ECOSOC BEGINS CONSIDERATION OF OPERATIONAL ACTIVITIES OF THE UNITED NATIONS FOR INTERNATIONAL DEVELOPMENT COOPERATION

03.07.03


High-Level Panel Held on Resources for Operational Activities
for Development, Progress on Development Cooperation Activities Reviewed



The Economic and Social Council began its consideration of the operational activities of the United Nations for international development cooperation this morning, and held a high-level panel on resources available and progress on development cooperation. It was stressed that there was a need for official development assistance to be strengthened; new and alternative contributions; more even burden-sharing of funding; a strong, well-funded United Nations; and reform of international financial institutions.
Opening the panel discussion, the Vice-Chairman of ECOSOC, Abdul Mejid Hussein, said the United Nations’ system had aimed to better its effectiveness; yet the level of funding made available had stagnated – or declined – in tandem with the decline in official development aid. Panelists were encouraged to shed light on how to redress the funding situation of the United Nations by the Under-Secretary-General for the Department of Economic and Social Affairs, Nitin Desai, who introduced the panelists.
Given the fact that the official development assistance (ODA) necessary to attain the Millennium Development Goals was substantially higher than – double –the amount of ODA pledged, the United Nations must examine methods for mobilizing increased assistance, said Walter Fust, the Director General for Development Cooperation of Switzerland. Such examination must cover both OECD countries and the performance of their partners in the South and East, as well as the future of the United Nations development system and partnership support on a lending and grant basis.
Ruth Jacoby, Director General for Development Cooperation of Sweden, said long-term development based on annual voluntary contributions was no longer viable. Deep, frank and fundamental questions needed to be asked about how the United Nations fit into the development agenda as a whole. Advocating the need for harmonization, Jean-Claude Faure, former Chairman of the Aid for Development Committee of the Organization for Economic Cooperation and Development (OECD), echoed her sentiment and stressed the need to find new solutions to old problems. Stressing the need to redesign the funding system of the United Nations, Bruce Jenks, Associate Administrator and Director of Bureau for Resources and Strategic Partnerships of UNDP, highlighted current problems faced by the international development community.
The World Bank and the IMF were comparatively attractive to financiers, said Ron Keller, Director General for International Cooperation of the Netherlands. He suggested that one solution lay in examining their successful reform elements, since improvement in the qualitative sector should improve the United Nations’ system in the quantitative sector. Ariel Buira, Chairman of the Group of 24, stressed the need for the International Monetary Fund to engage in further reforms, including the reform of its voting, vetoes, and quota systems which currently only benefited a few developed countries. Did the IMF even live up to its own standards in terms of terms of transparency, accountability, and legitimacy, he asked and regretted the recent decision of the United States to renege on the consensus to reform the IMF.
Marco Cesar Naslausky, Director General for Development Cooperation of Brazil, said the notion that development meant the satisfaction of people’s basic needs – especially food in adequate quantity and quality – designated in Brazil by the President as “Zero Hunger” – as well as the access to drinkable water, sanitation, electricity, education and health, underlined the very urgency of the contribution to be provided by international cooperation for less favored nations. Unfortunately, as a result of the lack of funding, the United Nations system had been unable to respond to the needs of developing countries, Muchkund Dubey, President of the Council for Social Development of India, said. If the situation did not change, the United Nations would become increasingly marginalized in the development process.
During a subsequent interactive segment, speakers suggested the creation of a “road map,” which the United Nations funding system could use and build upon; pointed out that the United Nations was very good at public awareness, but not so good at acting directly; asked for elaboration on medium size economies, tied contributions and the importance of national ownership; asked how to ensure political will and action; emphasized the need to address fragmentation; and encouraged long-term official development assistance. Panelists responded to the questions raised and stressed to country representatives the importance of political will and long-term commitments.
In his concluding remarks, Mr. Desai, said that the message was clear – more funding, efficiency and impact were needed in order to maintain the momentum of the international development process.
The representatives of Chile, Guatemala, Nigeria, El Salvador, South Africa, Sweden, Germany, and Norway participated in the interactive segment.
ECOSOC will reconvene at 3 p.m. this afternoon to hold a high-level dialogue with executive heads of United Nations funds and programmes.

Document
Before the Council, there is the report of the Secretary-General on Funding of Development Cooperation of the United Nations System (E/2003/89) which reviews the conclusions reached at the triennial comprehensive policy review on resources for operational activities for development, and reviews the progress made in funding development cooperation activities of the United Nations system. The report analyses the issue of funding for the United Nations system’s development cooperation in the new context emerging from the Millennium Summit and the Monterrey Conference, and highlights the development role of the United Nations system through its operational structures. It reviews the pattern of United Nations development funding, its trend and current modalities, outlines traditional public funding sources, as well as private initiatives and domestic resources, implications of the relationship with Bretton Woods institutions and consequences of the core funding shortfall, and concludes with a recommendation for renewed dialogue among Member States with a view to reaching agreement at the triennial comprehensive policy review in 2004 on strengthening the resource foundation for the operational work of the system.

Statements
WALTER FUST, Director-General for Development Cooperation at the Ministry of Foreign Affairs of Switzerland, said that although official development aid (ODA) pledges accounted for approximately $ 55-60 billion, real disbursements were substantially lower, at approximately $ 40-45 billion. And demand for the ODA necessary to attain Millennium Development Goals was substantially higher than – double –the amount of ODA pledged. Thus, in spite of the stress placed upon the idea of “partnerships” in political declarations over the last five years, there was an increasing gap between declared and disbursed money. A trend involving already pledged money being recycled into new programmes had also affected the transparency of ODA.
The goals internationally agreed on at Monterrey, he said, were to be realized in a time of falling revenues. As it looked difficult to mobilize the required additional measures and means within traditional budgetary models, new ways of financing ODA needed to be found. In this vein, it was important to examine closely the architecture of the present United Nations development system. For example, the self-financing aspect of World Bank operations should be supplemented by a substantial grant element. He warned that if the international community did not look carefully into every dimension and aspect of the architecture of the United Nations’ financing system, there would be a growing disparity between development actors and those operating on a grant basis.
Mr. Fust suggested that methods for mobilizing increased ODA within Organization of Economic Cooperation and Development (OECD) countries should be examined, as should the performance of their partners in the South and East, among other issues. Another issue for examination was the shape of future dimensions of the United Nations development system to render adequate partnership support on a lending basis and to forward grants for capacity building.
Among the options he suggested for discussion were that the entire role of the Bretton Woods financing system be rethought, in order to examine those aspects better financed on a lending basis and those on a grant basis; that the goal of the multilateral system should be to bring in complementary and added value; that ODA and development should be raised to higher positions of importance on national agendas; and that donors should further harmonize and coordinate approaches in the field of multilateral activities. Among the immediate measures suggested were the banning of the term “voluntary” from the United Nations vocabulary for funding pledges, making multi-year funding commitments, and creating country-related consortia through which the United Nations’ financing system could come up with national projects for development on a 10-20 year basis and could get clear commitments from development partners.
MARCO CESAR NASLAUSKY, Director General of the Brazilian Agency for Cooperation, said it was clear that the development objectives established in Monterrey and in the Millennium Declaration would only be reached by strengthening the funding of development cooperation as a whole, and in particular the multilateral segment, through the United Nations. The notion that development necessarily meant the satisfaction of people’s basic needs – especially food in adequate quantity and quality – designated in Brazil by the President as “Zero Hunger” – as well as the access to drinkable water, sanitation, electricity, education and health, underlined the very urgency of the contribution to be provided by international cooperation for less favored nations. Nevertheless, the basic level established more than three decades ago of mobilizing 0.7 per cent of GDP for official development assistance had been achieved only by five countries: Denmark, the Netherlands, Luxembourg, Norway, and Sweden.
The challenges ahead were enormous: 20 per cent of the world population still lived on less than one dollar a day; 820 million were illiterate; one billion lacked access to drinkable water; and 2.4 billion did not have sanitation services. Taking into consideration this picture it was impossible to avoid questioning why the funding for development was still so far away from its goal. Brazil was not yet a donor country for international cooperation. Being a medium human development country, Brazil had been receiving cooperation during the last five decades from many nations and organisms of the United Nations. This cooperation had been instrumental in achieving current development. In spite of all economic and financial constraints faced by Brazil, it had been providing growing human and financial resources of development cooperation. This policy of horizontal cooperation had been developed for almost two decades. The newly elected President considered solidarity with the less developed countries an ethical imperative. The Government of Brazil therefore intended to deepen and enlarge the transfer of knowledge, technologies and best practices with national willing to share them.
RUTH JACOBY, Director-General for Development Cooperation in the Ministry of Foreign Affairs of Sweden, said that the issue before the panel was not a new one, but that today more than ever before, there was a need for a well-funded, strong United Nations system. There was now a broad consensus on a shared agenda, the result of the Millennium Development Goals (MDGs) and the agreements reached at other international conferences and summits. There was also a deeper understanding of the roles funding and partnership could play. Moreover, it would not be possible to achieve the MDGs if business continued as usual.
She said that deep, frank and fundamental questions should be asked about whether the United Nations was serious in its intent to ask fundamental questions about the funding system and the development system as a whole. There was a lack of thought and clarity as to the issues needing to be addressed and the United Nations could not afford to compete at the level of sub-systems. It was not ideal to have 60-odd United Nations agencies competing for funding from the same, small group of OECD donors, thus a division of labor should be considered. Once that had been decided, with political will the division could be quickly accomplished.
It made no sense to base long-term development work on annual voluntary commitments, she said. In addition to banning the world “voluntary,” “annual” should also be banned. There should also be burden sharing; small European countries contributed the majority of funding while the largest economies contributed comparatively little.
ARIEL BUIRA, Chairman of the Group of 24, said it was clear that resources were necessary for the implementation of the decisions of United Nations conferences, particularly the outcome of the Monterrey Conference. However, some aspects of the development agenda were not totally dependent on financing, but on political will. He therefore regretted the recent decision of the United States that the International Monetary Fund did not require reform. Since 1997, the IMF had given increasing attention to the issues of governance, promoting transparency and accountability of its member countries. It was necessary to question how IMF attained adequate participation of all members in decisions and how IMF governance met its own standards of transparency and accountability. Unfortunately, the voting system of IMF was based on the percentage of contributions offered, standing in the way for the voices of developing countries to be heard. Another problem was that of the qualified majority and vetoes. This meant that with the votes cast by the G-5 and by Belgium, Dutch and Swiss directors represented over 60 per cent of votes.
The role of the “quota formula” also presented a problem, he said. At the time, it had been designed to meet political objectives and to give the United States the most power, and some power to the British Empire, the Soviet Union, and China. This formula was still being used with variations in weights given to variables of national income, gold and dollar reserves, variation in exports and other variables. It was a fact that discretion was used in the selection of formulas to be applied in each case, and that the determination of quotas lacked transparency. This begged the question; did IMF meet its own standards of governance? In terms of transparency, IMF required all decisions to be the result of open discussion with full participation of members, yet appointments of MD and of Senior Staff lacked transparency. In terms of accountability, the IMF required that decision-makers faced up to the consequences of their decisions, yet, the IMF was accountable for no one when programmes failed. In terms of legitimacy, the IMF required adequate checks and balances; however the current power structure placed decisions in hands of small groups. The reform of IMF had been agreed upon in Monterrey. Given these facts, it was shocking that the United States had reneged on this consensus.
RON KELLER, Director-General for International Cooperation in the Ministry of Foreign Affairs of the Netherlands, said that consideration of the issue of funding should be split into its qualitative and quantitative aspects. Qualitatively, there was the issue of core versus non-core funding; core funding was the preferred mode as it fit into a multilateral agenda and long-term development while non-core funding ran the risk of pulling the system into fragmentation. The system should say no to non-core funding, the temptation to accept non-core funding during a period of declining funding was strong. Yet the more harmonization throughout the system that existed, the less motivation financiers would have to offer non-core funding.
Touching upon the subject of World Bank and IMF reform, he suggested that the successful elements of their structure should be examined, as they were comparatively attractive to financiers. Two possible explanations for the difference could be found in the World Bank’s very structure, in the voting structure that had just been criticized and in its single structure. The United Nations system was not one organization, but a group of institutions. In the coming months, the United Nations institutions should come together to issue a joint action plan. They needed to share policy, not just jeeps in the field. Improvement in this qualitative sector should improve the United Nations system’s improvement in the quantitative sector. Also suggesting that the United Nations system did not reward donors enough, he suggested that a legal structure for donation should be created.
MUNCHKUND DUBEY, President of the Council for Social Development in India, said that it was plain that there had been a decline in core contributions to the United Nations system, an increase in extra-budgetary non-core funding, and a real-term decline in assessed contribution. The extreme fragmentation in United Nations programmes had arisen from decentralization in terms of appeals for funding; when he was employed at the United Nations, only UNDP had an appeal capacity. Also, programming had become extremely complicated. These factors all led to the complex problem of funding on the table, in which the United Nations system was unable to respond to the needs of developing countries because of lack of sufficient funding. Thus, in the development process, the United Nations was being marginalized.
The decline of the state in economic terms in the 1980s had coincided with increased difficulties for developing countries, abetted by the havoc wreaked by reform-based development aid, he said. Such reform policies constituted a massive invasion of national policy making. As it would be impossible to revert to a single financing process or to expect that increased donations would arise overnight due to good will, he suggested that the way forward would not be found in tinkering with the current system, but in finessing it. Among the suggestions offered were that once a programme had begun implementation, it should not be limited on budgetary grounds. Also, there was a need for a system of international taxation, as well as for national ownership of development programmes – in real terms. Finally, he said that even if defense spending was cut as had been suggested, there was no assurance that there would be a related increase in funding to the United Nations unless a link between national and international spending was created.
JEAN-CLAUDE FAURE, former Chairman of the Aid for Development Committee of the Organization for Economic Cooperation and Development (OECD), said the way in which ECOSOC had been approaching fundamental subjects on funding was very constructive. Some success had been noted in the joint endeavour to work in this manner. However, it was stressed that these were old problems that required new solutions. The new approach needed to be one of getting back to basics. When talking about financing of the United Nations system, it was necessary to question poverty reduction strategies alongside national sustainable development policies. An allocation of aid discussion with partner countries needed to integrate these issues. The second main approach was the implementation of the MDG with a global implementation strategy, requiring both vertical and horizontal funding approaches. For a lasting dynamic process, questions needed to be raised about good governance, performance, and donor policies. The United Nations was currently involved in reforms, but one could not think about the best way to achieve the Millennium Development Goals without taking into account what was going on around the United Nations. There was a clear need for harmonization, he said. Referring to earmarking allocation of official development assistance, he said current thinking was on a micro level and very specific to institutions or countries. However, the thinking on allocation needed a macro approach of practical consistency. In addition, he suggested that donors needed to be asked how they wished to have their funds utilized.
BRUCE JENKS, Associate Administrator and Director of the Bureau for Resources and Strategic Partnerships of the United Nations Development Programme (UNDP), said that the strength of the Bretton Woods institutions and the bilateral system was beneficial for the United Nations system. The issue was not whether the United Nations needed a strong bank, but whether the bank needed a strong United Nations. Looking at the overall resource situation, he suggested that it was not so bad. The strong performance of non-core funding suggested there was a place for the United Nations in the development market. Yet on the core side, there was a different situation. Even in the last couple of months, good donors had had budgetary complications leading to a freezing of funding and cuts in allocations, among others.
One of the United Nations’ problems, he said, was that it was residually funded by its Member States. Questions could also arise about the priorities of foreign offices in the post-11 September world. Structurally, the United Nations was not well planned; this needed to be recognized. The case for an adequately funded United Nations programme had never been stronger, but the funding of the United Nations needed to be redesigned in order to be effective.

Interactive Dialogue
During the subsequent interactive debate, one speaker said that it was important to proceed with work on the issue of funding on the basis of the ideas presented by today’s panel, if the United Nations wished to make progress. He suggested the creation of a “road map” which the United Nations could use and build upon.
Another speaker suggested that there had been two types of subject matters this morning: the first, a follow-up to the Monterrey Conference; and the second, a focus on the operational activities of the United Nations. Under this second topic, it should be recognized that the United Nations was very good at public awareness, but not so good at acting directly. Government representatives addressing the United Nations often said that words were fine, but it was time to act. The United Nations should put its work where its mouth was and lead the way in its area of comparative advantage – capacity building. The speaker had never understood why it was difficult to raise $ 1 billion for UNDP, which was the main operational arm of the United Nations, when moderately increased resources could enable the United Nations to lead the way in operational activities and complement the United Nations’ role in offering policy guidance.
Mr. Desai, responded to some of the questions and issues raised and said today, there was far greater agreement than ever before on what aid was for and how it was to be used. In the 1980s the situation had been different; there had been neither such consensus nor clear vision on how aid was to be used. This meant that there were positive signs for the future since there was more coherence now than ever before. However, the process itself needed to be more coherent and harmonized. He stressed that United Nations agencies were not competing for the same funds, but were in fact competing for different aims. Concerning core and non-core funding and the need for predictability and consistency for United Nations contributions, he said it would be interesting to integrate new donors. The processes and coordination of aid involved both developed and developing countries. Too many aid processes were seen to be run by donors.
Mr. Dubey’s presentation was raised by one delegate who brought up the issue of tied contributions and the importance of national ownership. Responding, Mr. Dubey explained that medium size economies like Nigeria, India and Brazil could contribute further in a tied form of contributions. It was not a new concept within the United Nations system and could be worth looking into.
A representative said that even though many of the panelists’ remarks had been controversial, they did shed light on the work of ECOSOC. As several of the panelists had stressed, the need for political will of States to improve the coordination and consistency of policy would turn out to be the critical point needed to structure a new international financial system. The question arose that, if this was so, what new form of institution would need to be created to be effective? In response, Mr. Keller acknowledged that there was an aspect of global governance that needed to be incorporated so that all elements could be discussed. However, the sheer political component must be acknowledged. Some channels were favored over others because of the political power that could be gained from participating in them.
Turning to the issue of fragmentation which was raised by many panelists, Mr. Keller asked whether it was naïve or daring to ask the heads of agencies to confront the United Nations with a single, united appeal for funding.
Responding, Mr. Jenks said the only risk right now was to not take risks. It was important for heads of United Nations agencies, funds and programmes to rise to the occasion. In fact, comparatively speaking, modest amounts that were needed and the goals were possible.
One speaker raised the issue of effectiveness and efficiency and stressed that this must apply to both recipient and donor countries. To what extent could “best practices” be shared between countries that had succeeded in raising levels of contribution for others to emulate. He also asked if part of good governance did not entail ensuring that ODA was not residual but a commitment. Responding, Ms. Jacoby said that good governance was needed on both sides and that annual voluntary contributions did not make sense. Concerning the process of funding, she called for a more harmonious process, ensuring that the funding came together in a holistic manner.
It was important for the United Nations to find a new way of funding the United Nations funds and programmes. How would the panel advise the United Nations to go about increasing funding? Secondarily, she requested that the panel comment upon the humanitarian perspective of the funding issue.
Mr. Dubey, in response, said that the United Nations Charter did not provide for voluntary contribution. When the United Nations was established, governments were supposed to discharge their responsibilities based on payments based on objective criteria.
One speaker said that until recently, United Nations institutions had been the major channel for aid, but now the international community had to be careful not to make a change of systemic proportions leading to a deterioration of the United Nations system.
In response to a request for comment on the humanitarian perspective of funding at the United Nations, Mr. Fust acknowledged that humanitarian assistance was growing faster than ODA in many countries. As an explanation, he offered the opinion that, in national parliaments, the need for humanitarian assistance could be better understood than the need for funding for programmes that lasted many years. Humanitarian assistance was more easily marketable.



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