Sixty-sixth General Assembly

Fifth Committee

2^nd Meeting (AM)

Budget Committee Takes Up Scale for Assessing Member States’ Dues;

 

Speakers Stress Importance of ‘Capacity to Pay’ Principle

 

As the Fifth Committee (Administrative and Budgetary) opened the second meeting of its sixty-sixth session with a discussion on the scale of assessments, several delegates raised a red flag over revising the complex methodology used to set the scale if the changes boosted the contributions of developing countries.

Used to determine the financial contribution that each United Nations Member State makes annually to the Organization’s budget, the scale of assessments involves a complex methodology that is periodically reviewed to reflect economic changes as well as the concerns of Member States.  Several speakers today strongly reaffirmed the principle of the capacity to pay as a fundamental criterion in the apportionment of the expenses of the United Nations.

Argentina’s delegate, representing the Group of 77 developing countries and China, emphasized that the core elements of the scale’s current methodology were not negotiable and must be kept intact.  Meeting ahead of the session in mid-September, the Group’s Ministers had stressed that the current maximum assessment rate, or ceiling, had been fixed as a political compromise and was contrary to the principle of capacity to pay and a fundamental distortion in the scale of assessments.  He noted that Assembly resolution 64/248 had approved the scale of assessments for the three-year period of 2010-2012 on the basis of the current methodology.  Adopted in December 2009, that text had, however, recognized the need to study the methodology.

Cuba’s representative noted the recent attempts of a few Member States to undermine the principle of sovereign equality by supposedly improving the current methodology.  That move merely transferred financial burdens to developing countries.  Many developing countries were bearing larger percentages in their scale as they posted increases in their economic data for the base period.  The percentages posted by important world economies were down considerably, yet several of those economies had promoted unjust changes in the scale methodology.  “Any change in the methodology that does not seriously tackle the removal of the ceiling of the scale of assessments makes no sense,” he said. 

Supporting the statement made on behalf of the Group of 77 developing countries and China, the representative of Senegal stressed that United Nations expenditures should be distributed among Member States based on their capacity to pay and the same base period should be used as long as possible to calculate the scale of assessments. 

He called on the Assembly to consider the tenuous economic situation of developing countries when establishing the scale of assessments for the 2013-2015 period.  Even though all countries were affected by the global economic crisis, it could not be used as a pretext to change the methodology with the intent to make low-income countries pay more.  It was necessary to consider the true obstacles certain countries faced in making their payments.  In that regard, Senegal fully supported the recommendation that the Central African Republic, Guinea-Bissau, Liberia, Sao Tome and Principe, Comoros and Somalia be allowed to keep voting in the current Assembly session.

Japan’s delegate said that his country, as the Organization’s second-largest financial contributor, considered that the capacity to pay principle should be “respected and maintained”.  But the changing world economic situation meant the United Nations had to find a methodology to reflect each Member State’s “real and current capacity to pay” in a more equitable way, based on the current, comprehensive and comparable data available.  In line with resolution 64/248, Member States should start reviewing all elements of the methodology of the scale of assessments during this session, based on the report of the Committee on Contributions.

In introducing that report, Bernardo Greiver, Chairman of the Committee on Contributions, noted that the current methodology could be enhanced, bearing in mind the principle of the capacity to pay.  The Committee had recognized gross national income as the best available measurement of that capacity and had found no technical merit in using alternative income measures, such as the human development index and exponential functions in the scale of methodology, to define adjustments to gross domestic product.

Chandramouli Ramanathan, Director, Accounts Division, introduced the Secretary-General’s report on multi-year payment plans, which contained the status of payment plans as of 31 December 2010.  It showed that five Member States had completed payments under the system since its adoption in 2002.

The report provided detailed information on the two remaining plans, submitted by Liberia and Sao Tome and Principe, and the status of implementation as of year-end 2010.  An updated status that ended 24 June 2011 was laid out in the Committee on Contributions’ report.  He said that so far, no other Member State had submitted payment plans or schedules for the elimination of arrears, although several Member States had indicated they were considering submitting such a plan to the Committee on Contributions.

Fifth Committee Chairman Michel Tommo Monthe of Cameroon made brief remarks.

Also participating in the discussion were representatives of Ukraine, Kuwait, Russian Federation, Republic of Korea and Sudan.

The Committee will reconvene at 10 a.m. Tuesday, 5 October, to resume its discussion of the scale of assessments.

Background

The Fifth Committee (Administrative and Budgetary) met this morning to consider its agenda item on the scale of assessments for the apportionment of the expenses of the United Nations.

The Committee had before it the report of the Committee on Contributions’ seventy-first session (6-24 June 2011) (document A/66/11), in which the Committee reviewed the methodology of the scale of assessments, pursuant to rule 160 of the rules of procedure of the General Assembly, Assembly resolution 58/1 B, and specifically, to Assembly resolution 64/248.

The Committee reaffirmed its recommendation that the scale of assessments still be based on the most current, comprehensive and comparable gross national income data.  It recommended that the Assembly continue encouraging Member States to submit that required data under the System of National Accounts, and where available, to submit data based on gross national development income so that more comprehensive information could be used to measure one’s capacity to pay.

In its review of how to best convert the statistical data received from Member States in their respective national currencies into a common monetary unit, the Committee reaffirmed its recommendation that the conversion rates be based on market exchange rates, except in cases where that would cause excessive fluctuations and distortions in Member States’ gross national income expressed in United States dollars.  In the latter case, price-adjusted rates of exchange should be applied.  The Committee decided to continue studying the conversion rate methodology based on further input from the Statistics Division and in light of any guidance from the Assembly.

Regarding the base period used to calculate the scale of assessments, the Committee recommended that once chosen, the base period — whether long or short — be maintained for as long as possible to achieve stability in the scale of assessments.  The Committee noted that there was no rationale for changing the current combined approach based on both the three-year and the six-year periods.

Concerning the low per capita income adjustment, the Committee reaffirmed that the scale methodology should continue to take into account comparative income per head of population.  It decided to continue to consider the feasibility of applying systematic transitional relief measures for Member States facing large scale-to-scale increases in their assessments rates, in light of any Assembly guidance.  At future sessions, also in light of any Assembly guidance, the Committee would further consider the debt-burden adjustment as well discuss annual recalculations.

Despite disagreement over whether the multi-year payment plans should be mandatory, the Committee believed that the plans continue to be a viable means for Member States to reduce their unpaid assessed contributions and demonstrate their commitment to meet their financial obligations to the Organization.  Noting Liberia’s continued successful efforts to make regular payments under the multi-year scheme and fully fulfil its payment commitment by 2013, the Committee emphasized the importance of implementing the multi-year plans and making annual payments, exceeding current assessments, to avoid a further accumulation of arrears.

The Committee noted that no new multi-year payment plans had been submitted for several years and reiterated its recommendation that the Assembly encourage Member States in arrears that were requesting an exemption under Article 19 of the Charter, and in a position to do so, to consider presenting a multi-year plan.

Concerning application of Article 19, the Committee recommended that the following Member States be permitted to vote in the Assembly until the end of its sixty-sixth session:  the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, and Somalia, having concluded that the failure to pay was beyond their control.  It urged the Central African Republic, which had yet to comply with its stated intention to submit a multi-year plan, to begin making one in consultation with the secretariat of the Contributions Service.

The Committee also urged Comoros and Guinea-Bissau to submit a plan as soon as possible and to ensure, to the extent possible, that payments exceeded the level of annual contributions.  The Committee also decided to authorize its Chair to issue an addendum to the present report concerning those six States, as necessary.

The Committee noted that, as of 15 June 2011, more than $2.8 billion was owed to the Organization for the regular budget, peacekeeping operations, the international tribunals and the Capital Master Plan.  This was up from the $2.4 billion outstanding in the previous year, as of 31 May 2010.

The Committee decided to continue reviewing its working methods at its next session, to be held in New York from 4 to 29 June 2012.

Also before the Committee was the Secretary-General’s report on multi-year payment plans (document A/66/69), submitted in connection with resolution 57/4 B, on the status of payment plans of Member States at the end of each year.  It provides a summary of plans and schedules submitted by Liberia and Sao Tome and Principe and their implementation as of 31 December 2010, and recommends that the Assembly note the report and encourage Member States with significant arrears to consider submitting a multi-year plan.  It notes that as of 31 December 2010, outstanding assessed contributions were $398,643 for Liberia and $798,797 for Sao Tome and Principe. 

Introduction of Reports

BERNARDO GREIVER, Chairman of the Committee on Contributions, introduced that Committee’s report on its seventy-first session (6-24 June 2011) (document A/66/11), which listed the Committee’s recommendations concerning the methodology of the scale of assessments based on its recent review.  It noted that the current methodology could be enhanced, bearing in mind the principle of the capacity to pay.  However, it recognized that at present, gross national income was still the best available measurement of that capacity.  The Committee found no technical merit in using alternative income measures, such as the human development index and exponential functions in the scale of methodology, to define adjustments to gross domestic product (GDP) to better reflect the capacity to pay. 

He noted that Committee members had divergent views on the debt-burden adjustment:  some reiterated that it was conceptually unsound and, therefore, should not be part of the scale methodology, while others felt it was essential for alleviating Member States’ debt burdens.  The Committee decided to further consider the debt-burden questions at future sessions in light of any guidance from the Assembly.  The report listed the main potential benefits and drawbacks to annual recalculation, he said, noting that the Committee also had decided to further consider the question of annual recalculation at future sessions, in light of any Assembly guidance. 

He said chapter VI of the report contained the results of the Committee’s review of the most recent report of the Secretary-General on multi-year payments and updated information, as of 24 June 2011, on the status of implementing such plans.  He said two of the six Member States that had requested an exemption under Article 19 to maintain their vote in the Assembly had also submitted multi-year payment plans, and that the Committee had encouraged all Member States requesting an exemption to do the same.  Pursuant to paragraph 12 (a) of Assembly resolution 64/248, the Secretary-General had accepted in 2010 the equivalent of $2 million in a currency other than United States dollars.  Lastly, he noted that the assessment of South Sudan, which was admitted as a Member State after the end of the Committee’s last session, would be considered at the Committee’s seventy-second session, scheduled for 4 to 29 June 2012. 

Introducing the Secretary-General’s report, multi-year payment plans (document A/66/69), CHANDRAMOULI RAMANATHAN, Director, Accounts Division, said this latest report contained the status of payment plans as of 31 December 2010.  As recalled in the report, five Member States had completed payments under the system since the adoption of the multi-year payment plan system in 2002.  That report provided detailed information only on the two remaining plans, those submitted by Liberia and Sao Tome and Principe, and the status of implementation as of the end of 2010.  The updated status, to 24 June 2011, of these payment plans is indicated in the report of the Committee on Contributions.

Continuing, he said that no other Member State had so far submitted payment plans or schedules for the elimination of arrears, although several Member States had indicated in the course of representations to the Committee on Contributions that consideration was being given to submission of a plan.

Statements

SEBASTIÁN DI LUCA (Argentina), speaking on behalf of the Group of 77 developing countries and China, said his delegation reaffirmed its long-standing position that the financial resources provided to the Organization had to be commensurate with its legislative mandates.  Without adequate resources, the United Nations could not be expected to implement its mandates effectively. 

The Group stressed that the genuine difficulties faced by some developing countries had prevented them from temporarily meeting their financial obligations and General Assembly decisions should respond to those difficulties. The Group emphasized the importance of urgently dealing with the issue of Article 19, he said.

The Group, he continued, reaffirmed that the Fifth Committee was the Organization’s sole Main Committee entrusted with responsibilities for administrative, financial and budgetary matters, and such matters should be discussed solely in the framework of that body, in conformity with the United Nations Charter.

He noted that Assembly resolution 64/248 had approved the scale of assessments for three years for 2010-2012 on the basis of the current methodology.  The Group reaffirmed the principle of capacity to pay as the fundamental criterion in the apportionment of the expenses of the United Nations, and it rejected any changes to the elements of the current methodology used to prepare the scale of assessments that aimed to increase the contributions of developing countries.

The Group emphasized that the core elements of the current methodology of the scale of assessment, such as base period, gross national income, conversion rates, low per capita income adjustment, gradient, and floor for least developed countries, had to be kept intact and were not negotiable.  He said the Group’s Ministers stressed that the current maximum assessment rate, or ceiling, had been fixed as a political compromise and was contrary to the principle of capacity to pay and a fundamental distortion in the scale of assessments.  In that context, the Ministers urged the Assembly to undertake a review of the arrangement, in accordance with paragraph 2 of Assembly resolution 55/5 C.

On the issue of multi-year payment plans, he said the Group reiterated that such plans should remain voluntary and take into account the financial situation of the concerned Member States.  They should not be used as a way to exert pressure on Member States already facing difficult circumstances and should not be a factor when considering exemptions under Article 19 of the Charter.

Article 19 was the main priority for this agenda item in this session and the Group had carefully reviewed the requests by the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe, and Somalia for exemption under Article 19 of the Charter.  He said the Group was convinced that the inability of those States to make the minimum payments on their assessed contributions was due to conditions beyond their control. The Group endorsed the recommendations of the Committee on Contributions to permit these countries to vote until the end of the sixty-sixth session of the Assembly.

MONDO YAMAMOTO (Japan) said that his country, as the second-largest financial contributor to the United Nations, attached great importance to the scale of assessments and Japan had paid its dues faithfully, even though it was faced with economic and financial difficulties.  Japan believed that the capacity to pay principle should be respected and maintained.  Considering the changing world economic situation, the United Nations had to find a methodology that would better reflect each Member State’s real and current capacity to pay in a more equitable way, based on the current, comprehensive and comparable data available.

In line with resolution 64/248, Member States should start reviewing all elements of the methodology of the scale of assessments during this session, based on the report of the Committee on Contributions. Japan would actively and constructively participate in the coming round of negotiations.

SERHII YAROVYI (Ukraine) said a fair, balanced and depoliticized approach was needed to reach consensus concerning the scale of assessments.  He expressed hope that delegates would work in a meaningful, constructive manner towards that aim.  The capacity to pay should remain a basic principle for the methodology of the future scale of assessments, he said, stressing that the scale should be based on the most current comprehensive and comparable data available for gross national income.  At a time when all countries were trying to cope with the global financial crisis’ impact, it was necessary to avoid “artificial” revision of the scale of assessments.  The Committee should exert every effort to make the scale more balanced and transparent.  Noting how changes in States’ gross national income affected others States’ assessments, he said the Committee should consider establishing within the frame of scale methodology a mechanism that would help avoid considerable changes of States’ assessments.

ABDOU SALAM DIALLO (Senegal) supported Argentina’s statement on behalf of the Group of 77 and China.  He underscored that the United Nations expenditures should be distributed among Member States based on their capacity to pay.  The same base period should be used as long as possible to calculate the scale of assessments.  The debt-burden adjustment for least developed countries should change progressively, or be revised upwards, based on their capacity to pay.  He noted that the contributions of certain least developed countries had risen exponentially.  Senegal’s contribution to the regular budget and peacekeeping operations jumped almost 50 per cent from the 2007-2009 period to the 2010-2012 period.  That was unacceptable, particularly when considering the sacrifices of least developed countries. 

He called on the Assembly to take into account the tenuous economic situation of developing countries when establishing the scale of assessments for the 2013-2015 period.  He recognized that all countries were affected by the global economic crisis, but said it could not be used as a pretext to change the methodology of calculating the scale of assessments with the intention of making low-income countries pay more.  It was necessary to take into account the true obstacles certain countries faced in honouring their obligations to pay.  In that regard, he fully supported the recommendation that the Central African Republic, Guinea-Bissau, Liberia, Sao Tome and Principe, Comoros and Somalia be allowed to continue to vote in the Assembly.

JORGE CUMBERBATCH (Cuba) noted continuous attempts in recent months by a few Member States to undermine the principle of sovereign equality as it concerned the scale of assessments and the scale methodology; and to supposedly “improve” the current methodology by making relative the capacity to pay — a move which merely transferred financial burdens to developing countries that had nothing to do with national economic development.  That exercise was a mere continuation of efforts to deprive developing countries of access to international cooperation mechanisms promoted by the United Nations.  Those in favour of the alleged improvement did not plan on seriously addressing the ceiling imposed in the Assembly’s fifty-fifth session, which was the main cause of the distortion of the scale of assessments.  “Any change in the methodology that does not seriously tackle the removal of the ceiling of the scale of assessments makes no sense,” he said. 

Countries that posted an increase in macroeconomic data during the base period, among them a significant number of developing countries, had assumed greater percentages in their scale, he said.  Based on available information, the percentages of important world economies were considerably reduced.  But several of those world economies had promoted unjust changes in the scale methodology.  Cuba would closely follow the arguments made on the scale methodology during the current session.  Noting that during the current difficult economic times developing countries had made huge efforts to pay their financial contributions to the Organization, he supported the recommendation that a small group of countries be exempted from during so under Article 19.  He also supported the multi-year payment mechanism.  He reaffirmed Cuba’s willingness to continue to honour its financial obligations to the Organization despite suffering the consequences of a unilateral economic blockade.

Mr. AL-OMAIRI (Kuwait) said the scale of assessments issue now before the Committee was a very important one and his delegation fully supported the statement made by the representative of Argentina on behalf of the Group of 77 developing countries and China.  The vital role of the United Nations depended on predictable financial flows so the Organization could satisfy its mandates and objectives.  The principle of “capacity to pay” was important, and the various elements in that principle had to be developed to include more equity, transparency and flexibility.

He said the impact of the global financial crisis had led to increases in the contributions made by developing countries, even though they had no role in creating that crisis.  Many of those countries were going beyond their capacity to pay.  Kuwait supported multi-year payment plans, which would enable Member States to satisfy their obligations, he said, also expressing his delegation’s support for the recommendations made by the Committee on Contributions.   Kuwait believed in the vital role of the Organization and would always pay its obligations on time.  He hoped the Committee on Contributions would continue to develop its methodology and avoid any assessments that would have a negative impact on developing countries.

DMITRY CHUMAKOV (Russian Federation) supported the Contribution Committee’s conclusions regarding article 19 of the Charter.  The Committee’s work was intensive, as evidenced by the report’s narrative section.  But regarding its conclusions, he could not say there had been any real progress or success, notwithstanding the appeals of the Assembly.  He drew attention to the price-adjusted rates of exchange and the market-exchange rates.  He did not understand why some Committee members did not wish conscientiously to implement Member States’ request to define the approach to be taken to subsequently implement the price-adjusted rates of exchange.  He said delegates were told that Member States sometimes did not provide instructions for the work of the Committee, but resolution 64/248 had clear instructions concerning price-adjusted rates of exchange.  Unfortunately, paragraph 42 of the report of the Committee on Contributions clearly stated that several members rejected those instructions, hiding behind economic arguments, which were quite disputable.

That sort of approach for the Committee was rather indecisive, lacked determination or was extremely politicized, he said.  The Committee’s following session should overcome such differences of opinion so next year’s report would be much more significant for the contributions of States.  Regarding working methods, for two sessions in a row, the Committee stated the necessity to draw up such methods instead of providing the methods themselves.  He requested more detailed information in that regard.  He asked what stopped the Committee from implementing that objective on time.  That information, however, should probably be provided in an informal format.

PARK CHULL-JOO (Republic of Korea) said that as many Member States tightened their belts, the scale of assessments had become more important than ever.  The assessment should be based on the capacity to pay, and there was room to improve the current methodology.  He said that two years ago, there had been consensus in the Assembly that the current methodology would be reviewed before the end of this session.  Korea supported a fairer methodology.

IDRIS ISMAIL FARAGALLA HASSAN ( Sudan) said when assessing the contributions of South Sudan, the Committee should consider that the “mother country”, Sudan, had lost 70 per cent of its revenues.  Most of Sudan’s oil was in the south, and consequently Sudan’s national income had suffered drastically.  The Committee on Contributions should take into account those factors.   

Responding to the delegates’ comments, Mr. GREIVER, Chairman of the Committee on Contributions, said the information on the Committee’s discussions was contained in his Contribution Committee’s report.  All concerns expressed in the Assembly and during today’s meeting would be given to Committee on Contribution members for inclusion in their upcoming report.  He said the comments and questions expressed in both the Fifth Committee and the Assembly were extremely important and extremely necessary, and that his committee would be ready to answer them.  

In closing, Fifth Committee Chairman MICHEL TOMMO MONTHE (Cameroon) urged the Committee not to conduct informal discussions indefinitely.  He encouraged delegates to adhere to their established timetable for the Committee’s session.  He noted that if solutions were provided for every agenda item, then the coordinator of any given item would be able to bring people together to provide mutually agreed upon and acceptable solutions.  He called for active, open and generous consultations that were focused on solutions.

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