Fifty-sixth General Assembly

Fifth Committee

37^th Meeting (AM)

BUDGET COMMITTEE CONSIDERS FINANCING OF INTERNATIONAL TRADE CENTRE,

EXCHANGE RATE EFFECTS, SPECIAL POLITICAL MISSIONS

As the Fifth Committee (Administrative and Budgetary) continued its consideration of various aspects of the Organization’s proposed programme budget for the next biennium this morning, it turned its attention to the financing of the International Trade Centre UNCTAD/WTO; the effect of the changes in exchange and inflation rates on the 2002-2003 budget; and estimates for the special missions dealing with the matters of which the Security Council is seized.

In the debate on the International Trade Centre UNCTAD/WTO (ITC), the representative of Canada noted that over one third of the 148 proposed posts were for the Centre’s Division of Administration.  He expressed concern that so many positions were being proposed for non-programmatic activities of the ITC.  Also, introduction of the documentation before the Committee one week after the proposed end of the session was a big problem.

[The ITC acts as the focal point for all United Nations technical cooperation activities in trade promotion.  The United Nations and World Trade Organization equally share the funding of the programme.]

Responding to questions, the Deputy Executive Director of the International Trade Centre stressed the importance of the administrative division and said that no new posts were being proposed there, but a number of positions were being reclassified following an independent evaluation of the requirements.

Introducing the Secretary-General’s report on the effects of recosting on the proposed budget for 2002-2003, Warren Sach, Director of the Programme Planning and Budget Division, said that adjustments to the budget estimates were routinely made at this time of the year, to bring them in line with the changes in the exchange rates, inflation and other factors.

As a result of recosting, the proposed budget for 2002-2003 had increased by some $35.27 million under the expenditure sections -– from $2.65 billion to some $2.68 billion.   The net increase under the income sections amounts to some

$8.17 million, bringing the total to some $408.34 million.

Questions were raised in the debate about the rates of inflation applied to various duty stations, post adjustments and other calculations.

The Committee decided to prepare a draft, to be acted upon next week, by the terms of which the Assembly would take note of the recalculated estimates.

Also this morning, following its consideration of the estimates in respect of matters, of which the Security Council is seized, the Committee decided to prepare a draft decision, by the terms of which the Assembly would take note of the Secretary-General’s report on the proposed resource requirements of

15 political missions with mandates that extend into 2002-2003.  It would also concur with the observations and recommendations of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) in that respect.

[In its report, the ACABQ expressed its concern at the submission of a proposal of such magnitude (the total cost of the activities described in the Secretary-General's report amount to some $29 million) so late in the session.  Accordingly, the Advisory Committee recommends that the matter be deferred pending a detailed review in February 2002 and subsequent action by the Assembly.]  Action on the draft is to be taken next Tuesday.

Also speaking this morning were the representatives of the United States, Mexico, Syria, Norway, Japan and Iran.

The Director of the Programme Planning and Budget Division; the Chief of the Economic, Social and Human Rights Service of the same Division; the Chairman of the ACABQ and the Deputy Executive Director of the International Trade Centre responded to comments and questions from the floor.

The Committee will hold its next formal meeting at 10 a.m. Tuesday,

18 December.

Background

This morning, the Fifth Committee (Administrative and Budgetary) met to consider several items, including the 2002-2003 proposed programme budget for the International Trade Centre/United Nations Conference on Trade and Development (UNCTAD)/World Trade Organization (WTO) and the effect of the changes in exchange and inflation rates on the 2002-2003 proposed programme budget.  The Committee was also expected to take up estimates in respect of matters of which the Security Council is seized.

Proposed Programme Budget for International Trade Centre/UNCTAD/WTO (ITC)

The Committee had before it the Secretary-General's 2002-2003 proposed programme budget for the International Trade Centre/UNCTAD/WTO (ITC) (document A/56/6/Add.1 (Section 11B).  The International Trade Centre UNCTAD/WTO (ITC) acts as the focal point for all United Nations technical cooperation activities in trade promotion.  The United Nations and the World Trade Organization share equally the funding of the programme. 

The amount proposed for 2002-2003 -- some $18.02 million after recosting -- represents an increase of some 3.1 per cent in real terms.  The biennial contribution of each organization is estimated at Swiss Francs 30.27 million, representing resource growth after recosting of some 3.28 per cent using the methodology applied by WTO.  The increase includes proposals to strengthen the

in-house capacity in electronic trade (by establishing one P-5 post and one General Service post under the Division of Trade Support Services) and requirements for expertise not available in the Centre for mainstreaming the core activities of the Executive Forum for National Export Strategies and the implementation of the Integrated Management Information System.

On the basis of an exchange rate of Sw F 1.76 to $1, the provision requested for the United Nations contribution for the biennium would be some $17.20 million.  On the basis of the latest data on exchange rates, the ITC budget would need to be recosted at Sw F 1.68 to $1.

In a related report (document A/56/7/Add.3), the Advisory Committee on Administrative and Budgetary Questions (ACABQ), recommends acceptance of the Secretary-General’s staffing proposal for 148 posts for the International Trade Centre UNCTAD/WTO and notes that the updated amount represents an increase in real terms of 3.1 per cent instead of the 3.7 per cent indicated in the budget outline.  The corrected submission has been made on the basis of more precise data, which became available following the preparation of initial estimates.   The ACABQ further notes that, on the basis of the exchange rate of Sw F 1.76 to $1, the provision requested for the United Nations contribution for 2002-2003 would amount to some $17.2 million ($287,250 more than the amount provided in the outline). 

The Advisory Committee recalls that the current submission is the second one to be presented in compliance with the revised administrative arrangements endorsed by the General Assembly during its fifty-fourth session.  As a report on the lessons learned in that respect is to be submitted by the ITC in the first quarter of 2002, the Advisory Committee intends to make further comments when it considers that document.  In the meantime, it recommends approval of the resources proposed for the International Trade Centre UNCTAD/WTO.

Estimates Concerning Security Council Matters

The Committee had before it a report of the Secretary-General on estimates in respect of matters of which the Security Council is seized (document A/C.5/56/25), which is submitted in the context of actions taken by the Council in 2001 regarding good offices, preventive diplomacy and post-conflict peace-building missions on the basis of requests from governments and/or recommendations of the Secretary-General.  The Assembly, in its resolution 55/233 of December 2000, decided that some $93.7 million, at revised 2000-2001 rates, should be reflected in the proposed programme budget for 2002-2003 for special political missions.

The report contains the proposed resource requirements of 15 political missions pertaining to matters of which the Council is seized with mandates that extend into 2002-2003.  The total estimated requirements, amounting to some

$29.52 million, would be charged against the $93.7 million (before recosting) provision proposed for special political missions under section 3, Political affairs, of the 2002-2003 proposed programme budget.

Included in the political missions listed in the report are the Special Representative of the Secretary-General for Afghanistan, the Personal Representative of the Secretary-General for Southern Lebanon and the counter-terrorism committee established pursuant to Security Council resolution 1373 (2001).   Annexed to the report is a breakdown of cost estimates for each political mission.

Also before the Committee was a report of the Advisory Committee on the estimates in respect of matters, of which the Security Council is seized (document A/56/7/Add.5), according to which the ACABQ expresses its concern at the submission of a proposal of such magnitude (the total cost of the activities described in the Secretary-General's report amount to some $29 million) so late in the session.  Accordingly, the Advisory Committee recommends that the matter be deferred pending a detailed review in February 2002 and subsequent action by the Assembly.  In the meantime, the ACABQ recommends approval of a charge of

$8 million against the provision for special political missions under section 3, Political affairs, of the proposed programme budget.  Pending consideration of the report of the Secretary-General, no action should be taken to fill the additional 41 positions shown in that document, nor should any reclassifications be implemented.

Proposed Programme Budget for 2002-2003:  Revised Estimates

The Committee also had before it a report of the Secretary-General on revised estimates: effect of changes in rates of exchange and inflation (document A/56/659) which explains that, in accordance with established practice, the proposed programme budget is recosted prior to its adoption by the Assembly.  The report provides the latest data on actual inflation experience, the outcome of salary surveys, the movement of post adjustment indices in 2001, salary expenditure experience and the effect of the evolution of operational rates of exchange in 2001 on the proposed programme budget for 2002-2003.  After recosting, the resources proposed under the expenditure sections would amount to some $2,681.0 million.  The recosted estimates of income for 2002-2003 amount to some $408.3 million. 

According to the ACABQ report on the revised estimates related to changes in the exchange rates and inflation (document A/56/7/Add.4), the Advisory Committee has found no technical basis for objecting to the Secretary-General’s revised estimates arising from the recosting of the proposed programme budget for 2002-2003.  Thus, the ACABQ is transmitting them to the Fifth Committee for its consideration.

Statements

CONRAD S.M. MSELLE, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introduced a report of the Advisory Committee on the International Trade Centre UNCTAD/WTO.  The Advisory Committee was recommending the approval of the budget proposed by the Secretary-General in the amount of some Sw F 61 million. 

JOHN ORR (Canada) said that when agreeing to the new procedure for approval of the ITC budget, the delegates had been told that the process was being streamlined.  He believed that introduction of the documentation before the Committee one week after the proposed ending of the session was a big problem. 

Regarding the proposed post structure, he said that out of 148 proposed posts, over one third were in the Division of Administration (21 Professional posts and 30 General Service positions).  He was not sure what exactly the Division was doing, but it was a cause of concern that one in three proposed posts was not directly dealing with the programmatic activities of the organization.  He also wanted an explanation as to why so many posts were required for that Division. 

Finally, regarding the format of the presentation of the fascicle, he noted that there was no division of labour between the ITC’s four divisions.  He wanted to know why such information was not being provided in the Secretary-General’s report.

HOWARD STOFFER (United States) said that he had similar concerns.  He had serious questions regarding the need for so many posts in the administrative division.  Regarding the proposals for the activities of the Executive Forum, he asked why funds from the regular budget were being requested if Switzerland was providing voluntary contributions for that programme and intended to do so in the future.  The Secretary-General’s report also contained a request for consultants amounting to over Sw F 828,000, and he wanted to know what they would be doing.  Why was such an amount required?

Mr. MSELLE, responding to the question on the timing of the submission of the documents, drew the Committee’s attention to the fact that the Advisory Committee had previously made a recommendation that a report be submitted on the experience and lessons learned in the context of the new procedure for budget submission by the ITC.  Such a report had not been submitted and was expected to be presented in 2002.  At that time, the ACABQ would review the process, including the timing of the submission of the document. 

JOSEPH SMADJA, Deputy Executive Director of the International Trade Centre, said that no new posts were being proposed for the Division of Administration, but a number of positions were being reclassified following an independent evaluation of the requirements.  When working on the submission, the understanding was that it should be presented on the basis of individual programmes, for which each division was responsible. 

As for the “overstaffing” of the Division of Administration, he said that Division was providing centralized services and administering the building.  In fact, the ITC was a “semi-autonomous” entity, to a large extent responsible for its own management.  The situation was regularly reviewed, and the Centre was considering subcontracting some services to the United Nations Office at Geneva . As for information about consultants, it was provided in the report.

Turning to the question on the Executive Forum on national export strategies, he said that from 1999 to 2001, it had been funded by the Government of Switzerland, but the impact and results of that body’s work were so important that the same resources were now being requested from the United Nations' regular budget.  Direct field application would be funded from extrabudgetary resources, however, and some events in the field would still be financed by Switzerland.

ALI KHAMIS, Chief of the Economic, Social and Human Rights Service of the Programme Planning and Budget Division, commenting on the lateness of the report, recalled that it was the second such exercise and that more time was needed to see how the arrangement was working.  One element of that arrangement was the difference in timing between the WTO and the United Nations in terms of the review process.  The Centre was equally funded by the two organizations, and it was difficult for one to go ahead without consultation on the contents and proposals to be put to Member States.  Two years ago, the United Nations and the WTO had  different views on the proposals contained in the budget at that time.  Not enough attention had been paid to the need for in-depth consultation to arrive at an understanding with the WTO.  In the WTO, decisions were taken by reviewing bodies.  The committee on budget, finance and administration had met only in November.  It was only at that time that there was understanding on what the WTO would be able to accept.

Mr. STOFFER (United States) said the use of consultants to introduce the Integrated Management Information System was understandable.  Given the important role of the Executive Forum, however, why would Sw F 585,000 be needed for activities such as brainstorming and research?  Those activities should be absorbed by the organization itself and not hired out to consultants.

Mr. SMADJA, ITC Deputy Executive Director, said the Executive Forum process was an integral part of its activities.  A number of topics would be covered during the Executive Forum.  The Forum did not have specialists on hand to cover the many topics that would be addressed.  There was need, therefore, for access to national consultants to form the basis of the Forum’s discussions.  While the WTO had global knowledge, specific expertise could only be attained through the recruitment of consultants.  The expertise of the national consultants, who were familiar with local situations, would be integrated into the overall approach.  The gathering of national experiences was part of the goal to arrive at best practice in international trade.  There was no doubt that they were needed as the WTO lacked very focused knowledge.

Mr. ORR (Canada) asked for a breakdown of the Administration Section of the ITC.  He also noted that the budget document did not follow the format of the tables.  What was the actual expenditure for 1998-1999?

Estimates Concerning Security Council Matters

Mr. MSELLE, Chairman of the ACABQ, introduced that body’s report explaining that the ACABQ had decided to defer detailed consideration of the Secretary-General’s report for reasons set out in its report.  It was not the intention of the ACABQ to affect the Secretary-General’s ability to react in a timely manner.  The ACABQ recommended that some $8 million out of $29.5 million be authorized by the General Assembly as a charge to the $93.7 million provision for special political missions for 1 January to 31 March 2002.

ERNESTO HERRERA (Mexico) said that while he agreed with the ACABQ recommendations on the estimates, he sought additional information on when the Assembly would be able to consider the first four missions listed in the annex to the ACABQ report, including the Central American peace process and the United Nations Verification Mission in Guatemala.

WARREN SACH, Director of the Programme Planning and Budget Division, said that draft resolutions had been tabled regarding the Central American peace process and Guatemala.  Related statements of programme budget implications had also been presented to the Advisory Committee, and the Fifth Committee should be receiving them soon.  Regarding the Afghanistan mission, a draft resolution was about to be tabled on that item.  A statement of programme budget implications was expected to be reviewed by the ACABQ on Tuesday.  Action on all three missions should be seen shortly.

ABDOU AL-MOULA NAKKARI (Syria) said he had expected a representative of the Secretary-General to present the Secretary-General’s report so that the Committee could hear the Secretary-General’s views on the matter.  Then the Chairman of the ACABQ would present the report of the Committee.  In principle, the reports of the Secretary-General should be introduced by his representative and ACABQ reports by the Chairman of that body.  It was not the first time that he was drawing the attention of the Committee to the issue.  He hoped that the Committee could return to the rules, so that the views of the Secretary-General could be presented through his representative.

Mr. SACH said there was no general problem with the ACABQ’s recommendation in that the $8 million was a pro-rata provision to take care of requirements in the first part of 2002.  He had a reservation, however, regarding paragraph 5 of the ACABQ report, which might represent a constraint for the Secretary-General.  In the last sentence of that paragraph, the ACABQ recommended that no action be taken to fill the additional 41 positions, 19 of which related to the office of the Special Representative for West Africa.  That was a new mission, which had not yet begun.  It had been the Secretary-General’s intention to announce an appointment regarding that mission shortly.  He would like to be in a position to understand that activities for the new mission would not be constrained.  There were 15 missions mandated by the Security Council, 14 of which were existing missions.  Most of their mandates were familiar to the Committee.  The additional mission for West Africa, recently mandated, should be acted upon shortly.

Mr. MSELLE said that as to the order of the introduction of reports, it did not matter if the Chairman of the ACABQ or the representative of the Secretary-General spoke first.  There were no rules in that respect.  Regarding the Advisory Committee’s recommendations, he said that the last sentence of paragraph 5 had to be read in conjunction with the observations in paragraph 4, according to which it was not the intention of the ACABQ to restrict the ability of the Secretary-General to react in a timely manner with regard to the missions referred to in his report.

Whenever the Advisory Committee made recommendations regarding deferral of action on special missions or peacekeeping operations, such recommendations were made without prejudice to the flexibility accorded to the Secretary-General in respect of recruitment and filling of posts.  Regarding the number of posts and the grading patterns, he added that the action taken in that respect should also provide sufficient flexibility to react to the subsequent decisions of the General Assembly. 

Mr. NAKKARI (Syria) said, indeed, there was no difference whether it was the report of the ACABQ or the Secretary-General’s report that was introduced first, but both documents had to be presented.  In some cases, the reports of the Secretary-General left an impression that the Secretary-General was commenting on the observations of the ACABQ, while the opposite should be the case:  the ACABQ was supposed to comment on the Secretary-General’s proposals. 

ANNE MERCHANT (Norway) asked if the ACABQ would recommend postponing action on the special missions to be considered on Tuesday.

Mr. MSELLE said that the ACABQ had finished its reports on several such missions, and it did not intend to recommend any deferrals.

Mr. NAKKARI (Syria) said that if the Committee intended to act on the special missions today, he would have no problem with the content of such a decision, but he had some reservations regarding the procedure to be followed.  As he understood the time constraints that the Committee was facing, he would not block the decision on the matter, but all drafts were to be presented in writing and in all six official languages in advance of taking action on them.

The Chairman of the Committee, NANA EFFAH-APENTENG (Ghana) then proposed that the Committee should take note of the Secretary-General’s report and concur with the recommendations of the ACABQ, approving the charge of $8 million for the period from 1 January to 31 March 2002 for the 15 missions dealt with in the report of the Secretary-General against the provision for special political missions requested under section 3, Political affairs, of the proposed programme budget.  A formal decision would be presented to the Committee on Tuesday.

As the Committee turned to the revised estimates for the proposed programme budget, Mr. SACH introduced the Secretary-General’s report before the Committee, saying that the adjustments in the budget estimates were routinely made at this time of the year, to bring them in line with the changes in the exchange rates, inflation and other factors.  In the course of the year, the dollar had weakened in relation to several currencies, and additional resources would be needed for several duty stations.  However, the dollar had strengthened at such duty stations as Addis Ababa and Nairobi.  Inflation adjustments were also reflected in the level of Professional salaries. 

Mr. MSELLE introduced the report of the ACABQ on the matter. 

Mr. ORR (Canada) said that regarding schedule I and the annual rates of inflation for New York, the duty station for which some 50 to 60 per cent of the regular budget was expended, the inflation rates were going down for 2002-2003 from the original projection of 2.7 per cent.  He noted that for the departments that were New York duty stations, the cost for inflation appeared to be going down.  One would think that if inflation were going down from original estimates, then the salaries would also follow.  He asked for clarification on the matter.

SHINICHI YAMANAKA (Japan) said he had a similar question.  He referred to paragraph 4 of the Secretary-General's report on the proposed revised recosting factors, which mentioned assumptions applied in the preliminary recosting.  Changes in inflation rates had impacted the costing for the provisions

New York and Geneva.  Inflation rates had decreased from 2.7 to 2.1 per cent in New York.  He did not understand why more resources were needed for inflation.

SEYED MORTEZA MIRMOHAMMAD (Iran), speaking on behalf of the "Group of 77" developing countries and China, said he wished to put on record that the resource requirements for the recosting should be appropriated in accordance with the procedures set forth in General Assembly resolution 41/213.

Mr. SACH, on the treatment of inflation, referred the Committee to the detailed information provided in paragraphs 7 and 8 of the Secretary-General's report.  The three different elements of the budget included non-post costs, General Service salaries and Professional salaries.  Inflation rates in schedule I were based on non-post costs.  Schedule II had specific methodology for consumer price index movements and out-of-area expenditure components.  The movements of General Service salaries according to the results of surveys and cost-of-living adjustment mechanisms mostly paralleled consumer price index movements.  Some $1.400 billion of the proposed $2.645 billion related to New York, which represented a large proportion of the budget.  The impact of inflation had to be precisely calculated for Professional and General Service staff.  New York post adjustment multipliers had risen over what had been anticipated in the initial proposals.  Projections were based upon movements between November 2000 and November 2001. 

Mr. ORR (Canada) said he was still curious as to why inflation was running at different rates for the same duty station.  The issue appeared as clear as mud to him.  He asked the Secretariat for further clarification.

Mr. SACH said that simply put, the post adjustment system was not working in locked step with consumer price index movements.  It was much more complicated than that.  Different weights in the consumer price index did not mirror those in the post adjustment system.  It was for that reason that there was a difference of movement in post adjustment indices from the consumer price index.  Because the Organization had to pay salaries at the rate mandated by the International Civil Service Commission (ICSC), it was appropriate to calculate according to the post adjustment index, as opposed to the consumer price index, which was based on a certain urban consumer.

The CHAIRMAN then requested the Secretariat to prepare a draft for a formal decision to be taken by the Committee at its next formal meeting.

Other Matters

Mr. NAKKARI (Syria), commenting on the Committee's programme of work for next week, said he did not see the pattern of conferences in the programme.  There might be need for more than one meeting on that item.  He hoped that his comments would be taken into consideration when adjusting the programme of work.

The CHAIRMAN said a meeting was scheduled for Saturday, 15 December,

from 11 a.m. to 4:30 p.m. on the pattern of conferences.  He hoped that all outstanding issues could be addressed during that meeting.

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