CHAIRMAN: To those delegations who have been here since the scheduled beginning of the meeting, may I apologise on behalf of some other delegations for the late start. We have only just achieved a quorum.
We have a three-part agenda this morning. First we will take up Conference Agenda Item number 21 which includes the financial position of the Organization and the Payment Incentive Scheme. This first item is for information. Any delegations wishing to do so may make a statement. Statements submitted in writing for the record will be reproduced in full in the Verbatim.
After discussion of the financial position we will take up the proposal of the Director-General to discontinue the Payment Incentive Scheme.
As you agreed on Friday, following our decision on that item we have invited a representative of FAO staff members to address the Commission briefly. After the address by the staff member, the Secretariat will be available if there are delegations who have any questions. Following that, discussion will move directly to the adoption of REP/1 and REP/2, which record the discussions we had on Friday. Both of these documents are available at the documents desk. Unless there are any questions or comments we will turn our attention to the financial position of the Organization.
Since the document C 95/LIM/16-Sup.l was published three additional members have made payments. The document I have just cited was updated as of 25 October. Since that date, Guinea Bissau has made a payment of US$70 000, Ethiopia has made a payment of US$65 380, and Mozambique has made a payment of US$29 640. With the addition of those three you have an accurate record of the status of payments as of this morning.
We now turn to the proposal by the Director-General to discontinue the Payment Incentive Scheme which Conference adopted four years ago on an experimental basis.
Elmer S. OWENS (Director, Finance Division): The Commission has before it this morning document C 95/LIM/26 which for the information of the Commission contains extracts from the document submitted to the Finance Committee at its 86th Session in September of this year. This item was discussed at length in the Finance Committee. I draw the attention of the Commission to page 2 of C 95/LIM/26. The Table contained in paragraph 11 shows the results of the three years preceding the introduction of the Discount Schemes and the three years in which the Discount Scheme has been in effect.
If the Commission would look at the amounts received during the first three months of the year for the three years 1990 through 1992 compared with 1993 through 1995, this indicates the scheme has not been a contributing factor to the timing of receipt of contributions. In fact, there has been an increase in the number of Member Nations which have paid within the first three months. During that period, the total amount received from Member Nations paying their assessment in full during the first three months has not equalled or exceeded the amounts for the three years preceding the introduction of the Scheme. In the light of this experience of the three years in which it has been in operation, the Director-General strongly recommends the Scheme be discontinued, since it has not proved effective, while it has had the effect of reducing the interest income of the Organization, in turn reducing the amount of Miscellaneous Income available, which in fact results over time in an increase in Member Nations' contributions.
At the 109th Session of the Council preceding the start of this Conference, Council was informed that the Discount Scheme has not had the desired results. However, since there was no general consensus on the recommendation of the Director-General, Council decided to refer this matter to Conference for its consideration and decision. At this point I have no further comment to add.
CHAIRMAN: On behalf of the Commission, may I ask two questions? If the Discount Scheme is discontinued, what would be the impact on the payments in 1996 of those countries who paid their full assessment during the first quarter of 1995? If the Discount Scheme is discontinued, what would be the impact at current interest rates over the biennium - and over a normal biennium because it will impact on one year of the coming biennium - and what happens to assessments if the Discount Scheme is discontinued?
Elmer S. OWENS (Director, Finance Division): In regard to your first question, a total of 31 nations which paid their full assessments before 31 March 1995 would receive a credit against their 1996 contributions. We have to remember there is one criteria in the Discount Scheme - the discount is paid from interest income so there has to be a net positive interest income for the year, but assuming that to be the case, those countries who paid in 1995 would receive a credit against their contribution due for 1996 at the rate approved by the Finance Committee in its September Session.
As regards your second question, Mr Chairman, the impact for the next biennium, if the Conference approves the discontinuance of the Scheme, would be approximately US$1.4 million or US$1.5 million in discounts which would be credited in 1997. Assuming the payment pattern is the same and assuming the same number of Member Nations pay before 31 March, it would be approximately US$1.4 million to US$1.5 million in discounts which would not be applied to 1997 and which would remain in Miscellaneous Income. In future biennia it would be approximately US$3 million in savings in Miscellaneous Income. I think I have responded to the question. If you need further clarification I will be glad to provide it.
CHAIRMAN: The floor is now open for discussion. I remind Members of the Commission that we are requested to make a decision on the proposal of the Director-General.
Ernst ZIMMERL (Austria): We have heard that the early payment Incentive Scheme has not worked, and the same thing also shows in the document. When I look at the percentage paid at the end of March there is no real increase. In previous years the Incentive Scheme has produced about 35 percent and this year it has produced only a little more, 40 percent, so it was really not an incentive.
Therefore, we must ask ourselves why it was not an incentive. I think there are two reasons why. First, a Member Nation does not know at the time of early payment how big is the incentive, because it does not know how big the interest income will be during the year. Secondly, in looking back, Austria has always had this incentive, and the incentive was too little.
Last year, in our case and also in that of others who paid early, it was 0.88 percent. I do not believe that an interest rate of 0.88 percent is an incentive; it is perhaps a disincentive. If I put my dollars on an account I receive a higher interest rate than 0.88 percent.
I can agree with the Director-General's proposal to discontinue this scheme. If the situation worsens in the future we should perhaps see if we can find another scheme.
Four years ago we also discussed a scheme which might punish the late payers. That is not a proposal which I make now but, if the situation does not improve in the future, perhaps at the next Conference we could consider such measures.
CHAIRMAN: Just a comment on your arithmetic - the 0.88 percent is for one quarter only. The annualized percentage rate would be closer to 3.5 percent as interest on that payment.
Sra. Ileana DI GIOVAN BATTISTA (Argentina): Gracias señor Presidente. Señor Presidente, la cuestión planteada, evidentemente, no es una cuestión política, ni ética, es simplemente una cuestión práctica, instrumental; por tanto, la base de nuestra decisión debe ser la evaluación de los efectos de esta práctica o de este mecanismo en el pasado y, al mismo tiempo, la estimación para el futuro del probable impacto de la supresión del esquema en el próximo bienio.
Ahora bien, se nos ha explicado por la Secretaría que de todas maneras, con la aplicación del esquema habrá un crédito para el año 1996 a la tasa aprobada por el Comité de Finanzas para los países que han cumplido puntualmente con sus cuotas. De tal manera que si se suspendiera el esquema, el efecto de esta suspensión se vería en 1997 y lo que estaría en juego sería alrededor de un millón y medio de dólares.
Señor Presidente, dadas las consideraciones expresadas por algunos miembros del Comité de Finanzas y por el propio Director General, la delegación Argentina apoya que sea discontinuado este esquema, es decir, que sea suspendido durante este bienio. Sin perjuicio de ello, el Comité de Finanzas observará el efecto de la suspensión de este esquema durante este bienio y podría proponer, como dijo la delegación de Austria, algún esquema alternativo de incentivos a los pagos o de desincentivos a los incumplimientos.
Pero creo que sería una buena oportunidad observar en el año 1997 cuál será el efecto de la suspensión de este esquema.
John Egan McATEER (United States of America): As a member of the Finance Committee, the United States actively participated in discussions on the issue of improvement of the collection of contributions. The United States wholeheartedly supports the Director-General's recommendation to discontinue the Discount Scheme, given its cost and the negative impact on Miscellaneous Income.
The findings of the Finance Committee reported in C 95/LIM/26, that during the three years in which the Scheme has been in effect the rate of receipt of current contributions in full does not exceed that of the three previous years, indicates the wisdom of discontinuing this plan. The trend that the Finance Committee noted would indicate that the Scheme is not a contributing factor in the timing of receipts of the larger contributors to the Budget and, consequently, does not have the desired beneficial effects on the cash flow of the Organization. We therefore think that it should be brought to an end.
CHAIRMAN: Thank you, USA. For an alternate view, I turn to Canada.
Robert F. ANDRIGO (Canada): I cannot quite understand why you would say that, Mr Chairman. I find the concerns of the Finance Committee and of this assembly salutary in respect to the financial straits in which the Organization finds itself; but I am also struck by the fact that we are looking to punish the virtuous.
What we are proposing in this piece of paper is to look at the extent to which those who pay, and on time, actually might be asked to pay a little more than they currently do. We are looking at the wrong end of the telescope on this and, in this respect, I come back to what we said in our intervention on the Programme of Work and Budget.
I believe that the real problem here is not the payment on time by those who do so and the small recompense they receive for that, but rather it is the additional cost to those who pay that is imposed on them unilaterally by those who do not pay or who pay late. The Secretary will probably bear me out: that as a result of the late and non-payment by members of their contributions, the impact is to increase the assessed contributions of all members and, most particularly, of those who pay by about four percent or five percent per biennium. Consequently, it is rather contradictory not at least to attempt to reward the responsible behaviour of those who do pay on time.
Before we claim that this particular measure has no impact, we need to recall the fact, as did my Austrian colleague, that our national treasuries do look at the opportunity costs of investments in this Organization or elsewhere. I would not gainsay the possibility that our treasuries, looking at the return that they do receive on early payment of the FAO, are indeed induced to pay on time. The removal of this Scheme, especially at this particular point in time when treasuries are looking for ways of economizing, may well be much more negative than that which is contained in this report.
Unless and until we can put a measure in force which appropriately punishes negative behaviour, therefore, we would not be in support of the removal of this Scheme.
XU NANSHAN (China) (Original language Chinese): The Chinese delegation has given serious consideration to the documents prepared by the Secretariat on the Director-General's proposal to recommend the discontinuation of the Incentive Scheme.
At the present time, since we have not adopted new measures, we believe it is much better to use the present measures rather than to discontinue them. The continuation of the present measures will at least bring some comfort to those countries which have paid in time.
Moussa BOCAR LY (Sénégal) : Monsieur le Président tout d'abord sur le point concernant la situation financière de l'Organisation, vous avez dit qu'il n'y avait pas d'intervention. En effet, mais j'espère simplement que ce que vous voulez dire par là c'est que nous prenons en compte les conclusions contenues dans le document C 95/LIM/16 puisque personne n'est intervenu. En effet les observations venant du Conseil impliquent d'être prises en charge. Ceci dit sur le plan d'incitation au paiement rapide des contributions je crois que le document C 95/LIM/16 n'a pas totalement reflété la réalité car le Comité financier était plutôt partagé - ce qui apparaît dans le document 26. Si certains ont dit que ce plan n'avait pas produit tous les effets escomptés et revenaient un peu plus cher, il reste que d'autres ont soutenu qu'en l'absence d'un autre système, il vaudrait peut-être mieux continuer ce plan d'incitation.
Puisque le Secrétariat a dit qu'il était disposé à écouter les questions, j'en poserai une moi-même: dans la mesure où la deuxième et la première commissions ont exhorté le Directeur Général à poursuivre ses efforts pour le paiement rapide des contributions, je me demande comment le Secrétariat lirait cela par rapport au plan d'incitation et je voudrais bien que devant cette exhortation de la Conférence, le Secrétariat puisse nous dire comment le plan d'incitation pourrait s'agencer dans cet appel fait par la Conférence au Directeur Général pour qu'il continue à intensifier ses efforts pour récupérer les contributions à temps.
Ceci dit, je crois que notre Commission pourrait, dans la ligne de ce qu'a dit le Conseil, proposer que ce plan puisse être continué tout au moins jusqu'à l'exercice prochain et, à ce moment-là faire une variante, étant entendu que la commission financière pourrait proposer une solution alternative c'est-à-dire un plan plus incitatif.
Voilà ce que notre Commission pourrait retenir pour tenir compte aussi bien des travaux du comité financier que de ceux du Conseil et de l'appel récent de la Conférence.
CHAIRMAN: In an attempt to have a dialogue both amongst members and between members and the Secretariat, let me now call on Mr Hjort, representing the Director-General, to answer the question from Senegal.
DEPUTY DIRECTOR-GENERAL: Thank you, Mr Chairman. In a general way, the lessons from alternative ways of trying to encourage timely payments in the entire UN system is that penalties work; incentives do not. There are, I believe, two organizations in the United Nations system that have a penalty scheme in operation, the UPU and the ITU, both small organizations, but their record is in marked contrast to the rest of the system where they do not have a penalty system. So in searching for measures to accomplish this objective, it is, I suspect, time once again to consider the Penalty Scheme rather than an Incentive Scheme.
As indicated in the documents before you, it does not appear to us that the Incentive Scheme has had a positive impact and certainly not an impact of a magnitude equal to the loss in miscellaneous income. In this context, I wish to remind the Committee of the decision taken by the Conference last Friday evening. If this
Incentive Scheme is continued, there will be a loss of US$3 million in Miscellaneous Income. If the Incentive Scheme is discontinued or, as the Representative from Argentina has suggested, suspended for the biennium, there will be US$3 million more in Miscellaneous Income. While that might not sound like much relative to the US$76.4 million that we have to find, it is significant.
Kenji SHIMIZU (Japan): Japan has had difficulty with the Incentive Scheme itself since its outset, as a matter of principle for a Member Nation. This position exists everywhere in all the international organizations, and as for FAO, this Organization, it now needs a sound financial base more than ever before. Therefore, my Delegation is able to support the Programme of the DG to eliminate the Scheme.
This position also has reflected the fact that the Scheme did not result in expected progress. My Delegation also noted very seriously that, as just stated by Mr Hjort, that penalty worked in all the United Nations organizations, which my Delegation was able to associate itself with, as I stated at Commission II of this Conference as well as at the last Council.
Igor MARINCEK (Switzerland): Thank you, Mr Chairman. Last Friday we agreed in consensus on a realistic budget. In paragraph 2 of this Resolution, which we approved, we recall that in order to implement a Programme of Work, Members have to make their Member contributions; so now we need to have solid financing. As we all recall, the budget will ask higher assessments from us of about US$80-US$90 million than in the present biennium.
Now it is time to take the second step. After having approved a realistic budget, we now need to approve a way to have solid financing of it; so the question of incentives/penalties is very important. The Incentive Scheme is, on the one hand, a financial question; on the other hand, we also have a political question in this respect. It is financing of the Miscellaneous Income. The Incentive Scheme is something which we put on the burden of the Organization. We should try to find a solution which is on the burden of the Members. That is why my country supports a Penalty Scheme. And we see also that the document recalls that in those UN Organizations where we have a penalty scheme, the financial discipline is a very good one.
We should also see that here we have some sanctions, some existing schemes for sanctions. Now, it seems that the sanctions with respect to Council Seat loss work but the sanctions with respect to Right to Vote in the Conference do not work, and we have been shown this again at this Conference.
As you know, we have now, I believe, 26 or 29 countries which still are at risk of sanctions. I would propose that in future, in the financial reports of the Organization, we have regular reporting on this. For the moment we do not have regular reporting. I think it is important that we have it.
This Discount Scheme which we have when we look at the success -I would share my opinion with the Austrian delegate - for those who look at the question in financial terms, it is not really an incentive because there are alternatives which are more interesting. When we look at the performance, we see that the discounts per year have increased; so we have a small success. But clearly, it is not very relevant for the financial situation of the Organization; so we cannot say it was not successful, but it was maybe successful but not very relevant.
In the discussion of the Council preceding the Conference, we heard the Australian delegate remind us how high the foregone interest income would be, if every country were to pay as it is stated in the Financial Regulations of this Organization. Then the miscellaneous income would be much, much higher. It seems that the foregone interest income is of the size of US$30-US$35 million per biennium. That is a very important amount. And if this is the amount which, according to the Secretariat, is the right amount, I think we should also put this in the report, that is, the foregone interest income.
We have also the actual interest income, which is maybe about US$9 million -I would like Mr Owens to give us this figure as well - we have that part of the interest income which is given back to the good payers in the Incentive Scheme. So the potential interest income for the Organization, which would be an income under "Miscellaneous Income", is very, very relevant. And obviously, that is what could be gained by this
Organization if we had a penalty scheme, if we had the payment pattern those organizations have which have a Penalty Scheme.
My delegation strongly advocated a differential treatment between good payers and bad payers when the question was discussed in the Finance Committee. If we do not have a differential treatment, we have a disincentive for good payers. And I think, in particular now, where we are challenged to have a solid financing of this forthcoming biennium, it is important that we do not have this kind of disincentive.
So in order to conclude, my country is in favour of a differential treatment; it is in favour of a penalty scheme. Only if there is no possibility of finding agreement on a penalty scheme, our fallback position is to continue with the Incentive Scheme. This is not the scheme we would favour because it is a scheme which is on the shoulders of the Organization and not on the shoulders of the Members, but we cannot agree that we do not have a differential treatment at all. Either we could come to an agreement here at the Conference on the penalty scheme or we should give the Finance Committee a mandate to look into the matter and make clear proposals to the next Conference, but my delegation would favour a more rapid decision on this. Thank you.
CHAIRMAN: Thank you, Switzerland. Let me ask Mr Owens if he could answer the questions at this point.
Elmer S. OWENS (Director, Finance Division): I believe the specific question from Mr Marincek was the interest earnings of the Organization under the Regular Programme. I have the figure for 1992-93 here in the Audited Accounts, which was US$4.3 million. The interest rates were a little lower in 1992-93 than they are in 1994-95; so I would suggest that the interest earnings for this period would be slightly improved. I do not have those figures in the room with me, but approximately half of our miscellaneous income at this time is from interest earnings.
CHAIRMAN: I believe there was a second part to the question.
If all contributions were paid in the first 30 days of the calendar year, what would the approximate interest income be for the year?
Elmer S. OWENS (Director, Finance Division): I have not actually sat down and calculated that, but the figure cited by Mr Marincek of US$30- US$35 million, depending on interest rates, seems reasonable over a biennium. We can calculate that and get that information back to you or have it included in the report if you wish.
Tore ZETTERBERG (Sweden): The statement on contributions clearly indicates that some radical measures are needed to come to grips with late payments and arrears. Like the delegations of Austria, Switzerland, and others, we agree that some fresh thinking must be done on how to get members to pay on time.
One could be less generous with voting rights for slow payers. My delegation found the General Committee a bit too lenient in document C 95/LIM/28 when 15 Members were authorized to vote having requested special consideration under Article III. 4 of the Constitution. For the future this has to be changed.
Other measures that could be contemplated are to bar such slow payers from keeping or taking seats on the FAO Council hencewith. Further activities could be to deny such countries the right to nominate candidates for posts in the Secretariat of FAO.
In conclusion, I mean to say that it should hurt to pay late or not at all.
Francis Montanaro MIFSUD (Malta): We have looked at the documentation for this item, and have carefully listened to what the Secretariat has had to say to us. We feel however that the Secretariat's point of view is too narrowly an accounting point of view. Of course, you might argue that the Incentive Scheme has not induced enough early payers, and it is more than likely that the early payers would have paid with or without an Incentive Scheme.
However, we feel that this is not a main issue. The Organization is in need of resources and in need of those resources when they are due. What is happening at present is that the early payers are financing the late payers. We are therefore very prudent in this matter, and would not like the Scheme to be abandoned so early.
Mr Hjort has told us that in his experience and in the experience of other organizations penalties work -incentives do not. What is happening at the moment is that the early payers are being penalized.
I would therefore suggest that we do not discontinue this Scheme without introducing a Disincentive Scheme comtemporaneously for late payers.
Patrick PRUVOT (France): Le plan d'incitation semble poser problème à certains, ici, il nous semble pourtant qu'en l'absence d'autres mesures existantes qui pénaliseraient les retards ou les non-paiements, le seul moyen positif, pour reprendre le mot de notre collègue du Canada est, en fait, une reconnaissance des Etats Membres vertueux. Les recettes accessoires, comme l'a souligné le délégué de la Suisse, augmenteraient bien plus si les pays membres concernés s'acquittaient tout simplement de leurs contributions, et n'accusaient pas de retard dans leurs versements. A cet égard, nous pensons qu'il conviendrait sans doute que les Etats Membres s'appliquent à eux-mêmes la rigueur financière qu'ils exigent de l'Organisation. Nous estimons donc qu'il est important de maintenir le plan d'incitation tel qu'il existe actuellement sans pour cela négliger l'application des sanctions telles que prévues par les textes ou d'envisager d'ailleurs tout programme d'incitation sur une base qui pourrait, par exemple, être le manque à gagner de l'Organisation du fait du retard de paiements de certains contributeurs.
Jalal RASOOLOF (Iran, Islamic Republic of): Having had the very useful explanation by Dr Hjort, it seems very logical to support the Director-General's proposal for discontinuation of this Scheme. While asking the Secretariat or the Finance Committee to work on a Penalty Scheme which has proven useful in other organizations, to be discussed in the coming Council and Conference.
Shahid RASHID (Pakistan): The figures presented in the documents on this subject clearly indicate that the Incentive Scheme has not proved beneficial for the financial situation of the Organization. The original presumption that the Incentive Scheme would not create a deficit in earnings from investments has obviously proved not to be a valid one. It does therefore appear that much deeper insights into this whole question of incentives versus penalties is required. On the other hand, we do not yet have the necessary information, or the results of any clear analytical examination on the relative advantages of incentives or a Penalty Scheme. Pending that, I think that it might be difficult to clearly pronouce judgement in favour of one or the other.
But this much is clear from the experience of the last three years: that the Incentive Scheme has not met its intended objectives. There is therefore apparently a rather strong case for discontinuing the Scheme at this stage but at the same time, as has been mentioned by several Delegations, there is a need to recognize the difference between those who pay on time and those who pay late. I think that is also very important.
So I think that at this stage it might be more useful to discontinue the Scheme, perhaps on a temporary basis -that is, a suspension of the Scheme, as has been suggested by another Delegation, for the next biennium, and during the biennium the Finance Committee could review what other incentives or penalties can be adopted to encourage prompt payment of contributions.
CHAIRMAN: I have on the speaker's list now Italy, and Argentina for a second time. Before calling on Argentina I would ask if there are other delegations wishing to speak on this issue. From my perspective it would seem that there are really at this point three different views being expressed in this Commission, fairly evenly divided between those who wish to eliminate the Discount Scheme, those who want to maintain it and a third view, which is recommending that we look at other alternatives and specifically that there be some consideration of a Penalty Scheme. That would probably require an examination to come back to the Conference in two years from the Finance Committee and the Council.
So, if there are other delegations that wish to speak on this issue -I am trying to keep track of a general sense of the meeting and it would be useful to hear from as many delegates as possible.
Franco GINOCCHIO (Italy): The Italian delegation has taken note of the proposals of the Director-General for FAO to discontinue the Discount Incentive Scheme. We would like to express our worries about the possible negative impact of the elimination of this Scheme.
We think in particular of the risk that many countries could delay their payments, and we therefore wonder whether it would not be better to postpone a decision on this point to the next FAO Conference. In this case, there would be the possibility of a more detailed examination of this proposal by the FAO Finance Committee.
Robert S. THWALA (Swaziland): My delegation, having examined the documents presented here, has found that comparisons of figures over a 5-year period have indicated no significant change in contributions at the expected time, up to October. This is either because members have remained indifferent to the presence of this Scheme, or have concluded that the Scheme has not made the desired impact for which it was put in place.
Bearing this in mind, my Delegation has also noted on the other hand the appeal by the Director-General, that the Scheme itself is a cost burden to the Organization. When looking at the amounts involved, several Member States could most definitely benefit from small programmes, specific projects, and other such.
My delegation would therefore support the Director-General's appeal for a discontinuation of this Scheme. Having given it a biennium, I think that if this was done as only a temporary measure, it would allow the Secretariat to examine further other options that may be available to make member countries pay on time -because that is the primary thing. My delegation truly feels that it would only be paying lip service to the importance of this Organization now and in the future if we cannot demonstrate our commitment to supporting the Organization.
We therefore feel that a suspension would be in order to cut down the costs that have been experienced and that could be experienced if it continues, and that at the same time the Secretariat should be given time to examine other options - and we allude to the one that was raised by Switzerland, namely, a Penalty Scheme which could transfer the costs of making members pay from the Secretariat to the member countries themselves, in order to raise members' consciousness of the need for commitment, or demonstration of commitment, to the Organization through payments in time.
CHAIRMAN: Given the importance of member contributions to the Organizations, I assume, Swaziland, that you meant to say that you would like to have the members examine other possibilities with the assistance of the Secretariat, rather than have the Secretariat determine how we will make payments.
Mile Colette TAQUET (Belgique): La Belgique regrette de ne pouvoir se rallier à la proposition du Directeur général qui est à l'examen. Nous sommes favorables au maintien du système de ristourne tel qu'il existe; en tout cas, pour toute la période où un système de pénalités, appliqué aux Etats Membres indisciplinés, ne sera pas en vigueur.
Ahmad Rusli JOHARIE (Malaysia): On the issue of whether there is a need to continue or discontinue the present Scheme, I think we must consider two questions. The first is whether the three years that have passed is an adequate time frame to judge the effectiveness of the Scheme, or we need a longer time frame. Secondly, is it not possible for the Scheme to be improved?
If the answer to question 1 is "yes" and the answer to question 2 is "no", then there is very good justification to review the Scheme and to discontinue it. At the same time, there is a need to think of other plans or schemes, whether it be a Penalty Scheme or a Disincentive Scheme, to replace the existing one.
Ms Maria KADLECIKOVA (Slovakia): My delegation is in favour of the elimination of the Incentive Scheme for the forthcoming biennium. This point comes from the decision of the 28th Conference made last Friday. Some savings should be made. Perhaps the Conference can propose a more appropriate solution for incentive penalties.
Sra. Ileana DI GIOVAN BATTISTA (Argentina): Gracias señor Presidente por concederme, nuevamente, el uso de la palabra. Pedí nuevamente el uso de la palabra porque en el debate, realmente, las opiniones están divididas y, será su tarea extraer una conclusión. Sin perjuicio de ello, señor Presidente, de decidir mantener o discontinuar el sistema de incentivos, creo que es importante adoptar orientaciones para establecer un sistema de penalidades al incumplimiento.
Yo dije, al principio, que el tema no es ético porque creo, francamente, que los países que cumplen en tiempo con sus obligaciones lo hacen, sobre todo, por una fuerte conciencia de cumplir con esas obligaciones y por un principio de solidaridad internacional.
Permítame decir hasta que punto los países en desarrollo reconocemos la importancia de los países que cumplen puntualmente con sus obligaciones y les escuchamos en sus intervenciones con todo el respeto que merecen.
Creo, sin embargo, que ellos no necesitan, a lo mejor, incentivos para cumplir, pero también creo que los países que demoran el cumplimiento, que no cumplen puntualmente, pueden necesitar un incentivo para hacer mayores esfuerzos para cumplir en tiempo con sus obligaciones.
Además, señor Presidente, debemos tener presente que en muchos países los ministros de Economía no siguen las recomendaciones o las prácticas de cooperación internacional que piden los ministros de Relaciones Exteriores, por lo cual, la Delegación Argentina cree que un sistema de castigos de tipo financiero, más allá de mantener los castigos o las sanciones que ya tiene la Organización en cuanto a derecho a voto y derecho a ser nominado; creo que un sistema, repito, de castigo financiero, como existe en la Unión Postal Universal o en la Unión Internacional de Telecomunicaciones sería, a lo mejor, conveniente en esta Organización.
Pero sobre este punto, señor Presidente, la Delegación Argentina quisiera escuchar opiniones para ser transmitidas al Comité de Finanzas y al Consejo, es decir, si encaminarnos hacia el estudio de un esquema de castigo de orden financiero, es decir, aplicación de intereses progresivos o no.
Moussa BOCAR LY (Sénégal): Monsieur le Président j'avais posé une question à laquelle vous avez répondu en partie. Implicitement est-ce que cela veut dire que ce plan d'incitation n'aidera pas en fait le Directeur général dans les efforts que lui a demandé de faire la Conférence pour que les Etats Membres puissent payer rapidement leurs contributions. Je voudrais savoir si j'ai bien compris.
Ceci dit, Monsieur le Président, je suppose que vous êtes en train de chercher une solution susceptible de satisfaire tout le monde. A mon avis, ni l'élimination du plan d'incitation ni son maintien n'ont rencontré un accord à l'heure actuelle. Cependant je pense qu'il y a un moyen terme qui serait, ainsi que l'a proposé l'Argentine, soit de suspendre pour l'exercice biennal et de demander au Secrétariat mais également au Comité financier de rechercher simplement, avez-vous dit, un plan de pénalités, soit de voir toutes les possibilités d'aide dans la modération du plan actuel d'incitation. Je crois que ce pourrait être une porte de sortie car si l'on continuait ainsi, vous ne pourriez conclure de manière heureuse. Je pense qu'il y a un compromis possible comme l'a proposé le représentant de l'Argentine.
Robert F. ANDRIGO (Canada): As I understand it, for the next year the Incentive Scheme will pay back 1.49 percent against assessed contribution analysed and compounded. That implies an incentive of well over 6 percent to national treasuries to pay early and on time.
I believe it was Malta who said it may be premature to pronounce the Scheme as ineffective. I believe that may well be the case, because 6 percent to national treasuries is something they will consider very seriously.
However, considering the fact that one person's disincentive is another person's incentive, as we indicated in our earlier intervention, we are quite happy to replace an Incentive Scheme with a Disincentive Scheme, in so far as such a scheme is workable.
I would suggest that it is not necessary for us to spend a great deal of time asking the Finance Committee and the Council to work out a scheme. In effect, the Scheme that might be workable as a Disincentive Scheme, or as a Penalty Scheme is the obverse of the Incentive Scheme that we have. This particular assembly could take a decision that, beginning with 1 January 1996, there will be a penalty paid that is based on a calculation of the 12th month Euro Dollar deposit rate.
For example, at the moment the 30 days net payment terms have been exceeded. This will imply, for example, that beginning with February next year the assessed contributions would be increased by 0.5 percent. This would continue every month until the end of December, when the penalty would be 5.5 percent.
All national treasuries seeing the potential additional costs might well be induced to pay early. We do not need a great deal of study to do this. That rate can be established at the beginning of each year based on what the Euro Dollar deposit rate for the following 12-month period might be. If that is something on which we can reach an agreement, we conceivably have a solution to our problem. At least this is something worthwhile trying and it fits in perfectly with what Mr Hjort has said as to penalties being more effective than incentives. Let us try it.
Kenji SHIMIZU (Japan): There are three different views on the issue before us. Japan is in the second group, but partly in the third group, particularly in terms of severing the penalty. The important element of the penalty is the voting right.
It may also be necessary to look into the other various services Member Nations now enjoy, for example delivery of documents and Conference support. Perhaps that could be considered by the Finance Committee. As a compromise for the next biennium, the Incentive Scheme rate may be reduced, as contained in paragraph 3.54 in document CL 109/4. Severing the penalty could also be considered by the Finance Committee.
Sra. María E. JIMENEZ DE MOCHI ONORI (El Salvador): Gracias, señor Presidente. En forma muy breve mi delegación quería apoyar la suspensión provisional del plan de incentivos que propuso la delegada de Argentina en su primera intervención.
Asimismo, nosotros compartimos lo expresado por esa misma Delegación en el sentido de que es necesario establecer un plan de penalización para ayudar a los países a pagar en tiempo sus cuotas.
Ernst ZIMMERL (Austria): It is obvious that there are about 35 countries who paid in time. They did not do so because they got the incentive. They did so because they respected the Financial Regulations where it stated clearly that they should pay within 30 days of receipt of the Director-General's letter. Therefore the incentive did not work.
If we can not agree today on a penalty I can go along with that. In my first intervention I stated that one of the reasons why incentives did not work was that we did not know at the time of payment how large the incentive would be.
If you go shopping and you pay by cash or credit card you know immediately if you have got a 3 percent discount. Perhaps we can make the incentive scheme better, so that the Member Nation will know immediately how large the incentive will be. The Director-General's letter could state: "If you pay within 30 days, or before 31 March, you will get a 1, 2 or 3 percent discount". Perhaps that could help to make the Incentive Scheme more effective.
CHAIRMAN: I would simply note with regard to your comments that when the Incentive Scheme was set up a discount level was established. The discount level is the average Euro Dollar rate on short-term deposits payable over the first quarter of the following year.
In terms of establishing a precise rate, Member Governments and their treasuries have as good an idea of what the future rate will be as the Secretariat has. Establishing the set rate without knowing what future interest rates will be is a dangerous practice for the Organization. It may end up losing money, as well as saving a little bit from the early payment.
John Egan McATEER (United States of America): The United States of America continues to support the discontinuation of the Incentive Schemes for the reasons which we have already stated. As the remarks of the last two or three speakers have indicated, this is a fairly complicated procedure not only as to whether we discontinue, but rather, where do we go from this point? In an effort to narrow the divergence of views of at least three groups which you have mentioned, Mr Chairman, the United States would support what we understand to be the original suggestion of the delegation of Argentina, and some others, that the Incentive Scheme be suspended provisionally for the coming biennium with nothing said about what would happen in the following years.
During that two-year period, this broader issue with all its diversity could be further discussed particularly in the Finance Committee, or at least beginning in the Finance Committee, which is where these matters will have to be begun if we are to find a solution to all this.
CHAIRMAN: Could I ask the delegate of Switzerland if he could address the Argentine proposal for a suspension in the coming biennium while making his other remarks?
Igor MARINCEK (Switzerland): There are three points here and the first is whether we all agree that what we have is a soft Incentive Scheme. The Austrian delegation has already suggested it should be a stronger Scheme and one with better information. When we are thinking of the idea of a penalty scheme, one possibility would be to make a soft Penalty Scheme, more or less, to take what we have here and apply it in a Penalty Scheme. I think this would be quite a practical and uncomplicated solution.
With respect to the suggestion of a provisional suspension, my delegation has already made it clear we do not favour this. We are for maintaining differential treatment between good and bad payers. This is important in the next biennium also. If we have a provisional suspension we take away some of the urgency of dealing with the problem and finding a solution, so we want to keep a little pressure on this issue.
Thirdly, even though this is not really the question here, we should look at other sanctions: how they have to be applied, and whether there is a chance to extend them. Our proposal is, for example, that eligibility of all nations to be on the Finance Committee should be the same as for Council itself. In the Finance Committee we have big defaulters who, on the question of financial discipline, have a very biased view, which is not to say that this comes under the same rules as for the Council.
Kenji SHIMIZU (Japan): I wish to clarify a point in my statement. First of all, my delegation belongs to the first category, not the second - namely that my delegation supports the elimination of the Incentive Scheme in the future. Secondly, the penalty is on those in arrears, not against those who pay on time.
Robert F. ANDRIGO (Canada): Simply to recall that the delinquency of those who do not pay or who pay late has the net effect of taking the resources away from the Organization and/or of increasing the assessed contributions of those who pay - indeed of all of us. I do not believe that a penalty scheme which results, for example, in reduced access to the restricted committees would be particularly meaningful given the small number of countries who can participate in those committees. Similarly in respect to Council. I think financial problems need to be addressed with financial solutions.
Unless and until we do have a workable alternative in place for the current Incentive Scheme which, as I have stressed earlier, is probably under-estimated in terms of its impact on national treasuries in that there is a return which can be identified, that can be annualized and related to what the particular costs of their investment might be - until we have an alternative in place, I would not favour, as suggested by the delegate of Argentina, the discontinuance of this Scheme and the study of the issue by the Finance Committee. We know what needs to be done. We either do it or maintain the present Scheme.
I. RUFF (United Kingdom): The United Kingdom supports the suggestion made a few moments ago by the delegation of the United States, namely, that we suspend the present Scheme for the coining biennium and ask the Finance Committee to look at other options during that period.
CHAIRMAN: You have made it very difficult for your Chairman to come up with a consensus or some decision from this body. Let me try to do so. Twenty delegations have spoken on this issue. There is not a majority in favour of the proposal of the Director-General to eliminate the scheme, one less than half of the members who have spoken before the proposal. However, I believe a clear majority of this Commission wishes to examine other means by which we can obtain prompt payment from member countries.
Therefore, it is the Commission's recommendation that Conference request the Finance Committee to consider other options. There have been three types of proposals on what those options could be, and the Committee can be asked to look into, I think, at least two of those; first of all as penalties for late payments, and the Committee would have to consider various definitions of late payment - whether a payment after 30 January is considered late: whether there would be interest on arrears, any interest on obligations due during the current year, and other possibilities. They would have to examine the experience that other UN Organizations may have had with similar schemes.
Several delegations indicated that eligibility to vote in the Conference and to participate in other restricted bodies than the Council (which also has a very strict rule) should be considered. I think we should ask the Committee to do that.
One delegation proposed that the Finance Committee should also consider a penalty which involves eligibility for services of the Organization. I heard no other support for that. This issue has been discussed previously in the Finance Committee and I must say there is very little support for denying the services of the Organization to those countries that have not been able to pay their prompt payment.
The Chairman concludes that there is not even majority support for the proposal. Indeed, there is not majority support for any proposal. Maybe one of the problems with our decision of four years ago, in 1991, is that we made a tentative decision to establish an experimental Discount Scheme. At that time we did not put in what is called a "sunset" mechanism which says that if the experiment does not prove to be successful it is automatically eliminated. I suggest we should consider that type of provision in future, whether a Positive Incentive or a Negative Penalty Scheme, and that the Financial Committee build such a provision into any recommendation that it makes on this issue, or we will be back in the same position two years from now that we are in today. We are unable to make a decision because of the wide variety of issues we have, and in the absence of a positive decision we are stuck with a tentative decision made some years ago.
I conclude that there is not sufficient support for the recommendation to eliminate the Discount Scheme, but there is very great support for asking the Finance Committee to examine other alternatives which may be more effective in obtaining prompt payment of dues owed to the Organization. That concludes the discussion on this item.
DEPUTY DIRECTOR-GENERAL: I would just encourage members of this Commission to reflect upon the debate you have heard between now and the time when you have to adopt your Report, and make your recommendations to the Conference.
No one has denied the facts of the matter. The facts are that there has been no apparent benefit associated with the Scheme. However, there has been a very clear cost. Conference has asked the Secretariat to search for every possible means of increasing income and making further improvements in efficiency and effectiveness. Conference has called upon the Secretariat to give more attention to benefits and costs, to inputs and outputs. If you ever had a case before you where the facts suggest a decision, it is this one.
It is a fact that part of the matter is uncertain. It is not easy to quantify the benefit side. It is easy, however, to see the magnitude of the cost. We will have to give discounts at January 1996 of US$1 453 184. There is no way we can avoid that.
I want to correct one point. I said that there would be a US$3 million difference in this biennium. That will be the cost over the forthcoming two years; but we could only capture US$1.5 million from suspension, because the other US$1.5 million would become a discount at the beginning of the following biennium. Nevertheless, in our present situation US$1.5 million is equivalent to about seven P-4 posts. The trade-off you are asking us to do, therefore, is to cut out a nice chunk of this Organization's work - to cut one sub-programme or one element - in order to be able to keep this discount which so far has no tangible benefit.
CHAIRMAN: I would like to make a couple of points on Mr Hjort's statement. First of all, I hope that he did not mean to suggest that we will re-debate this issue when we adopt our Report. The adoption of the Report will be an attempt to make sure that it reflects the debate; it will not be an attempt to re-open the debate. If there are delegations wishing to continue the debate now is the time to do that.
I would also note that cutting personnel is not the only way of reducing the cost of the programme. The US$1.5 million could be saved in a number of different ways rather than cutting personnel.
Are there are any other delegations wishing to continue the debate at this point? If not, let us proceed to Agenda Item 22.
CHAIRMAN: I have been asked by the Secretariat to bring a document to your attention which will be issued later today. It is C 95/INF/24. This is for information; there need be no discussion at this time. It is the Administrative Committee on Coordination's statement on the report of the International Civil Service Commission (ICSC) on staff salary adjustments.
I will now call on Steve Dembner, President of the Association of Professional Staff. On Friday we invited him to give a short address to this Commission on FAO staff members' concerns.
Steve DEMBNER (FAO Staff): It is an honour and a privilege to speak to you here today on behalf of the three staff bodies: the Association of Professional Staff, the Union of General Service Staff and the Field Staff Association. The FAO Manual specifies that the staff associations may ask to address the Governing Bodies under extraordinary circumstances. We are grateful to the Director-General and to you, Mr Chairman, for acceding to our request.
We think you will agree that our Organization indeed finds itself under extraordinary circumstances. We are not referring, although we might wish we were, to the historic milestone of FAO's 50th Anniversary. For FAO's staff that proud occasion has been overshadowed by the harsh realities of the present and the seemingly bleak prospects for the fixture.
For many months now we have heard and read about proposals drastically to reduce FAO's budget. Many of these proposals have seemed to consider FAO staff not as its greatest asset but rather as the crux of its problem. Such proposals inevitably cause alarm among staff; but as much as we fear for our own jobs and careers we are equally concerned about the future of this Organization and its ability to fulfil its mandate.
We would argue that, before making significant reductions to the budget, several basic questions ought to have been posed, discussed and answered. The first question is why have you been talking about cutting FAO's budget at all? Is it that too much money is being focused on the challenges of agriculture and sustainable development? We doubt that anyone can make that affirmation in good conscience - not when some 800 million people still go hungry, not when soil degradation, deforestation and depletion of fish resources threaten the resource base that is the key to our very survival.
A second question is could the member countries truly not have afforded to continue funding at the current levels? We also find that hard to believe, when we consider the vast sums generated by trade and agricultural products, or the generous subsidies provided to farmers in some donor countries; not to mention the monies which are still devoted to military expenditure in almost all of our member countries.
Is the problem then that Member Nations feel that we have not been using our resources as efficiently and as productively as possible? If that is the problem, simply cutting the budget is not the answer. We would have proposed a different solution: a solution that involves support and expanding a process of reform and renewal, fully engaging the knowledge, the experience and the commitment of staff, to help FAO meet the challenges of the next millennium.
The staff would be among the first to agree that steps should be taken to improve the efficiency and productivity of the Organization. What Conference delegates and FAO management may see as inefficiency, the Organization's staff experience as frustration, when we are impeded, among other things by limited resources, from contributing to the best of our abilities. Who could possibly be in a better position to identify problems and propose solutions? We would gladly participate in a process to reduce such inefficiencies and frustrations and identify possible economies. We fear, however, that the drive for quick reductions in the budget will short-circuit the possibility for a genuine consultative process and inflict significant damage on our ability to perform the work assigned to the Organization by our Member Nations.
Effectively, we have already weathered two years of deep cuts in which the Organization has operated with funding well below the budgeted level, in which both our working conditions and the work of the Organization have suffered. The question now becomes one of how the budget cuts you have imposed will be implemented.
We hear discussion of sharply reducing the number of posts, both among Professional and General Service staff, but we do not hear proposals for corresponding reductions in the quantity and the quality of work that we, the staff, will be expected to perform. Cuts of this sort cannot enhance productivity and efficiency. There is no gain in efficiency when a technical officer is compelled to absorb the duties of a vacant post whose responsibility falls outside his or her area of expertise. Productivity is not enhanced when a General Service staff member who has been trained to assist with desktop publishing or other advanced skills must take on additional low-level administrative functions because there is nobody left to handle them.
We hear it suggested that the Organization as a whole could cut costs and improve performance by employing more consultants and fewer staff. Our experience tells us that this proposal ignores hidden costs of consultancies and unrecognized benefits of staff employment.
We also hear suggestions that savings can be achieved by downgrading posts and recruiting younger, less experienced and less expensive staff. We would welcome the infusion of energy and new ideas but we also know the value of experience, and we cannot believe that a systematic elimination of high-level technical posts will enhance the standing of FAO as a Centre of Excellence - a hub of information.
We recognize that careful examination of possibilities for cost savings are necessary, but we would suggest that the short- and long-term effects of widespread downgrading cannot be justified. The Organization already has grave difficulties in hiring and retaining qualified staff at the current grading levels and their accompanying uncompetitive pay scales.
The General Service staff are particularly concerned about two aspects of the discussion on cost containment. The first is the way the General Service category is increasingly defined by relation to the Professional category rather than on its own terms. The second refers to the way basic principles are being ignored.
You will recall the discussion of a few years ago concerning the question of the salary overlap between the higher-level General Service grades and the lower-level Professional grades. The real problem lay in the misapplication of the Noblemaire principle, thereby setting the level of Professional salaries too low; but instead of dealing with this, the General Service salaries were considered too high by comparison and measures were taken to curtail them. Today, the result is that the General Service salaries are firmly on a downhill track, but the problem of the level of Professional salaries remains unresolved.
In the current discussion there is the risk of making a similar mistake with regard to the size of the General Service category that this Organization requires. It is misleading to consider the General Service/Professional ratio as an objective indicator of the cost-effectiveness or efficiency of an organization. The different agencies have different mandates and different structures, each requiring a different balance between General Service and Professional ratios. If FAO is compared with other Agencies with significant field programmes, we might actually appear understaffed in the General Service category.
On the question of respect for principles, the recent General Service Salary Survey conducted by the International Civil Service Commission gave little consideration to the technical aspects and the methodology, and will lead to unjustified erosion of General Service salaries. It appears that anything is acceptable as long as it cuts costs, and the General Service staff will lodge an appeal against the ICSC to emphasize that financial considerations must not override respect for principles.
We would also like to draw your attention to an important part of the Organization that has already undergone deep cuts in the budget and staff over a period of several years - the field programme. In 1988, FAO employed almost 1 200 experts worldwide in a range of projects. Today only 450 remain. Field experts with long-standing experience have seen their careers terminated with little or no prospects for future employment at FAO or in their home countries. The situation not only threatens the careers of our field experts but also implies for the Organization the loss of valuable and unique technical experience. The Field Staff Association hopes to be able to establish a mechanism with FAO management to maintain the pool of eminent FAO field experts.
In confronting a short-term financial crisis it may be appropriate to spread the impact more or less evenly across the programmes of the Organization, and to mobilize extraordinary efforts from staff to avoid erosion of the quality and quantity of our work. If what we are facing, however, is a permanent and perhaps ever-deepening reduction of the budget of the Organization, a different approach must be taken. It would be necessary to retain only a limited number of priority tasks and to eliminate other programmes completely, so that we could perform well rather than struggle without the resources to complete our work programme properly. Decisions of this sort cannot responsibly be taken in haste, however. They would need to be the subject of careful analysis and consultation, both among the Member Nations and among the staff - those with the most direct knowledge about the working of our Organization.
In conclusion, we would like to pose another question. Do you honestly believe that any viable alternative exists or even could exist to FAO, in terms of shouldering the wide range of responsibilities in the area of agriculture, forestry and fisheries, and of performing the tasks that we have taken on over the past 50 years?
If FAO had not been created by your predecessors 50 years ago, might you not be meeting today to invent it? We would suggest that you, the Conference of this Organization, do in fact invent FAO every two years when you meet to set its Programme of Work and Budget. In taking up your challenge, you have an advantage over your predecessors of 50 years ago. You have a nucleus of expertise and commitment that you can draw on in defining priorities and allocating resources. That nucleus is the current staff of this Organization.
The staff of FAO are proud of what we have accomplished over the past half century. At the same time we are acutely aware of the enormous challenges that remain, and we are convinced that the Organization can only build upon its achievements and overcome its shortcomings through a process that fully recognizes and engages the knowledge, the commitment, and the creativity of its staff.
Consultation and negotiation are not the fastest way to arrive at decisions, but they are the best way. We would even argue that they are the only way to take the decisions that could truly improve the efficiency and the productivity of this Organization while minimizing the damage both to the working conditions of the staff and to the quality of the work that we perform for the benefit of our Member Nations. I thank you for your attention.
CHAIRMAN: Thank you, Mr Dembner. The Committee has taken note of your remarks, and the full text will be printed in the Verbatim Record.
Is there other financial and administrative business that members of this Commission would like to conduct this morning? That concludes, then, our regular agenda, but let us turn immediately to the adoption of the Report.
I would like to ask the Rapporteur of the Committee, Mr Ly of Senegal, to join us to discuss the Report. As Mr Ly is coming to the table, let me, on behalf of all of the Members, congratulate him on a very concise Report, one that I hope we can adopt very quickly this morning.
