BUDGET COMMITTEE CONTINUES DISCUSSION ON SCALE USED FOR UN CONTRIBUTIONS; MANY SPEAKERS SAY CAPACITY TO PAY NOT ACCURATELY REFLECTED

Fifty-eighth General Assembly

Fifth Committee

6^th Meeting (AM)

BUDGET COMMITTEE CONTINUES DISCUSSION ON SCALE USED FOR UN CONTRIBUTIONS;

MANY SPEAKERS SAY CAPACITY TO PAY NOT ACCURATELY REFLECTED

Several Delegations, However, Object to Immediate

Reopening of Debate on 2000 Agreement on Assessment Scale

As the Fifth Committee (Administrative and Budgetary) continued its deliberations on the scale of assessments for 2004-2006, several speakers insisted that the methodology for calculating Member States’ dues to the Organization should not be re-examined at this point, because three years ago, the Assembly had decided by consensus that the elements of the scale would be fixed until 2006, subject to certain provisions.

One of the main features of the new scale, contained in resolution 55/5 B, is a reduction of the maximum rates of assessment (the “ceiling”) from 25 to 22 per cent.  Subsequently, the new ceiling has been applied to the Organization’s main contributor -– the United States -– and the points arising as a result of the change were distributed pro rata among other States, except for those affected by the “floor” and the least developed country ceiling.

The representative of the United States noted that when the Committee on Contributions had conducted its review of the scale of assessments for 2004-2006, it had done so on the basis of the elements of the scale methodology as contained in resolution 55/5.  That was the correct stand to take, as resolution 55/5 had been negotiated at a time when many countries were experiencing a growth in wealth.  Certainly, wealth had a way of changing, sometimes quite rapidly and unexpectedly, yet the basic principles agreed to three years ago remained relevant to the deliberations during the current session.

While many other speakers complained of increased financial burden as a result of the scale changes, several, including the representative of Trinidad and Tobago, pointed out that the decision on the 2000 scale, unprecedented as it was, reflected a delicate political balance achieved through long and difficult negotiations and their countries would abide by it.

Agreeing with that position, India’s representative welcomed the fact that, despite concerns expressed by some Member States at the increase in their assessment rates, there appeared to be a consensus not to reopen the debate on the methodology until 2006.  At present, such a debate could prove to be ruinous for the Organization.

Concerns remained, however, he said, over the financial situation of the Organization on account of high outstanding arrears.  Sympathizing with the situation of those Member States that had not been able to pay their dues because of genuine economic difficulties, he endorsed the recommendations of the Committee on Contributions on the modification of fixed exchange rates in those cases where the use of market rates of exchange resulted in distortions in national income computation.

In particular, price-adjusted exchange rates were applied for two years of the six-year base period for Argentina, which has suffered from a serious economic crisis and an unprecedented devaluation.  That country’s representative pointed out that applying a fixed exchange rate to determine Argentina’s assessment would mean that the next scale would be determined on the basis of a “fictitious” ability to pay.

In that context, Switzerland’s representative shared the opinion of some members of the Contributions Committee that such requests for adjustments might be avoided if the scale was based on more current information, involving a shorter base period and an automatic annual recalculation.  By proceeding in such a manner, there would be fewer requests for the application of price-adjusted rates of exchange instead of market exchange rates to convert gross national income.

Cuba’s representative expressed concern that some 84 per cent of Member States who had seen their assessments rise were developing countries, saying that such a situation was paradoxical.  Many of the governments were facing serious development and international challenges, and the proposed scale did not reflect the real ability of those countries to pay.  He also stressed that, while all Member States had an obligation to pay on time, in full and without conditions, it was necessary to draw distinctions between the failure to pay due to genuine economic difficulties, and non-payment motivated by political considerations.

Also taking part in today’s debate were representatives of Jordan, United Arab Emirates, Libya, Bahrain, Kuwait, Ukraine, Guyana and Qatar.  The Chairman and Secretary of the Committee on Contributions responded to comments and questions from the floor.

The Committee will continue its work at a date to be announced.

Background

The Fifth Committee this morning continued its consideration of the scale of assessments.  See press release GA/AB/3576 for background.

Statements

MOHAMMAD TAL (Jordan) stressed that the principle of capacity to pay should remain the basis of apportioning the costs of the United Nations.  It was essential that all Member States shoulder their responsibilities to the Organization.  It was necessary, however, to understand the special circumstances of some States, particularly those in the developing world.

Turning to the report of Committee on Contributions, he viewed with concern the sharp increase in the assessments of a large number of States, particularly developing States, which did not really reflect their real capacity to pay.  Many Arab States were undergoing harsh economic circumstances, aggravated by grave political circumstances in the region, preventing them from realizing the required development levels.  His delegation demanded that the statistics division provide the Fifth Committee with more information on the accuracy and the neutrality of the related assessments.

SHAIKA AL-SUWAIDI (United Arab Emirates) said that her delegation had studied the Committee on Contributions report carefully and was concerned about the new increase in her country’s assessment, especially since it had also risen significantly during the previous triennium.  That would have a negative effect on the country, which was still in the early stages of building its infrastructure and implementing its development programme.  A significant portion of the United Arab Emirates’ income went outside the country to the families of expatriates, who represented a big proportion of the workforce of the country.  The figures upon which the assessments were based did not accurately reflect the real conditions.

Furthermore, she said, the economies of the oil countries had been facing difficulties over the past two years, due to the slowing of the world’s economy, which had weakened the ability of these countries to pay.  In that regard, her delegation hoped that the forthcoming negotiations on the scale would take into consideration the difficulties that the economies of developing countries, including oil-producing countries, were facing.

Mr. AL-MUTAA (Libya) associated himself with the position of the “Group of 77” developing countries and China, and supported yesterday’s statement by the representative of Syria on behalf of the Arab Group.  He also recalled that the majority of States, particularly the developing countries, had expressed dissatisfaction with the scale of assessments for 2004-2006.  In particular, the new scale was unfair to his country, as it failed to reflect the difficulties it was facing.  Libya’s assessments had increased some 100 per cent, but during the last decade, it had experienced severe economic hardships as a result of the economic sanctions unjustly imposed by the Security Council, as well as by unilateral sanctions that were still in force.  Both sanctions had a negative impact on the economic and social development of the country and continued to do so.

The problems were exacerbated by high inflation, he said.  There had been a sharp decrease of the living standards within the country.  Libya had also endured grave losses in the oil sector, amounting to some $6 billion.  Nevertheless, the country was keen on paying its dues to the Organization in full and without delay.  He hoped Libya’s assessment would be reconsidered.

ORLANDO REQUEIJO GUAL (Cuba) also supported the position of the Group of 77 and China and said that assigning assessments to Member States was a highly sensitive issue, which had direct impact on their ability to meet their obligations.  While all Member States had an obligation to pay on time, in full and without conditions, it was necessary to draw distinctions between the failure to pay due to genuine economic difficulties, and non-payment motivated by political considerations.

Having studied the proposed scale, his delegation was concerned that some 84 per cent of Member States who had seen their assessments rise were developing countries.  That situation was paradoxical.  Many of the governments were facing serious development and international challenges, and the proposed scale did not reflect the real ability of those countries to pay.

Cuba was among the countries whose assessments would go up, he continued.  The country was suffering from serious economic difficulties, which were exacerbated by the long economic blockade imposed on Cuba.  The country’s payment record, however, testified to its political will to meet its obligations.  The Committee should continue work to further refine the methodology to take account of the real ability of countries to pay.

Going over the rest of the Contributions Committee’s recommendations, he added that it was important to pay attention to the requests for assessment modifications when those reflected a situation beyond an individual country’s control.  Regarding multi-year payment plans, Cuba reaffirmed that they must remain voluntary and not be tied to other measures, including exemptions under Article 19.

TAWFEEQ AHMED ALMANSOOR (Bahrain) noted the large increases applied to some States, including Bahrain, in the scale for the next three years.  He expressed his concern at the increase and its consequences, namely new financial burdens that would obstruct some Member States from fulfilling their financial obligations to the United Nations.  The increase applied to his country was 67 per cent, and was one of the major increases.  Bahrain had paid all of its dues without delay.  It believed in its financial commitments, and had made extraordinary efforts to fulfil them.  The increase for the next three years was inappropriate and should be reconsidered when the scale was finalized, he concluded.

ANJA ZOBRIST RENTENAAR (Switzerland) said that her delegation would have to caution against a proliferation of requests for modification to the agreed methodology.  Her delegation welcomed the initial observations of the Contributions Committee on the criteria regarding adjustment under rule 160, as requested by the General Assembly in last year’s scale resolution.  In that context, she shared the opinion of some members of the Contributions Committee that such requests might be avoided if the scale was based on more current information, involving a shorter base period and an automatic annual recalculation.  By proceeding in such a manner, there would be fewer requests for the application of price-adjusted rates of exchange instead of market exchange rates to convert gross national income.

Her delegation appreciated the information contained in the Secretary-General’s report on multi-year payment plans, she continued.  These plans were a useful tool for reducing arrears and for demonstrating a Member State’s commitment to meet its financial obligations.  She noted, however, that of the 10 Member States that had been granted an exemption under Article 19, only four had submitted payment plans.  Although her delegation shared the view that such payment plans should be voluntary, it would encourage all Member States in arrears to submit such plans.  Regarding measures with a positive impact to encourage the payment of arrears, her delegation supported the recommendation of the Committee to fix the deadline for timely payment from the date of issuance of the assessments, rather than from the date of their receipt.

HOWARD STOFFER (United States) noted that when the Committee had conducted its review of the scale of assessments for 2004-2006, it had done so on the basis of the elements of the scale methodology as contained in resolution 55/5.  That was the correct stand to take, as resolution 55/5 had been negotiated at a time when many countries were experiencing a growth in wealth.  Certainly, wealth had a way of changing, sometimes quite rapidly and unexpectedly, yet the basic principles agreed to three years ago remained relevant to the deliberations during the current session.

His delegation also noted the careful consideration the Committee on Contributions had given to Member States to take specific circumstances into account when considering adjustments to assessment rates for the upcoming three years.  The Committee had not addressed the issue of possible changes in the scale methodology, nor was it up for discussion during this session of the General Assembly.  That issue would be revisited in connection with the sixty-first General Assembly session –- the appropriate place to discuss any changes to the methodology, if needed, he said.

That also extended to the consideration of revisions to the scale of assessments for peacekeeping missions, he continued.  His delegation believed that the methodology and instructions adopted in resolution 55/235 should also remain fully in effect, without exception.  Due to the thorough documentation provided by the Committee on Contributions in its report, his delegation believed that their conclusions should be accepted without prolonged discussion during the current session.

Moving to the question of multi-year payment plans, he agreed that they formed a useful means by which Member States could act on their intentions to fulfil their obligations.  Regarding the situation of the successor States of the former Yugoslavia, he recalled that consideration of the item last year had been deferred at their requests, while they continued consultations to find a possible solution.  His delegation looked forward to any new information that might be presented in informals on the topic.

RAJIV RAMLAL (Trinidad and Tobago) called for a higher sense of responsibility and a greater commitment on behalf of all Member States to pay their assessed contributions in full, on time and without conditions.  Consideration of the matter required continued recognition of the need to extend sympathetic understanding to those who were temporarily unable to meet their financial obligations as a result of genuine economic difficulties.  That was why it was commendable that the Committee had handled with such dispatch and balance the requests for exemption under Article 19.

Regarding the scale for 2004-2006, he said that three years ago, the Assembly had decided by consensus that the elements of the scale would be fixed until 2006, subject to certain provisions.  That decision, unprecedented as it was, reflected a delicate political balance achieved through long and difficult negotiations.  Trinidad and Tobago abided by the decision of the Assembly as contained in resolution 55/5 B.  Noting considerable efforts made by the Committee on Contributions to treat various representations made by Member States in the context of the preparation of the scale for 2004-2006, he expressed satisfaction that, within the limits of the current price-adjusted rates of exchange methodology, the Committee had acted with technical propriety.  However, there was perhaps merit in the view that more systematic criteria for the use of price-adjusted rates should be developed.

In conclusion, he reiterated that the principle of the capacity to pay should remain the fundamental criterion for determining the scale of assessments and added that due consideration should be given to ensuring adherence to the fundamental principles and processes, which had guided the Assembly for the last 50 years in its deliberations on the scale.

MESHAL A.M.A. AL-MANSOUR (Kuwait) said that his delegation supported the statements by Morocco on behalf of the Group of 77 and China and Syria on behalf of the Arab Group.  He welcomed the work of the Committee on Contributions, which provided advice to the Assembly on the scale and the exemptions under Article 19 of the Charter.

Despite the fact that economies of many developing countries were facing difficulties, their assessments had gone up, he continued, and as a result, they were facing difficulties in fulfilling their obligations to the United Nations.  The main reason for the financial crisis of the Organization, however, was not the methodology for calculating the scale of assessments, but the failure of some States to pay on time, in full and without conditions.  The political will to pay was an essential element of the Organization’s financial health.  For its part, Kuwait had paid its dues on time and in full.

Continuing, he stressed the importance of the principle of the capacity to pay and said that, when reviewing the scale, it was important to allow no increases in assessment for developing countries as a result of decreases for developed countries.

OLEKSII IVASHCHENKO (Ukraine) said that the Committee on Contributions had the unique and authoritative expertise to make proposals to the General Assembly for the establishment of United Nations Member States contributions to the Organization’s regular budget, particularly when dealing with the national statistical data and conversion rates.  Since the General Assembly had already agreed that the elements of the scale methodology should be fixed until 2006, the appropriate course of action for the Fifth Committee was to support the scale as recommended by the Committee on Contributions.  Regarding payment plans, his delegation firmly believed that such plans should remain a voluntary tool for governments that sought rescheduling of their payments, and should not be imposed on any Member States or automatically linked to other measures.

RAM NATH KOVIND (India) said that on the revised scale of assessments there were Member States whose assessment rates had risen significantly.  India’s own assessment rate had gone up by nearly 25 per cent.  Based on the current methodology, his country accepted the inevitability of that action, given the strong performance of the Indian economy in recent years.  His delegation recognized the delicate political balance of the current scales and welcomed the fact that, despite concerns expressed by some Member states at the increase in their assessment rates, there appeared to be a consensus not to reopen until 2006 what could prove for the Organization at this present juncture to be a ruinous debate on the issue.

Concerns remained, however, on the financial situation of the Organization, on account of the high outstanding arrears.  His delegation sympathized with the situation of those Member States that had not been able to meet their obligations to the Organization on account of genuine economic difficulties.  In that connection, his delegation endorsed the recommendations of the Committee on Contributions on the modification of exchange rates used for those Member States in whose cases the use of market rates of exchange resulted in distortions in national income computation.

On the criteria for ad hoc adjustments of the rates of assessment, the deliberations within the Committee vindicated his delegation’s stand that seeking to develop such criteria was a futile exercise and that rule 160 of the rules of procedure of the General Assembly was itself the only practicable criterion for such consideration.  His delegation hoped that the Committee would conclusively report on the matter at its next session.

GUILLERMO KENDALL (Argentina) supported the position of the Group of 77 and the Rio Group and addressed his country’s case.  For reasons with which everyone was familiar, Argentina had submitted a request to the Committee on Contributions in connection with its assessment.  Capacity to pay must be a defining principle for setting the Member States’ contributions.  The economic crisis and an unprecedented devaluation experienced by his country showed that the fixed exchange rate failed to reflect in dollars the actual facts of the economy and the country’s ability to pay.  Using a fixed exchange rate to determine Argentina’s assessment would mean that the next scale would be fixed on the basis of a fictitious ability to pay.

As reflected in the report of the Committee on Contributions, a consensus solution was reached in the Committee following difficult discussions, he continued.  While application of the price-adjusted rates of exchange was not accepted for the entire base period, as requested by Argentina, they were applied for the last two years of the base period.  Argentina respected the decision taken by the Committee.  He also agreed with the representative of New Zealand that the Committee needed to use objective criteria in applying the price-adjusted rates of exchange.

GARFIELD BARNWELL (Guyana) held the view that the resources provided to the Organization must be commensurate with its mandates and that Member States had a legal obligation to bear the expenses as apportioned by the General Assembly.  The Organization could not effectively discharge its many responsibilities if it were not provided with the required resources.  For those reasons, his delegation firmly believed that progress would be curtailed unless all Member States abided by their legal obligations to pay their contributions in full, on time, and without conditions.

His delegation considered that the principle objective of the scale methodology must be its accuracy in determining all Member States’ real “capacity to pay”.  That remained the fundamental criterion in the apportionment of the expenses of the United Nations.  It was worth stressing that the difficult financial situation of the Organization was not linked to the methodology of the scale of assessment.  A revision of the methodology would not significantly impact, nor resolve, the critical financial situation facing the United Nations.

JAMAL NASSER AL-BADER (Qatar) said that his country’s contribution would almost double under the proposed scale for 2004-2006.  That was a big surprise for his country, which was experiencing serious economic difficulties.  Relying on its oil industry, Qatar faced serious fluctuations in its income from year to year.  He believed that in recommending such a large increase in the country’s assessment, that fact needed to be taken into consideration.

Mr. GOICOCHEA (Cuba) asked when an update would be provided on the current status of Member States’ contributions.

UGO SESSI, Chairman of the Committee on Contributions, said that deliberations for the scale for 2004-2006 had been guided by General Assembly resolution 55/5 B.  He was pleased that, in general, the Committee on Contribution’s report had been found useful, but he had also noted the concerns of certain delegations regarding the adjustments to their rates of assessment.  Although official consideration of the approach to be taken on the next scale of assessments for 2007-2009 would not begin before 2005, he said that any input with regard to the next scale would be appreciated.  He had taken note of the comments on multi-year payments plans, he continued, and assured delegates that the Committee on Contributions would consider carefully the particular circumstances of each Member State concerned.

He then responded to a point raised by the representative of the United Arab Emirates, that the figure of assessment for her State was based on conditions that did not reflect real conditions, due to the great number of foreign expatriates residing in the country.  That issue had been brought to the attention of the Committee two years ago, and the Committee had noted that at least part of the remittances of expatriates was already included in gross national product data. That issue had been given due consideration by the Committee, he said.

MARK GILPIN, Secretary of the Committee on Contributions, responding to a question from Cuba, said that the Secretariat provided regular information on the status of contributions and would provide any information needed during informal consultations.

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