FIFTH COMMITTEE REVIEWS PROPOSALS TO INCREASE PROFITABILITY OF REVENUE-PRODUCING ACTIVITIES BY UNITED NATIONS

Fifty-eighth General Assembly

Fifth Committee

3^rd Meeting (AM)

FIFTH COMMITTEE REVIEWS PROPOSALS TO INCREASE PROFITABILITY

OF REVENUE-PRODUCING ACTIVITIES BY UNITED NATIONS

Non-Payment of Assessed Dues also Considered; Exemptions

Suggested for 10 Member States Said to Face Financial Hardships

The Fifth Committee (Administrative and Budgetary) this morning focused on the provision of common services in Vienna, measures to increase the profitability of the revenue-producing and commercial activities of the United Nations and application of sanctions for non-payment of dues by Member States under Article 19 of the Charter.

Ion Gorita, Vice-Chairman of the Joint Inspection Unit, introduced the Unit’s report on revenue-producing activities saying that for all the organizations of the system, income from activities under review amounted to some $670 million in 1998-1999, with about 87 per cent of the total generated by three organizations:  the United Nations, United Nations Children's Fund (UNICEF) and the World Intellectual Property Organization (WIPO).

While the organizations of the system neither had commercial mandates, nor were expected to operate like business entities driven by financial profit motives, the secondary objective of the activities to generate income or at least ensure self-financing was stated in the policy documents of most organizations.

Expressing particular interest in the United Nations Postal Administration, the United States representative said that given recent experience, it seemed highly unlikely that the United Nations could meet the projected revenue goals on which the proposed budget was based.

In that connection Andrew Toh, Assistant Secretary-General for Central Support Services, who introduced the report on the profitability of the Organization’s commercial activities, said that a new and dynamic management team had been installed which was planning to implement a series of projects to increase revenue, including the sale of “fun packs” of excess stamps that had been previously destroyed and the production of personalized stamps. 

He also informed the Committee of the action undertaken by the Department of Public Information (DPI) in that regard.  One element of restructuring of the Department was the creation of the Outreach Division, whose activities included the sale of publications and services to visitors.  An integrated e-commerce site that would provide a worldwide sales outlet for the Organization’s publications was in the final stages of implementation.

While Italy, on behalf of the European Union, supported the recommendations of the Joint Inspection Unit for fostering integration of services for the United Nations Industrial Development Organization (UNIDO), the International Atomic Energy Agency (IAEA), the Comprehensive Nuclear-Test-Ban Treaty and the United Nations Vienna Office, the United States did not think a convincing case had yet been made for the establishment of a single common services unit in Vienna.

Also this morning, numerous speakers addressed requests for exemption under Article 19 from 10 Member States -- Burundi, the Central African Republic, the Comoros, Georgia, Guinea-Bissau, the Republic of Moldova, Sao Tome and Principe, Somalia, Tajikistan and Niger.  A consensus began to emerge that, given extraordinary difficulties faced by those countries, they should be allowed to vote in the General Assembly until June 2004.

[According to Article 19, if a Member State falls behind in the payment of its dues by an amount equal to its assessments for the two most recent years, it will lose its right to vote in the General Assembly, unless the Assembly decides that non-payment is a consequence of factors beyond its control.]

Also addressing the Committee this morning were representatives of Canada, (also for Australia and New Zealand), Niger, Morocco, on behalf of the Group of 77 and China, New Zealand (also for Australia and Canada), Nepal, Pakistan, Botswana, on behalf of the African Group, South Africa, Cuba, Venezuela, Saudi Arabia, Nigeria, Syria, Guinea, Argentina, Bangladesh, Libya, Uruguay, Trinidad and Tobago and Japan.

The Committee will meet again at 10 a.m. on Monday, 13 October, when it will continue its discussion of items related to the scale of assessments and begin its consideration of the pattern of conferences.

Background

This morning the Fifth Committee (Administrative and Budgetary) was expected to continue its consideration of reports related to the review of efficiency and profitability of commercial activities of the United Nations (see press release GA/AB/3573 of 7 October for details). It was also expected to begin consideration of items related to the scale of assessment.

Scale of Assessment

Before the Fifth Committee was a letter dated 3 July 2003 from the President of the General Assembly addressed to the Chairman of the Fifth Committee (document A/C.5/57/39) transmitting a letter dated 27 June 2003 from the Chairman of the Committee on Contributions regarding its report on the requests for exception under Article 19 of the Charter from Burundi, the Central African Republic, the Comoros, Georgia, Guinea-Bissau, the Republic of Moldova, Sao Tome and Principe, Somalia and Tajikistan for appropriate action by the Fifth Committee.  Based on the information considered, the Committee on Contributions concluded that the failure of the aforementioned Member States to pay the minimum amount necessary to avoid the application of Article 19 was due to conditions beyond their control.  It therefore recommended that they be permitted to vote until June 2004.

As the letter from the Chargé d’affaires of the Permanent Mission of the Democratic Republic of the Congo had been received two weeks after the beginning of its session, the Committee on Contributions decided that it could take no action on its request.

The Committee then turned to a request for exemption from Niger under Article 19.  Document A/C.5/58/4 transmits a letter dated 26 September 2003 from the Permanent Representative of Niger to the United Nations, Osumane Moutari, to the President of the General Assembly concerning a request for exemption for his country.  Due to unforeseen circumstances, such as the coup d’état of April 1999 and the military transition of one year to set up a democratic regime, Niger had not been able to pay its contributions, and as a result had lost its right to vote in the General Assembly since 1999.  Despite economic and social difficulties, the Government of Niger was actively working to obtain the necessary amount to restore its participation in the work of the United Nations and asked that consideration be given to granting Niger exemption, under Article 19, until June 2004.

ALDO MANTOVANI (Italy), speaking for the European Union, said that those countries welcomed the activities undertaken by the Secretary-General to assess the progress and impact of management-improvement measures and, in particular, the new online tool for tracking management reforms called “PIRS”.  The European Union also took note of the report of the Secretary-General (document A/57/185) on outsourced activities between 1999 and 2001, and supported the recommendations contained in the report of the Joint Inspection Unit (JIU) (document A/58/92).  In particular, the Union shared the concern of the JIU that outsourcing activities remained a relatively small proportion of the Organization’s financial resources and that the services and activities outsourced continued to be concentrated in specific areas, such as information and communication technologies and systems.

With reference to the common and joint services of the United Nations system organizations located at Vienna, the European Union commended the JIU for its thorough examinations of the functioning of the concerned administrative mechanisms (document A/58/258) and supported JIU’s recommendations for fostering integration of services for the United Nations Industrial Development Organization (UNIDO), the International Atomic Energy Agency (IAEA), the Comprehensive Nuclear-Test-Ban Treaty and the United Nations Vienna Office through the establishment of a single unit.

CHRISTOPHER WITTMANN (United States) said that, while his delegation found several very solid recommendations in the report on common services in Vienna, it concurred with the judgement of the Consultative Committee on Common Services regarding recommendation 1.  He did not think a convincing case had yet been made that the establishment of a single common services administrative unit under the management of the United Nations Office at Vienna would necessarily bring about substantial cost savings.  Not all attempts at common services in Vienna and at other duty stations had proven successful and effective.  The fact that the JIU pointed out that there was “little enthusiasm” for an expansion of common services indicated that all the Vienna-based organizations viewed a single common services unit unfavourably.  It would be unfortunate to damage the considerable success that Vienna had had over the past two decades in the provision of effective common services.

Regarding recommendations 5 and 7, which called for consideration of consolidating printing services and language training, he said that the requirements for those services among the Vienna-based organizations were a simple and effective way to avoid unnecessary duplication of services.  He agreed with the JIU Inspector that the Member States could do more to provide guidance and oversight of common and joint administrative services.  He supported recommendation 12 related to the biennial consideration of common and joint administrative services by the Boards of relevant organizations.

SHANNON-MARIE SONI (Canada), speaking on behalf of Canada, Australia and New Zealand, said that in general the strengthening of common services was an integral part of the Secretary-General’s reform efforts.  She believed that the recommendation for a single common services administrative unit, under the management of the United Nations Office at Vienn, merited further consideration.  Such a unit could allow the specialized organizations to concentrate on their core functions.  The Consultative Committee on Common Services had stated that a single common unit would not be desirable but did not explain why.  It would be helpful to have a more detailed analysis of the benefits of a single unit.

She said the delegations of Canada, Australia and New Zealand wished to ask two questions.  Who paid the cost for building-management services supervised by UNIDO and what would be the financial implications for the United Nations if this were transferred to a single common service unit?  Secondly, how much money was involved in the disagreement between the Vienna Office and the agencies on cost-sharing methodologies for security and interpretation services?

She also thanked the JIU for its report on outsourcing, but was not sure if it had accomplished what it had set out to do, namely to establish the extent to which the outsourcing practices in 1999 and 2000 were consistent with approved policies.  Canada, Australia and New Zealand strongly disagreed with recommendation 3b of the report, suggesting that biennial budgets indicate the services outsourced and saw no merit in intergovernmental involvement in routine administrative decisions, as if outsourcing was somehow inherently an inappropriate activity.  To the contrary, outsourcing was important in order to acquire technical skills not readily available within the Organization and to achieve cost savings.

ANDREW TOH, Assistant Secretary-General for Central Support Services, described a number of developments that had taken place in respect of commercial activities within the United Nations since the preparation of the Secretary-General’s report (document A/57/398).  In the area of the Department of Public Information (DPI), he said, one element of restructuring of the Department was the creation of the Outreach Division, which brought together a broad range of activities that contained an element of outreach.  Those included the income-generating activities of the Department, namely the sale of publications and services to visitors.  Putting the management of those programmes in one Division should result in synergies, particularly as they related to the bookshop and guided tours activities at Headquarters, which should enhance the effectiveness, if not the profitability, of those endeavours.

He said that in addition to the changes brought about by DPI’s restructuring, the sale of publications operation was now in the final stages of implementing an integrated e-commerce site that would provide a worldwide sales outlet for United Nations publications.  While the development of this project had been outsourced, it was being undertaken in cooperation with the Information Technology Services Division in the hope that the technology developed could later be applied to other income areas.  Furthermore, over the past year, the guided tours operation at Headquarters had seen a steady rise in attendance, which had been helped, in part, by a cooperative agreement with the tours operator, Gray Line.

The more dramatic developments had been in the area of the United Nations Postal Administration (UNPA) and, at the beginning of this year, a new and dynamic management team was installed.  Two reviews of the postal administration had recently been completed, he said.  The first concerned the proposal mooted by the Advisory Committee on Administrative and Budgetary Questions (ACABQ) to determine if it were feasible to outsource the activities of the postal administration.  An international tender for the outsourcing of UNPA operations had therefore been issued, but it had elicited only one partial response which sought considerably higher cost than a self-running operation.

The second review was a study by expert consultants on the financial viability of the UNPA in the longer term.  The consultants were of the view that the postal administration could be financially viable if certain changes could be made to the manner in which the operation was traditionally conducted.  The main recommendation was to streamline the postal activities at UNPA Geneva and UNPA Vienna that were found to be duplicative and unnecessary.  As a result, several posts at UNPA had been abolished, and other operational expenditures severely trimmed.  Additionally, novel ways to increase revenue had been introduced, such as personalized photo stamps and “fun packs” for children.

ION GORITA, Vice-Chairman of the Joint Inspection Unit (JIU), introduced the JIU report on revenue-producing activities (document A/57/707).  He said the report drew attention to the fact that the organizations of the system neither had commercial mandates, nor were expected to operate like business entities driven by financial profit motives.  Nevertheless, the secondary objective of the activities to generate income or at least ensure self-financing was stated in the policy documents of most organizations.  In resolution 56/238, the Assembly had called for measures to improve the profitability of the commercial activities of the United Nations, thereby underlining the need for those activities to be managed efficiently and effectively.

For all the organizations of the system, he continued, income from activities under review amounted to some $670 million in 1998-1999, with about
87 per cent of the total generated by three organizations:  the United Nations, United Nations Children's Fund (UNICEF) and the World Intellectual Property Organization (WIPO).  Overall, it was found that the activities tended to be managed more efficiently, depending on their financial value to the budgets of the organizations concerned.  The recommendations contained in the report sought to contribute to the strengthening of the policy framework, management efficiency and marketing arrangements.

JAIME SEVILLA, representative of the Secretariat of the United Nations System Chief Executives Board for Coordination (CEB), introduced the comments of the Secretary-General and those of that Board on the JIU report (document A/57/707/Add.1).  The members of the executives’ Board generally welcomed the report and found it particularly significant, because it was the first study of its kind.  Agreeing with the main thrust of the document, however, members of the Board believed that in some cases, greater specificity and specific means of implementation were essential before the recommendations could be considered.

MELANIE ATTWOOLL (United States) said the report on revenue-producing activities came before the Committee at a time when those activities of the United Nations were not doing well and a thorough rethinking of such activities was due.  Although the United Nations was a non-profit organization, Member States should not be expected to support activities that were supposed to be self-sustaining, yet proved to be financially unstable.  She said she also questioned to what extent the Organization’s human and financial resources should be devoted to activities that were not directly relevant to implementing the priority mandates of the United Nations.

She said delegation was particularly interested in any further analysis and recommendations concerning the United Nations Postal Administration, in light of the proposals made for that activity in the proposed budget for 2004-2005.  Despite the Assembly’s request in resolution 57/292 that the Secretary-General take quick action to reverse the downward trend there, the situation remained bleak.  The proposed budget was a “transitional arrangement bridging from the current operation to its final form”, yet there was no information on what the final form was and why that activity was being revived in the light of the shrinking philatelic market.  Given recent experience with the Postal Administration, it seemed highly unlikely that the United Nations could meet the projected revenue goals on which the proposed budget was based.

Turning to the report on proposed measures to improve the profitability of the Organization’s commercial activities, she noted the Secretary-General’s intention to submit to the Assembly his comprehensive recommendations about the reviews and initiatives of commercial activities.  It was not clear to her delegation whether that was a separate set of recommendations from those made by the Unit concerning revenue-producing activities.  If it was, she said, she would like to know when the additional recommendations would be presented to the Committee. 

She said her delegation would refrain from commenting on each of the recommendations at this time, but would note that they were comprehensive in their scope and posed creative options for how to revitalize the revenue-producing activities.  However, a number of the recommendations could require considerable financial investment of Member States.  As such, those recommendations lacked analysis about their capacity to realize return on investment.  For instance, the recommendation to expand the geographical spread of revenue-producing activities had the potential for huge cost implications, but did not contain any information on how such an investment would actually improve the profitability of existing sales activities.  Furthermore, some recommendations appeared to be peripheral to the issue at hand.  Her delegation would need further information on the financial and operational implications of the JIU’s recommendations in order to decide whether to endorse them. 

ROBERTO MARTINI (Italy) said it was important that the United Nations membership send the right signals about the necessary balance between rigour in prompt payment and compensation for those States that were unable to pay through no fault of their own.  Exemptions should be limited to very special cases, however, and supported by objective reasons.  Concerning the nine requests dealt with in the report A/58/11 of the Committee on Contributions, the European Union considered the recommendations of that Committee as an important reference.  With respect to the case of Niger, the Union was ready to consider it favourably, particularly since this was the first time that Niger was submitting such a request.

However, he expressed his deep concern on the procedural rules for exemptions, including the need for Member States to comply with the time limits set by General Assembly resolution 54/237 C, in order to ensure a fair and complete review of their requests by the Committee on Contributions.

OUSMANE MOUTARI (Niger) said that his country’s request for exemption was based on an exceptional situation that the country was facing.  It was the first time that Niger was applying for such an exemption.  Generally, his country took its financial responsibilities very seriously, but now it was unable to pay its contributions to the United Nations.  The country’s new Government, instituted as a result of free elections following a period of political instability and social turbulence, had hoped that it would be able to make its payments.  Unfortunately, the existing situation did not allow it to do so.  A landlocked poor country, Niger had signed an agreement with the International Monetary Fund (IMF) to improve the public financial situation.  The critical situation of the country had been confirmed by numerous United Nations reports, including the one on the index of poverty.  Niger intended to submit a payment plan to cover its dues to the Organization.

AICHA AFIFI (Morocco), speaking on behalf of the “Group of 77” developing countries and China, re-stated the importance attached to the efficient and effective discharge of mandates by the Organization, which required a sound financial base.  The Group urged all Member States to meet their financial obligations on time and in full.  On the other hand, the Group had always emphasized the need to grant special consideration to those who could not meet their obligations due to unforeseen circumstances.  The Group of 77 and China therefore endorsed the recommendations of the Committee on Contributions that the Member States requesting exemption today be allowed to vote until 30 June 2004.

FELICITY BUCHANAN (New Zealand), also speaking for Australia and Canada, said that the discussion on the Committee on Contributions demonstrated the importance of the rule that mandated the Committee to provide advice on the application of Article 19 of the Charter.  The point of departure for all applications was the premise of circumstances beyond the control of the countries concerned.  However, they were required to make their best efforts to pay at least some of their assessments and to avoid falling deeper into arrears.  She said multi-year payment plans were an important tool to reduce arrears.  While a voluntary measure, submission of such plans demonstrated countries’ good will to reduce arrears. 

Continuing, she expressed concern about another case, where multiple plans had been submitted, but none had been implemented.  Equally concerned about cases in which the Members had made not more than one or two payments over the last

10 years, she urged the Contributions Committee to monitor closely the efforts of those countries to make at least some payments, so that performance could be taken into account when possible future applications for exemptions were considered in that Committee.  She said that, sensitive to Niger’s situation, she wanted to know why the country had not followed the established procedures.  For the future, the applications should be considered only on the basis of the recommendations of the Committee on Contributions.

KASHI NATH ADHIKARI (Nepal) said his delegation believed a pragmatic balance should be struck between improving the financial situation of the United Nations and the scale of assessments for the apportionment of the expenses of the Organization.  Each country should contribute based on its capacity to pay.  However, sometimes United Nations Member States were in arrears due to hardships suffered as a consequence of genuine socio-economic, political and natural phenomena.  At other times, Member States might not be able to pay their outstanding contributions due to the higher level of scale assessment not commensurate with their capacity to pay.

The delegation of Nepal felt that the requests made for exemption today should be given favourable consideration in view of the genuine conditions beyond the control of those countries.

AIZAZ AHMAD CHAUDHRY (Pakistan) noted Niger’s request for an exemption under Article 19 of the Charter.  He said the case was genuine and convincing, and the Committee needed to take a humane view of it.  There was a long-standing tradition in the Assembly to take such an approach.  That did not mean that the Committee should disrespect Article 19 -– on the contrary, it was necessary to ensure adherence to its provisions.  Out of a membership of 191, only 10 States were seeking exemptions.  The General Assembly needed to take due account of those countries which were temporarily unable to pay, because of circumstances beyond their control.  The Committee on Contributions had recommended granting exemptions to the nine countries that had applied for exemptions.  He fully supported granting exemptions to those countries, and to Niger.

COLLEN VIXEN KELAPILE (Botswana), speaking on behalf of the African Group, emphasized the importance of the obligation by all Member States to pay their financial commitments in time, in full, and without conditions, in order that the Organization could effectively discharge its mandates.  However, there could be unforeseen political and socio-economic developments undermining the ability of countries to meet their financial obligations.  The African Group, therefore, supported the requests for exemption before the Fifth Committee today. 

KAREN LOCK (South Africa) agreed with the position of the Group of 77 and supported the statement by Botswana on behalf of the African Group.  She said Niger was experiencing genuine and debilitating difficulties, which hindered its ability to pay its dues to the United Nations.  She was encouraged by the country’s intention to present a multi-year payment plan.  In the belief that the country's inability to pay was due to circumstances out of its control, she supported granting exemption to Niger under Article 19.

HOWARD STOFFER (United States) said that his delegation fully supported the report of the Committee on Contributions before the Committee today.  His delegation was also prepared to act favourably on the request of Niger asking for exemption under Article 19 in order to be able to vote in the General Assembly until June 2004.  Finally, he urged that countries wishing for exemption under Article 19 go through the Committee on Contributions and not directly to the General Assembly or the Fifth Committee.

Ms. GOICOCHEA (Cuba) supported granting exemptions under Article 19 to the 10 countries that had asked for them.  It was a matter of rendering justice towards a group of countries that were experiencing genuine difficulties out of their control.  Reaffirming that all the States needed to pay their contributions in full, on time and without conditions, she added that it was important to take into account the special difficulties of some of them. 

ASDRÚBAL PULIDO LEÓN (Venezuela) associated himself with the position of the Group of 77 and China.  He said that having listened to all the statements in the debate, he also wanted to thank the representative of Niger for his presentation, which had convinced him that it was difficult for his Government to comply with the procedure of the Committee on Contributions.  It was not the first time that a country requested an exemption without applying to that Committee first.  His delegation supported granting exemptions to Niger and all the other countries that had applied for them, for they were experiencing financial difficulties out of their control. 

Mr. FARID (Saudi Arabia) joined other Member States in endorsing the recommendations of the Committee on Contributions on exemptions under Article 19, and also supported the request from Niger, to allow them to vote until June 2004.

NONYE UDO (Nigeria) said the situations of the Member States requesting exemption were critical and well-deserving of sympathy and understanding.  Every country should pay its contributions in full and without conditions, she said, but certain countries deserved special consideration.

NAJIB ELJY (Syria) expressed his delegation’s full support for the request from Niger to grant an exception to the application of Article 19.

CHEICK CAMARA (Guinea) fully supported the position of the Group of 77 and the African Group.  He said it was necessary to be flexible in considering the requests for exemptions, and he fully supported granting an exemption to Niger and to the nine countries recommended by the Committee on Contributions.

GUILLERMO KENDALL (Argentina) said he also supported the Group of 77 and Venezuela.

MUSTAFIZUR RAHMAN (Bangladesh) aligned himself with the position of the Group of 77 and China and reiterated that all Member States should pay their contributions in full, on time and without preconditions.  However, some countries were faced with serious difficulties, and he supported granting exemptions to the countries in question.  The situation faced by Niger was, indeed, critical, and deserved to be considered favourably, on an exceptional basis.

Mr. ALMUTAA (Libya) also supported granting the exemptions.  At the conclusion of the meeting, the delegates debated a proposal by Uruguay, supported by Morocco and Guinea, to prepare a draft resolution to reflect the emerging consensus on the matter, with several speakers expressing preference for continuing the consideration of the issue in informal consultations first.  Also taking part in this discussion were representatives of Japan, Australia and Trinidad and Tobago.

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