GA/AB/3386

FIFTH COMMITTEE COMMENCES DISCUSSION OF SCALE OF ASSESSMENTS

The United Nations had been in a financial straightjacket, and arrears were undeniably an element, the representative of the United States told the Fifth Committee (Administrative and Budgetary) this morning, as it began its consideration of the scale of assessments for the Organization�s regular budget.

He said that the Fifth Committee needed to stop the ossification of the United Nations financial structures. In working out the new scale of assessments, Member States must leave behind excessive reliance on one Member State. Seeking a reduction in his country's regular rate of assessment, the United States was not backing away from its unique responsibility to the Organization. Of $3 billion of the United States total contribution to the United Nations for 2000, some $830 million was the assessed contribution for the regular budget and peacekeeping, and more than $2 billion was voluntary contributions. The United States had played the role of the largest contributor to the United Nations and it was determined to continue it.

Speaking on behalf of the Non-Aligned Movement, the representative of South Africa said that the reduction of the ceiling on the payments for the regular budget would distort the principle of the capacity to pay, and was therefore unacceptable. The scale of assessments for 2001-2003 must take into consideration economic conditions of developing countries, and any unilateral attempt to modify the scale through applying conditions which were contrary to the United Nations Charter should not be tolerated.

Also stressing the need to take into consideration the needs of the developing countries, the representative of Nigeria, who spoke on behalf of the "Group of 77" developing countries and China, said that developing countries should not be assessed at a rate higher than their capacity to pay as a result of any adjustments to the scale.

The low per capita income adjustment should remain an integral part of the scale, and must be subject to a comprehensive discussion with a view to increasing both the threshold for its application and the gradient. Special consideration should also be given to those developing countries that were crossing the threshold from the low per capita income adjustment, as they otherwise might be assigned a disproportionate burden.

Speaking on behalf of the European Union and associated States, the representative of France favoured the retention of the current ceiling of assessment of 25 per cent of the budget, adding that the initial estimate of the

Fifth Committee - 1a - Press Release GA/AB/3386 5th Meeting (AM) 2 October 2000

capacity to pay required reliable and homogenous gross national product (GNP) data. To be comparable, data needed to be converted into United States dollars using market exchange rates. While in 1998 the Union accounted for about 29.5 per cent of world gross national product, it contributed some 36.6 per cent of the regular budget. That distortion meant that each of the Union�s 15 member States paid considerably more than its national wealth could justify. One dollar in three in the United Nations budget was paid by a European citizen. As the Union�s share of world GNP had fallen in recent years, it followed that its share of the regular budget should be reduced.

Addressing the proposals that permanent members of the Security Council should not be eligible for relief under the low per capita income adjustment, the representative of the Russian Federation said that this would contradict the principle of capacity to pay and the Charter of the United Nations. The special responsibility of permanent members of the Council was exclusively for the maintenance of international peace and security. Russia, as a permanent member of the Council, was meeting additional financial obligations in respect to peacekeeping budgets. However, it strongly objected to the attempts to impose special financial responsibility on the permanent members of the Security Council and artificially set a floor rate for those States.

The representative of Pakistan also stressed that any attempt to link a State's contribution to its membership of various organs of the United Nations would run counter to the whole concept of universality of the Organization. That could result in Member States not seeking membership in important organs simply because they could not afford it. That approach was, therefore, neither desirable nor practical.

Weighing the proposals before them, most speakers in today�s debate agreed that capacity to pay should remain the main principle for the calculation of the scale and that the new scale should reflect the new economic realities of the world. They also stressed that the scale should be simple, equitable and transparent.

Determining the scale of assessments for the United Nations regular budget for 2001-2003 is one of the most important tasks facing the Fifth Committee at its current session. [The scale of assessments is a formula determining the amount each Member State must pay towards the regular budget of the Organization, based on capacity to pay.] Criteria used to determine a Member State's capacity to pay include national income data, the minimum assessment rate, or "floor", and a ceiling over which no country can be assessed. Together, those criteria should result in a reviewed scale of assessments which will accurately reflect every Member State's real capacity to pay.

In weighing all the options before it, the Committee had to consider possible reductions in the proportion to be borne by the largest contributor, the United States, and in the minimum amount payable by smaller Member States, as well as the eligibility of permanent members of the Security Council for relief under the low per capita income adjustment.

Fifth Committee - 1b - Press Release GA/AB/3386 5th Meeting (AM) 2 October 2000

The Fifth Committee will base its decision on the report of the Committee on Contributions, which was introduced by the Chairman of that body, Ugo Sessi. The report contains 12 proposed scales of assessments based on various sets of criteria. One includes the set of elements currently in use and the others reflect proposals put forth by States and groups of States.

Also speaking this morning were the representatives of Australia, Brazil, China, Republic of Korea, Croatia, Japan, Norway, Argentina, India, Colombia and Botswana.

The Committee will continue its work at 3 p.m. this afternoon, when it is going to begin consideration of the pattern of conferences.

Fifth Committee - 3 - Press Release GA/AB/3386 5th Meeting (AM) 2 October 2000

Committee Work Programme

As the Fifth Committee (Administrative and Budgetary) met this morning, it was expected to begin its consideration of the scale of assessments for Member States� contributions to the regular budget of the United Nations for the years 2001-2003. The Committee had before it a report of the Committee on Contributions (document A/55/11), which contains 12 proposals for the next scale, as required by the terms of General Assembly resolution 54/237 D. (For further details, see press release GA/AB/3385 of 29 September.)

Statements

Introducing the report to the Fifth Committee, UGO SESSI, Chairman of the Committee on Contributions, said that the scale of assessments had been the main focus during the work of the Contributions Committee at its sixtieth session. A suggestion had been made that it might be useful to organize a seminar or a briefing on the question, and he wanted to know Members States' opinion on that question. The Contributions Committee had studied the 12 formulas set out in the relevant General Assembly resolution, finding certain similarities between them. He then elaborated on the main elements of the proposals and on the methodology used in their preparation, also giving an account of the deliberations in the Contributions Committee, as described in the report.

JEAN-DAVID LEVITTE (France), speaking on behalf of the European Union and associated States, said that it was essential to the effective functioning of the United Nations that common rules be defined to ensure the financial burden which the United Nations regular budget represented was divided fairly among Member States. All United Nations partners had long been aware of the European Union�s analysis and proposals, which were formulated some five years ago. Europe�s commitment was deep. The principles on which these proposals were based were clear. Contributions must reflect the real capacity of Member States to pay, and the methods used to define the scale must be simple, equitable and transparent. The ability of Member States to contribute to the United Nations depended on their recent macro-economic performance, as well as currency movements. Those two factors determined �purchasing power� in the currency in which contributions were paid today -� the United States dollar.

The initial estimate of capacity to pay, therefore, required reliable, homogenous and comparable data regarding gross national product (GNP), he said. To be comparable, data needed to be converted into United States dollars using market exchange rates. The body of experts whose task it was to assess technical criteria was the Committee on Contributions, not the Fifth Committee. While in 1998 the Union accounted for about 29.5 per cent of world GNP, it nevertheless contributed some 36.6 per cent of the regular budget. That was a distortion which meant that each of the Union�s 15 Member States paid considerably more than its national wealth could justify. The Union has long been the United Nations largest contributor. One dollar in three was paid by a European citizen. As the Union�s share of world GNP has fallen in recent years, it followed that its share of the regular budget should be reduced.

Rather than reflecting capacity to pay, the methodology currently used to establish the scale unduly distorted it, he continued. Member States' ability to contribute depended on their economic weight. However, calculations of Member States wealth was based on data that were 10 or even 15 years old. The best way to reflect each country�s current performance, with minimum delay, was to select a shorter base period. The Union was also proposing that that base point be updated annually with fresh economic data. Annual recalculation would eliminate excessive fluctuations from one scale to another and would provide a transitional mechanism which would never depart from the principle of capacity to pay.

The Union also believed that the adjustment for countries whose per capita income was lower than the world average must remain a basic feature of the scale, he said. Developing countries accounted for about one fifth of the world�s economy. In 2000, however, those countries contributed globally a little less than one tenth of general budget expenditure. The Union believed that the capacity to pay principle for countries taken individually had been somewhat overlooked. Two features must be corrected. Firstly, debt-burden adjustment today made for a lack of transparency, complexity and inequality in the scale, and should be abandoned. Secondly, the adjustment factor for low-income countries must be reduced and should not exceed 75 per cent. The European Union would like the ceiling to remain at the current level of 25 per cent thereby avoiding a more serious distortion. Finally, the formula of limiting share variations should be eliminated.

ARTHUR C.I. MBANEFO (Nigeria), speaking on behalf of the "Group of 77" developing countries and China, said that while the Group thanked the Committee on Contributions for introducing the report, it regretted that not enough guidance was provided to the Fifth Committee on the scale methodology. The Organization could not be expected to implement its legislative mandates and programmes if it was not provided with adequate resources. The Group reaffirmed that the principle of capacity to pay was the fundamental criterion in the apportionment of the United Nations expenses. Developing countries should not be assessed at a rate higher than their capacity to pay as a result of any adjustments to the scale. Low per capita income adjustment should remain an integral part of the scale methodology to provide relief to developing countries. The methodology for low per capita income adjustment must be subject to a comprehensive discussion, with a view to increasing both the threshold and the gradient so as to make the scale of assessments fair and equitable.

Special consideration should also be given to those developing countries that had crossed, or were in the process of crossing, the threshold of the low per capita income adjustment, and which otherwise might be assigned a disproportionate burden that would affect their capacity to pay, he said. Mitigation of the effects of discontinuity must be incorporated in the next scale. The Group reiterated its support for limiting to 25 per cent the effects of the end of the scheme of limits, on an annual basis for the first years of the post-transition period. The debt burden adjustment should be maintained as an integral element of scale methodology, based on total debt stock. Income measure should be based on GNP, using a statistical base period of six years. Market exchange rates should be sued for the scale, except in cases where its use would cause excessive fluctuations and/or distortions in the income of Member States.

He went on to say that the floor should remain at 0.001 per cent and the maximum assessment rate for least developed countries should not exceed the current level of 0.01 per cent. On the ceiling, it should not be arbitrary, as this obscured the relationship between a country�s capacity to pay and the rate of assessment applicable to it. Any unilateral attempt to modify the scale through conditionalities was unacceptable. Any modification of the current ceiling would be considered only if it spread the burden of payment among the major contributors without affecting the Group. A new floor on the obligations of permanent members of the Security Council should not be included, as the inclusion of such an element would be contrary to the principle of capacity to pay. The proposal for the annual recalculation of the scale was not in conformity with the principles contained in the original terms of reference of the Committee on Contributions.

On the application of Article 19 of the Charter, the Group accepted the need to consider requests for exemption, in particular for developing countries that were temporarily experiencing genuine economic difficulties. The Assembly should continue to examine ways in which requests for exemption could be examined in a timely manner. The difficult financial situation of the Organization was not linked in any way to the methodology of the scale. Revisions to the scale, therefore, would not solve the critical financial situation facing the United Nations since it would neither change the level of resources available to the Organization nor guarantee payment of future assessments promptly and in full.

PENNY WENSLEY (Australia), also speaking on behalf of the delegations of Canada and New Zealand, said the scale should be simple, equitable and transparent. She believed in capacity to pay as the fundamental principle underlying the scale. Current global economic realities should be accurately reflected in the scale, including the rapid economic growth of some developing countries. By the same token, economic decline should be reflected in lower rates of assessment. She did not support methodological adjustments as a way of sidestepping the basic responsibility of Member States to pay their fair share of the United Nations costs.

In terms of the elements of the scale, she supported a somewhat shorter base period, using the most recent economic data, because it reflected current capacity to pay more accurately. She was also in favour of a debt flow approach to the debt-burden adjustment measure -- if such a measure was retained -- based on actual repayments of external debt principal, because debt could only be a burden if it was actually repaid. Any change in the low per capita income adjustment should be for a gradient to be reduced. For the greater part of the Organization�s existence, the scales used gradients which were much lower than 80 per cent. There was merit in splitting the gradient into two: one for least developed countries at 80 per cent and a second, considerably lower than 80 per cent, for other countries below the threshold.

Continuing, she supported the reintroduction of the method of distributing the cost of the adjustment which had been used before 1979 -� that is to distribute the costs to all Member States. She did not support the introduction of special provisions to deal with the effects of discontinuity, for it would be unfair to all those Member States which had previously experienced discontinuity without relief. She continued to support a floor rate of 0.001 per cent, and a maximum rate of 0.01 per cent for the least developed countries, as well as the concept of annual recalculation.

Turning to the quality of GNP data, she said that Member States were currently in the process of moving from the 1968 system of national accounts to the 1993 system, with over half of the membership still using the 1968 system. That created inequities and inconsistencies in the scale. In the past, to make the information comparable, the Statistics Division of the Secretariat had adjusted the data to overcome the problem. She favoured a continuation of that approach.

As for conversion rates, she said that market exchange rates should be used in all but the most extraordinary and exceptional cases. In making its decisions in general, the Fifth Committee should be guided by the technical advice of its experts. The current ceiling was a distortion of the principle of capacity to pay in the scale, and she supported a review of it. It was a political, rather than a technical, element in the scale of assessments. In conclusion, she reiterated a call to all Member States to pay their assessed contributions in full, on time and without conditions, and said that granting of exemptions under Article 19 should be an extremely rare occurrence.

GELSON FONSECA, Jr. (Brazil) said that for more than 50 years the Fifth Committee had endeavoured to refine, with technical input and support from the Contributions Committee, an appropriate methodology to assess Member States� capacity to pay -� the basic criterion to share the financial obligations among the membership. The complexity of the task for 2001-2003 was highlighted by the fact that the Fifth Committee had not been able to give clear guidance to the Contributions Committee on the basic elements for a methodology of the scale. As a result, the current report before the Fifth Committee did not contain agreed recommendations. Therefore, the Fifth Committee had a difficult job ahead, but it also had a long tradition of hard work, good will, flexibility and mutual understanding.

One of the most important aspects of the deliberations was transparency in the negotiating process, as well as in the figures to be adopted for the assessment in the next scale, he continued. The Fifth Committee should begin its consultations by addressing the existing distortions in the preliminary data provided by the Secretariat. An important number of Member States were negatively -� and drastically in some cases -� affected by such distortions, which represented a deviation from their real capacity to pay. To illustrate, the real growth of the Brazilian GNP during the statistical base period was 10.3 per cent, while the nominal growth estimated in United States dollars was 37 per cent. That distortion had a clear impact on the calculation of Brazil�s capacity to pay, as the country�s share of the GNP of the world product moved upward from 1.979 per cent in the period 1990-1995, to 2.424 in the period 1993-1998. That result did not correspond to reality, the distortion resulting from the use of market exchange rates, and it should be corrected by using the price-adjusted rate of exchange instead.

The second important element was the ceiling, he said. Brazil was opposed to any artificial ceilings that would distort Member States� comparative capacity to pay. The present ceiling, applied to the assessment of a single Member State, already represented a significant distortion of its capacity to pay and an undue burden to the rest of the membership. Past reductions of the ceiling had been warranted by increase in the number of Member States with a high capacity �- which was not the current situation. Moreover, past reduction in the ceiling had followed a trend of the United States� economy decreasing vis-�-vis world product. Preliminary data in the report before the Contributions Committee showed an upward movement in that share at present. Hence, to be consistent with the principle of capacity to pay, the ceiling should be increased, not reduced.

Brazil favoured a base period of six years, he said, as that could provide the necessary cushion for excessive fluctuations from one scale to another. The GNP should be kept as the most suitable first indicator of a country�s capacity to pay. The low per capita income adjustment should be considered an intrinsic and extremely important element of the methodology of the scale. Nevertheless, he questioned the fairness of the parameter used -- the world average per capita GNP -� which did not reflect the increasing gap between poor and rich nations. Developing countries had been penalized with increases in their assessment rates resulting from a sharp reduction in the actual benefit of the low per capita income adjustment. That was particularly true for middle-income developing countries that were rapidly losing the benefits of the adjustment. The Fifth Committee had a duty to ensure that the distribution of burden of funding of the United Nations took into account the need to reduce the gap between the rich and the poor.

Brazil had introduced a methodological proposal for the next scale, he continued. Looking at the preliminary results of the mechanical scales, he verified that, despite the increasing gap between developed and developing countries, most scales showed a clear transfer of points from developed to developing countries. The threshold should be adjusted upwards in order to reflect the growing distance between the affluent and the poorer. His country had proposed the adoption of the World Bank�s threshold as the benchmark for the low per capita income adjustment. That figure was internationally accepted and based on a sound methodology. The debt stock criteria was the most faithful expression of the persistent structural constraints to the developing countries� capacity to pay. The main focus of the negotiations ahead should be the discussion in depth of how to find a sound financing basis to the Organization�s regular activities.

RICHARD HOLBROOKE (United States) said that the Committee had today launched an effort to improve the United Nations. This effort took into account realities which reinforced the historic criteria of the United Nations, assessments: capacity to pay. The 150 leaders who had gathered at the Millennium Summit had come to create a new vision and set forward a new plan of action. Today the United Nations was at a watershed. It was important to bear in mind where it had been. With the cold war, polarization bred paralysis in the institution. As a result, many threw up their hands and allowed the United Nations to atrophy. As the geo-political climate changed, the United Nations did its best to forge a new role. With a weak infrastructure, the United Nations took halting steps forward, steadily winning back the trust of its membership. Recently, the United States population had shown increased respect for the Organization. Last June, the Secretary-General had set out a bold new vision for the United Nations. The Secretary-General deserved great credit for what he had done. Today the Committee had a historic opportunity to back resolve with action. No part of the United Nations system had a more pivotal role than the Fifth Committee. It would determine whether the United Nations could marshal the resources needed to implement the millenum agenda.

The United Nations had been in a financial straightjacket, he said. The problem had no single cause. Arrears were undeniably an element. No issue had been more important to the United States. He had committed himself to making the United Nations reform, including the settlement of arrears, the number one sustained priority. Almost every Mission represented in the room had been contacted by the United States to build consensus on the reform issue. The United States did not shirk from admitting that failure to pay its dues on time had contributed to the problem. President Clinton wished to end that anomaly. He, also, committed himself personally to deal with the issue in an open and frank way. But he needed their help and understanding. The root of the problem ran deep. He said that the Committee needed to stop the ossification of the United Nations financial structures.

At the dawn of the new millennium, the Fifth Committee had an opportunity to turn a page and put the United Nations on a sound financial foundation, which must begin with a revision of scale of assessments, including the peacekeeping scale, he said. More than 75 Member States had joined together to revise the inaccurate scale for peacekeeping assessments and had proposed a new agenda item to that end. As leaders of the 0rganization, the Russian Federation and China had committed themselves in statements, along with Great Britain, the United States and France, to fulfil their special responsibilities for peacekeeping with contributions commensurate with their countries' roles. The Gulf Cooperation Council and the Geneva Group had also called for revisions. That underscored the importance of making some revisions before the end of the year for both the regular budget and the peacekeeping budget. The Brahimi report provided an impressive set of recommendations which could not be carried out without restructuring. The political will appeared to be here for the first time. It was up to Member States to overcome their differences and confront the �devil in the details�. The base period should be shortened to reflect current realities. Ability to pay could not be based on data 10 years old. A sliding gradient was also needed. The debt-burden adjustment should be predicated on debt flow as opposed to debt stock. Together those steps would culminate in a scale more fairly distributing financial responsibility among Members.

The United Nations must leave behind the practice of placing excessive reliance on one Member State, he said. The United States strongly recommended that principle be reasserted to help promote political well-being. Since 1946, the United States recognized that the capacity to pay must be modified by other ceiling imperatives. Capacity to pay was the cornerstone, but it was not sufficient to provide an adequate foundation for the edifice. In the post-cold war period, when the United States accounted for some 50 per cent of the GNP, the scale ceiling was set at 39 per cent. Since then the ceiling was gradually lowered to 25 per cent. Fifty-six new Member States had joined since then, and the world economy had been transformed. New realities should be taken into account in the revision of the scale. The time had come to re-establish the balance that the original framers of the United Nations Charter sought to strike. The United States was not backing away from its unique responsibility to the Organization. Of $3 billion of the United States total contribution to the United Nations for 2000, some $830 million was for assessed contribution for the regular budget and peacekeeping, and more than $2 billion was voluntary contributions. The United States had played the role of largest contributor to the United Nations and it was proud of its role and determined to continue it. It sought a reduction to strike a more appropriate balance and not to shirk its responsibilities. Member States must come together. If they failed to do so, the spirit of the Millennium Summit would die rapidly.

He said that the current United States Administration was committed, until noon of 20 January 2001, to work for United Nations reform as its highest priority. In all areas of crisis around the world today, the United Nations had a vital role to play. To succeed, it must improve and reform. This debate was of historic importance. For the next four months, he committed the United States Government to that effort.

WANG YINGFAN (China) said that capacity to pay was the basic principle on which the apportionment of the expenses of the Organization should be based. China was not opposed to reasonable adjustments to the scale of assessments for the sake of improvement. Years of practice had shown that the principle of the capacity to pay had withstood the test of time and was in the interest of the majority of Member States. He believed, therefore, that any adjustment to the scale must be based on that principle and agreed on by consensus after extensive consultations.

The low per capita income adjustment was an excellent expression of the principle of capacity to pay, as it took into account both a country�s aggregate national strength and its per capita income, thereby reflecting the actual capacity to pay, he said. He noted with regret that certain States were against the application of the low per capita income allowance to permanent members of the Security Council, and that some had even ventured the idea that there ought to be a floor for permanent members of the Council. Those proposals violated the principle of capacity to pay and were unacceptable to the Chinese Government. While economic globalization had facilitated the development of the world economy, it also had a negative impact on many developing countries, further widening the gap between the rich and the poor. In the globalization process, a certain country that had enjoyed sustained robust economic growth was doing everything it could to have its rate of assessments lowered. Any attempt to depart from the principle of capacity to pay was unacceptable to China, and he trusted it was to the general membership as well.

For the United Nations to play a greater role in international affairs, the Organization must have a sound financial basis, a Member State with the capacity to pay, to fulfil their financial obligations under the Charter. China�s economic growth had been relatively high in the last 20 years, but as a developing country with a population of nearly 1.3 billion, its per capita income was still very low. Proposals or ideas aimed at sharply increasing China�s assessment -- in total disregard of its actual capacity to pay -- were unrealistic. As a developing country, China had conscientiously fulfilled its financial obligations to the United Nations. As its economy developed further, China was ready, on the basis of capacity to pay, to continue to fulfil its financial obligations to the United Nations.

SERGEY V. LAVROV (Russian Federation) said that a fair apportionment of United Nations expenses assumed particular importance in the current situation of acute financial crisis of the Organization. The main factor on which the financial health of the United Nations depended now was the political will of its Member States to fulfil their obligations to the United Nations. No less important was the way in which the level of those obligations was determined. A fair scale was important from the financial, as well as political, point of view, as it strengthened the Member States� trust in the United Nations.

Taking note of the attempt of the Contributions Committee to work out its own version of the scale for 2001-2003, he said that although it did not succeed in arriving at consensus on the elements of the methodology, it was necessary to creatively use the ideas and proposals expressed by that Committee�s members. The concept of relative capacity to pay, chosen by the United Nations founders, had proven its viability. It was the deviation from that principle that caused problems and difficult situations in setting budget assessment rates. At present, the GNP was the most objective income measure for the calculation of assessment rates. Market exchange rates should be used in calculating the GNP.

Continuing, he reaffirmed his long-standing position on the base statistical period. The shorter it was, the closer the resulting assessment rates were to real capacity to pay. In view of that, he took note of the alternative proposal for a four-year base period in order to synchronize the scale of assessment and the United Nations budget. He also noted with satisfaction that the Contributions Committee had armed itself with multifaceted information on the external debt situation. The Russian Federation reaffirmed its belief in the full validity of the per capita income adjustment element of the methodology. However, currently the application of that adjustment, at least as far as the gradient was concerned, was determined using a political basis. Therefore, he was ready to support efforts aimed at ensuring that objective criteria for the economic situation of States were used to calculate that adjustment. The idea of applying a sliding gradient also deserved attention.

Any suggestion that permanent members of the Security Council should not be eligible for relief under the low per capita income adjustment was absolutely unacceptable, as that contradicted the principle of capacity to pay and the Charter of the United Nations, he said. The special responsibility of the permanent members of the Council arose exclusively when the Charter functions of maintaining international peace and security were involved. Therefore Russia, as a permanent member of the Council, was meeting and would continue to meet additional financial obligations in respect of peacekeeping budgets. However, it strongly objected to attempts to impose special regular budget financial responsibility on the permanent members of the Security Council and to impose an artificial regular budget floor rate for those States.

The lowering of the ceiling for contributions to the regular budget was probably the most acute issue, he said. It was, of course, the result of a political decision by the General Assembly. The terms of reference for the Contributions Committee specified that, if a ceiling was imposed, it should not seriously obscure the relation between a State�s contribution and its capacity to pay. The Assembly would have to adopt a balanced decision, taking into account the interests of all parties concerned, and provide a sound financial basis for United Nations activities. It was also important to agree on a package that would guarantee the United Nations against a repeat of the financial crises caused by subjective biased applications in the future.

SUN JOUN-YUNG (Republic of Korea) said that this year the Fifth Committee had an important task before it. The Committee stood at a critical juncture, from where it could adopt a scale based on a fairer and more reliable methodology. He would make every effort towards that end and, in that regard, reiterated that the methodology for the scale should be stable, simpler and more transparent, and reflect the principle of capacity to pay.

He firmly believed that scale data should be reliable, verifiable and comparable, he said. He noted the Contributions Committee's decision to use the latest estimates of the GNP for each Member State, regardless of whether they were based on the 1968 or 1993 System of National Accounts. Data from Member States should be comparable. As many as 75 per cent of Member States presented their GNP estimates based on the 1968 system. Under the circumstances, it was not equitable for somme Member States to see their GNP-based share increase substantially with updated data, while old and unreliable data continued to be used for other Member States.

With regard to exchange rates, he said that he regretted that the Contributions Committee was unable to provide an agreed data set to the Assembly. The Republic of Korea supported the Contributions Committee�s earlier conclusion that Market Exchange Rates should be used for the scale unless that caused excessive fluctuations or distortions in the income of some Member States. The term �excessive� should be interpreted strictly, and would therefore cover only a small number of cases. He also stressed that the scale should be stable and predictable, particularly when the budgetary process of each Member State was considered. As for elements of debt-burden adjustment, low per capita income relief and the floor rate, he reaffirmed their continuing relevance and importance as basic elements in calculating the scale, despite the view of some that they were contrary to the principle of capacity to pay. As regards the maximum assessment rate, the Republic of Korea maintained its concern that lowering the current ceiling of 25 per cent would aggravate the already serious deviation from the capacity to pay. However, his delegation was open to any constructive proposals in the course of discussions to resolve the chronic financial problem of the United Nations.

IVAN SIMONOVIC (Croatia) said that all Member States should pay their contributions to the United Nations budget. The principle of the capacity to pay should be the basic principle of the scale, with GNP data as the first element in the methodology. The scale of assessments approved in 1997 was a significant step forward, but there was still room for improvement. He supported a more stable and simple methodology for calculation of the scale. In order to reflect the current economic reality, a short base period was appropriate. However, he could accept an argument that a longer base period provided for greater stability over time. Regarding conversion rates, he encouraged the use of market exchange rates, with some necessary exceptions where price-adjusted rates should be employed. He also supported the retention of the debt-burden adjustment as one of the important elements of the scale.

Croatia supported the maintenance of the current threshold at the level of the average per capita GNP of the membership of the United Nations, he continued. The level of the gradient, at 80 per cent, seemed to be appropriate for a number of States, although he could support a further reduction, or different gradients for least developed countries, and for other developing countries. The floor should be maintained at 0.001 per cent. Every deviation from the principle of capacity to pay should be by a consensus decision, primarily the subject of agreement among those Member States which would share the cost of any possible lowering of the ceiling. The Organization should not rely upon one major contributor, and due regard should be given to the effects of changes upon other States, especially developing countries.

The provisions of Article 19 of the Charter should be respected to ensure equal treatment of all States, he continued, and each request for an exemption from its sanctions should be considered on a case-by-case basis. As for the recommendations of the Contributions Committee, they should be clear and unambiguous. Contributions should be paid, and not just apportioned. That was why the assessment should be apportioned only among Member States. It was inappropriate to assess a former Member State, which ceased to exist eight years ago, namely the Socialist Federal Republic of Yugoslavia. Similarly, an assessment should not be made for a State that had not yet applied for membership, namely the Federal Republic of Yugoslavia.

HIDEAKI KOBAYASHI (Japan) said that it was essential for Member States to cooperate in order to realize a fair and equitable system for sharing the financial burden, while making efficient use of the financial resources of the Organization. Today�s scale of assessments did not reflect the economic strength of individual Member States or their position and responsibilities within the United Nations.

Japan�s proposal on the reform of the scale was now on the table, as contained in subparagraph 4 of Assembly resolution 54/237 D. It was aimed, in particular, at reforming the current low per capita income adjustments, which resulted in an unfair and inequitable scale of assessments. He added, however, that his country supported the concept of low per capita income adjustment, but the current per capita income adjustments were causing too large a discrepancy between GNP shares and scales for countries which were not eligible for them.

It was very difficult for Japan to understand why its share of the assessed budget was now more than 20 per cent, while its GNP share remained approximately 17 per cent, he said. Now that Japan�s share of global GNP was decreasing, it was all the more difficult to understand. Moreover, under the current system, there was a very unfair divide between large developing economies and smaller ones. A large proportion of the total discounts under the current system went to a very limited number of countries having large economies. As a result, the capacities to pay of the countries with large economies were undervaluated.

Japan�s proposal was primarily aimed at correcting distortions by slightly lowering the level of the entire per capita income adjustments and, more importantly, by introducing the so-called �sliding gradients� to their allocation. The proposal contained three levels of gradients; 10 per cent to the countries whose GNP share was more than 3 per cent; 40 per cent to those between 1 and 3 per cent; and 70 per cent to those with less than 1 per cent. Impacts on the other 128 countries whose GNP shares were less than 1 per cent would be very minimal, while only a limited number of countries with large economies would be affected. By adopting the sliding gradients system, it would be possible to adjust the scale to better reflect Member States� actual capacity to pay.

Another element of his country�s proposal was to ask the permanent members of the Security Council to give up the benefits of per capita income adjustments, for they clearly had special responsibilities within the United Nations. The privileges of the permanent members extended far beyond matters relating to peace and security. He believed that his country�s proposal would make the scale of assessments fair and equitable.

OLE PETER KOLBY (Norway) said that the question of a fair and equitable scale of assessment was an inescapable issue, if the Fifth Committee were to resolve the United Nations financial crisis. Capacity to pay must remain the basic criterion for assessments. The Committee�s task should be to examine the degree to which that was actually reflected in current arrangements, and where it was not, to devise a simple, transparent way to improve the methodology of calculation. The challenge confronting the Committee was a political one. The numerous criteria determining the capacity to pay and the degree of anomalies to which the current, overly complex methodology had given rise, had resulted in distortions in the relationship between many Member States shares of global income and their United Nations contributions. There was a need to restore the basic principles, apply them to current economic situations and to obtain reliable, verifiable and comparable data that reflected each Member States capacity to pay.

The issue of the scale needed to be seen in its proper context: as part of an agreement which would only succeed if it achieved a binding commitment by all Member States to pay their contributions promptly and in full, he said. The methodology should continue to include a low per capita income adjustment to provide relief to low per capital income countries. Recent economic developments might further strengthen the appeal of some of the reform proposals, such as that of reducing the base period. Norway also thought that the Committee must take a close look at the pros and cons of retaining the present ceiling in the scale. It was in the interest of all Member States to agree to a methodology that was simpler, more transparent and equitable. In efforts to reach a consensus resolution, the Committee�s deliberations should be guided by a spirit of generosity. Norway was a strong supporter of the United Nations, which was why its voluntary cash contributions to the United Nations system were 20 times the total amount of its assessed contributions.

THEODORE ALBRECHT (South Africa), speaking on behalf of the Non-Aligned Movement, said that any reduction of the ceiling of the regular budget scale of assessments would distort the principle of capacity to pay, and was unacceptable to the Non-Aligned Movement. During the XIII Ministerial Conference of the Movement, which was held in Cartagena in April 2000, the Ministers reiterated that the principle of the capacity to pay was a fundamental criterion in the apportionment of expenses of the Organization The scale of assessments for 2001-2003 must take into consideration the economic conditions of developing countries, and any unilateral attempt to modify the scale through conditionalities which were contrary to the United Nations Charter was unacceptable.

He said that any significant modification of the scale would be considered only if it spread the burden of payment, in accordance with the principle of the capacity to pay, more broadly among the major contributors without adversely affecting the Non-Aligned Movement and other developing countries. The Non- Aligned Movement was ready to join with the Group of 77 and China as its negotiating partner in consideration of that issue.

ARNOLDO M. LISTRE (Argentina) said that the fact that the General Assembly had sent 12 proposals to the Committee on Contributions eloquently demonstrated the difficulties that applied to the issue being considered today. Argentina was fully committed to the work of the United Nations. An efficient United Nations meant one with adequate resources, but everyone was familiar with the financial crisis that the Organization was facing. Difficulties could only be overcome if Member States discharged all their obligations and paid in a timely fashion. The fact that the Organization had 189 Members was not just another statistic. All had equal obligations, but nobody had suggested that everybody should pay the same amount.

The principle of capacity to pay remained of utmost importance, he continued. For that reason, he looked with alarm at some proposals on the table. Some of the proposals could mean an increase in the assessment of his country of some $2 million. Some other countries would be equally affected. The distribution of financial burden must be equitable and fair.

KAMALESH SHARMA (India) said that the problem faced by the Contributions Committee, and now by the Fifth Committee, was in many ways unique. The crucial point at question was the ceiling, and whether it should stay as it was or be lowered. There was nothing sacrosanct about the present ceiling. Even at the current level, it represented a departure from the principle of capacity to pay. If it were to be changed, Member States would have two objectives in mind in lowering it. The first was that it should be brought down to a level where no contributors would have a preponderant weight simply because of the volume of their contributions. The sacrifice of the principle of capacity to pay would lead to a more equitable distribution of the burden among a large group of countries with the economic capacity to share it. Secondly, it should also ensure that the United Nations would not again have to undergo the travails it had suffered over the last five years. Could it be guaranteed that assessed contributions were never withheld in the future, and also would the functional benefit of lowering the ceiling release the United Nations from undue dependence upon a very few major contributors?

India would support the adoption of a scale that was equitable and fair, and one that was acceptable to the general membership of the United Nations, he said. Negotiations must be conducted in a transparent manner and in keeping with established rules, regulations and procedures. He believed that the Assembly should approve a scale that would also safeguard the financial stability of the Organization in the long term. India would be willing to accommodate modifications to the scale if the burden of payment was spread more broadly among the major contributors. Equity with financial predictability and stability should be the motto. On the income measure, India agreed that the GNP should continue to be the basis and that the base period should be a multiple of the scale period. On conversion rates, Market Exchange Rates should be used. Their replacement by Price Adjusted Rates of Exchange should be resorted to only where excessive fluctuations or distortions in the income of Member States was brought about through use of market rates.

The debt-burden adjustment should be retained in the scale methodology, he said. On the low per capita income adjustment, he concurred with the Group of 77 on the need for an upward revision of the gradient from the current level. On the ceiling, while the maximum assessment rate for least developed countries of 0.01 per cent was acceptable, the question of reducing the maximum assessment rate was an element on which a consensus political decision would be necessary.

SHAMSHAD AHMAD (Pakistan) said that without a stable and sustainable financial base, the Organization could not be expected to fulfil its mandated programmes and activities. The urgency of remedial steps needed no reiteration. Member States should be prepared to undertake a pragmatic and realistic reappraisal of all aspects of the question. In producing the machine scales for the 12 proposals referred to it by the General Assembly, the Contributions Committee had essentially completed its task. However, it did not make concrete recommendations on various elements of the scale methodology. The Fifth Committee now had the arduous task of reconciling different interests and viewpoints.

Central to the concept of capacity to pay was the principle of the low per capita income adjustment, he continued. This was of crucial importance for developing countries and had been an integral part of the scale methodology since its inception. It still remained relevant and important. For an objective and realistic assessment of a country�s capacity to pay and to provide relief to the developing countries with low per capita income, the gradient of that adjustment needed to be revised upward. The element of debt- burden adjustment also should be maintained. In the context of the prevailing global economic realities, adjustment for high levels of indebtedness assumed even greater importance. He noted that 10 out of 12 proposals on the table included a debt-burden adjustment.

Regarding other elements of the methodology, he said that the views of his country had been adequately voiced in the statement of the Group of 77 and China. He only wanted to emphasize one element: in seeking any adjustment of the scale, it was important not to lose sight of the economic difficulties of developing countries, especially least developed ones, small island developing States, landlocked developing countries and those with economies in transition. As for exemptions under Article 19, he recommended a favourable consideration of the requests of developing countries simply because the amount at stake was so insignificant, whereas the extremely difficult political and economic conditions faced by those countries were due to circumstances beyond their control.

The review of the scale of assessments for the regular budget should not be predicated on the reform of the United Nations, he said. Any attempt to link the level of contribution to a States� membership of various organs of the United Nations would run counter to the whole concept of universality of the Organization. That could mean that some Member States would not be able to seek membership of important organs simply because they could not afford it. The approach was therefore neither desirable, nor practical.

ALFONSO VALDIVIESO (Colombia), speaking on behalf of the member States of the Rio Group, said that the Rio Group had always been concerned at the negative effects of the discontinuity experienced by two groups of States; those moving up through the low per capita income threshold between scale period, and the Member States just above the threshold. It was the responsibility of the Assembly to take corrective measures. To that end, formulas had been proposed with various options that deserved the Committee�s support. The time had come to address the situation and to approach the problem from a perspective that took into account the experience of the World Bank in establishing income thresholds. Colombia noted with satisfaction that proposal C adopted that approach. On the low per capita income adjustment, the conditions do not exist for a decline in levels so the current percentage should be retained. On the base statistical period, it would be best to maintain the current period of six years. The Rio Group was in favour of maintaining the debt-burden adjustment methodology, based on the �debt stock� approach. Since the debt burden was one of the priority issues on the international agenda, the Assembly could ill afford to ignore the impact which the debt burden had on the economies of developing countries.

The Contributions Committee report stated that several experts raised the specific problem of increases in contributions of more than 50 per cent, which bore no logical relationship to the real growth in the economy of those countries, he said. That problem affected a large number of countries in Latin America. The lack of flexibility in dealing with a situation that required more equitable treatment had blocked any initiative that might have prevented Latin America from being affected. During the past decade, his region had experienced its worst financial crises.

Regarding the compilation of statistical data, the Rio Group was of the view that no effort should be spared to ensure complete transparency, he said. It was essential to maintain a balance in the process in which transparency was not thwarted by the questionable concept of confidentiality.

LEGWAILA J. LEGWAILA (Botswana) said that the report of the Contributions Committee provided a sound basis for negotiations on the scale, and provided a reasonable appreciation of delicate political sensitivities. The issue of the scale had been a subject of intense review by both the Contributions Committee and the Fifth Committee for many years. Some of the elements of the current scale methodology were incorporated by the Assembly on a non-technical grounds,

and their validity to date remained crucial. Although it had often proved difficult to define capacity to pay with precision, the Assembly had never failed to find an objective formula that provided the best approximation of capacity to pay. The Fifth Committee should not pretend that the Assembly had ever discovered a �one size fits all� scale of assessment. There had always been general agreement that the best possible measure of capacity to pay was based on widely acceptable measures and relied on the least unsatisfactory elements and the fairest guides.

As regards the question of debt, the majority of developing countries were groaning under a serious crushing burden of external debt and needed relief and support. Debt relief was, more than ever, a moral imperative, and could not be ignored. There was a strong case for the retention of debt-burden adjustment in the next and future scales, and it should be calculated on the basis of debt stock. It would be unfair if the Assembly were to adopt a scale that would shift a disproportionate burden to developing countries and distort their actual capacity to pay. All developing countries deserved relief, to cushion them from the heavy socio-economic burden they endured.

On the floor, Botswana believed that the retention of the floor remained valid to ameliorate the plight of developing countries with low per capita income. The current floor of 0.001 per cent should be retained for the next scale of assessment.

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