Sixty-third General Assembly

Fifth Committee

2^nd Meeting (AM)

BUDGET COMMITTEE DEBATES SCALE OF ASSESSMENTS USED TO CALCULATE

MEMBER STATES’ FINANCIAL CONTRIBUTIONS TO UNITED NATIONS

 

As the Fifth Committee (Administrative and Budgetary) this morning began its consideration of the scale under which individual countries’ contributions to the United Nations are calculated, the “Group of 77” developing countries and China reaffirmed the capacity to pay as the fundamental principle underlying the scale of assessments, and categorically rejected any move to force a developing country to accept a scale beyond its capacity to pay.

Speaking on behalf of the Group of 77, the representative of Antigua and Barbuda singled out the maximum rate applicable to countries -- the so-called “ceiling” -- as the main element affecting the principle of capacity to pay and with the largest distortional effect on the scale.  [In 2000, the General Assembly revised the scale in resolution A/RES/55/5 B, reducing the ceiling from 25 to 22 per cent.  The new ceiling was then applied to the Organization’s main contributor -– the United States -- and the points arising as a result of the change were distributed 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.]

Agreeing with the position of the Group of 77 on the ceiling, Iran’s representative said that the current maximum rate had been a temporary political compromise to facilitate the payment of arrears by a particular Member State, but that the goal of that compromise had not been reached, eight years later.  He asked that the Assembly revisit its decision, as stipulated in paragraph 2 of its resolution A/RES/55/5 C, and further requested a fuller review of the matter in the report of the Committee on Contributions for next year.

While supporting the evaluation of the capacity to pay on the basis of the most current, comprehensive and comparable data available for gross national income, delegates also supported the recommendation of the Committee on Contributions on the use of conversion rates based on market exchange rates.  Where such rates would cause excessive fluctuations and distortions in the gross national income of some States, other appropriate conversion rates, such as price-adjusted rates of exchange, should be used.

Elaborating on the conversion rates, the representative of Antigua and Barbuda said that the Group of 77 did not support the use of purchasing-power parity as a basis for currency conversion rates.  Purchasing-power parity was based on hypothetical and non-existent currency conversion rates and reflected the capacity to consume, rather than capacity to pay.  Also, purchasing-power parity methodology did not take into account different cultural and social consumption preferences.  It was clear that the rates derived from purchasing-power parity did not meet the criterion of being reliable, verifiable and comparable.

The representative of the Russian Federation insisted that the capacity to pay, rather than purchasing power, was the basis for the fairest burden sharing at the United Nations.  It made the United Nations a unique global organization, where each Member State had the right to vote, regardless of the size of its monetary contribution.

The representative of Japan, the second largest financial contributor to the United Nations, shouldering nearly one sixth of the Organization’s financial burden, said it was important to find a methodology that would better reflect each State’s current capacity to pay.  While supporting the principle that each Member State should pay its assessed contribution according to its capacity to pay, he pointed out that, over the years, a discrepancy had developed between the scale and Japan’s gross national income share.

Also stressing the need to consider the countries’ current -- and not yesterday’s -- capacity to pay, Mexico’s representative noted the importance of further work on the base period and annual adjustments.  With the base period fixed, in January 2009 the scale would take into account the period up to 2004, including information dating as far back as 1999.  In general, existing elements of the methodology were appropriate to measure Member States’ capacity to pay, but some fine-turning might be needed.

The representative of Angola, on behalf of the African Group, said that the ability to pay for many developing countries had been affected by the ongoing food and energy crises, as well as the recent surge in troubles in the global economy.  Those Member States who fell behind in payments for reasons beyond their control should be allowed to vote in the General Assembly, and the African Group was among the speakers who supported requests by seven countries in that regard.

France, speaking on behalf of the European Union, also supported the recommendation of the Committee on Contributions to authorize the right to vote through the end of the sixty-third session of the General Assembly for the Central African Republic, the Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan.  However, if certain countries did not undertake measures towards paying their dues, the European Union maintained the possibility of taking a more reserved position regarding the exceptions foreseen under Article 19 of the United Nations Charter.

Reports before the Committee were introduced by the Chairman of the Committee on Contributions, Bernardo Griever, and the Chief of the Contributions and Policy Coordination Service, Lionel Berrige.

The Committee will continue its consideration of the scale of assessments at 10 a.m. Tuesday, 7 October.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to consider the scale that is used to calculate Member States’ assessments for the United Nations budget.

Reflecting the outcome of its sixty-eighth session, this year’s report of the Committee on Contributions (document A/63/11) presents its review of the methodology for preparing the scale of assessments.

Under the current scale, individual countries’ assessments are based on their gross national income, which is converted to United States dollars after adjustments for external debt and low per-capita income.  Among other elements, there are also minimum and maximum rates -- so-called “floor” and “ceiling” –- of assessment.  One of the main revisions to the scale that was determined in resolution A/RES/55/5 B in 2000 was a reduction of the ceiling from 25 to 22 per cent.  The new ceiling was then 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 (0.001 per cent) and the least developed countries’ ceiling of 0.01 per cent.

During its latest session, the Committee on Contributions reaffirmed its recommendation that the scale of assessments continue to be based on the most current, comprehensive and comparable gross national income data, and recommended that the General Assembly encourage Member States which have not yet done so to implement the System of National Accounts, 1993.  It also reaffirmed the need to use conversion rates based on market exchange rates, except where that would cause excessive fluctuations and distortions in income.  In such cases, price-adjusted rates of exchange or other conversion rates should be employed.  The Committee decided further to use price-adjusted rates or other appropriate conversion rates as part of the preparation for the next scale, based on the revised criteria, in order to avoid an excessive appreciation or depreciation, particularly in view of significant fluctuations of United States dollar exchange rates in recent periods.

The Committee on Contributions also decided to further consider the base period, the debt-burden adjustment and the low per-capita income adjustment at its next session, in light of the guidance of the General Assembly.  The questions of annual recalculation and large scale-to-scale increases in rates of assessment would also be further considered during future sessions, based on guidance from the General Assembly.

The Committee concluded that the system of multi-year payment plans, endorsed by the Assembly in 2002, continues to be a viable means of assisting Member States in reducing their arrears and provides a way for them to demonstrate their commitment to meeting their financial obligations to the United Nations.  Noting that no new multi-year payment plans had been submitted this year, the Committee recommended that the Assembly encourage Member States in arrears for the purposes of the application of Article 19 of the Charter to consider submitting multi-year payment plans.  [According to Article 19, a Member State that falls behind in the payment of its dues by an amount equal to its assessments for the two most recent years, loses its right to vote in the General Assembly, unless the Assembly decides that non-payment is a consequence of factors beyond its control.]

While recognizing that the submission of multi-year plans was voluntary and not automatically linked to other measures,the Committee encouraged all Member States requesting an exemption under Article 19 that are in a position to do so to consider presenting such plans.  Recognizing that non-payment of dues by seven countries was due to conditions beyond their control, it also recommended that the Central African Republic, the Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan be permitted to vote in the Assembly until the end of its sixty-third session.

The Fifth Committee also had before it a separate report on multi-year payment plans (document A/63/68), which provides information on payment plans/schedules submitted earlier by Liberia, Sao Tome and Principe, and Tajikistan and on the status of implementation of those plans as at 31 December 2007.

Introduction of Documents

BERNARDO GREIVER, Chairman of the Committee on Contributions, introduced that body’s report.

Presenting the elements of the scale methodology that had been discussed by the Committee on Contributions during its session, he said that, on the base period, the Committee had noted that it would be technically sound to use a single base period.  At the same time, it had recalled that the current approach of averaging scales for base periods of three and six years had been used for the last three scale periods, being a compromise between those favouring shorter and those favouring longer base periods.  The Committee on Contributions had decided to further consider that element of the methodology at its next session, in light of General Assembly guidance.

On the debt-burden adjustment, the Committee on Contributions had noted that the availability of data on public debt had improved substantially.  Some members had noted that the use of public external debt had been intended when that element had been introduced in 1986 and considered that the use of public external debt was preferable to the use of total external debt, since public debt had to be repaid from the Government budget.  Others had expressed the view that the use of total debt stock was necessary, as private debt influenced the Member State’s overall capacity to pay.  The debt-burden adjustment would be further considered during the Committee on Contributions’ next session, in light of Assembly guidance.

On low per-capita income adjustment, he said that the Committee had considered alternative definitions of that threshold and recalled that it had previously discussed the issue of discontinuity experienced by Member States that had moved up through the threshold of the adjustment between scale periods.  One alternative approach proposed was to delay by a few years, or phase in, the increase related to having to help to pay for the adjustment.  Another approach would be to create a range below and above the threshold, where Member States would neither receive nor pay for any benefit.  Other approaches included fixing the threshold based on the world median per-capita gross national income or, in real terms, instead of setting it at the current average world per-capita income for the scale base period.  As with the two preceding elements, the Committee had decided to carry out further analysis of various options on the basis of information from the United Nations Statistics Division and in light of the Assembly’s guidance.

He added that, at the conclusion of Committee on Contributions’ session, seven Member States had fallen under the provisions of Article 19, but had been permitted to vote in the Assembly until the end of the sixty-second session.  The Committee had noted that, pursuant to the provisions of resolution 61/237, the Secretary-General had accepted in 2007 the equivalent of approximately $1.3 million in currencies other than the United States dollar.  As for its working methods, the Committee had welcomed the launching of its public website. A secure restricted website had also been established to facilitate intersessional work.

Presenting the Secretary-General’s report on multi-year payment plans, LIONEL BERRIGE, Chief of the Contributions and Policy Coordination Service, said that four Member States had earlier completed payments under their payment plans.  Accordingly, the report provided detailed information on the three remaining plans and schedules.  The updated status of those plans, as of 27 June 2008, was included in the report of the Committee on Contributions.  No other States had so far submitted payment plans for the elimination of their arrears.

Statements

GRÉGORY CAZALET (France), on behalf of the European Union, said that the Union had always held that full, unconditional and timely payment of United Nations contributions was a fundamental responsibility of Member States.  However, it recognized that there were circumstances beyond the control of certain States that made that difficult.  In such situations, multi-year payment plans were an effective means of reducing the arrears of those countries, he said.

He also expressed concern at the absence of efforts by some countries to pay, such as Guinea-Bissau, Sao Tome and Principe, and the Central African Republic, and urged those countries that had not yet adopted a multi-year payment plan to do so.  He further praised the successful efforts of the Comoros and Liberia, and encouraged other countries to follow their example.

The European Union supported the recommendation of the Committee on Contributions to authorize the right to vote through the end of the sixty-third session of the General Assembly for the Central African Republic, the Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan.  However, if certain countries did not undertake measures towards paying their dues, the European Union maintained the possibility of taking a more reserved position regarding the exceptions foreseen under article 19 of the United Nations Charter.

CONROD HUNTE ( Antigua and Barbuda), speaking on behalf of the “Group of 77” developing countries and China, reaffirmed that the financial resources provided to the United Nations must be commensurate with the legislative mandates given to it.  Without adequate resources, the Organization could not be expected to implement its mandates effectively.  It was crucial that Member States fulfilled their legal obligations under the Charter to bear those expenses and to pay their assessments in full, on time and without conditions.  He also reaffirmed the capacity to pay as the fundamental principle underlying the United Nations scale of assessments.  That principle should not be altered in any form, and the Group of 77 categorically rejected any move to force a developing country to accept a scale beyond its capacity to pay.

The main element affecting the principle of capacity to pay was the ceiling rate, which had the largest distortional effect on the scale, he continued.  The reduction of the ceiling to 22 per cent in 2000 had been meant to facilitate the payment of arrears by one Member State and to improve the financial situation of the Organization at the time.  Despite the Group of 77’s objections to such a unilateral move, it had ultimately joined consensus for the sake of the well-being of the United Nations.  Eight years on, one had yet to see the fulfilment of the promises that had lead to the reduction of the ceiling.  The Group of 77 was, therefore, of the view that it would be incumbent on the Assembly to undertake the review as provided in paragraph 2 of its resolution A/RES/55/5 C.

He went on to support the recommendation of the Committee on Contributions that the scale should continue to be based on the most current, comprehensive and comparable gross national income data.  The Group also supported, generally, the use of conversion rates based on market exchange rates.  Where such rates would cause excessive fluctuations and distortions in the gross national income of some States, other appropriate conversion rates, such as price-adjusted rates of exchange, should be used.  The Group of 77 considered the use of purchasing-power parity to be unsuitable as a basis for currency conversion rates.  Purchasing-power parity was based on hypothetical and non-existent currency conversion rates and reflected the capacity to consume, rather than capacity to pay.  Purchasing-power parity methodology also did not take into account different cultural and social consumption preferences.  It was clear that the rates derived from purchasing-power parity did not meet the criterion of being reliable, verifiable and comparable.  The Group of 77 would not support any proposal to use purchasing-power parity in preparing the scale.

The low per-capita income adjustment, which had been an integral measure of the scale since 1948, was critical in determining States’ capacity to pay, he said.  The measure had been designed to ensure that Member States were not unduly penalized for having large, yet less affluent, populations.  The Group of 77 strongly supported maintaining the adjustment as a central element of the scale and would continue to oppose any attempts to undermine the principle and application of that adjustment.  The Group of 77 also considered debt-burden adjustment based on the debt stock approach to be important in determining capacity to pay and strongly supported maintaining it as an integral element of scale methodology.  He also supported maintaining a maximum assessment rate of 0.01 per cent for least developed countries, as well as maintaining the floor rate of 0.001 per cent.

In apportioning the expenses, the Group of 77 gave special attention to the abrupt and sharp increases experienced by developing countries in their rates of assessments between scale periods, he continued.  That placed significant pressure on their ability to meet their Charter obligations.  The Group supported the view that large increases should be phased in across the scale periods.  It also continued to be concerned over the concept of annual recalculation of the scale.  In addition to being contradictory to rule 160 of the Assembly’s rules of procedure, the proposal was encumbered by numerous technical and procedural difficulties, making it impractical to implement.

In conclusion, he endorsed the recommendations of the Committee on Contributions to allow exemptions under Article 19 of the Charter to seven countries and encouraged all Member States, when submitting requests for exemption, to make every effort to do so in accordance with the provisions of resolution 54/237 C.  The Group of 77 appreciated the efforts by those States that had submitted multi-year plans and that had honoured those commitments.  The Group continued to invite all Member States facing significant arrears to consider submitting such multi-year payment plans, if they were in a position to do so.  At the same time, multi-year payment plans should be voluntary and should be prepared while considering the financial situation of the Member States concerned.  Such mechanisms should not be used as a way of exerting pressure on Member States already facing difficult circumstances and definitely should not to be included as a factor when considering exemptions under Article 19.

Having arisen of circumstances from over 15 years ago, the issue of the unpaid assessments of the former Yugoslavia should be resolved as soon as possible, he added.

ELSA DE JESUS PATACA ( Angola), on behalf of the African Group, aligned the Group with the statement of the Group of 77 and China.  She recognized that the expenses of the United Nations were a responsibility to be borne by all Member States and reaffirmed the principle of capacity to pay as the basis for apportioning each Member State’s financial contribution.  Further, full, timely and unconditional payment of contributions was essential to ensure a predictable cash flow to the Organization’s funds and activities.

At the same time, she said, those Member States who fell behind in payments for reasons beyond their control should be accorded the measures provided for in Article 19 of the Charter.  She noted that the ongoing food and energy crises, as well as the recent surge in troubles of the global economy, particularly exposed the developing countries to additional vulnerability.  Therefore, the African Group supported requests by the Central African Republic, the Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, Somalia and Tajikistan to be permitted to vote and participate in the activities of the sixty-third session of the General Assembly.

Regarding multi-year payment plans, she noted that no new plans had been submitted for this year, acknowledging that such plans could serve as a demonstrable gesture by affected Member States that they intended to settle their arrears within a specified period.  Such plans should remain voluntary and untied to any other measures.  Each country must be allowed to analyse its own situation, as countries might be unable to meet payment schedules of plans submitted under pressure.  She also commended Niger for its plan to voluntarily commit to pay arrears in full through a multi-year payment plan.  Finally, she expressed concern at the large scale-to-scale variations likely to result from the recommendations of the Committee on Contributions regarding scale methodology and said that such variations would negatively affect developing countries.

KEN MUKAI ( Japan) said that, as the second largest financial contributor to the United Nations, shouldering nearly one sixth of the Organization’s financial burden, Japan placed great importance on the scale of assessments.   Japan continued to pay its dues faithfully, without conditions, despite the fact that its Government faced a difficult financial situation.  He supported the principle that each Member State should pay its assessed contribution according to its capacity to pay.  Over the years, however, a discrepancy had developed between the scale and the gross national income share of Japan.  It was necessary to find a methodology that would better reflect each Member State’s current capacity to pay.  Expressing gratitude to the Committee on Contributions for its consideration of various elements of the methodology based on the principle of capacity to pay and for producing its report, he said his delegation endorsed the Committee’s recommendations regarding the exemptions under Article 19.

DMITRY S. CHUMAKOV ( Russian Federation) said his delegation attached great attention to the fair allocation of the expenditures of the United Nations among Member States, as well as the fundamental principle whereby States’ calculated assessments must be paid in full, on time and without conditions.  That was the guarantee that allowed the United Nations to carry out successful work and gave it the flexibility to handle various challenges.  His delegation gave a positive assessment to the work of the Committee on Contributions during its sixty-eighth session.  The Committee was an important expert body, which had considered a full range of the scale methodology last summer, in particular the options related to calculating gross national income on the basis of purchasing-power parity and other data.  He noted the recommendations in that regard, which supported the principle of the capacity to pay and unambiguously favoured the current conversion factors.  The capacity to pay, rather than purchasing power, was the basis for the fairest burden sharing.  It made the United Nations a unique global organization, where each Member State had the right to vote, regardless of the size of its monetary contribution, provided existing rules and procedures of payment were observed.  The report of the Committee also testified to some progress in considering such elements as the base period and low per-capita income adjustment.

Continuing, he stressed that the existing scale methodology -- the result of a difficult process of taking into account Member States’ preferences -- did not require substantial changes in the near future.  He also noted the Committee’s intent to continue its survey of the remaining elements of the methodology and present a comprehensive report on the results of that survey during the Assembly’s sixty-fourth session.  He welcomed the launch of the website of the Committee on Contributions and took note of the information regarding Member States in arrears under Article 19.  The Russian Federation did not object to giving them the right to vote until the end of the sixty-third session.

JAVAD SAFAEI ( Iran) aligned himself with the statement of the Group of 77.  He also supported the right of the seven countries who were in arrears due to circumstances beyond their control to vote during the sixty-third session of the General Assembly.  He affirmed capacity to pay as the fundamental criterion in determining the scale of assessments, and noted that the scale should not be assessed at a rate higher than a country’s capacity to pay, especially for developing countries.

He said that the current maximum assessment rate had been a temporary political compromise to facilitate particular outstanding arrears, but that the goal of that compromise had not been reached, eight years later.  He asked that the General Assembly revisit its decision, as stipulated in paragraph 2 of its resolution A/RES/55/5 C, and further requested a fuller review of the matter in the Committee on Contribution’s report for next year.

He supported evaluating capacity to pay on the most current, comprehensive and comparable data available for gross national income, and said that low per-capita income adjustment was an integral part of the scale methodology and should be maintained.  He said that purchasing-power parity did not provide a useful measure for capacity to pay, as it was not verifiable, reliable and comparable.  He further cautioned against the danger of severe fluctuations in scale assessments from one year to another.

CARLOS G. RUIZ MASSIEU ( Mexico) stressed the importance of giving guidance to the Committee on Contributions for its next session.  The Chair of the Committee, in his presentation, had said several times that the Committee was awaiting guidance from the Assembly, and he hoped the Fifth Committee would meet those expectations.  In general, existing elements of the methodology were appropriate to measure Member States’ capacity to pay, but some fine-tuning might be needed.  He also thanked the Committee on Contributions for its work to find a formula to compensate large scale-to-scale increases for some Member States.  He was particularly grateful that the Committee had worked on low per-capita income adjustment, creating a neutral zone in that regard.  It was fundamental to work further in the same direction.

Turning to the base period, he said it was an important element for measuring the capacity to pay, but asked “the capacity to pay for when”?  With the base period fixed, in January 2009 the scale would take into account the period up to 2004, and information from as far back as 1999 would be considered.  It was necessary to give further consideration to whether one should look at the capacity to pay today or yesterday.  It was also necessary to think further about the base period, as well as an annual adjustment.  Issues like that affected the dynamics of negotiations and conditions when trying to reach agreement.  Decisions taken on the issue were political, but it was also necessary to think about the future work on the scale of assessments.  For example, not having an annual update meant, for some delegations, that they could be more flexible in analysing proposals and look more towards the future.

In conclusion, he supported the recommendations of the Committee on Contributions regarding the exemptions under Article 19 of the Charter.

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