25 October 2002


Press Release

Fifty-seventh General Assembly

Fifth Committee

16th Meeting (AM)



The capital master plan for refurbishment of United Nations Headquarters  was a project for which there must be a clear mandate from Member States, or the momentum might be stalled or lost, said the representative of the United States today as the Fifth Committee began its consideration of the item.  The plan was not in the category of “nice to do when we have the time and resources”, he continued.  Today, it was a “must do” -- and without hesitation.

From a distance, he said, the marble and tinted glass of the United Nations complex appeared ready to stand for another half century, but report after report attested that such appearances were deceiving.  More serious than a failed generator or ventilation system was the very real threat of a catastrophic event, such as fire or steam pipe rupture.  The odds of a disastrous equipment failure were near certain, and unfortunately age had stacked the deck against the Organization. 

[Under the Capital Master Plan, the Secretary-General proposes moving the United Nations Headquarters to an 800,000-square-foot building south of 42nd Street while major repairs are carried out on the existing complex.  Upon completion of the plan, that building could be used to house the offices currently located in UNDC-1, UNDC-2 and other commercially leased buildings.  This could only be feasible with the help of New York City, which has indicated its willingness to construct, through the United Nations Development Cooperation, a building south of 42nd Street.]

Introducing the Secretary-General’s report, Toshiyuki Niwa, Assistant Secretary-General for Central Support Services, said that the city’s proposal had significantly changed the situation.  “In a way, our dream solution is now our most viable option", he said.

Singapore’s representative said the United Nations complex was an ailing patient in need of urgent medical treatment.  While the doctors were deliberating on the type of medical procedures to administer, the condition of the patient was deteriorating steadily.  Any delay in administering treatment now would cause the situation to further deteriorate, resulting in more costly subsequent treatments.

While the representative of Brazil agreed that there was no choice but to proceed with the implementation of the capital master plan, however, he stressed that the costs involved were very high and that not all Member States -- certainly

not in the developing world -- had the same capacity to burden their national budgets with additional contributions.

In discussion of matters relating to the financial situation of the United Nations, several delegates were concerned that it remained uncertain and fragile. Whereas last year had been a historic “good” year for the United Nations, the situation today once again threatened to reflect the all-too-familiar picture of the recent past -– insufficient cash balance and mounting unpaid assessments. Member States, it was repeatedly stressed, should pay their contributions in full, on time, and without conditions.

Of particular concern to many speakers was the issue of cross-borrowing from peacekeeping funds in order to finance expenditures under the regular budget, which, in turn, hampered the Organization’s ability to pay Member States for troops and contingent-owned equipment.  Instead of resorting to cross-borrowing, speakers said, it was time for the Secretariat to explore other equitable and innovative ways of financing its cash flow deficits.  The representatives of India and Pakistan proposed that the Secretariat undertake a comprehensive study to explore the alternatives to cross-borrowing. 

The representatives of Venezuela, Russian Federation, Denmark (on behalf of the European Union), the Lao People’s Democratic Republic (on behalf of the Association of South-East Asian Nations (ASEAN), Bangladesh, Costa Rica (on behalf of the Rio Group), Canada (also on behalf of Australia and New Zealand), China, Norway, Belarus, Nigeria, Republic of Korea, Japan, Switzerland, South Africa and Ghana also spoke today.

The Committee will meet again at 10 a.m. on Monday, 28 October, to continue its discussion of the capital master plan and take up items related to human resources management.


This morning, the Fifth Committee (Administrative and Budgetary) was expected to continue its general discussion of the financial situation of the United Nations, which was outlined for Member States by the Under-Secretary-General for Management on Monday (see Press Release GA/AB/3235 of 21 October).  Also, before the Committee, were several reports on the capital master plan for refurbishing the buildings of the Secretariat.

Capital Master Plan

The Secretary-General's latest report on the capital master plan (document A/57/285) is a follow-up to his June 2000 report, which proposed a major refurbishment of the United Nations complex.  In December 2000, without prejudice to a final decision, the Assembly appropriated $8 million, authorizing the Secretary-General to proceed with the preparation of a comprehensive design plan and cost analysis for the capital master plan.

Following a detailed analysis of a number of design schemes, which was carried out by the Secretariat with the help of a team of architectural and engineering firms, the Secretary-General has concluded that there is no choice but to proceed with the implementation of the capital master plan.

According to the engineering team, the best option is to move the United Nations Headquarters to an 800,000-square-foot building south of 42nd Street, while major repairs are carried out on the existing complex.  Upon completion of the capital master plan, that building could be used to house the offices currently located in UNDC-1, UNDC-2 and other commercially leased buildings.  This could only be feasible with the help of New York City, which has indicated its willingness to provide assistance.

The envisioned refurbishment of existing structures would involve improvements in the areas of meeting facilities, conference and multifunction spaces, technology and public areas used by visitors, as well as rationalizing the use of space.  The capital master plan would cost between $1.1 and $1.3 billion, depending on the scope and phasing of the work.  The Secretary-General believes that a decision on the matter can be made by the General Assembly at its fifty-seventh session, subject to a satisfactory consideration of financing.

In theory, the Secretary-General concludes, the "reactive" approach -- to continue major maintenance and repair on an ongoing basis through the biennial budget -- could remain as an option at least in the short term.  In practice, however, it is not an option, for the existing facilities will not be able to cope with the growing demands of Member States, civil society and the public.  From the financial point of view, the reactive approach will not be sustainable in the long run, because the cost of major maintenance and emergency repairs will become prohibitively high within the next few years.  Worse still, despite maintenance expenditures which are now estimated to reach some $2.09 billion over the next

25 years, serious deficiencies in building and safety codes, security, hazardous materials, accessibility and energy efficiency will remain.

Regarding the means of financing the capital master plan, the report states that serious consideration should be given to obtaining an interest-free loan from Member States, without prejudice to the Secretary-General's continuing efforts to mobilize resources from both the public and private sectors.  In case of failure to secure such a loan, the Assembly should consider commercial borrowing through bond issues, as explained in the previous report.

In a related report (document A/57/7/Add.4), the Advisory Committee on Administrative and Budgetary Questions (ACABQ) agrees with the Secretary-General that there is no choice but to proceed with the implementation of the capital master plan, and that the only question remaining is how to implement it in the most efficient and cost-effective manner.  It recommends that the Assembly approve the plan on the basis of the baseline scope proposed by the Secretary-General.  The total cost should be adjusted to reflect a reduction of $17 million previously appropriated for security measures.

The Advisory Committee also shares the view of the Secretary-General that the first approach (building office space south of the complex) is the most desirable way of implementing the capital master plan.  The Committee was informed, upon enquiry, that the preliminary estimate of the cost of purchasing the building after construction is completed in 2005 is $335 million, including building costs of $315.8 million and construction loan and management costs of $19.2 million.  The ACABQ points out that the size and design of the building should be in harmony with the Headquarters complex, and its quality should meet the highest industry standards, providing sufficient flexibility to accommodate foreseeable future needs of the Organization.

Regarding proposals for obtaining financing for the plan, the ACABQ points out that the Organization has not resorted in the past to commercial borrowing, and it does not find any compelling reason to change that practice.  In any case, the funding arrangement should be developed as soon as possible after the various negotiations with the host authorities are completed and the projected final cost is known accurately; the funding arrangement should then be reported to the Assembly for its approval.  In this connection, the Advisory Committee also stresses the importance of observing all relevant financial rules and regulations of the United Nations, and emphasizes the need to ensure proper oversight of the project.


ASDRUBAL PULIDO (Venezuela), speaking on behalf of the Group of 77 developing countries and China, reaffirmed the legal obligation of Member States to bear the expenses of the Organization in accordance with the Charter and to pay their contributions in full, on time and without conditions.  However, there was an acknowledged need to extend sympathetic understanding to those Member States temporarily unable to meet their financial obligations as a consequence of genuine economic difficulties.  The Group of 77 was concerned with the unabated and recurring cash-flow problems faced by the Organization in the second half of every year, mainly due to late payment of contributions by the major contributor.  The Group would appreciate being informed of how the Secretariat intended to resolve the situation without cross-borrowing.

The Group had also noted the delays in reimbursements to developing countries that provided troops and contingent-owned equipment to various peacekeeping operations.  The Group requested that all outstanding amounts owed to developing countries should be promptly honoured.

VLADIMIR VOLKOV (Russian Federation) said the financial situation had improved in 2001 and on the whole was still improving.  This year, however, the Organization could not be too optimistic since there were still serious problems. The overall debt from Member States was still vast, new resource needs were emerging, and there was still a need for enormous spending on peacekeeping operations.  In that connection, receiving the required payments from United Nations Member States was of crucial importance.  The Russian Federation had paid $102 million to the United Nations budget last year, and this year it had already contributed more than $38 million.  The political will of Member States to meet their obligations was the basic prerequisite for the financial health of the United Nations.  At the same time, his delegation understood the situation facing the poorest countries.

ELLEN MARGRETHE LOJ (Denmark), speaking on behalf of the European Union and associated States, noted Under-Secretary-General Connor's conclusion that 2002 was a good year for the United Nations.  She was satisfied that the Organization’s finances slowly but surely continued to move away from the state of crisis and precariousness of earlier years.  As the demands on the United Nations continued to grow, it was of absolute importance that the Secretary-General should have a solid and predictable financial basis on which to carry out the tasks entrusted to him in a cost-effective manner.  The European Union had also taken note, however, of Mr. Connor’s words of caution regarding the status of contributions, the

cash-flow situation and the capacity of the regular budget for 2002-2003.

It was a cause of concern that only 105 countries, compared to 122 in 2001, had paid their full assessed contributions to the regular budget this year.  The total amount of unpaid assessments, including the regular and peacekeeping budgets and the Tribunals, was nearly $2.5 billion.  Those alarming figures showed that the financial stability of the United Nations remained under pressure.  She urged all countries to fulfil their Charter obligations with respect to the payment of assessed contributions.  She regretted the continuing problem of late payments and growing arrears to the Organization, and noted with concern that the declining number of payments in full had resulted in a growing cash-flow problem for the Organization.  By the end of the year, it might once again be necessary to resort to cross-borrowing from peacekeeping.  As pointed out by Mr. Connor, the amount available for that purpose would decrease in the future.

The European Union was concerned, she said, over the slowdown in the scheduled payment of the Organization’s debt to Member States which had contributed troops and equipment to United Nations peacekeeping operations.  Unfortunately, the Secretary-General’s goal of paying for all current obligations in the year they were incurred had not been met. 

In conclusion, she noted that more focus would be given to the lack of alignment between appropriations and mandates in the programme budget.  She was concerned that the present budget was under considerable pressure due to a number of “add-ons”.  Those additional expenses were presently estimated to exceed

$300 million.  That figure was disturbingly high, and would bring the regular budget close to $3 billion for the first time in the history of the Organization. 

MUNIR AKRAM (Pakistan) said that when the Assembly undertook the historic step of revising its scales of assessments two years ago, it was told that the Organization would thus be able to eliminate its financial difficulties.  While the situation last year had shown signs of improvement, this year’s figures showed that the financial stability of the United Nations remained uncertain and fragile.  For peacekeeping alone, unpaid assessments as of 30 September stood at

$1.776 billion.  The figures presented by Mr. Connor were alarmingly high, and the cash-flow position added to his concern.  The need to cross-borrow from peacekeeping funds and the growing debt to troop-contributing countries were among the signs of impending financial crisis, which could seriously undermine the capacity of the Organization to carry out its mandated activities.

As the second largest troop contributor, Pakistan was owed some

$80.25 million as of August of this year.  That mounting debt was a direct consequence of the extraordinary practice of cross-borrowing from peacekeeping funds, which the Secretariat had resorted to since 1992 to finance shortfalls in the regular budget.  If that trend continued, further cross-borrowing might no longer be feasible and could jeopardize the ability of the United Nations to play its primary role in the maintenance of international peace and security.  Instead of resorting to cross-borrowing, it was time for the Secretariat to explore other equitable and innovative ways of financing its cash-flow deficits.  He proposed that the Secretariat undertake a comprehensive study to explore the alternatives to cross-borrowing. 

If the United Nations was to ensure its financial stability, each and every Member State must demonstrate its commitment to the Organization by meeting its financial obligations in time and in full, he said.  The Secretariat, for its part, should make efficient and transparent use of resources.  He advocated greater accountability of programme managers for that purpose.  The efforts of the Secretariat should not be merely a cost-cutting exercise.  The aim should be to optimize the use of resources available.  Should the financial situation fail to improve, he believed that a strong message emanating from the Assembly, in the form of a resolution, could help to generate the political will required to respond to the difficulties of the Organization.  Prevention was better than a cure, and he believed that it was necessary to act now, resolutely and decisively, to prevent another financial crisis.

ALOUNKEO KITTIKHOUN (Lao People’s Democratic Republic), also speaking on behalf of the Association of South-East Asian Nations (ASEAN), said he was pleased that the financial outlook for the United Nations remained positive for a second year.  However, ASEAN could not but remain cautious.  It was concerned that the practice of cross-borrowing from peacekeeping accounts to finance regular expenses continued, and that the budget had not kept pace with mandated activities.  Furthermore, it was necessary to speed up the process of reimbursing troop- and equipment-contributing countries.

The ASEAN was pleased to note that the Organization had been able to meet the management challenges it faced, yet remained concerned over its ability to implement fully, efficiently and effectively the programmes and activities mandated by Member States.  And with the projected total of unpaid assessments at $2.4 billion, the financial situation of the United Nations still remained critical.  The ASEAN, therefore, renewed its call on Member States in arrears to reduce and eventually pay those arrears, and for all Member States to pay their assessed contributions in full, on time and without conditions.

IFTEKHAR AHMED CHOWDHURY (Bangladesh) said that whereas last year had been described as a historic “good year” for the United Nations, this year the Organization once again seemed poised to project the all-too-familiar picture of the recent -– insufficient cash balance, mounting unpaid assessments, and increased cross-borrowing from peacekeeping accounts.  The primary reason for that sad state, as his delegation saw it, was the failure of a few Member States to pay their contributions.  It scarcely bore repeating that the financial well-being of the United Nations depended largely on the prompt payment of assessed dues.

His delegation noted with some concern that the Secretariat had once again returned to the practice of cross-borrowing.  That unhealthy practice had, in the past, resulted in inordinate delays in reimbursements to countries providing troops and contingent-owned equipment.  The Secretariat was already one year behind in payment of contingent-owned equipment and six months behind for troops.

Countries which responded to United Nations calls to maintain international peace and security were mostly developing countries, he continued.  They mobilized their men, women, materiel and resources at the call of the international community, often under difficult domestic circumstances.  As the largest troop contributor, Bangladesh could not overemphasize the need for timely payment of dues by the Organization.  The issue had to be resolved urgently.

JAGMEET SINGH BRAR (India) associated himself with the position of the Group of 77 and China, and said that Member States had begun the year with the impression that the financial health of the United Nations had finally taken a turn for the better.  It was, therefore, with some disappointment and concern that he looked at the year-end projections presented by Mr. Connor.

The problems some Member States had in meeting their obligations to the Organization were understandable, and were not the cause of the situation the United Nations faced today, he continued.  That situation had been brought about largely by the fact that a very large number of States had not demonstrated their commitment to service dues on time.  He noted with concern that only 105 Member States had met their current obligations, as opposed to 122 at this date last year.  While he was heartened by the Secretariat’s expectations that arrears for the regular budget would come down to $298 million by the end of the year (from the current level of $576 million), the situation with regard to unpaid assessments relating to the peacekeeping budget was most unsatisfactory.  The dues owed for peacekeeping accounted for $1.766 billion, or 74 per cent of all unpaid assessments.  Nearly 80 per cent of that was owed by 12 major contributors. 

It was also unfortunate that the largest amounts owed by the United Nations to Member States were to developing countries, he said.  What was of even greater concern was that there had been a steep rise in overdue troop reimbursements owed to Member States.  Those payments were, on the average, six months in arrears.  That was imposing an unfair economic burden on developing countries.  Clearly, the United Nations could not continue to penalize countries which had not only shown consistent commitment to peacekeeping, but had also been paying their assessments in full and on time.  A further cause of worry was that the regular budget cash situation was at a critical level, and cross-borrowing from peacekeeping continued. 

“Where do we go from here?” he asked.  First and foremost, it was essential for Member States to pay their assessments in full and on time.  Concrete proposals on how to minimize cross-borrowing should be presented by the Secretariat with the objective of eliminating it altogether.  With regard to the unexpectedly large increase in the budget for the current year, his delegation had pointed out in the past that the incompatibility between approved mandates and resources available for their implementation should be considered for immediate corrective action by the membership of the Organization.

BRUNO STAGNO (Costa Rica), speaking on behalf of the Rio Group, noted with concern that the financial situation of the Organization had shown some decline since last year.  In fact, the situation was precarious as far as cash flow and the falling number of Member States paying their contributions in full were concerned.  He urged all Member States, particularly the main contributor, to fulfil their financial obligations to the United Nations.  Nevertheless, the Rio Group attached great importance to sympathetic consideration of the situation of States that were temporarily unable to fulfil their obligations due to genuine economic difficulties. 

The Rio Group regretted that the necessary conditions to end the practice of diverting resources from peacekeeping to finance regular budget activities had not yet been achieved.  That impacted on reimbursement to troop contributors and generated a double financial burden on countries which, in addition to their assessed contributions, had to assume the financial cost of the Organization’s debt.  It must be noted that the majority of troop contributors were developing nations, he added.

The Rio Group had taken note of the need for additional resources to meet the Organization’s legislative mandates, he said.  While that matter required a deep discussion within the Fifth Committee, he wanted at this point to state his commitment to considering each additional requirement thoroughly.  Regarding the special political missions located in its region, the Rio Group had a keen interest in the United Nations Verification Mission in Guatemala (MINUGUA).

PAUL HEINBECKER (Canada), also speaking on behalf of Australia and New Zealand, said that judging by the various United Nations accounts -– regular budget, the Tribunals, peacekeeping -– Members were not paying their assessments in full or on time, or, in too many cases, without conditions.  The honour roll of Members with all assessments paid in full was depressingly short -– only nine.  That list included both developed and developing countries.  The issue was, therefore, less about resources than about will.  With respect to the regular budget, the trend towards delinquency noted last year had worsened.  All

84 countries who were late in discharging their obligations bore the responsibility for the cash crunch on the regular budget.

The issue of unpaid peacekeeping assessments had particularly harsh implications for troop contributors.  Many troop contributors were developing countries which had largely met their assessed contributions and would now see delays in reimbursement.  Furthermore, while borrowing from other accounts had enabled the Organization to continue to operate financially, it was not good fiscal practice.

He welcomed the steps being taken by the United States to reduce its arrears and lift the cap on peacekeeping assessments, and was encouraged that the United States was considering making regular budget payments at the beginning of the year rather than at the end.  He hoped that other Member States, particularly major contributors, who paid late and had arrears, would also take steps to address the issues. 

ZHANG YISHAN (China) said that in an international situation marked by complexities, changes and lack of stability, the international community had high expectations of the United Nations.  Without a solid, stable and powerful financial foundation, however, it would be difficult for the United Nations to play its proper role in international affairs.  Non-payment of assessed contributions was the primary cause of the grim financial situation facing the United Nations today.  “On time, unconditional, and in full” had almost become the most frequently heard catch-phrase in the Fifth Committee and even throughout the Organization.

Thanks to the concerted efforts of all Member States, however, financial reforms had achieved considerable progress.  For example, adjustments had been made to the scale of assessments, and a new format for budget preparation had been adopted. A solid and stable financial foundation would undoubtedly provide United Nations reforms with strong support. It was now high time to redress the financial situation, and his delegation looked forward to the day when that would become a reality. China was a developing country and its capacity to pay was rather limited, he said. But as a responsible country, China would, as always, continue to contribute in a real and concrete way to a solid financial foundation of the Organization.

HOWARD STOFFER (United States) was pleased to see that the Secretary-General had initiated a number of projects to modernize United Nations management and ensure that resources contributed by Member States were used efficiently and effectively.  He was also pleased that Member States had acted on key initiatives, including safety/security and human resources reform, aimed at protecting and strengthening the Organization’s most valuable resource, its staff.  The financial picture appeared to have improved compared to several years before, and he expressed his appreciation to Mr. Connor and his team for managing the United Nations’ complex finances.

Like other countries, the United States, he said, was working hard to pay its current assessments as well as its arrears.  In fact, it would have paid more than $1 billion before the end of the year, thus helping to further improve the Organization’s financial situation.  By the end of this month, the United States would have paid $255 million, or about 90 per cent of its regular budget assessment for the year, with the remainder to be paid as soon as its Congress approved the country’s full-year budget.  Almost $285 million would be paid in peacekeeping assessments by the end of October, and another $228 million early next year.  Those amounts also included payments for the Tribunals.  Recent approval of tranche III under the Helms-Biden legislation would soon provide

$30 million for peacekeeping arrears, and an additional $214 million to other United Nations system agencies.  Another $70 million in peacekeeping arrears had been recently paid as a result of the lifting of the “cap” on the United States assessment rate.

With the tranche III payments, the United States would complete an important chapter in its relations with the United Nations, he said, but its interest in United Nations reform would not end.  It would continue to work with others to ensure that the Organization constantly strove to set priorities as it responded to the demands placed on it by Member States.  Consistent with the principle of priority-setting, he endorsed Mr. Connor’s view that mandates needed to be kept in close alignment with the resources contributed by Member States.  It was important to adhere to budgeting rules, and programme managers needed to comply with the requirement to identify obsolete and ineffective activities to make funds available for the highest priorities.  Ultimately, it was up to Member States to ensure that resources were used wisely. 

ANNE MERCHANT (Norway) said that in addition to unpaid assessments, cash on hand and debt owned to Member States, Mr Connor this year had added another yardstick for judging the financial health of the Organization, namely the adequacy of budgets to fund all of the Organization’s mandates.  Her delegation noted the lack of alignment between appropriations and mandates in the programme budget for 2002-2003.  New factors had been approved and were anticipated.  They would push the budget level some $300 million higher than the current approved level of $2.63 billion.  All the programmes which corresponded to essential United Nations activities as set out in the Charter should be funded from the Organization’s regular budget.  All Member States were responsible for providing the United Nations with the resources it needed to carry out its mandates.  That did not, however, mean that it should not continue to seek improvements in productivity and efficiency gains.  It was also necessary to live up to Members’ collective responsibility, as laid down by the Charter, to pay their contributions in full, on time and without conditions. 

She went on to analyse the situation in the payment of assessed regular budget contributions by Member States since 2000, asserting that it was a very negative trend which undermined the financial stability of the Organization.  The situation was also bleak as far as the two Tribunals and peacekeeping operations were concerned.  The Secretary-General had again been unable to fully pay new obligations to troop-contributing countries incurred during the current year, and the remaining debt was forecast to be $850 million.  That news was both alarming and disappointing.  She urged all Member States that had not done so to pay up their arrears and assessed contributions.  Assuring the financial solvency of the Organization must be the collective goal.  The new scale of assessments gave reason to hope that the financial situation of the United Nations would improve to a certain extent.  She was concerned that by the end of the year, the Organization might once again have to resort to cross-borrowing from the peacekeeping budget.

ALEG IVANOV (Belarus) was pleased that in recent years the financial situation of the Organization had somewhat improved.  However, the situation could be described as relatively prosperous only when compared to critical periods in the past.  In fact the situation was far from ideal, and this year the bad practice of cross-borrowing was still continuing.  In his report on Monday,

Mr. Connor had emphasized the limited resources in the regular budget.  In his delegation’s view, concerns about the funding deficit were quite justified. However, the implementation of further reform should not become a pretext for another cycle of budget cuts.

Among the reasons for the current financial situation were late payments of assessments and arrears.  For all types of payment, the bulk of accrued arrears was caused by just a few States.  That was attributable not so much to a lack of political will as to the imperfections contained in the scale of assessments.  A major challenge next year would be to work out an improved version of the scale, where, for example, fuller account should be taken of the principle of capacity to pay.

NONYE UDO (Nigeria) said that last year had been one of the best financial years ever for the United Nations.  However, by early this year it had become clear that the focus for the rest of the year would be the all-too-familiar deficit cash balance.  Cross-borrowing from peacekeeping funds should not be a viable option.  Most of the troop-contributing countries owed money because of these practices were developing countries.  It was mind-boggling to imagine that while cross-borrowing was continuing, the amount owed to troop- and equipment-contributing countries was increasing.  It was time that the Secretariat led by example.  If Member States were obligated to pay in full, unconditionally and on time, the United Nations should discharge its similar obligation by paying troop-contributing countries their dues and finding a solution to cross-borrowing.

If the Secretariat was committed to reimbursement it would devise the means to do so, she said.  Her delegation called on all Member States to endeavour to pay their assessed contributions so that the Organization could better serve the world.

HA CHAN-HO (Republic of Korea) said that following the remarkable year of 2001, his delegation was pleased to note that the overall financial situation of the Organization was still good, although some worrisome trends had recently been discerned.  In particular, he noted with concern that only 105 Member States had paid their assessments in full by the end of September.  Delayed payment or non-payment of dues had plunged the cash balance of the United Nations into a deficit, and forced cross-borrowing from peacekeeping accounts.  He was also concerned that the capacity of the regular budget for cross-borrowing had declined due to the dwindling cash balances of completed peacekeeping missions.

He took note that assessment levels for peacekeeping were expected to fall below $2.1 billion this year from a peak of $3 billion in 2001.  Certainly, that would be a relief for Member States which had trouble meeting their financial obligations.  In contrast, the budgets of the Tribunals had increased continuously since their inception, and his delegation was concerned over the lack of an explicit fiscal cap for those courts.  Welcoming the progress made thus far in compensating troop- and contingent-contributing States, he also expressed hope that the expected payment of arrears from the major contributor would be primarily used for the reimbursement of debts to Member States.

Regarding budget capacity, he agreed with the general premise that adequate resources should be provided to implement all mandates.  He also acknowledged the Secretariat’s serious efforts to absorb higher costs within limited available resources.  However, he believed that much still remained to be done to enhance efficiency and cost-effectiveness in the operations and activities of the United Nations.  The fact that overall budget levels had been maintained for a while did not necessarily mean that it was time to substantially increase appropriations for the next biennium.  Each programme and activity should be judged on its own merits in terms of resource requirements for its execution.  His delegation was open-minded as far as the budgets for special political missions were concerned.

The representative of Japan addressed the issue of the Organization’s budget capacity and pointed out the importance of the relationship between the budget level and its affordability by Member States.  As reflected in the past two years’ decrease in the number of countries that had paid their regular budget assessments in full as of 30 September, it was increasingly important to take into consideration the affordability of Member States.  The regular United Nations budget level had remained relatively constant for many years, and the background to such a situation had been the favourable exchange rate.  However, the current exchange rate was negatively affecting the Organization.  Furthermore, cash in the completed missions category, which was the only source for cross-borrowing, was declining.  That needed to be taken into account when discussing the United Nations budget.

It was unfortunate that the regular budget cash balance had gone into deficit in September, he continued, recalling that because of full payment by Japan of its regular budget contributions earlier than in the past, the deficit balance had been resolved in May.  It was also unfortunate that projected payments to Member States providing troops and equipment would be lower in December than they had been in March.

He went on to express concern with the situation where only 56 Member States had paid their 2002 assessments in full for both international Tribunals, and where budgets for the courts were expected to increase in the future.  Concrete exit strategies for the completion of the Tribunals’ work were important, and it was necessary to carefully monitor their implementation.

His delegation was concerned that a steep increase of over $300 million was projected for the 2002-2003 regular budget, he said.  He could understand the identified increases caused by technical and statutory reasons, as well as by the events of 11 September.  However, he emphasized the fact that it was also necessary to take into consideration the issue of affordability.  His delegation intended to analyse the projected increases under various related agenda items, based on detailed information to be provided by the Secretariat.

JULIUS ANDEREGG (Switzerland) noted with a certain relief that on the whole, budget levels were being reduced, but was nevertheless concerned at the overall level of arrears.  Only nine countries had honoured all of their commitments for the three budgetary categories, for example.  The situation was also unsatisfactory with regard to payments to the budgets of the two international Tribunals.  Ninety-eight countries had paid nothing to those budgets during 2002. Switzerland had every confidence in the quality of the reports of the Secretary-General; however, the figures were not easily comparable with figures to be found in other contexts, and the periods covered did not always coincide.

KAREN LOCK (South Africa) emphasized the legal obligation of all Member states to bear the financial expenses of the United Nations and to ensure that assessed contributions were paid in full, on time, and without condition.  Her delegation recognized, however, that a situation might arise where some Member States were unable to meet their obligations because of genuine economic difficulties.  She was encouraged by the assurance that the United Nations was in a better situation today than it was a few years ago.  However, no one could feel completely comfortable with a situation where the United Nations would have to start a new year with a zero balance in its regular budget.

She was also concerned with the practice of to cross-borrowing from the peacekeeping budget in order to finance expenditures under the regular budget -- which, in turn, hampered its ability to pay Member States for troops and contingent-owned equipment.  She was disturbed by the fact that the United Nations was one year behind in paying its debt to Member States, which had provided equipment, and six months behind in paying its debt to troop-contributing countries.  That trend became even more alarming when one realized that the majority of the 24 Member States that were owed this debt were from developing countries and countries in Africa.  She urged the Secretary-General to avoid adopting short-term solutions that might have negative implications for developing countries and countries in Africa, and to seek other alternatives where possible.

Remarks by Under-Secretary-General for Management

Responding to comments and queries from the floor, Under-Secretary-General for Management JOSEPH E. CONNOR clarified that he had characterized the year as a good one not because of what had happened, but because of what was expected to happen.  Certain commitments had been made by the United States, and they would guarantee that additional payments would be made for troops and equipment by the end of the year.  It was necessary to address the long-range situation, however. Efforts to improve the financial situation of the United Nations included resynchronizing payments of dues; removal of caps on peacekeeping payments; and measures to clear out old arrears.

Resynchronization meant that payments would be made in the same year they were authorized.  Payment dates had gradually slipped over the years.  Now, the word from the United States regarding resynchronization meant that the United Nations would be able to eliminate the cross-borrowing need.  Member States were the capital of the Organization, and resynchronization was the primary component of improving the financial situation of the United Nations.  As for peacekeeping, he said that removal of the cap on United States contributions would bring more cash to the United Nations.

To a question by Pakistan’s representative about closed missions cash,

Mr. Connor replied that restrictions applied to the type of cash in particular accounts.  "We live in dread of the absence of closed mission cash", he added, which would affect the Organization’s ability to cross-borrow for the regular budget.

Introduction of Reports on Capital Master Plan

Assistant Secretary-General of the Office of Central Support Services TOSHIYUKI NIWA introduced the Secretary-General’s report on the capital master plan.  He said that Member States would have to decide whether to choose the "reactive" approach (continuous ad hoc repairs), or the capital master plan (a complete refurbishment).  In the Secretary-General’s judgement, he said "we cannot in all honesty ignore the life-threatening conditions of work to which delegates and staff are increasingly exposed on a daily basis".  The current state of the complex posed direct challenges to safety, health and efficiency.  The recommended approach was to proceed with the capital master plan.  A clear decision was also needed on whether the Organization would proceed with the baseline scope, or with the scope options.  The scope options would allow the United Nations to deal with future needs to take advantage of the one-time opportunity to practice what the United Nations advocated:  sustainable development and introduction of green technologies.

The New York City proposal to construct, through the United Nations Development Cooperation (UNDC), a building on part of the Robert Moses playground located at First Avenue just south of 42 Street, had significantly changed the situation.  "In a way, our dream solution is now our most viable option", he said.  The UNDC now expected that approval might be possible for a building of some 900,000 square feet, or even slightly larger.  Provided the building would complement the existing Headquarters Building, he felt that was a positive development.

The ACABQ had requested the best estimate of the cost of purchasing the building from UNDC at various stages, he continued.  The answer was somewhat complex, as it would depend on the interest rate and duration of the bonds issued by the UNDC for construction of the building.  If the Organization were to buy the building in late 2005, the estimated cost was about $355 million, plus the cost of converting temporary meeting rooms to office space (an estimate of $15 million to $25 million).  In 2010, the cost would be $316 million, and in 2016, it would be some $271 million.  If the Organization were to purchase the building at the end of the bond period, say 2036, there would be no added cost as lease payments over the years would have paid the bonds in full.

The project would have a budget equal to the annual regular United Nations budget, and would require a sufficient degree of project personnel to ensure smooth running and completion on time and within the estimates.  However, it was important to remember that it was a construction project of huge proportions, which only happened every 50 years or so and was certainly not part of the Organization’s regular work.

Among other decisions to be made by the Assembly, he listed the need to address the architectural approach to the building; a decision on the fundamental approach to phasing the work; a decision to authorize funds needed to continue the detailed design work in 2003 and 2004; and a decision to reach agreement on funding for the actual refurbishment work as soon as possible in 2003.

Introducing a related report, the Chairman of the ACABQ, CONRAD S.M. MSELLE, said the Secretary-General had informed the Advisory Committee that the cost of the "reactive" approach was now estimated at $2,088 million for a period of

25 years.  The capital master plan would cost slightly less than $1,300 million, based on the assumptions in the Secretary-General’s report.  The cost of the plan would increase at the rate of $35 million to $40 million a year.  The ACABQ, therefore, agreed with the Secretary-General that the capital master plan was the most cost-effective choice, and recommended that the Assembly authorize, this year, the implementation of the baseline scope with the scope options.  In order to minimize cost escalation and other risks, the ACABQ recommended the first approach suggested, namely, vacating most of the Headquarters complex.

Further Statement by Delegates

THURE CRISTIANSEN (Denmark), speaking on behalf of the European Union and associated States, said that the United Nations buildings were in dire need of renovation and modernization and must be improved to meet the present security, environmental and fire-safety standards.  The capital master plan would constitute a significant, tangible and far-reaching contribution to ongoing efforts to strengthen the United Nations.  The report on the issue before the Fifth Committee demonstrated that the cost of a reactive approach would be higher than the cost of a complete renovation, and would not provide the necessary improvements to Headquarters facilities envisaged in the capital master plan.

While the European Union generally supported the main elements of the Secretary-General’s proposal, it looked forward to receiving supplementary information relating to concrete design plans and other matters, including the need for and location of new conference rooms; the proposed level of security protection of the complex; the prevention of cost overruns and delays; and legal aspects of construction management.  The Union noted that the total cost of the baseline scope of the plan was slightly higher than the proposal put forward in 2000.  The additional scope options presented by the Secretary-General at a cost of $180 million merited further consideration.  Voluntary contributions from public and private sources could be an important source of funding, he said, and the host country should carry a substantial proportion of the full cost of the project.

NANA EFFAH-APENTENG (Ghana) believed that the structural deficiencies enumerated by the Secretary-General in his report made a compelling case for major refurbishment works to be carried out at the United Nations Headquarters complex.  Ghana shared the view that the reactive approach was a non-sustainable basis for maintaining the Headquarters complex.  Accordingly, his delegation supported the Secretary-General’s proposal on the long-term capital master plan.

As for concerns about cost overruns, he believed that the industry standard of a 10 per cent mid-point of the cost range -- while useful in ensuring that the estimated cost of the project did not overrun the budget -- would not necessarily guarantee that cost control would take place.  It was thus disappointing that the management structure of the capital master plan did not incorporate an adjunct oversight mechanism.  His delegation proposed that while the Secretary-General should invest the project management team with the necessary flexibility of authority, strong accountability mechanisms and oversight over the project should be maintained during the project cycle.

PATRICK KENNEDY (United States) said that the ACABQ’s report on the matter offered a reasoned, thorough and lucid endorsement of the capital master plan.  He welcomed the call for oversight and believed it should incorporate management, financial, technical and legal aspects commensurate with the inherent complexities and challenges of any construction project of such magnitude.

He said that from a distance, the marble and tinted glass of the current United Nations appeared strong and ready to stand for another half century.  But report after report attested that appearances were deceiving.  More serious was the fact that a failed generator or ventilation system carried the very real threat of a catastrophic event, such as fire or steam-pipe rupture.  The odds of a catastrophic equipment failure were near certain, and, unfortunately, age had stacked the deck against the Organization.  “Time is not on our side, and we need to proceed expeditiously”, he said.

Turning to financial aspects, he said that by not authorizing the funds and by delaying for just one year, normal project escalation would drive total costs up an estimated 3-4 per cent of the total $1.1 billion cost, or $35 million.  The funds should be committed now, applied to the renovation, and not lost to inflation caused by indecision.  At the same time, the ever-increasing costs of patchwork maintenance also represented funds that must be spent, but could be better utilized elsewhere.  Another aspect of the question was the need to use “the momentum that had built up with the principals of the City and State of New York and within the local community”.  But first there must be a decision, a plan, a project for which funding could be sought.

“But this is not an American project”, he continued.  “It is a project for the world’s peoples and as such there must be a clear, unambiguous mandate from Member States, or the project momentum may be stalled or lost.”  Specifically, he asked Member States to move immediately to approve the so-called first approach, that is, vacating the Headquarters complex and conducting an expeditious refurbishment programme via a swing space facility, and to authorize the

$22.5 million needed in 2003 to accomplish the next phase.  The capital master plan was not in the category of “nice to do when we have the time and resources”.  Today, it was a “must do” and without hesitation.

Mr. BRAR (India) said that the current report of the Advisory Committee did not incorporate any information on the status of negotiations with federal authorities on the renovation of the United Nations Headquarters, including the funding of the project.  That had been a major recommendation of the Advisory Committee last year.  A matter of concern was that delay in implementation of the project would result in cost escalation in the order of 3.5 per cent per annum. Moreover, annual expenditure for emergency repairs, major construction and energy was expected to increase progressively to a high point of $116 million in 2019 under the reactive approach.  The current level of those expenses was approximately $30 million.  For those reasons, his delegation would support a decision on the plan during this session itself, subject, of course, to acceptability of the eventual financing package.

The scope of work involved in the refurbishment programme was quite comprehensive, he said.  However, the details were mostly in narrative form and did not include specific cost elements associated with each segment and its components.  Since that the cost of refurbishment was almost three times that of constructing the swing space, a proper quantification of costs associated with the different types of work to be undertaken would make it easier for Member States to appreciate the complexity of the refurbishment programme.

Another aspect of the refurbishment programme, which needed additional inputs from the Secretariat, was the time frame for completion of different tasks.  Given the experience and expertise available these days, a shorter time span for completing the project should be quite feasible, as the project was time-bound and mission-specific.  It was important to bear in mind that the utmost consideration mist be given to avoid any form of cost escalation.  Oversight and accountability of the programme management team were of great importance for the successful completion of the project.

FOO KOK JWEE (Singapore) said the report of the Secretary-General stressed that occupants of the present United Nations complex had a lower chance of survival during a fire, consumed more energy at a higher cost, and enjoyed less access than they would in any comparable modern building in New York City or any other major world cities.  The implementation of the capital master plan presented the Organization with an opportunity to rationalize utilization of the United Nations complex, and it should be made use of to upgrade the facilities and capacity of the complex to meet current demands.

The United Nations complex was like an ailing patient in need of urgent medical treatment, he continued.  But while the doctors were deliberating on the type of medical procedures to administer, and on who would pay for the medical treatment, the condition of the patient was deteriorating steadily.  Any delay in administering medical treatment would also cause the situation to deteriorate further, resulting in more costly, subsequent treatments.  The Secretary-General’s report stated that delaying implementation of the master plan would result in increased costs of some S35-$40 million a year.  His delegation, therefore, strongly urged the General Assembly to take a firm decision on the direction of the capital master plan without delay.

His delegation believed that serious consideration should be given to the option of financing the plan through an interest-free loan from Member States.  In particular, collaboration with the host Government on that issue should be further explored.  The Secretariat should not only focus on such loans, however, but should examine all feasible and cost-effective financing options.

GILDA MOTTA SANTOS-NEVES (Brazil) agreed there was no choice but to proceed with implementation of the capital master plan.  On the other hand, the cost involved was very high, and not all Member States, certainly not in the developing world, had the same capacity to burden their national budgets with additional contributions.  The solution here depended on the host country’s willingness to play a central role in providing adequate installations to the Headquarters.

Turning to complementary ways of financing, she said her delegation still needed convincing that only the visible parts of refurbishment could be of interest to private-sector contributors.  The idea of breaking up the refurbishment project into blocks that could be “adopted” by different companies merited further consideration.  When it came to the project itself, conference rooms should be treated as regular working space.  It was not a matter of luxury that they should have natural light.

Regarding the appropriations for baseline design and management of the design work, she said they could only be envisaged on the understanding that design work would be useful irrespective of the outcome of future negotiations on the capital master plan.  While her delegation favoured the ACABQ’s recommendation to approve the implementation of the plan on the basis of the baseline scope proposed by the Secretary-General in the amount of some $1.09 billion, she believed that actual expenditures should only be approved once consensus had been established on financial provisions for the full implementation of the master plan.

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For information media. Not an official record.