-first century. Four years later, the grave financial situation continued to be of serious concern to Member States. The time had come to move beyond a preoccupation with dire consequences and confront the critical issue of the financial crisis. The challenges faced by the United Nations were interconnected, and must be analyzed in the context of the whole membership. The Organization provided good value in return for the sums assessed, although it could do better if the financial crisis were arrested. Predictable financing was the key to short and long-term success.

The Secretary-General had confirmed what the Group of 77 and China had stated -– that the crisis was caused by the absence of the political will of major contributors, he said. It was imperative that all Member States -– large and small –- fulfil their obligations by paying in full. Only that would resolve the cash flow crisis. The current situation should not be blamed on the scale of assessments, nor should it be linked to the overall reform of the Organization. To perform miracles, the Secretary-General needed the requisite resources. As former Secretary-General Boutros Boutros-Ghali had stated, “beyond what is possible for a Secretary-General to accomplish lie major decisions that only Member States can make”.

Developing countries expected the United Nations to play a vital role in their social and economic development, and he welcomed the Secretary-General’s commitment to strengthen the development mandate, he said. Adequate resources were required. The Nairobi office must be placed at the same level as the offices in Geneva and Vienna, and resourced accordingly. The solution to the United Nations problems was not beyond the collective wisdom of the General Assembly, either financially or intellectually. The size of the budget, in relation to the scope of its activities, was small. Member States must rise to the challenge.

BRUNO RODRIGUEZ PARILLA (Cuba) said the Secretariat should provide updated information on the cash status of the Organization in advance of this meeting, and the Secretary-General’s report should be published one week before its consideration in the Fifth Committee. The serious cash shortage, which had existed for more than a decade, existed because of the pattern of contributions by the United States. The United States attempted to impose conditions on the meeting of its obligations. It had recently adopted similar positions in other areas, such as attempts to link its approval of mandates to their being financed on a voluntary basis -- thereby transgressing Article 17 of the United Nations Charter.

The United States had demanded inappropriate reductions in the levels of United Nations staff, he continued. It had attempted to impose ceilings on the budget in contradiction of General Assembly resolution 41/213. It had also attempted to impose reductions on its obligations under the scale of assessments. In practice, those reductions were already in place, given its level of indebtedness.

In 1998, when the United States had been responsible for the largest proportion of unpaid assessments, United States companies were receiving the largest portion of United Nations contracts to purchase goods and services, he said. The same situation had existed in 1997. The cash situation would be helped if included in the measures to address it were a stipulation that goods and services could not be purchased from providers from countries with high levels of arrears.

A significant number of Member States honoured their commitments to the best of their abilities, he said. Fortunately, the majority of governments shouldered their responsibilities and recognized that their parliaments’ decisions could only be applied internally. At the end of this meeting, there was no reason to be optimistic. Events clearly showed that concessions to the greatest debtor were not the best way to go about resolving the problem. Cuba had paid in full its arrears for the regular budget and had reduced its peacekeeping indebtedness, despite being the victim of an economic blockade.

LEGWAILA J. LEGWAILA (Botswana) said paragraph 2 of Article 17 of the Charter could not have been more precise and clear, “that the expenses of the United Nations shall be borne by its Members as apportioned by the General Assembly.” It was against this background that as a poor nation Botswana had been consistently paying its assessed contributions to both the regular and peacekeeping budgets. Botswana therefore had the reasonable expectation that all others would do the same if they took their membership of the United Nations as seriously as Botswana did.

He expressed sympathy for countries that, because of conditions beyond their control were unable to discharge their financial obligations. But any continued withholding of payment under whatever political pretext was in contravention of the provisions of the Charter and must not be tolerated. The politicization of budgetary matters and the holding of the entire United Nations to ransom were dangerous developments.

Cross-borrowing of peacekeeping funds to bail out the colossal sums of arrearage that continued to be accumulated by some Member States was regrettable. But most regrettable was the fact that such cross-borrowing was at the expense of the reimbursement of those Member States providing troops and equipment.

ALYAKSANDR SYCHOV (Belarus) supported concern about the deterioration of the United Nations’ financial situation, particularly at a time when peacekeeping operations were increasing. Member States had a clear understanding of the gravity of this agenda item. But the Organization could not solve its problems unless funding was assured.

A stable financial base could be assured only when all contributions were paid in full and without condition, he said. Member States faced increased responsibility in that respect, but further steps in this direction were required.

The problem of countries in arrears was very serious, but the reasons underlying the arrears needed to be taken into account. The capacity to pay of Member States must be the principle criterion -- Belarus had done its utmost to reduce its arrears.

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