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Mr Chairman, Distinguished Delegates and Observers, Ladies and Gentlemen, each Session of the Council is asignificant event in the life of FAO, allowing us both to review achievementsand to plan for the future. Moreover, at times when the Organization is facedwith pressing problems and difficult decisions, this periodic self-examinationtakes on a special importance. This will undoubtedly be the case for theNinetieth Session which opens today. I should like to extend a very warm welcometo you all, and particularly to those Ministers of Agriculture who have paid usthe honour of attending.

I am also happy to greet twoeminent colleagues: Mr James Ingram, Executive Director of the World FoodProgramme, who is certainly well known to all of you and needs no introduction;and Mr Gerald Trant, Executive Director of the World Food Council, who took office recently and is attending a Session of our Council for the first time. Iam delighted to see them here, and their presence is indeed welcome.

There are many reasons why,today, it is essential for us to pick the right path. Now more than ever your guidance and your decisions will be instrumental in deciding the future of FAO,for you will be passing judgement on a range of tough measures renderednecessary by the unprecedented financial constraints now facing the Organization. Although. this subject will inevitably be at the forefront of yourdiscussions, the other agenda items are important too, and I hope you will be able to devote your full attention to them.

What does the background to thepresent difficulties reveal? A world-wide economic malaise, slightly allayed byattempts, still halting, at recovery.

Admittedly there has been a slight upturn: inflation has eased in most industrialized countries, interest rates are now more reasonable, and investment appears to be recovering. However, all this falls far short of an economic transformation. Growth levels in the industrialized countries remain disappointing, unemployment refuses to come down, and many nations are running budget deficits of alarming proportions.

The contraction in the world economy has had repercussions on international trade: the battle for markets has become even more desperate, and protectionism, already rife, is a growing temptation. Not surprisingly, Third World countries have been particularly hard hit, and the percentage share of their exports in the purchases of the industrialized countries, which has never been high, is now falling, while prices and the terms of trade have taken a further turn for the worse.

On top of this, there are huge financial problems. Indebtedness has reached dizzying heights and now even affects some of the wealthiest nations. In the Third World the situation is already intolerable, with debt-servicing absorbing nearly a quarter of export revenues. Pressure, however, continues to mount at the same time as financing possibilities commercial banks ate bowing out, soft loans, such as those provided by IDA and IFAO, are increasingly difficult to obtain because of delays in replenishment; and development aid is stagnant or declining. In many developing countries, moreover, capital outflows have begun to exceed inflows. International financing institutions have been assisting the most debt-ridden countries to set up recovery plans by which government expenditure is slashed, the currency devalued and wages frozen; but unless growth picks up sharply such measures are little more than palliatives. What chance is there of growth if imports have to be restricted for lack of foreign exchange, if investment stagnates for lack of funds, or if export revenues are squeezed by protectionism and the absence of sure markets?

It is indeed a bleak scenario, and I cannot see the situation improving without a radical reorganization of the international economic environment. However, the GATT talks have given us a slender ray of hope. For the first time ever the contracting parties agreed to review some basic problems regarding raw materials, and in particular to discuss the restrictions and distortions affecting agricultural commodities. I welcome this move and have already committed FAO to providing all the assistance, in the form of information and statistics, that may be required to further the discussions.

This difficult international context has left its mark on world agriculture. Since this is an important item on your agenda to which you will be giving careful study, I shall not dwell on it here.

Suffice it to say that the overall food situation for 1986 is satisfactory, although harvests have been a little less plentiful than in 1985. The main problem is that world markets are still unable to absorb grain surpluses. It is a problem that many Third World countries have had to face this year. Their excess grain has served only to depress domestic markets, as no openings have been found for it abroad. This is hardly a fair reward for all their- efforts, particularly when one considers that some of their neighbours have large food deficits.

This is a paradox worth pondering, but it is not the only one. While the world as a whole is burdened with food surpluses, malnutrition remains widespread. Underfed populations are too poor to constitute a market - a sure indication, if were needed, that food security is not just a problem of production but of income as well. If the world’s hungry are to be better fed, the struggle against poverty must be won first.

The world economic situation was bound to affect international organizations too. Once budget deficits reach intolerable levels, austerity measures must be introduced and expenditure curtailed. It is a thankless task, and I understand why politicians, who have to answer to public opinion, cut peripheral items first as being of less direct concern to their electors.

It is all too easy to include development aid, and contributions to the international organizations which manage it, in a list of cuts. Although the public responds generously to famines or earthquakes, it readily accepts economies such as these, not having a very high opinion of the work carried out by development bodies. Unfortunately the images the public has of these organizations are grossly distorted: bloated bureaucracies, squandered aid and high-living experts. Politicians, it must be said, are often the first to propagate such myths as a way of demonstrating their determination in budgetary matters.

This is easy enough to understand; domestic politics has its own demands. For my part, though, I deplore this situation, due to serious misunderstandings and, in particular, to a lack of proper information. I myself am proud to head this Organization; I only wish that my admiration for its staff, who work so hard and selflessly to overcome rural poverty and world hunger, was shared more wholeheartedly. I wish it were more widely appreciated, just as I wish that development assistance and Third World solidarity were more potent political forces rather than simply an excuse for indifference.

As for bureaucracies, I am the first to agree with the harsh comments made about them. It is a pity that the efforts that have been made here at FAO are not more widely known. For example, establishment costs accounted for 77 percent of the budget in 1975, but only 55 percent today; and during the same period administrative costs have fallen from 24 percent to 16 percent of the budget. As a result a greater proportion of resources have been allocated to field programmes. What better way to meet the needs of Member Nations?

I very much hope that the public will eventually come to have a more accurate idea of the role played by FAO and other international development organizations. I hope, too, that this understanding will grow and bear fruit. For the moment, however, we must face up to the facts; the financial problems will not go away and they need tackling with realism and foresight. I should like to run through them now, before you discuss them in detail.

As you are aware, the financial situation is determined mainly by the level and timing of payments due from Member Nations. When the situation was examined by your Finance Committee last September, it was already serious: it emerged that the usual problem of arrears in payments would be compounded by a delayed and reduced payment from the largest contributor. Moreover, Miscellaneous Income would also be lower owing to the fall in interest rates. The total shortfall was estimated at 58 million dollars, or around 13 percent of the budget for the 1986-87 biennium. Cash flow problems, however, were not expected; and despite the fall in the dollar it was thought that the resources in the Special Reserve Account would be just enough to see the Organization through until November 1987.

In view of the unexpected shortfall in resources, the Committee requested me to take appropriate action. At the same time, given estimated contributions outstanding at the end of the biennium of some 65 million dollars, the Committee appealed to all Member Nations to honour their commitments to the Organization.

This already disturbing situation has since been made worse by a law passed in the largest contributing country which limits payments to FAO and other international organizations. However, our information is changing all the time, and the figures I am giving you today are even less encouraging than those appearing in Council documents. The legislation provides for a contribution at a substantially lower level than expected, resulting in a total shortfall for the budgetary period in the region of 92 million dollars, or 34 million more than that foreseen in September.

In these circumstances, is it possible to avoid cash flow problems arising between now and the end of the biennium? After consideration of all the options, I now propose, albeit with the greatest reluctance, what I believe to be an effective strategy. It will be your task to review it and decide on its implementation. My chief concern has been to limit the damage to the Programme of Work approved by the Conference, so I have confined myself to proposing adjustments. Although implementation of some elements in the Programme will be slowed, essential activities are not affected. Moreover, since Member Nations attach particular importance to operations under the Technical Cooperation Programme, I have deliberately not sought any reduction there. The proposed plan should yield savings of around 16 million dollars, and the remaining 13 million or so dollars will have to be met by drawings from the Working Capital Fund. As you know, the existing regulations empower me to take this kind of action.

These measures should enable us to avert a serious deterioration in the situation between now and December 1987. However, we would still have to carry over into the next biennium obligations totaling some 60 million dollars. I should also mention that the total arrears due to the Organization at the beginning of 1988 would amount to 98 million dollars. Any further de1ays in receipts would leave me with no other alternative than to borrow a so of around 30 million dollars to meet cash flow requirements.

In the short term, therefore, we do have a way out. Solutions exist even if they are not very satisfactory. However, I make no attempt to hide my concern for the future, since nothing indicates that the situation in the next biennium will be any better. How would future budgets be affected by further delays in contributions? By yet another increase in arrears carried over? By changes in national legislation modifying commitments already made? By continuing exchange rate fluctuations?

Like agriculture itself, our Organization needs time and continuity. It is difficult for it to work effectively if its budget is insecure or its programmes uncertain. A sound financial base is essential.

You know how much importance I attach to financial soundness. I can truthfully say that it has been a guiding principle of FAO managers for over a decade now. Moreover, the results have confirmed our prudent stewardship: I need only point to the substantial cash surpluses which have been redistributed regularly to Member Nations on completion of the programmes of work.

To maintain this financial soundness and safeguard it from budgetary insecurity is, for the time being, my major concern. This is the basic problem that will have to be submitted to the next Session of the Conference, but we should do well to start thinking about it at this Session of the Council, since the financial constraints are there to spur us on. The documents you have before you outline some ideas on possible approaches. Before taking any further steps, I am keen to have your opinion and the benefit of your advice.

Before leaving this subject, I should just like to make one more point. The financial difficulties in which FAO finds itself affect the whole of the United Nations System. My colleagues in the other Agencies have had to face similar problems, and I am sure that their approaches will also contribute to effective solutions.

During this Session we shall be examining the activities of our Organization; there is therefore no need for me to say much on the subject. You will, however, allow me to draw your attention to one or two of the activities undertaken during the past year to which I attach particular importance.

I should like first of all to talk to you about emergency relief, since unfortunately there is never a year without some tragedy requiring quick action by FAO.

This year - and it is a good sign - I have not had to give priority to famine control. We have been granted a respite from drought, and only a few countries, all in Africa, are in a difficult situation; the international community should be in a position to meet their needs. In this connection, I cannot over-emphasize the importance of our becoming increasingly well- equipped to intervene promptly when such problems arise. As you know, FAO is gradually setting up a global information and early warning system designed to monitor continuously trends in the world food situation. I intend, despite financial difficulties, to go ahead with the establishment of this System and to ensure that its resources are strengthened.

Shortages are not the only problem encountered by food aid policies. There is another one to which I must draw your attention, namely, that of the cereal surpluses which arose this year in some African countries, particularly Zimbabwe - I have even learned recently that Burkina Faso has a surplus of 200 000 tons of millet and sorghum, that it would like to sell; and there are other African countries, too. These surpluses have not found a market, and it would appear logical that they be used to supply deficit countries. This is why I suggested that donor countries make an effort to purchase some of these surpluses for countries that need them. I am happy to note that this idea has been well received and will, I hope, be put into practice more frequently.

This year the emergency situation has been due to a forgotten scourge: locusts. With the return of the rains, they have been threatening many African countries. To deal with this considerable funds have had to be raised, and FAO has made every possible effort in this connection. A US$35 million international campaign was launched, with, as you know, the emergency unit I created within FAO as the real nerve centre. May I take this opportunity to extend my warmest thanks to the many donors who responded so generously to FAO’s appeals and supported this emergency action.

Today I am happy to announce to you that the danger is largely over and that serious food shortages have been avoided in East and West Africa. However, we must not slacken our efforts, since action will still be needed in several countries next year; above all, we must not lower our guard, since the eradication of this scourge is never final.

This year has also highlighted another source of anxiety, that of contamination by radioactivity. The Chernobyl accident, as you all know, caused grave concern for European agriculture.Products that might have been contaminated had to be withdrawn from the market, and grazing land and livestock had to be thoroughly checked, not without considerable difficulties. To avoid similar mistakes in the future and be in a better position to assess the risks for agriculture, governments felt the need for international action, and they turned to FAO. I immediately made arrangements, through our Joint Division with the International Atomic Energy Agency, to start up programmes to define standards of contamination, to study agricultural practices in the areas affected, and to set out measures to be taken in agriculture in the case of a fresh alarm - to name just some of the actions. I hope you will agree with me on the priority to be accorded to these programmes.

Forests have occupied an important place in recent FAO activities. The essential task in this field is to implement the Tropical Forestry Action Plan prepared with the assistance of our Organization. This task is at present under way, and I am particularly pleased to note that there has been very broad international cooperation in the preparation of programmes and detailed projects. FAO is playing a crucial role, particularly with regard to coordination. Also, it is a pleasure to recall FAO’s part in organizing the International Conference on Trees and Forests held this year in Paris I myself attended this Conference, which several Heads of State or of Government honoured with their presence.

This period has also been marked by important meetings, particularly the five FAO Regional Conferences, which I attended in person. These Conferences provided an opportunity for valuable discussions on the particular interests of each region; I am sure that they will serve as an ideas bank for the preparation of the next Programme of Work. In this connection, the Regional Conference for Africa stands apart from the others, since I had to submit to it the findings of a study on agricultural development in Africa which the Harare had requested from me two years before. I will say something about this presently. The Africa was honoured by the presence of the Chairman of the Council and the Secretary-General of the Organization of African Unity. At the Conference for Latin America and the Caribbean, participating nations asked me for an in-depth study of long-term agricultural prospects in the region. I trust that FAO will be able to reply positively to this request; for my part, I hope that the results will be as fruitful as they were in the case of Africa

I should like to mention the last Session of the Committee on Food Aid Policies and Programmes. This Session provided an opportunity for a very far-reaching examination of our activities, and I think I can say that collaboration between FAO and WFP came out of it strongly reinforced. This will, I am sure, lead to increased efficiency in the services of Member Nations. During that Session and after consultation with members of the Committee, I had the pleasure, on behalf of the Secretary-General of the United Nations and in my own name, of conferring on Mr Ingram a fresh mandate as Executive Director of WFP. His efficiency, his dynamism, his dedication to the cause of development are well known; he will, I am sure, continue to display these qualities, and their effect will be felt in all the activities of the Programme that he has been directing now for nearly five years. He is well aware that he can count on my support in his important task.

Lastly, I should like to return briefly to our study of African agriculture, since I have drawn some conclusions from it with regard to agricultural aid policies and I should like to submit them for your consideration.

Africa has been a major cause of concern to the United Nations this year. As you know, the General Assembly held a Special Session on its problems, and adopted a rehabilitation plan placing particular emphasis on priority to agriculture. Invited, like other United Nations Agencies, to do everything possible to translate this plan into a concrete programme, FAO prepared a Programme of Action covering its field of competence.

I had the honour to present this Programme of Action, based on the findings of the FAO study, to the Fourteenth FAO Regional Conference for Africa held last September. I had the great satisfaction of seeing it adopted and of realizing that, for -the Conference, the proposed programme was closely in line with the resolutions of the Special Session of the United Nations General Assembly - I think it is no exaggeration to say that the programme probably constitutes their first concrete application.

I am happy to note that His Excellency Mr Denis Sassou Nguesso, current Chairman of OAU, kindly confirmed the approval granted by the FAO Regional Conference when he addressed, on behalf of OAU, the present Session of the United Nations General Assembly. Moreover, he has paid me the great honour of inviting me to present our proposals for action to the Steering Committee of OAU which will examine next December in Brazzaville the implementation of the rehabilitation plan. As you can see, things are moving!

I particularly want to inform the Council of one of the recommendations in the Programme of Action. This was an appeal to donor countries to expand considerably the aid-in-kind that they are already providing on an ad hoc basis to agriculture in the poorest countries. Production, as everyone knows, requires inputs, equipment, means of transport and many other manufactured goods. The Third World, crippled by debt and short of foreign currency, is hardly in a position to make the necessary financial efforts. I think, however, that developed countries, whose industrial capacities are often under-used because of the crisis, could make an exceptional effort to supply such goods on easy terms. I am convinced it would be in their own interest in the long term.

I see in this form of aid one of the keys to agricultural recovery and an ideal way of circumventing the obstacles encountered at present by financial aid and investment programmes. The Regional Conference for Africa, anxious to see this idea put into practice, requested me to study it further. I indicated that I would be happy to do so if the Council gave me such a mandate and if a consensus became apparent among both donor and recipient countries. This is the proposal I am submitting for your consideration; you will find it set out in the documents before you.

I should, however, like to make it clear that this proposal for an expansion of aid-in-kind was conceived and developed in the light of the African situation alone. Now that it is before the Council of FAO I think it essential to extend its range. However vast the needs of Africa may be, this is no reason to neglect those of all too many countries in the Third World , so I am inviting you to consider the possibility of such aid on a global scale.

This Ninetieth Session is therefore opening in somewhat inauspicious circumstances: the still uncertain situation of the world economy; the aid crisis and increasing problems for the poorest countries; financial difficulties in our Organization and serious threats to its programmes.

In these troubled waters, FAO must hold its course. In the last four decades it has become an indispensable bulwark of food and agriculture. In the developed countries, where services and enterprises proliferate, its role is certainly not of paramount importance and its activities do not claim much interest from the general public, which is subject to so many other calls on its concern. But in the poor countries, of which there are so many on the planet, it is quite different. The majority of the population still depends on agriculture for its livelihood; malnutrition and rural poverty are everyday realities. As you know all too well, these countries have few resources available for education, extension work, research and administration. The importance of aid thus can only be measured by the poverty of the recipient.

You will therefore understand my anxiety when I see the Organization’s Financial situation threatened. You will understand my concern to establish mechanisms for its long-term consolidation. You will understand that we cannot fail all these countries that are waiting for our services and have no alternative solution.

This Session of the FAO Council therefore calls for your most earnest attention. Because of delays in the payment of contributions we are confronting serious funding problems, which unfortunately seem likely to last. What is at stake - I am not afraid to say so -is nothing less than FAO’s work in its fifth decade and its ability to maintain its role in food security and agricultural development. I do not doubt for one instant that you share my concern over this problem. Nor do I doubt that you will find the right solutions.

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