Global Policy Forum

Who Will Pay for UN Reform?


By Ayca Ariyoruk and Robert W. Hsu*

United Nations Association of the United States of America
November 7, 2006

Until December 2006, the United Nations' controversial and powerful Administrative and Budgetary Committee, also known as the Fifth Committee, will remain in session and tackle the unfinished business of reform. The savings to cover the cost of reform the UN hoped to achieve from efficiency measures such as outsourcing and shutting of outdated programs have not produced the expected results as of yet, and the prospect is not very promising. So how will the UN pay for its ambitious reform agenda? Indeed, one of the most contentious issues facing Fifth Committee delegates this year is the issue of reviewing the scale of assessments-the business of determining who pays how much to the UN. Tokyo and the European Union are advocating different proposals, but they are supporting one common theme-China and Russia should pay more to the UN regular budget.

Overall costs
Although cost estimates for reform have not been refined, roughly $500 million is expected to be needed for key initiatives: upgrading the UN's computer systems ($120 million over several years), one-time cash incentives for staff to voluntarily leave the organization ($100 million), and human resources reform, including improvements to field staff benefits ($280 million). As of September for the 2006-2007 biennium, member states have approved about $40 million in additional funds to implement UN reform, mostly in start-up costs and to cover temporary posts.

Evidently, there is no appetite among US policymakers to increase US contributions to the organization. Unlike the policy advocated by the US Ambassador to the UN John Bolton, UN reform will not pay for itself, an expert advising the UN's budget committee who prefers to remain anonymous recently told the UN Association of the USA. "Reform is a cost-increasing exercise. The specific proposals on the table for human resources management reform and information technology renewal involves costs on a scale that cannot be absorbed in existing budget levels without making major program cuts which are not likely be agreed."

No savings from program and activity review
Hopes about covering the cost of UN reform through savings from the review of UN's mandates quickly diminished when the Group of 77 (G-77) established a strict criterion under which any savings from this exercise would be reinvested in the areas from which they were derived. The G-77, a 131-member coalition of developing countries, took a special interest in this exercise because the subjected 9,000 UN mandates were formulated mostly to address the needs of the developing countries.

According to a report released in October 2006 by the US Government Accountability Office (GAO), as of September, UN member states have reviewed 399 mandates but have not agreed to change, eliminate or retain any. Another delegate to the Fifth Committee who also prefers to stay anonymous in order not to undermine his country's position which is supportive of the mandate review said he would be surprised if the overall exercise saves $5,000.

No savings from outsourcing and relocation either
The GAO reports that the Secretary-General projected cost and efficiency savings between $100 million to $400 million from procurement reform; but to date, there are no firm savings estimates, nor a timeline for implementation.

In May 2006, Secretary-General Kofi Annan's proposal on outsourcing elicited strong opposition from the G-77, which did not authorize him to conduct cost-benefit analyses of a plan to relocate translation, editing and document production services. Moreover, a General Assembly resolution dating back to 2000 establishing conditions for outsourcing further restricts the secretary-general's ability to move forward with this initiative. For instance, according to those restrictions, outsourcing may not be considered if there is a possible negative impact on staff, a statement wide open to a range of interpretations. In addition, the UN's current outsourcing practices are in need of better monitoring and management; fixing the existing practices alone may cost additional money at the offset.

A fix? Tokyo's proposal
Now before the UN's budget committee are various plans to redistribute the financial burden among the organization. According to a plan drafted by the Japanese, privileged members of the Security Council, otherwise known as the permanent five veto holders (P5), would pay a minimum amount of 3 or 5 percent of the UN budget. This arrangement would not affect France or the United Kingdom or United States, whose contributions to the UN budget are at 6.2 percent, 6 percent and 22 percent respectively. But an addition of this premium would boost China's contribution of 2.053 percent and Russia's 1.10 percent as assessed in 2006. The most vocal opponent to the idea, not surprisingly, has been the Chinese.

There are questions over whether China can afford to pay more. In November, China's total foreign exchange reserves reached $1 trillion. Yet, the country's administration argues that its crushing population burden of 1.3 billion qualifies the country as poor. According to the government, in 2005, there were 23.5 million Chinese with an annual income of less than $85.

Even if China could afford to increase its UN contribution, should the privileged members of the Security Council be expected to pay more? One reason the P5 should not be asked to provide more funds, China asserts, is that this could trigger a bad trend in the organization where member states "buy" power. But this trend is already in place. Since the UN's inception, financial contributions to the organization's budget and member state population have been the main factors in determining the desirable range of staff representation at the UN. In other words, the more a country pays, the more of their nationals get to be paid by UN dollars.

The Japanese proposal could make the criteria for expanding the unhealthy permanent arrangements of the Security Council more competitive. Currently, the contributions of India, Brazil, South Africa and Egypt-all permanent seat aspirants-are set below one percent or will drop below one percent as new assessments take effect in 2007.

Another potential solution: The European Union's proposal
The European Union is developing a proposal which argues that China and Russia should pay more to the UN not because they sit on the Security Council, but because they are large emerging economies and benefit unfairly from the discount rates available to the developing countries. Assessment formulas factor in two categories of states: developing and developed countries. Developing countries with low per capita income get a 20 percent discount on their dues. India, Brazil, China and Russia collectively receive 60 percent of the discounts. China alone gets greater discount than the whole of Africa. China and Russia with the special discount rates available to them, respectively, paid approximately $35 million and $19 million to the UN regular budget in 2006.

According to the United Kingdom's delegate to the Fifth Committee Wasim Mir, the Japanese proposal is flawed because about 70 percent of the regular budget is derived from the decisions of the General Assembly or the Economic and Social Council, not from the Security Council. "On the peacekeeping budget, permanent members pay a premium because peacekeeping derives from the decisions of the Security Council."

If the countries pay more, they will have more of a stake in how their money is spent at the UN. "Higher contributions could compel states to develop a strategic outlook towards the organization, a reform minded view of the budget where people can focus on priorities," said Mir.

How important is the UN for China?
Before convincing Russia, India and Brazil to increase their contributions, the Japanese or the Europeans would have to sell their proposals to China. Whether China can afford to pay five percent of the UN budget depends less on the strength of the country's economy and more on China's priorities. It is odd to see China, traditionally a reserved country who was "content to follow the lead of the Soviet Union" as James Traub recently wrote in the New York Times, now assuming an increasingly influential role at the UN. True "Beijing sleeps no longer" but not all change is for the good.

Beijing, for instance, protected the deficient system of regional rotation in selecting the next secretary-general, despite the historical opportunity to get rid of an outmoded practice once and for all. It was mostly the Chinese oil interest in Sudan that delayed robust action to stop the genocide in Darfur. And, most recently, China's seat in the Security Council prevented a stronger reaction to North Korea's nuclear test, cautiously guarding its border concerns with North Korea. China has a responsibility to pay more to an organization that has been a very effective instrument in helping the country achieve its foreign policy goals. China will not be buying new power but merely paying for what it owes to the UN for all of its service to China's position in the world.

If the Chinese were more amenable to new ideas and increase their contributions, Russia would have no choice but to follow suit.

The proposals of the Japanese and the Europeans before the Fifth Committee deserve a serious debate before they wrap up the scale of assessments issue in December for another three to six years. Redistribution of financial burden among the organization's members would create an environment that is more receptive to budget growth. Moreover, countries with more at stake could adopt a view more supportive of reform. In the meantime, nothing stops the UN from continuing to pursue cost savings measures during its reform process for the sake of increased efficiency.

About the Author: Ms. Ariyoruk is a senior associate and Mr. Hsu is a research assistant in the Global Policy Programs department of the United Nations Association of the USA

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