Finding agreement on Member States’ assessments complicates budget approval

By Lydia Swart
10 November 2009

Before the end of the year, the Fifth Committee is faced with making some major decisions. Approval of the 2010-2011 programme budget is expected to be an especially arduous task, unlikely to be resolved until the very end of the deliberations. Potentially complicating the budget negotiations further is the apparent difficulty in reaching agreement on the methodologies to be used to determine Member States' assessments - both for the regular budget and peacekeeping.

Currently, Member States pay dues for the bi-annual programme budget (also referred to as the 'regular' budget) of the UN in accordance with the capacity to pay principle. Dues are linked to a country's gross national income (GNI) over a certain base period and adjusted for high debt burdens, low per capita income, and currency fluctuations. Some exceptions are made for maximum and minimum assessment rates as previously approved by Member States. For instance, although the US holds more than 30% of the world's GNI, it pays a maximum of 22% of the budget. The minimum rate is 0.001%, and the 50 least developed countries (LDCs) pay a maximum of 0.01%. Using the current methodology, the European Union, Japan, and the US together pay almost 80% of the regular budget.

The agenda item "Scale of assessments for the apportionment of the expenses of the UN" was previously under discussion during the Fifth Committee's main session in late 2008. At that time, Member States made a wide variety of proposals to change the existing methodology, making it quite obvious that reaching agreement on the issue would prove to be difficult and highly contentious.

The Committee on Contributions (COC), which advises the General Assembly on this topic, consists of 18 members representing all regions. It recently proposed maintaining the key elements of the current methodology for the period 2010-2012, except for some minor adjustments such as the particular conversion rates to be used for a small number of countries. In its report A/64/11, the COC noted that it had not been provided with any specific guidance from the General Assembly during the 63rd session regarding its work. Seemingly, the COC decided as a result that it could postpone its review of the various proposals made by Member States in 2008 to future sessions.

Member States' Positions on the Scale of Assessments

The Fifth Committee started the deliberations on the scale of assessments on 5 October this year in a plenary session. It became clear immediately that the stance of the Group of 77 and China (G77), which seeks a continuation of the existing methodology for the 2010-2011 budget, is pretty much carved in stone. The G77 stated that if any of the key elements of the methodology is renegotiated, it would insist that the maximum rate of 22% also be reviewed. In 2008, the G77 had proposed increasing this rate to 25%.

Within the European Union, on the other hand, member states strongly feel that the current status quo is no longer acceptable. The EU would like the existing methodology to be changed, in particular by reconsidering the adjustment for low per capita income so that new and strong emerging economies will end up sharing more of the UN's financial burden. The EU did not name any specific countries, but it is generally assumed that they include Brazil, India, and China, among others. As a group, the EU provides approximately 40% of the UN's regular budget while its share in the global economy is much closer to 30%.

Like the EU, Canada, Australia and New Zealand (CANZ) believe that the current methodology no longer accurately reflects the capacity to pay principle. Consequently, they would like the low per capita income adjustment to be looked at, in particular its threshold of eligibility. This group feels that a small number of large developing economies benefit the most from this adjustment while smaller developing countries only marginally do so. CANZ also noted that debt-burden adjustment has no demonstrable link to the capacity to pay principle as the costs related to debts are already incorporated in the GNI of countries.

Switzerland and Liechtenstein also indicated that the current methodology does not sufficiently reflect some countries actual capacity to pay. As to the low per capita adjustment, they propose that it no longer be applied to a range of countries that fall just above or below the threshold for its implementation. As a result, for instance, a small increase in national income would not automatically result in a significant increase in dues. They further note that in order to reflect the current financial crisis, it might be better to use more recent figures than data for the base period 2002-2007.

The United States, in a rather low-key statement, said that the current methodology could be improved upon, but the US did not delve into any specifics. The US noted that the concept of fairness should also come into play when determining dues, which in the end depends on how the principle of capacity to pay is actually applied.

Japan spoke mostly in general terms, saying that the methodology should more closely reflect the real and current capacity of a country to pay its dues. Mexico would like to see a review of many aspects of the current methodology and noted that the Committee on Contributions seems politicized, undermining its technical ability to provide specific recommendations.

On the other hand, the Russian Federation noted that the Committee on Contributions had refined some elements in the methodology and stressed that the existing scale of methodology had been the result of long negotiations which should not require substantive changes in the near future.

China argued that over-emphasizing a country's share of the world's economy is inherently "unfair" and even "disrespectful of human rights." China stressed that taking low per capita income into account when determining dues is essential to reflect a country's actual capacity to pay. Its delegate pointed out that at the end of 2008, there were still 43 million Chinese living in poverty and the average per capita Gross Domestic Product was a mere $3,000. China added that the methodology used in the last decade had increased its share of dues from just under 1% in 2000 to 2.667% for 2007-2009. In the COC’s report A/64/11, China's relevant GNI share amounts to 6.532%.

Additional statements by Angola (on behalf of the African Group), Cuba, India, and Indonesia clearly fell within the position statement of the G77 as a whole. India made the point that readopting the methodology now would save on conference costs and provide more time to discuss other, more pressing issues. Malaysia's statement, however, sounded somewhat more flexible as it did not seem to exclude some changes to the methodology when it said that: "we are of the view that drastic changes in Member States' assessments should as far as possible be avoided."

Upcoming Process for Negotiating Assessments

In the weeks following the plenary meeting of 5 October, informal negotiations did not lead to any change in positions. Apparently, Member States are expected to submit draft text for the resolution on this topic by the middle of November with informal consultations to resume on the 20th of November. The current programme of work for the Fifth Committee - prepared by its bureau - envisions the negotiations on the scale of assessments to finish on 8 December, allowing the budget to be agreed on by 9 December. It should be noted, however, that in previous budget negotiations, final decisions by the Fifth Committee did not conclude until just a few days before Christmas, after very tense meetings that lasted throughout the night.

While the 130 countries of the G77 constitute a large majority of the 192 member General Assembly and can determine the outcome of any issue when a vote is called for, decisions are ideally made by consensus. A vote on some of the key issues currently on the agenda would likely lead to further polarization between developing and developed countries at the UN.

According to some insiders, it is hard to imagine how the EU and other countries from the North could convince the G77 to reconsider key elements in the methodology used to determine the scale of assessments. Any attempt to break up the consensus within the Group is likely to prove very difficult in light of the fact that the G77 solidified its decision at its ministerial September meeting at the UN.

While making more funding available for development did result in some flexibility from the G77 on some issues a year ago, so far it is unclear what agenda item would sufficiently motivate the group as a whole to agree to some kind of compromise on the issue of assessments.

*Unless attributed to a specific source, all expressions of opinion in this analysis are those of the author. The Center for UN Reform Education does not endorse any particular reform proposals.