Budget Committee Takes Up Scale for Assessing Member States Dues for 2010-2013, with Speakers Stressing Importance of ‘Capacity to Pay’ Principle

5 October 2009
GA/AB/3917

Budget Committee Takes Up Scale for Assessing Member States Dues for 2010-2013, with Speakers Stressing Importance of ‘Capacity to Pay’ Principle

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5 October 2009
General Assembly
GA/AB/3917
Department of Public Information • News and Media Division • New York

Sixty-fourth General Assembly

Fifth Committee

2nd Meeting (AM)

Budget Committee Takes Up Scale for Assessing Member States Dues for 2010-2013,

With Speakers Stressing Importance of ‘Capacity to Pay’ Principle

As the Fifth Committee (Administrative and Budgetary) took up the scale for determining Member States’ dues to the Organization’s budget in 2010-2012, the delegates emphasized the importance of following the principle of capacity to pay as the fundamental criterion in the apportionment of the expenses of the United Nations and considered the main elements of the methodology used to calculate the assessments.

With the current scale of assessments only valid through 2009, the Committee must adopt a new one during the main part of the session, in order to allow the Secretary-General to issue Member States’ assessments after 31 December.  Following its significant revision in 2000, the scale was last considered in 2006, when the Committee decided to maintain its methodology.  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. 

While several speakers today advocated the need to preserve the core elements of the current methodology, others insisted on adjusting the scale, saying that, in its current form, it did not truly reflect present-day economic realities, including the world financial crisis, and the countries’ capacity to pay.

The representative of Angola, speaking on behalf of the African Group, 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 it remained intact and not be negotiated.

A similar position was presented by the representative of the Sudan on behalf of the Group of 77 developing countries and China.  He said that Group was prepared to immediately adopt the updated scale of assessments for 2010-2012, prepared on the basis of the current methodology. 

He further said, however, 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 [the United States] 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.

Stressing the complexity of the issue, the United States representative said that a number of technical and political considerations must be taken into account in looking for a fair and equitable methodology.  Although the Committee had been unable to reach consensus on any of the proposals and decided to maintain the current methodology in 2006, his delegation continued to believe that, while it would be difficult to achieve, the current methodology could be improved upon.

There was recognition that all Member States were responsible for meeting the financial obligations of the Organization and were stakeholders in its activities and operations, he continued.  There was also agreement that the scale was broadly based on the capacity to pay.  In that last respect, he did not believe that the Organization should be overly reliant upon contributions from any one Member State.

The representative of Japan said as the second largest contributor to the United Nations budget, it was necessary to find a methodology that would better reflect each Member States’ real and current capacity to pay in a more equitable way, based on the most current, comprehensive and comparable data available.

The calculations by the Committee on Contributions showed substantial deviations between the scales and gross national income shares after applying such adjustments as the low per-capita income adjustment.  Some Member States with large gross national income shares were given scales much lower than their capacity to pay and influence, while, on the other hand, Japan’s scale was about 30 per cent above its gross national income share.  That discrepancy was only likely to grow, given the continued trend downwards in Japan’s gross national income share.

The representative of Sweden, who spoke on behalf of the European Union, said the status quo was no longer a solution.  The Union was not questioning the basic principles, but suggested some balancing adjustments that would address current flaws, 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.

The Union’s Member States’ assessed contribution of some 40 per cent of the Organization’s budget was significantly higher than their 30 per cent share of the world economy.  That was clearly not in alignment with capacity to pay.  The scale needed to better take into account the changing economic weight in the global economy.  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.

China’s representative insisted, however, that in measuring a States’ capacity to pay, it was necessary to look not only at the size of its economy and gross national income, but per capita income, as well.  China stood ready to make an even greater contribution on the basis of the capacity to pay, as its economy continued to grow.  But, despite its rapid economic development and impressive gross domestic product figures, China was the country with the largest population, which still faced enormous challenges at home.  In 2008, China’s per capita gross domestic product stood at $3,000 -- still “a far cry” from the threshold.  The evaluation of China’s capacity to pay should not be conducted without taking into account its specificities.

Also participating in the debate were representatives of Canada (also on behalf of Australia and New Zealand), Malaysia, Mexico, Cuba, Ukraine, Russian Federation, Switzerland (also on behalf of Liechtenstein), India and Indonesia.

The reports before the Committee were presented by the Chairman of the Committee on Contributions, Bernardo Greiver, and the Chief of the Contributions and Policy Coordination Service, Lionel Berridge.

The Committee will continue its debate on the scale of assessments at 10 a.m. Tuesday, 6 October.

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 $11,455 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.

Ms. NORFARINA MOHD. AZMEE (Malaysia) associated herself with the statement of the Group of 77, and said that the capacity to pay must continue to be the basis in determining Member States’ share of contributions to the United Nations and the new scale of assessments must reflect a fair, equitable and balanced rate, agreed upon by all Member States.  She expressed her full support for the Committee on Contributions in its recommendation that the scale of assessments for the period 2010-2012 should be based on the most current, comprehensive and comparable data available for gross national income.

She further supported the Committee on Contributions recommendation to retain the use of market exchange rates in reviewing the scale of assessments for the period, and agreed with the Committee that market exchange rates should be replaced by price-adjusted rates of exchange or other appropriate conversion rates in instances where the use of market exchange rates would cause excessive fluctuations and distortions in the income of some Member States.  In addition, she agreed with the Committee on Contributions that there were advantages in using the same chosen base period for as long as possible to smooth out, over the course of consecutive scale periods, the impact for every Member State, in order to provide stability and predictability in the United Nations scale.

Noting that it was not possible to determine a scale of assessment that would satisfy and accommodate the needs of all Member States, she said that drastic changes in Member States’ assessments should be avoided as far as possible.

Mr. MELROSE ( United States) said that the subject of the scale was very complex, involving a number of technical and political considerations that must be taken into account in seeking to find a fair and equitable methodology for sharing the financial burden of the United Nations’ activities.  When the Fifth Committee had last addressed the regular scale in 2006, many proposals had been submitted by Member States in an attempt to improve upon the current methodology, including suggestions to change virtually every element of the scale.  Ultimately, however, the Committee had been unable to reach consensus on any of the proposals and decided to maintain the current methodology.  His delegation continued to believe that, while it would be difficult to achieve, the current methodology could be improved upon.  In an attempt to do so, it would be useful to focus on a number of underlying principles that might assist the Committee in that effort.

There was recognition that all Member States were responsible for meeting the financial obligations of the Organizations and were stakeholders in its activities and operations, he continued.  There was also agreement that the scale was broadly based on the capacity to pay.  In that last respect, he did not believe that the Organization should be overly reliant upon contributions from any one Member State. That principle had been the central element of the methodology from the inception of the Organization.  He would add to that principle the concept of fairness.  Some might argue that the concept of fairness was included in the capacity to pay, but others would argue that it depended on how that principle was applied.

The challenges before the Committee were now even greater than in 2006, he added.  Since then, the world had experienced a global financial crisis.  Taking into account the principle he had identified, it was incumbent upon all Member States to work together as they addressed that important matter.  He welcomed the comments of the Group of Group of 77 in that regard and looked forward to working with the Group and other colleagues as the Committee went forward.

CLAUDE HELLER ( Mexico) said that the expenses of the Organization should be borne by Member States in accordance with their capacity to pay.  If the States intended to fulfil that obligation, it was necessary to modify the current methodology.  His delegation had agreed with the current methodology for the sake of consensus, even when it implied bearing the financial responsibility of the larger economies of developed countries, as well as other developing countries.  That was no longer possible.  His country had always been committed to the sound performance of the United Nations and would never hesitate to fulfil its financial obligations, according to its capacity to pay.  What it could definitely not continue doing was subsidize countries with a higher capacity to pay than Mexico.  For his delegation, it was not feasible to be a leader of the Organization without assuming a corresponding financial leadership, using a distorted methodology as an excuse.

The Committee on Contributions had offered the elements of how the scale should reflect Member States’ capacity to pay.  Unfortunately, that Committee was submerged into a political dynamic that had damaged its technical -- and limited ‑‑ ability to make specific recommendations.  It was essential to review several elements of the current methodology.  A scale of assessments that based its determination on how debt impacted income should base its debt burden adjustment on debt flow, rather than on debt stock, particularly if there was new information available in that regard.  The low per capita income adjustment should be reviewed, since it was too broad and affected middle-income countries to a higher degree.  The Fifth Committee should make a thorough analysis of each and every element of the methodology, from the income measure to the maximum assessment rate, or ceiling.  The current methodology was technically questionable, politically unacceptable and financially unviable.  It was the duty of the Fifth to approve what the collective wisdom of the Membership determined to be the fairest scale.

JORGE CUMBERBATCH ( Cuba) associated himself with the statement of the Group of 77 and China.  He said that the existing methodology had resulted from a long evolutionary process, and included the essential and most universally accepted data, so that the capacity to pay of Member States -- the principle governing the distribution of percentages of every member of the Organization -- could be assessed in a balanced way.  However, the ceiling imposed during the fifty-fifth session of the General Assembly “wrecked the supposed justice that would be implemented by the principle of the capacity to pay”.  There had been a hypocritical effort to transfer financial burdens unrelated to that capacity to developing countries, he said.

He noted with dismay that issues of peace and security had seized control of the United Nations budget, turning the Organization into a de facto military pact, while the agenda for social and economic development was being subjected to constant cuts.  Further, efforts were being made to silence the voice of developing countries when essential decisions were to be made.  In a crisis of governance, a small group of Powers was trying to decide for all, in marked opposition to the principle of sovereign equality contained in the Charter, and the most elemental notion of democracy in the deliberations of the Organization.

He opposed any attempt to modify the scale of assessments, which might contribute to that tendency.  Under the current methodology for elaborating the scale, the majority of contributions from developing countries would grow significantly.  “Any attempt to change it will be selective by nature, clearly politicized, and will have no meaning if the ceiling we endure is not eliminated,” he said.  He further supported the adoption, this week, of exemptions under Article 19 for those nations that had requested it.  He also reaffirmed Cuba’s willingness to meet its financial obligations, despite the consequences it suffered from a unilateral blockade contrary to international law.

YEVHENII TSYMBALYUK (Ukraine) said that a fair, balanced and depoliticized approach was required in determining the scale of assessments.  The current methodology resulted from long negotiations among all Member States and had produced a scale of assessments that would not require drastic changes in the coming years.  Determination of the scale of assessments should not become an annual exercise.  He hoped that the Fifth Committee would agree on the scale of assessments for the period 2010-2012 in a timely manner.

The principle of capacity to pay should remain the basis for Member States’ contributions.  He shared the opinion of the Committee on Contributions that it was inappropriate to use purchasing power parity to determine assessments, since the purchasing power parity reflected power to consume, rather than to pay.  Further, the use of purchasing power parity as a conversion rate was not in accordance with rule 160 of the General Assembly’s rules of procedure.  Purchasing power was based on hypothetical, non-existent currency conversion rates, and so was unsuitable for assessing Member States’ capacity to pay.  He, therefore, expressed support for the discontinuance of consideration of purchasing power parity by the Committee of Contributions.

Further, he said that the well-proven method of price-adjusted rates of exchange should be used for countries for which the use of market exchange rates ‑‑ as a conversion rate for gross national income data in national currencies -- caused excessive fluctuations and distortions.  In addition, he said that the low per capita income adjustment was an important, integral part of the current scale and that its current formula, without changes or the introduction of new elements, such as the “median approach,” adequately targeted those countries who required such adjustment.

He also favoured longer base periods, preferably six years, as a way to increase stability and smooth out year-to-year fluctuations in measuring the income of Member States.  Another way to address large scale-to-scale fluctuations of over 50 per cent would be to phase in such increases over a 3-year period, he said.  Finally, he endorsed the requests of those Member States seeking exemption under Article 19 of the Charter.

SHIGEKI SUMI ( Japan) said that, as the second largest financial contributor to the United Nations, his country attached great importance to the scale of assessments.  Japan had paid its dues faithfully, despite the fact that its Government was shouldering a huge debt and that the world financial and economic crisis was seriously affecting Japan’s economic and financial situation.  His delegation believed that it was necessary to respect and maintain the basic principle of the capacity to pay.  While views might differ on how correctly the gross national income share represented the actual economic strength of a Member State, it was recognized as the basis of comparison.  The calculations in the Committee on Contributions report showed substantial deviations between the scales and gross national income shares after applying such adjustments as low per capita income adjustment.  Some Member States with large gross national income shares were given scales much lower than their capacity to pay and influence, while on the other hand, Japan’s scale was about 30 per cent above its gross national income share.  That discrepancy was only likely to grow, given the continued trend downwards in Japan’s gross national income share.

Concerning the necessity of addressing large scale-to-scale change, he said it was not acceptable to add any element that would increase the deviation from the basic principle of capacity to pay by widening the discrepancy between the scale and gross national income share.  Focusing on the rapidly changing world economic situation, it was necessary 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 most current, comprehensive and comparable data available.  While it was regrettable that the Assembly had been unable to give any specific guidance to the Committee on Contribution during its sixty-third session, his delegation appreciated the excellent work it had done.  Member States should base their discussion on that report.

As for the application of Article 19 of the Charter, he added that his delegation endorsed the recommendations of the Committee on Contribution regarding the exemptions to its application. 

VLADIMIR N. PROKHOROV ( Russian Federation) gave great significance to the just assessment of contributions and the obligation of Member States to pay those contributions in full, on time and without conditions, so that the Organization would have the requisite flexibility to fulfil its complex global activities.  A just apportionment of assessments was particularly pressing during the current global economic instability, which made it more difficult for Member States to meet those obligations.  Some pressure would be felt by every delegation.  Still, he believed that the Fifth Committee would be able to avoid politicizing the discussion and to act in its expert capacity.

Stressing the importance of the capacity to pay in making determinations, over that of purchasing power, he said that principle was at the heart of making the fair assessments that established the United Nations’ unique position as an organization where all countries had an equal vote, regardless of financial contribution.  He also noted that the Committee on Contributions report showed some improvement in methodology with regard to the base period and to reductions for low per capita income countries.

He regretted that the Committee on Contributions discussion of the long-term instrument for conversion rates on per capita gross domestic product had not reached a unanimous conclusion.  That instrument was transparent and its previously agreed upon formulas would help to avoid distortion on gross domestic production data translated into United States dollars.  He further stressed that the existing scale methodology, the result of complex negotiations, should not require substantive changes in the coming years.  Finally, he supported granting the right to vote through the current session of the General Assembly to the relevant Member States under the United Nations Article 19.

THOMAS GÜRBER (Switzerland), also speaking on behalf of Liechtenstein, said that the two countries he represented had always paid assessments in full, on time and without conditions.  However, they were aware that sometimes Member States were not able to pay their contributions on time, due to conditions beyond their control.  He endorsed the recommendations of the Committee on Contributions that six Member States identified by the Committee should be permitted to vote until the end of the sixty-fourth session.  While commending the decision of important contributors to pay off their arrears, he remained concerned that the arrears of some Member States kept growing.  Multi-year payment plans were a useful tool for addressing that problem, which also allowed Member States to demonstrate their commitment to the United Nations.  Several recent examples showed the positive effect of such plans.  He commended Tajikistan for the successful implementation of its plan ahead of schedule, and Liberia for making regular payments, considerably exceeding its annual assessments.  At the same time, he encouraged all Member States with significant arrears to intensify their efforts to reduce their unpaid dues by submitting a payment plan.

Switzerland and Liechtenstein believed that the current methodology provided a reliable framework, which should not be changed fundamentally, he continued.  However, since the last substantial revision of the scale nine years ago, the world had seen differing economic growth patterns in different parts of the world.  While the capacity to pay should continue to be the cornerstone of the methodology, he doubted that the current distribution of assessments sufficiently reflected the actual capacity to pay.  He hoped the deliberations in the Committee would result in a burden-sharing arrangement, which would reflect Member States’ current capacity to pay more accurately and be perceived as fair and equitable.  States should focus less on how the scale affected their individual assessment rates in the next couple of years, and more on whether it would enhance the financial stability and the authority of the Organization.  In addition, the methodology should be as simple and transparent as possible. New or changed elements that made the methodology more complicated should be avoided, or compensated for by streamlining existing elements.

The Committee would be negotiating the scale for 2010-2012, but the negotiations would be based on economic data for 2002-2007, he added.  It was obvious that those figures reflected neither the current economic situation, nor the current capacity to pay. Those countries that had been hit the hardest by the financial and economic crisis would probably suffer most from that time lag.  The delegations he represented would, therefore, welcome a reduction of the time lag between data collection and the assessment period by moving towards a t-1 time lag.  Other options included a reduction of the length of the base period, as well as a yearly recalculation of rates, provided such a recalculation was considered a purely technical process.  He also believed the low per-capita income adjustment should be reassessed in light of current economic realities.  For instance, he saw merit in the creation of a neutral zone, whereby Member States within a certain range below and above the threshold would neither benefit nor contribute to the adjustment.  That could help to avoid abrupt rate increases resulting from a relatively small gross national income growth.

LIU ZHENMIN (China) stressed the importance of strict adherence to capacity to pay, which should serve as the basis for arriving at a practical and scientifically-based scale.  When measuring a Member States’ capacity to pay, it was necessary to not only look at the size of the economy and its gross national income, but also consider its per capita income.  While the former was the basis, the latter was the decisive factor.  Over-emphasis on gross national income, and disregard for such factors as the size of population and low per-capita income was disrespectful of human rights, unjustifiable and unfair.  Only by allowing reasonable income adjustment was it possible to ensure that Member States were assessed in accordance with their actual capacity to pay.  Low per capita income adjustment should be equally applicable to all Member States, based on the same set of criteria, as long as they qualified as low per-capita income States.  Evidently, Member States with big economic aggregates, yet low per capita income fell into that category.  Any proposal to limit the rate of adjustment, based on a State’s share in the world economy, or to put an artificial ceiling on adjustment, ran counter the principle of capacity to pay.

It was in the interest of all Member States to maintain the stability of the scale, he continued.  The existing methodology was the result of long and hard negotiations and full consultation among all Member States.  Practice had shown that it was reasonable, and had served Member States well.  In addition, the world economic and financial crisis was still deepening, affecting Member States’ ability to pay, particularly that of developing countries.  Consequently, it was not advisable to adjust the scale by a large margin.   China was in favour of adopting the methodology used for the 2007-2009 period to prepare the 2010-2012 scale.  As a responsible developing country, China had always honoured its financial obligations to the United Nations, even when it had suffered huge losses during severe natural disasters last year.  When, this year, its deficit had reached an historic record, as a result of the global economic crisis, his Government had paid its assessments in full and on time.  Meanwhile, as a permanent member of the Security Council, China had assumed additional financial obligations in peacekeeping.

China stood ready to make an even greater contribution on the basis of the capacity to pay, as its economy continued to grow, he said.  China’s assessment rate had increased from 0.995 per cent in 2000 to 2.667 per cent for 2007-2009.  According to the Committee on Contributions calculations, by using the current methodology, China’s assessment rate for 2010-2012 would go up further, to 3.189 per cent -- a growth of 20 per cent.

He added that, despite its rapid economic development and impressive gross domestic product figures, China had the world’s largest population, and still faced enormous challenges at home.  In 2008, China’s per capita gross domestic product stood at $3,000, which ranked around 100th in the world.  That was still a far cry from the average per capita, gross national income of $7,119 (the threshold).  The evaluation of China’s capacity to pay should not be conducted without taking into account its specificities.

MANJEEV SINGH PURI ( India) expressed strong support for the statement of the Group of 77 and China and said that the current methodology for preparing the scales of assessment for the apportionment of the expenses of the Organization truly reflected the fundamental and inviolable principle of the “capacity to pay.”  An overwhelming majority of Member States shared that view, he said.

The suggested figures for contribution by Member States to the Organization’s regular budget, determined through the current methodology, clearly accounted for changes in relative growth rates of different Member States.  That fact, by itself, provided validation of the methodology’s integrity.  A majority of developing countries would see a substantial increase in their assessed contributions in 2010-2012, based on the current scale of assessments.  The current global economic and financial crisis had hit developing countries the hardest, although they had not created it, he said.  Developing countries should not be asked to shoulder a greater burden in financing the Organization, especially by changing the methodology for the convenience of a few.  The current methodology should be maintained.

All Member States should fulfil their financial obligations to the Organization in full, on time, and without conditionality, especially when these obligations were determined by the General Assembly on the basis of clear, transparent, logical and unanimously agreed upon guidelines, he said.  He went on to fully support the exemptions, requested by six Member States under Article 19, which would permit them to vote through the end of the sixty-fourth session of the General Assembly.

MARTY M. NATALEGAWA ( Indonesia) said that capacity to pay had been the keystone of the scale methodology ever since the inception of the United Nations and this principle allowed for no change or distortion.  It reflected the general consensus worked out by the broad membership.  He opposed any proposal that deviated from that principle.

Taking national income and allowing appropriate adjustment for low per capita income countries proved to be the best way to measure and reflect Member States’ capacities to pay.  The gross national income took into consideration not only the overall economic strength of a State, as reflected in its national income, but also its actual capacity to pay, as reflected in its per capita income.  Only by allowing reasonable income adjustment would there be certainty that Member States would be assessed in accordance with their actual capacity to pay.  He favoured adopting the existing methodology for the period 2010-2012.  Using the same methodology would further ensure that the Organization would have a solid financial base, as is it underwent reforms.

The Organization’s budget was a trivial sum compared to the world’s gross domestic product, he said.  The International Monetary Fund (IMF) estimated global gross domestic product in 2010 to be $55.920 trillion, while the proposed United Nations budget for 2010-2011 was only $5,060 billion after preliminary recosting, or 0.009 per cent of the 2010 global gross domestic product.  While leaders in the General Assembly had consistently declared their commitments to the United Nations over the years, that commitment had yet to be reflected in the above figures.

While Indonesia’s promising economic development in recent years had enabled it to withstand the financial crisis relative to many, economic development, poverty eradication and the realization of modernization remained daunting challenges, he said.  Nevertheless, the Government was prepared to increase its contribution, as the domestic economy grew.  If the existing methodology held, he predicted that Indonesia’s assessment rate could rise to 0.238 per cent in 2010, a significant 47.8 percentage point increase, which would not be easy to bear, but would be given full consideration if that rate were calculated using the existing methodology.

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For information media • not an official record
For information media. Not an official record.