I have the honour to submit to the Conference proposals for the Programme of Work and Budget for 2002-2003.
Members will recall that at the last Conference they adopted the Strategic Framework covering the period 2000-2015. This landmark document not only set out, for the first time, the major policy orientations for the Organization over the longer term, but also laid down the essential elements of an enhanced programming and accountability process. Accordingly, the Medium Term Plan (MTP) proposed a programme over the shorter horizon of 2002-2007 which directly addressed the twelve Strategic Objectives set out in the Strategic Framework. The programme detailed in the MTP was endorsed by the Council in November 2000, as the blueprint of what FAO should do for the next six years.
Therefore, the formulation of this biennial Programme of Work and Budget has had the advantage of being firmly based in these two documents. It has also benefited from the complementary guidance on sectoral priorities provided at the sessions of the Technical Committees of the Council held in the early part of 2001.
In the Summary PWB, I highlighted the additional demands that were being placed upon the Organization both as a result of the need for support to the Membership in meeting the commitments made at the World Food Summit (WFS), and consequent upon the outcome of the Regional Conferences and the various meetings of the Committees of the Council and the Council itself. I will not repeat these here - suffice it to say that there has been no respite in the demand for FAO's services.
The Summary PWB proposals presented to the 120th session of the Council in June 2001, through the Programme and Finance Committees, were framed precisely to respond to the maximum extent possible to these demands. They embodied a real growth percentage level of 5.4 percent over the present approved budget at constant cost levels and at the same budget rate of exchange - a compromise which some Members criticised given their endorsement of the increase of 9.6 percent which was indicated in the MTP as highly desirable for the 2002-2003 biennium.
I explained then why the Executive Head of an Organization charged with such an important mandate as the eradication of hunger and malnutrition, considered it his duty to invite the Membership to accept resumption of real growth under its Regular Budget. The same compelling logic obliges me to reiterate this invitation in the context of these full PWB proposals and to seek acceptance of real growth in the order of US$ 35.5 million.
In short, when the annual rate of reduction in the number of under-nourished in the world is woefully inadequate in the light of the already conservative target agreed at the World Food Summit; after having exhausted realistic, as opposed to theoretical and potentially disruptive, possibilities offered by structural reforms and efficiency measures to cope with a protracted situation of declining resources; and given the impressive list of demands placed on FAO, which I presume the Membership wants translated into tangible actions and not to remain pious hopes, surely the same Membership should be prepared to allocate more resources to this Organization after more than eight years of budgetary decline and stagnation?
Yet, there was no agreement on the budget level at the last Council. This lack of consensus was accompanied by requests from some Members that several scenarios be prepared, including one for zero nominal growth. However, in the absence of any indication of where the reductions could be made to achieve such a scenario, I have been unable to meet that request.
Turning to the programme content of the proposals in this full PWB document, I note that most Members of the Council supported the balance proposed in the strengthening of FAO's technical programmes when considering the Summary PWB. Hence the proposals before you embody priorities in the same vein as those in the Summary, with some adjustments to take account of recommendations made at the Council, particularly as regards the relative allocations for fisheries and forestry, as well as for the TCP. The major highlights remain: to allow for selective increases under high priority technical activities; to raise the share of the TCP Appropriation as requested by the majority of Members; and to strengthen the breadth and depth of FAO's work at the country level.
As advised to the Council in June, the consequences of a possible zero real growth scenario are explained in the document.
I now turn to the other two factors which affect the level of assessed contributions on Members: cost increases and the exchange rate.
It is recalled that the Secretariat provided a supplementary paper to the Council with the latest data on cost increases which at that time were estimated at US$ 49 million assuming the budget rate of exchange for the current biennium of 1=US$ 1.0327 (US$ 1=Lire 1875). The same supplement also provided an initial calculation of the effect of the stronger US dollar on the cost increases but did not anticipate at that time the much more favourable rates experienced during July.
The wide variations in exchange rates and hence in the amount required for cost increases are of great concern to me. This is particularly so when virtually all of the professional advice on the subject suggests that at such rates the US dollar is over-valued and that some weakening is expected over the forthcoming months. Such a weakening would reduce the purchasing power of whatever amount is eventually approved for the budget, and therefore I have concluded that it is in the interest of the Organization (i.e. the Members and the Secretariat which serves it) that we take advantage of the strength of the US dollar by entering into a forward purchase contract to cover our Euro requirements at current expenditure rates for the entire biennium 2002-03.
I am pleased to report that this has been accomplished at an effective average rate of 1=US$ 0.88 (US$ 1=Lire 2,200) which I propose also be used as the budget rate of exchange, given that the contract guarantees this rate for the two year period covered by the proposed budget. For this reason, cost increases are calculated and applied at this rate of exchange throughout the document.
The good news arising from this action is that cost increases are now estimated to be slightly over US$ 3.2 million, with the consequence that they have a limited effect on the assessed contribution of Members. In fact, the net increase sought is 6.0% covering both the growth proposals in the document and inflationary trends.
I would like to turn briefly to the format of the PWB, where we are continuing with improvements in the light of Members' comments. I therefore draw the main points to your attention:
Such changes are not a matter of policy but I mention them to remind Members of our desire to be as responsive as possible to their concerns.
In conclusion, I look forward to the Members of this Organization renewing their World Food Summit commitment as expressed in 1996 at the highest political level. This opportunity will come into being through the World Food Summit: five years later, which will take place during the Conference. I trust they will also renew their expectation that FAO should contribute - albeit modestly - to supporting their own efforts and continue to serve as an international forum in its important domains of competence. It follows that I hope that Members, in renewing that commitment, will recognise the consistency between that act and the need to approve additional resources for the work of this Organization.
In this Introduction to the PWB proposals, I have chosen to use words in full consonance with what my conscience dictates I advise the membership at the current juncture. Managers are aware that when making the case for needed increases of resources to the stakeholders, they take a measured risk of being criticised or misunderstood. I accept that risk, trusting that the message will be considered on its merits. The final decision, as always, belongs to the Members assembled in the Conference.