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2003/II/PV |
Thirty-second Session |
Rome, 29 November – 9 December 2003 |
FIRST MEETING OF COMMISSION II |
1 December 2003 |
The First Meeting was opened at 11.30 hours
Mr Mohammad Saeid Noori-Naeini
Chairperson of Commission II, presiding
La première séance est ouverte à 11 h 30
sous la présidence de M. Mohammad Saeid Noori-Naeini,
Président de la Commission II
Se abre la primera sesión a las 11.30 horas
bajo la presidencia del Sr. Mohammad Saeid Noori-Naeini,
Presidente de la Comisión II
CHAIRPERSON
Ladies and Gentlemen, I am sorry that we have had to wait two hours before we reaching a quorum. I have the honour of chairing Commission II and I welcome all of you.
The Commission is called to order.
We have a difficult task ahead of us, but I am confident that with goodwill and collaborative spirit we will complete our work in a satisfactory and timely manner. We will see what these satisfactory means are later, but as far as time is concerned we have to reach a consensus by Thursday, prior to the Plenary on Friday. As announced by the Chair of the Conference on Saturday afternoon, and contained in the first report of the General Committee, 2003/L/9, our amended timetable foresees the discussion of item 14 - the Programme of Work and Budget 2004/2005 - first, followed by items 12 and 13 - the Programme and Implementation Report 2000/2001 and the Evaluation Report 2003. The most important task that we face is to report to the Plenary on Friday on a budget level that has been endorsed by consensus at this Commission. As was evident from last week's Council Meeting, the news on the budget level is widely diverging and, therefore, in order to maximise the time available for discussions, I would seek your cooperation in concluding interventions on this item in two sessions today. I hope this can be achieved. If not, we will have to consider an evening session. As it is unlikely that we will find a consensus emerging from the discussion in the Commission today (I hope that I am wrong and that we will), I would like to set up a Friends of the Chair group to meet tomorrow afternoon, from 14.30, in the Malaysia Room, room B227. On the matter of the budget level, I would ask the Regional Groups to nominate up to three members to attend this meeting and to provide me, or the Secretary, with the names of the countries by 17.00 this afternoon, so that I can announce the full membership of the group at the close of this afternoon's session.
I would like to turn now to the first substantive matter on the agenda, the Programme of Work and Budget 2004-2005, document C. 2003/3, which is in your possession. Many members took the floor on this matter in the Council and it would be helpful if repetition could be avoided as much as possible. I would also encourage delegations to use the facility established in the first report of the General Committee, Document C/2003/L/9; inserting a statement directly into the Verbatim Record of this meeting without having to make the statement orally, or the whole statement orally by passing written statements up to the podium, so that I can inform the Commission of their receipt.
Before inviting delegations to take the floor, I would turn to Mr Wade, Director of the Office of Programme, Budget and Evaluation, to introduce the item. In particular, I have asked Mr Wade to summarise the scenarios before us, so that we are clear about our options. In this connection, I have asked the secretariat to make available for the Commission, at the documents desk, the document submitted to the 125th session of the Council, Outline of a Possible Zero Nominal Growth Scenario, Programme of Work and Budget 2004-2005, CL/125/10. Before giving the floor to Mr Wade, I would ask the Secretary of the Commission to give you a quick overview of what we are going to do during the three or four days which we have at our disposal.
SECRETARY
The way we would like to proceed with the Commission is, as the Chairman has already stated, to discuss the Programme of Work and Budget 2004-2005, in its entirety today. Tomorrow morning we will resume the work of the Commission, taking up items on the Programme Implementation Report and the Programme Evaluation Report and, in the afternoon, convening the Friends of the Chair Group. Once the formal work of the Commission has been done, that is to say, the three items on its Agenda have been discussed, we would propose to suspend the formal meetings of the Commission to maximise the time available for the discussions that need to take place, particularly vis-à-vis the Friends of the Chair Group and the Budget Level. We would, obviously, seek to reconvene the Commission formally on Thursday to adopt the Commission's Report, also on the budget level, if at all possible. In this connection, I would like to announce to the Commission that a meeting of the Drafting Committee is foreseen tomorrow evening at 1800 hrs in the Mexico Room, room D211, to continue the business discussed in the Commission today. On Wednesday evening, at the same time and in the same room, we will continue the business discussed in tomorrow’s Commission. I would also like to announce the membership of the Drafting Committee. The list of members I have is as follows: Afghanistan, Argentina, Australia, India, Italy, Japan, Indonesia, Kuwait, Mali, Sweden, Namibia, the United States of America and Venezuela. I will advise you, in due course, as soon as I am formally advised of the Chairperson of the Drafting Committee. I believe that covers everything, Mr Chairman. Thank you.
Tony WADE (Director, Programme, Budget and Evaluation)
Mr Chairman, you asked that I provide some clarification of the various budget scenarios before us so that the membership is clear as to the options that are available to it. I have, therefore, prepared a table which has been distributed and should be on your desks in the appropriate language. It is a single page entitled PWB 2004-2005 Scenarios. If anybody has not got the table, could they draw it to the attention of the messengers; they will receive a copy, but it should be there.
The table summarises four scenarios and I would like to start with the third column of figures headed ZRG or Constant Purchasing Power. This describes the level of resources which would be needed to maintain the programme at current levels of activity. It is of critical importance to understand this scenario as it provides the base from which all other scenarios had to be developed. For those members who attended the Council, please note that these figures have since been revised to reflect the latest exchange rate and other factors. The first line, Mr Chairman, shows the figure of US$ 651.8 million which is the approved budget for the current biennium 2002-2003. We need to make two adjustments to this figure in order to maintain its purchasing power. The first concerns the exchange rate effect. The budget for 2002-2003 was calculated at a budget rate of exchange of one euro equals 88 cents US. This means, for example, for each 1,000 euro of General Service staff costs in Rome, there is US$ 880 included in the budget figure of US$ 651.8 million. However, the euro has now strengthened such that the table now assumes that we would have to pay US$ 1.19 for each euro. That means that for the same 1 000 euros of General Service staff we will have to pay out US$ 1 190. Instead of US$ 880 we will have to pay out US$ 1 190 for exactly the same service and cost in euro. This is an increase in US$ terms of US$ 310, or 35.2 percent which, if it is not funded from an increase in assessed contributions, would need to be offset by the equivalent level of savings. Now, of course, not all our expenditure is euro-based and hence the net adjustment of US$ 115.5 million that you see on the second line represents an increase of 17.7 percent. At this rate of exchange 55 percent of our expenditure is euro. Mr Chairman, the second adjustment concerns cost increases, or inflation if you prefer the term. This amounts to US$ 33 million and consists of the effect of increases in the cost of salaries, goods and services on the Organisation. The Finance Committee has endorsed the calculation of cost increases as well as the assumptions on which they were based. However, as a way of checking the reasonableness of this figure, members may wish to note, first of all, that it includes an exceptional amount of US$ 4 million, being the increased cost of field security. If we exclude that amount for the moment the balance is US$ 29 million which represents 2.6 percent per annum of the Programme of Work. Now given that the forecasts from the Economist's Intelligence Unit are for 2.7 percent and 3.3 percent of inflation on average earnings in Italy for 2004 and 2005 respectively you can see that the figure cannot be too far away from reality. So this is a sort of second check on the cost increase figure. Despite the fact that the Finance Committee has looked at this in detail you may want to confirm for yourself that this is a very reasonable figure.
Mr Chairman, if we add these figures together, that is the 651.8, the 115.5 and 33 we arrive at a figure of US$ 800.3 million being the appropriation that is necessary simply to maintain programmes at the same level as they are today. Of course this is the main problem facing the Organisation for you the membership and us the Secretariat. On the one hand we recognise how difficult it is to sell a net increase of close to 23 percent in US$ terms and yet on the other hand, the membership does not appear to have a list of programmes on which it agrees they could live without. On the contrary, we have heard in the Council that all this should be accomplished without detracting from the programmes of interest to the developing countries and without detracting from IPPC, Codex Alimentarius, Plant Genetic Resources, Fisheries, Forestry and Sustainable Development. So this is the issue or the problem which we face today.
Mr Chairman, I will now go through the other scenarios. I will start with real growth and, even in this difficult budgetary environment, I make no apologies for turning to the last column which is real growth. The first thing you will note is that we start with the ZRG scenario of US$ 800.3 million for this and incidentally all the remaining options. We do this so as to correctly identify the value of programme change, that is the increase or decrease in programme activity which is necessary to satisfy the assumptions of the scenario in question. In the case of the RG scenario, in the fourth column of figures, the programme increase is US$ 36 million, that is on the line titled Programme Change and is fully supported in the Programme of Work and Budget, Document C 2003/3. Now there is a tendency amongst some members to summarily dismiss this option but really they should not do so. In fact this scenario responds to the highest priorities as expressed by the membership and aims at maintaining a balance between normative and operational activities. The vast majority of the work that would be funded from this additional amount benefits the entire membership; benefits which, although hard to measure in purely financial terms, are real enough in their contribution to international trade, to food safety, to the improvement of food security.
Moving now to the concept of zero nominal growth. Essentially, the concept of zero nominal growth is the retention of the budget in the same nominal terms. While the definition seems simple, its application has always presented a problem. Why is this? When providing the membership with a scenario, one needs to know what it implies in terms of a programme cut. Unfortunately, when one applies this definition in terms of US dollars one either has to guess the rate of exchange to the euro many months in advance of the decision to set such a rate or one calculates the budget at the budget rate of exchange for the previous biennium. Now the problem substantially eliminates if one ensures that the budget is stated in the same nominal terms in its two key currencies, that is US dollars and euros. In such a case, the exchange difference is eliminated. To make sure everyone is following me on this, if you could turn to paragraphs 250 and 251 in the Programme of Work and Budget. Page 52 in the English version but that will vary by language. Let us look at the table in paragraph 250 first of all. This table is presented, assuming, as you can see from the title of the table, that one euro equals 88 cents - the budget rate for 2002/2003. If we look at the last column which is the ZRG scenario, as an example, we will see that the total line at the bottom entitled Assessed Contributions, shows a figure is US$ 689 710 000. That is translated on the two lines below as one figure for euro and one for dollars. The dollar figure is 361 903 000 and euro figure is 372 508. Now turn to paragraph 251. The only difference in this table, as you will see from the title, is that it has been prepared as 1 euro equals US$ 1.15. Again let us look at the last column, comparing it to the table we looked at in paragraph 250. We will see that the first two lines are the same in both paragraphs and total 651 758. Both tables have a figure of 47.1 million under cost increases and consist of 33 million in cost increases for 2004/2005 plus an additional 14.1 million for after-service medical costs. Both tables have the same figure. The next line is where the two tables diverge. This is where we have an addition in the Table in paragraph 251 of US$ 100.6 million being the exchange rate impact of a rate of exchange of 1 euro equals 1.15 dollars. So this is the amount it is necessary to add to the dollar budget simply because the euro is much stronger that it was in the ZRG budget on the previous page in paragraph 250. We add that into the column and we find that down the bottom we have Assessed Contributions totalling US$ 790 287 000. That is 100.6 million more. But what I want to draw your attention to is that on the next two lines you have the split between dollars and euro. Please note that those figures do not change. They are still the same as in paragraph 250. We still need US$ 361 903 000 and 372 508 000 euro. In nominal terms in the two currencies, we need exactly the same amount. So that is the point I want to make about ZRG.
In effect the US dollar figure is a nominal figure. If we stated the whole budget figure in euro we would see a completely different picture. Just for example, let me take you through a couple of figures. The assessed contribution for this biennium is US$ 645.3. Do not worry about looking these figures up. At 88 cents to the euro that was worth 733 million euro, so last biennium's budget in euro terms was 733 million. If we do the same for the 2004-05 budget at ZRG, that is 805.2 that you have on the bottom line of the table, and translate it at 1.19, the euro figure is only 676 million. Instead of 733 million euro, in euro terms, the budget drops by 56 million to 676 million. So you are seeing an exchange rate effect through this whole process which is distorted by the fact that we state our budget in dollar terms. Now we have to have a currency to work in but we also have to understand that is does not show necessarily the true facts simply by looking at the surface of the figures, and this affects how much you pay in the end, because your relationship to those currencies affects the total.
If we did this in Australian dollars we would get another picture; if we did it in Argentinean pesos we would get yet another picture. My point here is that we might be clearer in our communications if we moved away from the terms ZNG and instead referred to two or more reduction scenarios and that is what I will do from now on.
I would like, in fact to turn to reduction scenario number two, which is the first column of figures on the table which you have been given this morning. This starts on the third line with the 800.3 million, the same as all the other scenarios. Its aim is to arrive at the same appropriation in US dollars as we had for 2002-03, so if you drop immediately down to the line for appropriation 2004-05, this is about the third line form the bottom, you will see the US$ 651.8 million. Some members have suggested this should be the budget for 2004-05.
What does it mean? I am moving down the table. Below the line entitled zero real growth, in the first column of figures I have the figure US$ 800.3. The first line below that is a figure of US$ 152 million dollars representing the programme change needed to reach the target. This is a real reduction in programmes. The remaining three lines are adjustments. I will explain them to you briefly but they are not of any direct effect on you; the US$ 152 million is what you care about but for your information, to arrive at the 152, we had to calculate what effect a big reduction in the budget would have on the figure of 115.5 in the box above. You remember we added 115.5 for the exchange rate effect. Of course it will not be as much if we cut the budget by 150 million. So this 21.4 is a reduction to that 115.5.
The same is true of the next line. The minus 4.1 million is a reduction of the figure of 33.0 million of cost increases, so these are just adjusting the budget for the effect of a much lower-base budget.
Finally, the important figure there, the 29.3 million which is a statistical estimate of the cost of redeployment and separations. For your information this is based on the number of encumbered posts which we believe will have to be abolished if we implemented this scenario, and assumes the average cost of a redeployment and separation what we experienced in the two previous exercises that we have undergone in this regard.
By reducing the budget by 152.2 million, or rather reducing the programme of work by 152.2 million, would allow us to reach a target appropriation of 651.8.
What are the implications of this scenario? Frankly, it would be catastrophic.
As indicated to the Council, the implications are as follows: the 152.2 million represents a cut of 19 percent, more than the 15 percent cut than we have taken in the last ten years. In one biennium we are expected to have a larger reduction in the budget than we have taken in the last ten years. At this new exchange rate assumption of 1.19, the number of posts to be abolished would probably be about 740 posts, up from the figure of 650 that we reported to the Council on the earlier exchange assumption of 1.15; that is about one-fifth of the staff in this organization.
The reduction is so large that crisis management techniques would have to be implemented in order to avoid exceeding the appropriation. In practice, expenditure on everything except essential activities would have to be frozen, as would recruitment action on all vacant posts and that, in itself, would not be sufficient to prevent us from exceeding the appropriation at the end of the biennium. An exercise would have to be undertaken to stop the extension of a large number of fixed-term contracts, thus eliminating, I am sad to say, the new and generally younger recruits to the Organization.
Is this seriously what the advocates of this scenario intend? If so, I put the question on how they expect the membership to reconcile this scenario with the accompanying statements of keen support for FAO and to solidarity with the developing world? For me it is very difficult to carry out that reconciliation. If such as scenario were to be implemented, it would virtually mean writing off 2004-05 as the Organization retrenches and downsizes in crisis mode. It would hit hardest at the newest recruits, thus striking a devastating blow at the future workforce and the managers of the Organization. It would take years more that the two years to recover from that and why - largely because of a fiscal policy which responds without reason in my view to a blip in exchange rate relationships between the euro and the dollar - a blip which is likely to disappear over the forthcoming months, so we are hit by a peak in the strength of the euro at this moment in time and we are about to make a devastating decision based on that particular fact.
I regret the length of this introduction but it has been put to me that the Membership is simply not clear about the consequences of the various levels of the budget being proposed by other Members and, if we are going to make proper decisions, we must be very clear about that.
I turn now to the reduction scenario one; it is the last scenario presented; it is in the second column of figures before you. Further details of the impact of this scenario are provided, as I said, in Council document CL 125/10. I understand it is also a LIM document which is coming to you as well. It is available at the documents desk, but I should point out that the published version is calculated at the exchange rate of €1=equals US$ 1.15 whereas I am now dealing with something closer to the current reality which is 1.19. In fact it is 1.20 today.
As you can see in this column the programme change or cut to programmes would total US$ 35.2 million so instead 152.2. That is, we are down to 35.2, consisting mainly of the requirement to absorb cost increases of 33 million. The adjustment to the exchange rate effect and the cost increase figure below that reflect the overall programme reduction whereas the figure of 7.9 million is the additional estimated cost of redeployment and separations which would necessarily apply to the scenario.
I should say at this point that there is a danger that Members will greet this scenario with a sigh of relief after having considered scenario two, but they should not. They should question it with equal scepticism. At a time of growing demands on the Organization, it makes no sense at all to cut 160 posts and to diminish its capacity to respond. Even this lower level reduction is expected to impinge upon virtually all programmes.
The Membership needs to ask itself why is FAO facing the demands for such cuts when our sister Organizations do not.
A few facts, all of which are verifiable: FAO has been the most harshly treated of all the United Nations system bodies with annual budget in excess of US$ 100 million. Using the same index, starting at 1993=100, you will see that FAO has fallen to 96, so we start at 1993 at 100 and now we are 96. The United Nations itself is at 112. I am talking 2002-03. ILO has moved since 1993 to 2002-03 to 107; Unesco is at 122; WHO is at 116, so why is FAO getting this treatment?
In the current round, for the budget for 2004-05, there appears to be a serious inconsistency in the approach being taken, for example: ILO's budget for 2004-05 has been approved at ZRG which involves an additional US$ 95 million increase in US dollar terms, approved by the same Members here who are suggesting that we should not have anything other than ZNG in dollar terms. Their budget is assessed in Swiss francs; and, in fact, there was a reduction in Swiss francs and an increase in the dollar value of those Swiss francs.
WHO's budget has been increased by a nominal amount of US$ 25 million. They did not do as well - it is somewhere between ZRG and ZNG. IAEA's budget for 2004 has risen by 20.7 million or 7.8 percent implying real growth and Unesco's budget for 2004-05 rose from US$ 544 million to US$ 610 million, thanks largely to the re-entry of the United States into Unesco; that is a 12.1 percent increase.
The data puts in question the proposition that the Membership considers Agriculture, Fisheries and Forestry to be a high priority.
The suggestion has been made that either of these scenarios could be managed by increased efficiency savings. In both cases this is simply not true. In the case of reduction scenario two, which is minus US$ 152 million, it is actually an absurd statement to make; in the case of the reduction scenario one, minus US$ 35 million, it is impossible to do in a single biennium and is unlikely in two biennia. It probably would need three biennia.
Let me emphasize that we are not starting here with a fat and inefficient Organization; we have undergoing continuing reform for the last ten years. I would urge Members to review paragraphs 177 to 190 of the document which describes what has been achieved since 1994, savings which are estimated to have reduced costs by about US$ 60 million per annum, primarily by reducing the cost of inputs but also by improved processes and greater cost recovery.
I would remind members of some of the statistics behind these efforts: a reduction of 659 posts overall or 15.7 percent since the 1994 budget; a 37.6 percent reduction of General Service staff here in Headquarters in Rome, generally as a result of increased use of information technology and office automation; a 32 percent reduction in D-2 level posts, director level posts, the senior level posts in the Organization, and a further 11 percent decrease in D-1 posts, also director level posts; accompanied by115 percent increase in P-2 level posts aimed at bringing in new blood and revitalizing the professional capacity of this Organization.
We know that, as a Secretariat, we must continue to pursue relentlessly the search for further efficiency savings and greater enhancement of effectiveness. We know that there are further opportunities for such savings. For example a major review is underway, which is expected to greatly increase our efficiency in supporting the field programme, but the major incentive for the staff involved in this is their plan to reallocate the saved resources to enhance field programme development and to strengthen our operational capacity at the country level. I suspect it will take another year at least to generate these savings as they rely on time consuming changes to computer systems to enhanced infrastructure, and on changes to procedures, none of which will be possible if we face the cut of the order of magnitude envisaged in either of the reduction scenarios.
I am wearing a black tie today; I do not actually like black ties but it was given to me as a gift, and I am wearing it because it seems appropriate when this Organization is facing quite such a serious situation. It horrifies me that we are even discussing a reduction of US$ 152 million and I would close by saying, on behalf of my colleagues throughout the Organization that there is a sense of bewilderment. What is it that the Membership wants from the Secretariat before it will respond by raising the additional resources needed to do the job which has been set for us, needed to meet the demand that you yourself have placed on this Organization?
We have improved our strategic focus by working with you to create a Strategic Framework endorsed by all Members; we have introduced a sophisticated system of results-based budgeting and planning to ensure the sound use of resources in the achievement of clearly pre-defined outcomes, outcomes to which you have agreed; we have strengthened oversight in the broadest sense, including the independence of evaluation; we have certainly made great steps forward in improving efficiency; we are effectively managing important global programmes essential to the international community; the demand for our services to developing countries well outstrips our capacity, as you have heard time and time again.
All these things are widely acknowledged, but what does it need to convince you, as a Membership, that the resource allocations for FAO should be governed by programme needs and not solely by fiscal policies of Ministries of Finance which have no conception of what this Organization can and does achieve with the meagre amount of resources currently available to it.
I thank you for your patience.
CHAIRPERSON
Thank you, Mr Wade, for your explanation. Since the Chairman should remain neutral, I am not wearing a tie, so that the colour of my tie will not convey an opinion.
I think, before starting any discussion of the substance of these analogies that were presented by Mr Wade, it would be opportune to make sure that we have a full understanding of these scenarios. Please do not feel reluctant to ask if you do have any questions. If there is any misunderstanding, it will make it difficult to continue. So let us start with questions with regard to understanding the scenarios that have been presented to us here.
Any questions on that?
Víctor Hugo MORALES MELÉNDEZ (México)
Quisiera agradecer a la Secretaría de los extraordinarios esfuerzos que está haciendo para aclararnos, no sólo con las hipótesis para el PLP (Programa de Labores y Presupuesto) sino, también por el trabajo que hizo la semana pasada en relación al sistema de pago de las cuotas en dos monedas. Creo que hemos avanzado bastante, y también creo, que hay ya bastante claridad, no sólo en los impactos que tendría la FAO, sino también los impactos que tendría para los Estados Miembros. Sin embargo, quisiera solicitarle a la Secretaría, si es posible que en estos días se pudiera elaborar una relación con el cálculo de las cuotas netas anuales, que correspondería cubrir a los Estados Miembros en el próximo bienio bajo cada uno de los cuatro escenarios que nos acaban de explicar, esto permitiría conocer las implicaciones y compromisos específicos que correspondería asumir a cada uno y facilitaría eventualmente la toma de posiciones al transparentar y precisar el monto de las contribuciones de cada Estado Miembro, también se que la semana pasada, cuando se reunió el Grupo de Trabajo sobre el pago en dos monedas, se distribuyó una relación clara y específica, del impacto los Estados Miembros tendrían con el sistema de pago en dos monedas, hasta donde entiendo, esto no se hizo abierto a todos los Miembros del Consejo, sería conveniente que a todos los Miembros de la Organización tuvieran este cuaderno, donde se ve claramente cuál sería el impacto, también platicando con mi colega de Brasil, él pidió como Miembro del Grupo de Trabajo de dos monedas que se le hiciera un ejercicio específico de su país sobre las implicaciones que iba a tener, y afortunadamente fue atendido por la Secretaría, creo que incluso tenía un espíritu muy positivo después de conocer esta información. Sería conveniente que quienes requieran este ejercicio, y quienes como yo en el Consejo se pronunciaron y tuvieron dudas sobre el sistema de cuotas en dos monedas, también pudiéramos recibir este estudio como el solicitado por Brasil, que nos permitiría de tener una posición más clara, y más precisa y así eventualmente poder apoyar las propuestas que hace la Secretaría.
María Eulalia JIMÉNEZ DE MOCHI ONORI (El Salvador)
También mi delegación quiere agradecer la larga y detallada exposición que se nos acaba de hacer sobre este importante tema. Quisiera solicitar a la Secretaría una aclaración sobre este tema porque realmente no lo he entendido bien. En los párrafos 250 y 251 del Programa de Labores y Presupuesto para 2004-2005 (PLP), el Director de la Oficina de Programas y Programación de la Organización, nos indicó un cuadro de un primer presupuesto con la hipótesis de un euro a 0,880, y un segundo en el cual se plantea un cambio del dólar a 1,15 por euro, él lo explicó detalladamente, pero no logro entender, cómo es posible que las cuotas en las dos monedas sean iguales, y también el mecanismo por el cual la última parte de los dos cuadros nos resulta, que tanto las cuotas en dólares como las cuotas en euros son iguales, siendo estas cuotas asignadas diferentes. Espero de haber explicado bien mi duda. Quisiera una aclaración sobre este tema.
TANG SHENG YAO (China) (Original language Chinese)
Thank you, Mr Wade for the very conclusive explanation for the PWB Table. Now there are some PWB scenarios, I think there are two background indicators for this. I think one is the Exchange Rate change and the second one is the Cost Increase, so based on the present background information, we can find out that the PWB have made many changes or fluctuations that now the exchange rate is considered at 1.19, that is about US$ 151 million. If it is based on US$ 1.2 in exchange rate, all these contributions will increase, which means it is above US$ 150 million. So, against this foreground, if we adopt the ZNG scenario, it’s about US$ 650 million, we think there will be a reduction of staff or operations from FAO in order to maintain the reduction of US$ 650 million in contributions, or otherwise FAO can increase efficiency in order to maintain its operation and to minimise the cost. Now, I have two issues to raise: the first is concerned with the change of the contribution. In 1994 and 1995 the value of the US dollar has been going up and reached the peak at the end of 2001. The US figure index has been above 1.2. Since 1993, the budget of FAO is based on NG or on all the tendencies of the US dollars. The US dollar has been going up and the European currency has been going down. Based on this analysis, from US dollar perspective, the contribution is about US$ 650 million. From Euro to dollars the contribution has been going up to maintain the same programmes or the same number of programmes. We need to be clear about this. In the past few years, all these programmes have been going up because the Euro exchange rate has been going down, which means that we can save some finances to be spent on the Budget. However, we did not see any dramatic change in the PWB. Take Scenario 2, for instance. If the Euro exchange rate has been going up, there has been a reduction of US$ 152 million. In the past few years, the Euro has been going up and the strength of the US dollar has been going down. I think we need to get some explanations from the Secretariat based on the exchange rate tendencies for the past few years. As far as we can understand, based on the constant dollars turns, the index has dropped from 100 to 96. If it has been calculated through Euro, the PWB might see an increase. I'm not so clear about what happens under this background, so we would like to have explanations from the Secretariat. So, the scenario’s adoption will be decided by the Members. I hope we can decide on better options or scenarios in order to meet the demand of the developing countries for agriculture, fisheries or forestries, because these are all the priorities of this Organization which have been mentioned on many occasions and conferences. China is a developing country Member and we are also quite concerned with this contribution no matter what scenarios have been adopted. The contribution figure increase has been very big as far as agriculture is concerned. If the budget has been increased, it has been conducive for agriculture because this Organization can give great support and hope to the developing countries. We need to convince the other departments and the people to pay this contribution. The other Member Countries are confronted with the same problem, as I see. I'm not so sure whether you are clear about my issues. On the two issues, the first one based on the tendencies, I would like to know the impact of the tendency of exchange rates on the two scenarios. On the second issue, I would like to make it clear that we are quite concerned about the increase in contribution.
Bongiwe Nomandi NJOBE (South Africa)
Thank you Mr Chairman, particularly for the opportunity to clarify our understanding of the presentation, and I have one last little question for the Secretariat . Could you take your analogy of the comparisons on the index, the 1993 index, and what is happening with the other UN agencies. What then do each of these scenarios mean, if we were to apply each one of them to that index? I think that is the one of the most visible presentations, if you could just give as an indication of where we would be sitting on that index.
Tony WADE, (Director, Programme, Budget and Evaluation)
With regard to the request from Mexico that we prepare a report on Assessed Contributions from Member Nations for each scenario, yes, I think we can do that. The second request was for the Split-Assessment Table which was given to the Working Group. We can do that but I would want to revise it because that was done before the addition of the 4 new Members so it might be misleading to issue it as an official document, but we could produce something like that. The third item, which is what we did for Brazil. That's more difficult but we'll do it, if you don’t mind, on request because what Brazil ask us was to compare single and split-assessment and then take two hypothetical cases in the future of changes in the exchange rate: one where the Brazilian Real gets stronger and one where it gets weaker. So what we do there is we find in the historical data base exchange rates those two moments in time. At that point in time we have to match the euro to Real exchange rates and the Dollar to Euro rate because you need to have rates which really existed in the market to do a comparison. So it is quite a task to do it and we have to do it twice; one when the real is stronger, once when its weaker. It takes a while to do it. I prefer not to try and offer it for 180 Member states if the 150 of them are perhaps satisfied. Interesting how that the results are fascinating. I have yet to find an example where it is not of benefit to you to take split assessment. In every case we've done so far, we find that the effect is to reduce the Net Assessed Contribution if you take split assessment simply because the Euro and Dollar offset each other in the movement so you don't have such an extreme movement. Of course, if I did it for the United States of America, it wouldn't have the same effect. So we take that one on request if you like. I assume that Mexico has requested it.
Mr Chairman, turning to El Salvador's question, how come, in the tables in paragraphs 250 and 251, the figures for dollars and euro remain the same, whereas the dollar figure in the Assessed Contribution goes up by a hundred million, I think that's the question, isn’t it? Probably the simplest way to answer that is if I take in paragraph 250 the 372 million Euro and multiply them by the exchange rate of 0.880 I get US$ 327 million, that is, US$ 327 807. If I add that 327.8 to the 361.9 above it, I arrive at the figure for Assessed Contributions: US$ 689.7 million. So, by applying 88 cents to the dollar, to the euro requirement, I get exactly 689.7. If I go to the other side to paragraph 251, and instead of using 88 cents, I use 1.15, its worth so many more dollars, in fact, its worth a hundred million more dollars. So, it buys more dollars if we have to buy dollars. In fact, if we receive it in euro, we don't go through any exchange transaction at all. We use the euro for the euro expenditure, we use the dollars for the dollar expenditure. I'm not sure whether if that will solve the problem, but we'll come back again if I haven't manage to explain it.
Turning to China's questions, which I am not absolutely certain I've got them, let me try. I think the first question concerned what happened up until now: the dollar has been strengthening through all these years, have we been benefiting from it all, how is it shown? For the last budget, we adopted ZRG. You may remember we were 650 before and we went to 651.8. That consisted, now I'm taking figures off the top of my head but they're very close to being right, a plus 50 million in cost increases - comparison to the 33 million we have this time, last time we had 50 million. But then, because the exchange rate on the dollar went in favour of the dollar, the dollar strengthened and therefore our euros cost less. We have an exchange rate adjustment which has shown very transparently in a separate column in cost-increase table of something like 48.2 million, leaving a net requirement of 1.8 million. Hence the movement from 650 to 651.8. So the Conference made a decision, it said: We will grant the requirement to cover cost increases, but we will fund it from the gains, basically from the gains from the exchange rates variance; and it has done that, in fact, in just about every biennium since 1993. Because its been gradual strengthening of the dollar over that period, now we've got a situation where its bouncing back in the other direction. Now, you can argue this one either way, you can say that we're taking advantage of it, or we're not taking advantage of it. This is your individual decision which you have to make at that time. We are pointing out the impact of not making any decision in favour of funding this assessed contributions on this occasion for that difference.
Your second question, I think, was asking if the euro has strengthened as it has, in fact, especially at the beginning of this biennium, why have we not seen damage to the programme in this biennium? Its costing us 152 million for the next one, so surely it we must have seen damage to the programme during this biennium. We avoided that damage by entering it to a forward contract, in fact in July 2001, to cover the total requirements from 2002 and 2003 which gave us all our euro at US$ 0.88 cents. The contract is for 24 months that means that each month, we pay out a certain amount of dollars to buy our euro funds, and we still get them today at 0.88 cents. So there is no damage to the Programme in 2002 and 2003. But that contract ends on the 31st of December 2003. Well, in that moment in time, we will be back to buying dollars at the market rate which is 1.19 or 1.20 at the moment. So that's why you don’t see the damage of the Programme in the current biennium but you would see it in the form of a 152.2 million in the next biennium. If I haven't answered your questions, I apologise and please come back. Finally, your remark that the contribution increase is very, very big. Of course, we appreciate that and know that's the problem we face, and that you face, because even if you support the idea that these resources should be made available, you still have to fight at home to convince your finance ministers to do so.
CHAIRPERSON
Thank you Mr Wade, I hope that the picture is clearer now on these questions. The floor is open for your general statements on the Programme of Work and Budget. As I said, we have to finalize the primary discussion on this item today, by this afternoon, which means that we have about 20 minutes this morning and about 3 hours this afternoon and I hope that we can do so. The floor is open.
YUNG SU CHANG (Korea, Democratic People’s Republic of)
I am very pleased to congratulate you, Excellency Ambassador Noori, on your election as the Chairman of this important Commission II. I am sure that this meeting will be successful under your wise and skilful Chairmanship. I would like to express my thanks to the Secretariat of FAO for its hard work in the preparation of this excellent document and clear introduction to the Programme of Work and Budget 2004/2005 under discussion.
Mr Chairman, as you know, the World Food Summit set a goal to reduce by half the number of undernourished people in the world by 2015 and unanimously adopted the declaration and plan of action reflecting the political will and the means by which to achieve that target. However, judging from the background of recent world trends, the reality is far from the target to be achieved every year as set out by the World Food Summit and as shown in the document.
Between 1995-1997 and 1999-2001 the number of undernourished people in developing countries increased by 18 million in spite of the given global community's commitment to food security concerns, its capacity to produce more than enough food for human beings and its ability to make use of modern information and transport systems worldwide.
The whole security problem remains a persistent issue in development setbacks. This current situation requires that a number of countries make a common effort using their political will to strengthen FAO in terms of meeting the Programme of Work and Budget in order that FAO fully play its role as the leader and coordinating agent in the UN system for the implementation of the World Food Summit Plan of Action.
I would like to make the following comments:
First, with regard to the Programme of Work and Budget, my delegation believes that the yearly growth scenario in the document has been designed to ensure a balanced response to the main long term orientation in the strategic framework and is closely derived from the substantive content of the Medium Term Plan of FAO which is approved unanimously by all member countries as well as being geared to respond (to the maximum extent possible) to the recommendation of the technical commission of FAO, reflecting the urgent need of the community and the Member Nations for world food security. My delegation therefore welcomes and strongly supports the 2004-2005 budget initiated by the Director General of FAO and calls for all member countries to adopt, unanimously, the political will for world food security
Second, regarding the Technical Cooperation Programme, my delegation would like to remind the Conference of Resolution 9/89 that invited the Director General to make every effort in order to restore the resources available to the TCP to its former level of 14 percent over the total regular programme and if possible to raise it by 17 percent. Past practices have shown that TCP fully demonstrated its advantage and effectiveness in helping agricultural development and production of developing nations by playing a catalytic role to meet pressing problems of the benefiting countries. Expressly on the reduction of TCP allocation in the budget, my delegation would like to strongly suggest that FAO raise the TCP allocation to the maximum possible level of the Conference Resolution 9/89 on nations. Therefore, the major change in the resource allocation since the stage of the summary of PBE was a shift from the program (underneath programme 2.5 contribution) to sustain development and special programme trusts to contributions to other major programmes under Chapter 2 of the Programme of Work and Budget. My delegation expresses regret that this shift has resulted in the reduction of important activities under this major programme 2.5 including reduced support for capacity building in developing countries, and therefore my delegation would like to call for the allocation of resources where they will have less of a negative impact on this and major programs.
Víctor Hugo MORALES MELÉNDEZ (México)
En primer lugar mi delegación desea felicitarlo por su nombramiento para encabezar esta Comisión II. Su talento y desde luego su compromiso con la Organización son garantía de éxito. Estamos en esta Sesión con un espíritu positivo para las negociaciones. Las restricciones presupuestarias y las economías que se imponen en el Gobierno Federal de México, no permiten comprometer mayores recursos por concepto de cuotas en todos los organismos internacionales. A pesar de esas limitaciones, la cuota a la FAO se ha pagado en su totalidad y México estará comprometido al pago puntual de ésta. Por otro lado esperamos la información que proporcionará la Secretaría sobre el sistema de pago en dos monedas, para analizar el impacto en las cuotas de cada uno de los países y así tomar una decisión plenamente informada. Sería conveniente y deseable que los países paguen sus cuotas, sobre todo, sus atrasos como una vía para mejorar la situación presupuestal de la FAO y para fortalecer sus finanzas. Permítame insistir en el uso eficiente del presupuesto y en la prioridad en la asignación de recursos, ya que cualquier distorsión en la asignación de los mismos, puede causar desequilibrios que afecten a la ejecución de los programas, en los cuales la FAO tiene ventajas comparativas y competitivas que constituyen la columna vertebral de sus actividades. Hemos hecho una declaración en el Consejo sobre las prioridades que mi país concede en el Programa de Labores. La Secretaría de la FAO debe buscar con la orientación de sus Estados Miembros, la asignación equilibrada del presupuesto procurando aplicar los recursos de acuerdo a las prioridades en los programas de agricultura, pesca y montes. Así como una asignación regional equitativa de los recursos para las actividades de cooperación y de asistencia técnica. Finalmente mi delegación desea expresar su reconocimiento a la Secretaría de la FAO por las acciones de ajuste y reestructuraciones realizadas que han permitido economías y mejorías en la eficiencia de la gestión.
CHAIRPERSON
Distinguished representative of Mexico, I would like to remind participants that we do have a Working Group on Split Assessment chaired by independent chairs of the Council. This was deliberately done to separate these two issues of the budget and the split assessment and we would expect that all speakers kindly keep these separate. All questions about split assessment should be submitted to the Working Group by your representatives. Here the expectation is that you talk about the different scenarios and level of the budget.
Abdul Razek AYAZI (Afghanistan)
Despite the complexity of the subject matter I shall try to be brief. But before doing so I wish congratulate you on your election as Chairman of this important commission. Afghanistan is proud to see its neighbour chairing the commission. Mr Chairman we have no differences whatsoever for the Programme of Work and Budget presented by the Director General. It is clear, transparent and well integrated. Moreover the priorities that he is proposing were discussed in the regional conferences COAC, COAFI, COFO and CFS. We endorse the objectives designed in the operational modality of the programme presented, we also appreciate the adequate treatment of the cross-cutting issues. Our comments, Mr Chairman, relate to some selected issues.
First we wish to express our position regarding the level of the budget. At the 125th session of the Council that has just passed, the distinguished Ambassador of Guatemala explained in his eloquent manner, the three budget terms and used a word called ‘euphemism’. We share his wise observations. The scenarios before us are crystal clear. These are: a reduced budget, a stagnant budget, and a modestly rising budget. The reduced budget, the so called Zero Nominal Growth budget, as forcefully and convincingly explained by Mr Wade during the last Council session and now at this Commission as well as the articulation presented in Council paper 125-10 would have catastrophic effects on the work of the organization. We appeal to the advocates of the reduced budget scenario to kindly reconsider their position and save the Organization from the devastating effects of a reduced budget.
The stagnant budget, the so called Zero Real Growth scenario, will deprive FAO from meeting the challenges facing world agriculture and from fulfilling the demands made by membership following resolutions passed in the various international forums including the World Food Summit: five years later. Only a rising budget makes it possible to face up to the challenges facing world agriculture, and to accelerate the fight against world hunger and rural poverty. As part of the developing world, Afghanistan strongly supports this scenario.
We also support the increase in resources for standard setting programmes like IPPC, Codex Alimentarius and Plant Genetic Resources, provided that this increase is not at the expense of reduced resources for capacity building connected with these programmes. Without support for capacity building developing countries would not be able to put into practice standards which are of a sophisticated nature. We do not subscribe to the cuts envisaged in major programmes 2.5 and particularly in programme 251, 252, 253. How can resources for rural development be reduced when the eradication of rural poverty is the prime objective of the Organization? The idea that one can take away from Peter to pay Paul does not stand up to the test, though some may associate such tactical move with more assertive prioritization, and/or seeking comparative advantages. We think this attitude is not very helpful, because the work done by Peter and Paul are of equal importance and also both Peter and Paul are in need of a blood transfusion.
Secondly, we wish to reflect on the damages caused by the stagnant budget: The adoption of the Zero Real Growth scenario is tantamount to causing a paralysis of the Organization. It is like taking the wind out of one’s sail. The shift from the rising budget to the stagnant budget reduces the Regular Programme resources for many essential areas of work. As presented in the PWB, the axe falls particularly on Major Programme 2.5 (Contribution to Sustainable Development and Special Programme Trusts). This major programme, which has already been by-passed by the recent budget, will receive a further cut of 4.4 percent. This is not acceptable to the developing countries.
A large number of the cuts under the stagnant budget will fall under category A of the Strategic Objectives. We wish to emphasize that the activities falling under category A of the Strategic Objectives are as close, or close to, the aspirations of the developing countries, and we will be very disappointed by the cuts in these activities.
In spite of the high priority attached to investment promotion, the reduction in resources for Programme 3.2.2 (Investment Support programme) under the stagnant budget will be very severe indeed, amounting to a decline of almost 8 percent. The ECDC and TCDC activities, which are cherished and promoted by the developing countries, will also have to be curtailed due to a reduction of 11 percent in resource commitment. With respect to TCP, the commitment to projects will remain stagnant but there will be a marked increase in the budget of the TCP Unit. The reason for this increase is not spelled out in the PWB.
The Director-General has proposed 104 professional posts under the Real Growth scenario in order to compensate partially for the successive loss of professional staff in the previous biennia. This increase amounts to a 7 percent rise in the total number of established professional posts. The Zero Real Growth budget will cut down this incremental increase by one-third. Some members still maintain the view that FAO can reduce further its professional staff by improving efficiency. May I remind the critics to have a close look at the recommendation of the six independent evaluations presented in Programme Evaluation, 2003/4 that we are to discuss, I presume tomorrow. The shortage of staff is one of the main findings of these independent evaluations.
From the regional tables shown on pages 255 to 266 of the Programme of Work and Budget, it is possible to calculate the ratio of Trust Funds to Regular Programme resources for six Programmes, 2.1 to 2.5 and 3.1. The gearing ratio is 1.9 for Asia and the Pacific and only 1.25 for Africa and 1.35 for Latin America and the Caribbean. Obviously, more efforts are needed to promote Trust Fund activities in the latter two regions. The gearing ratio for the Near East, which amounts to 6.3 percent, is totally distorted due to the Iraq Programme.
Salisu INGAWA (Nigeria)
The Nigerian delegation congratulates you on the appointment. I would like to support my colleagues from North Korea and from Afghanistan in supporting the call for real-growth for the FAO budget of 2004-2005. It is an issue of integrity, actually, when you are calling for and supporting more activities that are based on the real needs of members – particularly in the case of members of the relevant countries – than if you go for a cut; definitely then the issue of integrity is at stake, because we have to stand by our words, if we are really supporting the rural people, eradication of poverty and improved food security, there is no way we can but support the real-growth scenario proposed by the Director-General. The Nigerian delegation strongly supports a real-growth budget.
CHAIRPERSON
I would like to remind the chairpersons of the regional groups, all the regional groups, that they have to give us a maximum of three names for the friends of the Chair by the closure of this afternoon's meeting.
The meeting rose at 12.55 hours
La séance est levée à 12 h 55
Se levanta la sesión a las 12.55 horas
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