Sixty-second General Assembly

Fifth Committee

2^nd Meeting (AM)

BUDGET COMMITTEE TAKES UP CONTRIBUTIONS COMMITTEE REPORT ON SCALE OF ASSESSMENTS

Asserting that all Member States had an obligation to pay their dues in full, on time and without conditions, speakers in the Fifth Committee (Administrative and Budgetary) took up the scale under which individual countries’ contributions to the United Nations are calculated.

The Committee had before it a report of the Committee on Contributions, which had, during its latest session, reviewed the methodology of future scales of assessments, based on the principle of Member States’ capacity to pay.  The Committee’s sixty-seventh session followed the General Assembly’s decision, at the end of 2006, to leave in place for the period 2007-2009 the main elements of the 2000 scale of assessments, basing individual countries’ assessments on their gross national income, with adjustments for external debt and low per capita income, and keeping the “ceiling” at 22 per cent.  In 2000, the ceiling was reduced from 25 per cent, with the new provisions applying to the Organization’s main contributor -– the United States.

Speaking on behalf of the “Group of 77” developing countries and China, the representative of Pakistan insisted that the Fifth Committee should avoid another round of divisive discussion on elements of the scale’s methodology during its current session, bearing in mind the difficult compromise on the scale in December 2006.

One of the Group’s major concerns related to the abrupt and sharp increases experienced by some developing countries in the rates of their assessments from one scale period to another, and he urged the Committee on Contributions to ensure that such exorbitant increases were avoided.  He recommended efforts to reduce anomalies arising from the application of the existing methodology, especially in relation to the relative contributions of developed and developing countries.  He also reiterated that the current maximum assessment rate had been fixed as a political compromise and was contrary to the principle of the capacity to pay.

All the speakers today supported the Committee on Contributions’ recommendation to exempt, due to economic difficulties and circumstances beyond their control, the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan from application of Article 19 of the Charter, under which Member States lose their right to vote in the General Assembly if the amount of their arrears to the Organization equals or exceeds their dues for two full preceding years.

In that connection, the representative of the United Republic of Tanzania, speaking on behalf of the African Group, noted that six of the seven countries that had requested exemptions were from Africa.  All of them experienced difficulties due to conflict and political and economic instability.  Some of those countries were also heavily indebted, which made it even more difficult for them to pay their dues.  The Group called on the international community to redouble its efforts to assist those countries in curbing conflict, consolidating peace and speeding up their economic recovery.

Also addressed in the debate were multi-year payment plans, which, as speakers pointed out, represented a voluntary tool that was meant to reduce outstanding balances of Member States lagging behind in their payments.

Portugal’s representative, speaking on behalf of the European Union and associated States, lauded multi-year payment plans as “an undisputed success story”, saying that the Union would continue to support them and encourage Member States that found themselves in a difficult situation to present them.  While recognizing considerable efforts made by those countries to honour their commitments, as well as the new payment plan submitted by Liberia, she noted with concern the Central African Republic’s failure to make a single contribution since 1998.  The Union agreed with the statement of the Committee on Contributions that the problems of the Comoros were systemic in nature and did not constitute exceptional circumstances.  Those States should make payments at least sufficient to avoid further increases in their debt to the United Nations.  Despite those concerns, the Union stood ready to endorse the recommendations of the Committee on Contributions that the seven countries in question be permitted to vote in the Assembly until the end of the sixty-second session.

The Chair of the Committee on Contributions, Bernado Greiver, introduced the report on the scale of assessments.  The Acting Secretary introduced the report on multi-year payment plans.

The Fifth Committee will meet again at 10 a.m. Tuesday, 9 October, to continue discussion on the scale of assessments and to take up a report on the Joint Inspection Unit.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to take up the scale under which Member States’ contributions to the budget of the United Nations are calculated.

Reflecting the outcome of its sixty-seventh session, this year’s report of the Committee on Contributions (document A/62/11) contains the outcome of its initial review of the elements of the methodology for preparing future scales of assessments, based on the principle that the expenses of the Organization should be apportioned broadly according to their capacity to pay.

The Committee’s latest session followed the General Assembly’s decision, at the end of its sixty-first regular session, to leave in place for the period 2007-2009 the main elements of the 2000 scale of assessments, basing individual countries’ assessments on their gross national income (GNI), with adjustments for external debt and low per capita income, and keeping the “ceiling” at 22 per cent.  That ceiling had initially been reduced from 25 per cent in 2000, when the new provisions were applied to the Organization’s main contributor -– the United States.  The points arising as a result of the change were distributed pro rata among other States, except for those affected by the floor (0.001 per cent) and the least developed countries’ ceiling of 0.01 per cent.

During its sixty-seventh session, the Committee reached agreement on such elements as income measure and criteria for deciding when to replace market exchange rates with appropriate price-adjusted rates of exchange.  Except where it would cause excessive fluctuations and distortions in the income of Member States, the Committee recommended that the scale be based on the most current, comprehensive and comparable data available for gross national incomes and encouraged Member States that had not yet done so to adopt the 1993 System of National Accounts.

When considering which market exchange rates should be replaced, Committee members reviewed the economies of States, typically with fixed exchange rates, whose levels of per capita gross national income in United States dollars had increased by more than 50 per cent, or decreased by more than 33 per cent.  The Committee also discussed using purchasing power parity as a possible measure of a State’s capacity to pay.  Some members expressed reservations, as sceptics argued that purchasing power parity reflects a State’s capacity to consume -- not pay -– and would be based on data that, in some instances, may not be current or available.

Some elements of the scale methodology were chosen for further review and guidance from the Assembly, including base period; debt-burden adjustment; low per capita income adjustment; relief measures for Member States facing large scale-to-scale increases; and a proposal related to annual recalculation of the scale.

Turning to multi-year payment plans, the Committee had before it the Secretary-General’s report (document A/62/70), which contains information on the submission of such plans and the status of Member States’ payments as at 31 December 2006.  The report includes information on the status of payment plans submitted by Georgia, Liberia, Niger, Sao Tome and Principe, Tajikistan, Iraq and the Republic of Moldova, and notes the Central African Republic and Guinea-Bissau as States with arrears, but no payment plans in place.  The plans of Georgia, Niger, Sao Tome and Principe, and Tajikistan had durations of 10, 9, 8 and 11 years, respectively.  The payments of Iraq and the Republic of Moldova have been fulfilled.

The Committee recognized Georgia and Niger for completing payments under such plans, recommending that other countries in a position to do so should establish similar plans to meet their financial obligations to the United Nations and avoid the application of Article 19 of the Charter.  [According to Article 19, should a Member State fall 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.]  Plans should, where possible, provide for the elimination of arrears in up to six years.

The Committee concluded that, although results so far were mixed, the system of multi-year payment plans, endorsed by the Assembly in 2002, had made a positive contribution in encouraging States to reduce their debt and in providing a way for them to demonstrate their commitment to meeting their financial obligations to the United Nations.

The Committee recommended that Member States submit all multi-year payment plans to the Secretary-General, consult the Secretariat for advice in their preparation and, where possible, eliminate arrears within six years.  Members also recommended that the Secretary-General submit payment plans and an annual report on the status of payments to the Assembly, through the Committee on Contributions, at the end of each year.

Meanwhile, the Committee recommended that the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan be allowed to vote until the end of the sixty-second session of the Assembly, given that their failure to pay is a consequence of factors beyond their control.

Introduction of Report

BERNADO GREIVER, Chairman of the Committee on Contributions, introduced the report on the scale of assessments.  Regarding the scale methodology, he called for using the most current information available to calculate gross national income and recommended the universal adoption of the 1993 System of National Accounts.  Continuing, he discussed conversion rates and said that an alternative was the use of a currency basket -– namely, the International Monetary Fund’s (IMF) special drawing rights to replace the United States dollar as a single conversion base.

MYA M. THAN, Acting Secretary of the Contributions Committee, introduced the report on multi-year payment plans.  She noted that Liberia had paid another instalment under its multi-year payment plan since issuance of the report.

CLOTHILDE MESQUITA ( Portugal), speaking on behalf of the European Union and associated States, said that payment of dues in full, on time and without conditions was a primary duty of Member States.  That applied to all States, irrespective of whether they fell or risked falling under the provisions of Article 19 of the Charter.  Substantive arrears from several major contributors continued to hamper the financial situation of the United Nations.  Nevertheless, the Union recognized that some Member States might have genuine difficulties in punctually paying their contributions, due to constraints beyond their control, and must, therefore, be afforded the allowance, for which the Charter made full provision.

In recent years, multi-year plans had made a very positive contribution in encouraging and assisting Member States in reducing their unpaid assessments, she continued.  The plans were an undisputed success story, and the Union would continue to support them and encourage Member States that found themselves in a difficult situation to present them.  The Union recognized the considerable effort made by those countries to honour their commitments, as well as the new payment plan submitted by Liberia.  She also commended Georgia and the Niger for making full payments under their plans.  She noted with concern the Central African Republic’s failure to make a single contribution since 1998.  The Union agreed with the statement of the Committee on Contributions that the problems of the Comoros were systemic in nature and did not constitute exceptional circumstances.  Those States should make an effort to make at least sufficient payments to avoid further increases in their unpaid assessments.  Despite those concerns, the Union stood ready to endorse the recommendations of the Committee on Contributions that the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan be permitted to vote in the Assembly until the end of the sixty-second session.

On the scale methodology, she agreed that universal adoption of the 1993 System of National Accounts would provide for a more equitable and comparable measure of a Member State’s capacity to pay.  She encouraged Member States that had not yet adopted that system to do so.  There was also a novel suggestion to study the feasibility of using IMF Special Drawing Rights, instead of the United States dollar, as a single conversion base.  She looked forward to the Committee on Contributions’ analysis of that proposal.  On the debt-burden adjustment, the new data had shown that the repayment period of total debt had declined from 9.9 years in 1999 to 6.9 years in 2005.  Further, data for public debt was now available from the Organisation for Economic Cooperation and Development (OECD) for 135 countries.  Those two elements showed promise in fine-tuning the current format of the debt-burden adjustment.  Finally, the Union would welcomed more detailed information on possible alternatives for the establishment of the threshold for low per capita income adjustment, to which reference had been made in paragraph 49 of the report.

IMTIAZ HUSSAIN (Pakistan), speaking on behalf of the “Group of 77” developing countries and China, acknowledged that the scale of assessments and the status of contributions were fundamentally important, but said the Committee should avoid another round of divisive discussions on elements of methodology of the scale of assessment, which might be more appropriate for future sessions.

He reaffirmed that Member States had a legal obligation to bear the financial expenses of the Organization, in accordance with their capacity to pay.  However, he acknowledged that some Member States, including the Central African Republic, Comoros, Guinea-Bissau, Somalia, Tajikistan, Liberia and Sao Tome and Principe, should be exempted from financial obligations due to economic difficulties and circumstances beyond their control.  Given time constraints during the budget year, he said the Group of 77 was ready to take action on the proposed draft resolution without informal consultations as soon as possible.

Taking up multi-year payment plans, he reiterated that those plans were a voluntary mechanism, and that Member States should be judged taking into account their difficult situations.  He expressed the Group of 77’s appreciation to Georgia and the Niger for fully paying their arrears and supported the recommendations of the Committee that encouraged Member States to adopt the 1993 System of National Accounts.  He also supported the recommendation on using the conversion rates based on market exchange rates for scale of assessment, except where that would cause excessive fluctuations and distortions.  In the latter case, price-adjusted rates of exchange or other appropriate conversions should be used.  He reiterated that the current maximum assessment rate had been fixed as a political compromise and was contrary to the principle of the capacity to pay.

With respect to the apportionment of the expenses of the United Nations, he said the Group pf 77 was concerned with the abrupt and sharp increases experienced by some developing countries in their rates of assessment from one scale period to another.  He urged the Committee on Contributions to examine the reason for such exorbitant increases.  He recommended that efforts be made to reduce anomalies arising from the application of the existing methodology, especially in relation to the relative contributions of developed and developing countries.  He also urged the Committee on Contributions to review measures that could address cases of excessive increases for developing countries.  He also requested additional information so that the issue of the scale of assessment of the successor States of the former Yugoslavia could be settled.

JOHN NG’ONGOLO (United Republic of Tanzania), speaking on behalf of the African Group, fully associated himself with the Group of 77 and emphasized the obligation of all Member States, large or small, to pay their assessed contributions in full, on time and without conditions, as stipulated in the Charter.  Some Member States, however, were genuinely unable to pay their assessments for reasons beyond their control, including socio-economic and political instabilities.  The Group concurred with the Committee on Contributions’ recommendation to exempt the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan from application of Article 19.

Multi-year plans represented a voluntary tool that was meant to reduce outstanding balances of Member States that were lagging behind in their payments, he continued.  Entering such plans was a demonstration of commitment to meeting financial obligations to the United Nations.  In that regard, the Group took note of the report on the matter.  He extended appreciation to the countries that had proposed multi-year payments and had made the envisaged payments.  He encouraged the rest of the Member States to follow suit, as that was the best possible way to gradually reduce their indebtedness to the Organization.  Six of the seven countries that had requested exemptions were from Africa.  All of them had experienced difficulties due to conflict and political and economic instability.  Some of those countries were also heavily indebted, which made it even more difficult for them to pay their dues.  The Group called on the international community to redouble its efforts to assist those countries in curbing conflict, consolidating peace and speeding up their economic recovery.  Strengthening the Office of the Special Adviser for Africa would also go a long way in addressing Africa’s special needs.

On a positive note, the said the Group was pleased that the Security Council had recently passed resolution 1778 (2007), authorizing deployment of a multidimensional presence in Chad and the Central African Republic.  He hoped that it would pave the way for political stability and much needed economic stability.  The Group hoped that a similar decision would soon be taken to address the situation in Somalia.  Involvement of the United Nations in those countries would help them out of conflict and put them on a path of recovery and post-conflict reconstruction and development.

He added that the African Group was acutely aware of the need to settle the issue of assessments of the States of the former Yugoslavia.  He supported the motion to defer that item to a future session.

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