UN - General Assembly: Fifth Committee
General Assembly
Department of Public Information • News and Media Division • New York - 5th October 2009
UN - General Assembly: Fifth Committee
Background
The Fifth Committee (Administrative and Budgetary) met this morning to take up the scale of assessments, which is used to calculate Member States’ contributions to the budget of the United Nations.
The outcome of the sixty-ninth session of the Committee on Contributions (document A/64/11) presents its review of the methodology for preparing the regular budget scale.
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 were determined in resolution 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 decided to review the scale for the period 2010-2012, reaffirming its previous recommendation that the scale should be based on the most current, comprehensive and comparable gross national income data available. Also reaffirmed was the recommendation that market exchange rates should be used in preparing the scale, except where that caused excessive fluctuations and distortions in a country’s income.
The Committee agreed that, once chosen, there were advantages in using the same base period for as long as possible, so as to smooth out over the course of consecutive scale periods the impact for every Member State. It also decided to consider further at future sessions the questions of the debt burden adjustment and the low per-capita income adjustment. Also during the session, the Committee decided to adjust market exchange rates for Iraq and to use United Nations operational rates for the Democratic People’s Republic of Korea, Myanmar and the Syrian Arab Republic.
For Member States’ information, the report includes the results of the Committee’s consideration of the application of the new data to the methodology used in preparing the current scale. The Committee also decided to study further the questions of automatic annual recalculation and large scale-to-scale changes in rates of assessment on the basis of any guidance thereon by the General Assembly.
With regard to multi-year payment plans, the Committee noted the completion by Tajikistan of payments under its plan and recommended that other States in arrears be encouraged, for the purposes of the application of Article 19 of the Charter, to consider submitting such 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.]
Also in connection with the application of Article 19, the Committee recommended that the following Member States be permitted to vote in the General Assembly until the end of the current session: the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia.
The Committee also had before it a separate report on multi-year payment plans (document A/64/68), 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 2008.
The plans proposed by Georgia, Iraq, Moldova and the Niger have been excluded, as those Member States have made the payments envisaged in their payment plans and no longer fall under the provisions of Article 19 of the Charter.
Introduction of Documents
Introducing the report of the Committee on Contributions, its Chairman, BERNARDO GREIVER, said that the current scale of assessments was only valid through 2009, and a new one must be adopted during the main part of the session in order to allow the Secretary-General to issue assessments to Member States for periods after 31 December. The major focus of the work of the Committee on Contributions during its sixty-ninth session had, therefore, been the scale of assessments for 2010-2012.
He said that the Committee had reaffirmed its earlier recommendations with regard to the income measure and conversion rates used in preparing the scale. On the income measure, it had reaffirmed that the most current, comprehensive and comparable data available for gross national income should be used. The Committee had met with representatives of the World Bank and International Monetary Fund to discuss purchasing power parity rates. It had also reaffirmed its earlier recommendation that conversion rates based on market exchange rates should be used in preparing the next scale, except where that would cause excessive fluctuations and distortions in the gross national income of Member States expressed in United States dollars. In that case, price-adjusted rates or other appropriate conversion rates should be used.
He added that, among other things, the Committee had considered large scale-to-scale increases and discontinuity, and had a further discussion of the possibility of introducing automatic annual recalculation of the scale. Members had differing views on the merits of annual recalculation, and the Committee had decided to carry out a detailed study of the matter at its next session on the basis of any guidance from the Assembly.
In considering the 2010-2012 scale, the Committee had before it statistical information for 2002-2007, provided by the Secretariat, he said. The primary source for income data in local currencies had been the national accounts questionnaire completed by the countries concerned. The Committee noted that the System of National Accounts (2008) was now being implemented. However, good progress had been made under the 1993 System of National Accounts, which had been implemented by 132 countries, representing 95.5 per cent of the total world gross national income in 2007. Information on external debt for the current scale had been extracted, in most cases, from the World Bank databases.
For the data reviewed by the Committee on Contributions, that included countries with per capita gross national income of ,455 or less. Due to changes in coverage by the World Bank and Organisation for Economic Cooperation and Development (OECD), some countries had not had data available after 2002. The authorities of those countries had been approached for alternative data and, where such information was not made available, the Committee had made use of the data, as applicable, that had been used for the current scale.
In connection with conversion rates, he said that for 11 countries, a country-by-country assessment of possible exchange rate overvaluation or undervaluation had been conducted, including the examination of information about the economic and financial situation. Based on the review, the Committee had decided to adjust the conversion rate of Iraq. Some members considered that the rate of the other 10 countries should also be adjusted. However, in line with the past practice and its recommendation on the scale methodology, the Committee had decided to use market exchange rates for the other Member States.
The Committee had recalled its earlier recommendations regarding the assessment of the remaining non-Member State, the Holy See, he continued. That recommendation, endorsed by the Assembly in resolution 58/1B, was that the annual assessment of the Holy See should be based on 50 per cent of its notional rate of assessment, applied to the net assessment, base for the regular budget. The Committee recommended that the arrangement be continued and that the notional rate of assessment for the Holy See in 2010-2012 should be fixed at 0.001 per cent.
As indicated in Chapter V of the report, the Committee had concluded, subject to a number of observations, that the failure of the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia to pay the full minimum amount to avoid the application of Article 19 had been due to conditions beyond their control and recommended that they be permitted to vote until the end of the sixty-fourth session.
Under other matters, he said that at the conclusion of the sixty-ninth session of the Committee on Contributions, only one Member State, Chad, had been in arrears under article 19 of the Charter and had not voted in the Assembly. Six other countries, the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia, were in arrears, but had been permitted to vote until the end of the sixty-third session.
The Secretary-General’s report on multi-year payment plans was presented by LIONEL BERRIDGE, Chief of the Contributions and Policy Coordination Service.
Statements
MAGID YOUSIF (Sudan), speaking on behalf of the Group of 77 developing countries and China, said that all Member States must pay their assessed contributions in full, on time and without conditions for the Organization to be able to implement its mandates effectively. However, he stressed that the genuine difficulties faced by some developing countries that temporarily prevented them from meeting their financial obligations should be taken fully into account, and that General Assembly decisions must be responsive to such difficulties.
He said that the Group was prepared to immediately adopt the updated scale of assessments for the triennium 2010-2012, as prepared on the basis of the current methodology, and strongly encouraged all Member States to do so. He noted that, although the current methodology would see substantial increases in the contribution rates of developing countries for the triennium 2010-2012, those countries were prepared to accept and fulfil their responsibilities as stakeholders in the Organization.
He cited the Group’s Ministerial Declaration of 25 September 2009, further reaffirming the principle of “capacity to pay” as the fundamental criterion in the apportionment of the expenses of the United Nations and rejected any changes to the elements of the current methodology for the preparation of the scale of assessments aimed at increasing the contributions of developing countries. In this regard, the Ministers 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, floor, ceiling for least developed countries and debt stock adjustment must be kept intact and were not negotiable.
He further said that the current maximum assessment rate of 22 per cent in the current methodology had been fixed as a political compromise and was contrary to the principle of “capacity to pay,” and a source of distortion in the scale of assessments. It allowed the main contributor an assessment rate far below its “capacity to pay” and imposed an unfair burden on the rest of the membership. For that reason, the Group was prepared for a serious discussion on the “ceiling” should others wish to examine the elements of the current methodology.
The Group endorsed 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, as recommended by the Committee on Contributions, and that, accordingly, they be permitted to vote until the end of the sixty-fourth session of the General Assembly. He urged the Fifth Committee to act promptly on those requests. Commending the efforts of Member States that had submitted and honoured commitments to multi-year payment plans, he stressed that such plans must remain voluntary and should not be used to pressure Member States that were already in difficult circumstances, or considered in determining exemption under Article 19.
He emphasized that negotiations must be conducted in an open, inclusive and transparent manner, which upheld the legitimacy and competency of the Fifth Committee. He reiterated the Group’s strong opposition to decision-making on this item in small-group configurations, as well as to the imposition of any conditionalities in the negotiations.
ANDERS LIDÉN (Sweden), speaking on behalf of the European Union and associated States, acknowledged that, for reasons beyond their control, some Member States might face genuine difficulties in fulfilling their financial obligations to the United Nations. Multi-year plans had been an effective tool to help countries reduce their unpaid assessments and, as the Union had stated before, he encouraged Member States requesting an exemption to present such plans. It was, therefore, with concern that the Union noted some of the issues raised by the Committee on Contributions: a continuing increase in the accumulation of arrears of some Member States, the fact that no new multi-year payment plans had been submitted, and that the plans already submitted were not always followed.
He said he encouraged further efforts to reduced unpaid dues by concerned Member States and urged the Central African Republic to submit and follow a plan. Such efforts would contribute to reducing unpaid contributions and demonstrate commitment to meeting the financial obligations to the United Nations. Despite those concerns, the European Union stood ready to endorse the recommendations of the Committee on Contributions to permit Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia to vote in the General Assembly.
Turning to the scale methodology, he said that the European Union was by far the largest financial contributor to the United Nations and had consistently supported the Organization’s efforts in meeting new challenges. A fair and more balanced way to share the budgetary responsibilities of the United Nations was essential to the effective functioning of the Organization. Ensuring effective funding was the joint responsibility of the membership. It was important to ensure that the scale of assessments agreed upon at the end of 2009 more accurately and fairly reflected collective ownership of the United Nations and each States’ capacity to pay, which the Union continued to stress as the basis for Member States’ contributions. However, the current scale did not truly reflected present-day economic realities. Union Member States’ assessed contribution of some 40 per cent of United Nations budget was significantly higher than their 30 per cent share of the world economy. That was clearly not in alignment with capacity-to-pay.
He said that the scale needed to better take into account the changing economic weight in the global economy. States’ contributions must reflect their real capacity to pay, as closely as possible. While the Union had, and would, continue to advocate the need for significant relief for the most vulnerable countries, it was necessary to recognize that some major emerging economies had seen substantial growth figures this decade and should take a larger share of the Organization’s expenses, reflecting their economic accomplishments.
The low per-capita income adjustment was an important element designed to provide relief to developing countries, but it had produced the effect of accumulating relief in a handful of Member States with a significant share of world gross national income, with the least developed countries scarcely benefiting from the adjustment. The European Union wanted to address that and ensure the adjustment was consistent with the original intent and better target those countries in real need of an adjustment. The debt-burden adjustment, first introduced in 1986, did not take full account of information now available. He would like to see an examination of the debt-burden adjustment and took note of the availability of data for public debt. The use of public debt would better reflect the responsibility of the Government and would correspond with the original intention of the adjustment. As with the low per-capita income adjustment, the least developed countries scarcely benefited from that adjustment.
For the European Union, the status quo was no longer a solution, he said. The Union was not questioning the basic principles of the scale methodology. What he had outlined were some balancing adjustments that would address flaws of the current methodology, without affecting the majority of countries. Those were prerequisites for the creation of a stable, transparent and sustainable financing in the service of the United Nations.
ELSA DE JESUS PATACA (Angola), speaking on behalf of the African Group, associated herself with the statement of the Group of 77 and China and said that the report of the Committee on Contributions reflected an increase in the assessments of many developing countries, while assessments for developed countries had decreased significantly due to the current financial downturn. As the current methodology for the apportionment of the Organization’s expenses reflected a truer picture of the global financial situation, it was imperative that the current methodology remain intact and not be negotiated.
She noted that the Committee on Contributions had acknowledged that, due to circumstances beyond their control, six nations had difficulty in meeting their financial obligations to the Organization and supported its recommendation that those six Member States be permitted to vote until the end of the sixty-fourth session of the General Assembly. She called for a swift decision on the matter.
JOHN MCNEE (Canada), also speaking on behalf of Australia and New Zealand, endorsed the recommendation that the Central African Republic, Comoros, Guinea-Bissau, Liberia, Sao Tome and Principe and Somalia be permitted to vote in the Assembly until the end of the sixty-fourth session. On the scale, he said that in apportioning the responsibility for financing the United Nations, the scale was the practical means for implementing Member States’ shared responsibility for the functioning of the Organization. The principles underlying the scale said a great deal about the values of the Organization and the character of the partnership within it. That was why the delegations on whose behalf he was speaking had consistently been committed to the capacity to pay as the key principle governing the scale. Three years ago, those delegations had resisted proposals that could have brought along short-term financial gains, because they weakened the application of the capacity-to-pay principle. It was in that spirit that he also believed in the importance of properly applying the governing principle to contemporary circumstances.
The current methodology did not adequately reflect the capacity to pay, he continued. An adjustment to the methodology was required for a fairer, more balanced and representative scale that more accurately reflected Member States’ capacity to pay. For instance, the current methodology did not reflect the recent rapid growth in a number of emerging economies. That was reflected most sharply in the low per-capita income adjustment, which he would be looking at carefully in the forthcoming negotiations. He recognized the merit of the adjustment idea, which was analogous to the progressive taxation concept, but he also recognized that there were problems with its application. The adjustment did not take account of the difference in capacities among countries falling under the threshold, applying instead the same discount rate to all. The result was that much of that adjustment was directed to a small number of large developing economies. While supporting the concept and continued application of adjustment, he felt that the adjustment should provide more benefit to smaller developing economies, which only received marginal benefits from the adjustment, as it stood. The question of how to define the threshold of eligibility for the adjustment also merited greater attention.
The debt-burden adjustment, first introduced in 1986, had little, if any demonstrable link to Member States’ capacity to pay, as the effects of debt servicing costs were already incorporated in the current income measure of gross national income. If the debt-burden adjustment was to be retained, it should at least reflect the more accurate data on public debt, which was currently available. The Committee on Contributions had indicated that the use of public debt better reflected the capacity of the Governments to pay.
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