ROME GENEVA GROUP MEETING ON FAO FINANCE AND

UNCLASSIFIED ROME 001884

SIPDIS

STATE FOR IO/EDA SETH WINNICK AND IO/S ABRAHAMS
USDA FOR FAS/HUGHES AND REICH
ATHENS FOR CLEVERLY
MEXICO CITY FOR BRAKEL
PARIS ALSO FOR UNESCO

FROM FODAG

E.O. 12958: N/A
TAGS: AORC KUNR FAO
SUBJECT: ROME GENEVA GROUP MEETING ON FAO FINANCE AND
PROGRAM COMMITTEE


1. SUMMARY: ROME GENEVA GROUP (GG) MEMBERS ARE DIVIDED ON
SUPPORTING ZERO NOMINAL GROWTH OR ZERO REAL GROWTH FOR THE
UN FOOD AND AGRICULTURE ORGANIZATION'S (FAO) UPCOMING 2004-
2005 BUDGET BUT DO AGREE THAT GOVERNANCE IS A MAJOR PROBLEM:
THE ORGANIZATION HAS REPEATEDLY FAILED TO BE RESPONSIVE TO
MEMBER PRIORITIES. GG COUNTRIES WHICH ARE MEMBERS OF THE
FINANCE AND PROGRAM COMMITTEES HAVE AN IMPORTANT ROLE IN
WORKING FOR GREATER FAO ACCOUNTABILITY: THE RECENTLY ISSUED
JIU REPORT ON FAO MANAGEMENT PROVIDED A GOOD ROAD-MAP FOR
NEEDED REFORM, PARTICULARLY AS REGARDS FAO COUNTRY
REPRESENTATIVES. GG MEMBERS WILL SEEK PROGRAM AND FINANCE
COMMITTEE ENDORSEMENT OF A TIME-BOUND FAO ACTION PLAN FOR
IMPLEMENTING THE RECOMMENDATIONS. END SUMMARY.


2. THE ROME GENEVA GROUP (MAJOR DONORS) MET APRIL 30, 2003
AT THE U.S. MISSION TO DISCUSS THE UPCOMING FAO FINANCE AND
PROGRAM COMMITTEE MEETINGS. DELEGATES FROM THE U.K., THE
NETHERLANDS, BELGIUM, NEW ZEALAND, AUSTRALIA, SWITZERLAND,
JAPAN AND FRANCE ATTENDED. ITALY, CANADA, SPAIN AND SWEDEN
SPAIN WERE ABSENT.

FINANCE COMMITTEE
--------------

3. UNDER "FINANCIAL AND BUDGET REPORTS," THE U.S. CALLED
ATTENTION TO THE FACT THAT CERTAIN FAO DIVISIONS (MOST
NOTABLY THE INVESTMENT CENTER) HAD OVERSPENT IN THE FIRST
YEAR OF THE BIENNIUM. IT WAS NOTED THAT THE FAO WAS IN THE
PROCESS OF SELECTING A NEW INVESTMENT ADVISOR LONG-TERM
PORTFOLIO MANAGER (THE FORMER ADVISOR MANAGER HAVING FAILED
TO MEET THE AGREED BENCHMARKS.) THE NETHERLANDS NOTED THAT
BOTH IFAD AND WFP HAVE A NEW INVESTMENT ADVISOR "WITH WHICH
THEY APPEAR TO BE SATISFIED." MEMBERS HAD A BRIEF
DISCUSSION OF THE DIFFERENCE BETWEEN IFAD'S INVESTMENTS
(WHICH ARE LONG-TERM) AND FAO'S (WHICH ARE MORE SHORT TERM).
IT WAS NOTED THAT BRAZIL AND ARGENTINA HAD THE LARGEST
ARREARS TO THE ORGANIZATION. DO YOU WANT TO MENTION
ARREARS?


4. UNDER "OVERSIGHT MATTERS" MEMBERS DISCUSSED FOLLOW-UP TO
THE RECOMMENDATIONS OF THE EXTERNAL AUDITOR, NOTING THE
SERIOUSNESS OF MANY OF THE EXTERNAL AUDITOR'S FINDINGS, AND
THE IMPORTANCE OF FAO COMPLIANCE. THERE WAS NO SPECIFIC
DISCUSSION OF ANY RECOMMENDATION, WITH THE EXCEPTION OF
APPOINTMENT OF A NEW INTERNAL AUDITOR. IN THIS CONTEXT, IT
WAS NOTED THAT FAO HAS NOT YET ADVISED CONCERNING THE
APPOINTMENT A NEW INTERNAL AUDITOR (AGENDA ITEM 10).


5. UNDER "FINANCIAL POLICY MATTERS," MEMBERS DISCUSSED THE
PROPOSAL FOR A SPECIAL FUND FOR EMERGENCY AND REHABILITATION
ACTIVITIES. THE NETHERLANDS STATED THAT A CLEARER PROPOSAL
WAS NECESSARY. HE NOTED THAT OTHER UN AGENCIES ACTIVE IN
EMERGENCIES "SEEMED TO MANAGE" AND ASKED WHETHER THE
ESTABLISHMENT OF SUCH A FUND HAD BEEN ONE OF THE
RECOMMENDATIONS OF LAST YEAR'S EVALUATION OF FAO'S EMERGENCY
ACTIVITIES. (THE FUNDING IS TO COME FROM, INTER ALIA,
DIRECT CONTRIBUTIONS FROM DONORS; RETENTION/TRANSFER OF FUND
BALANCES AS AUTHORIZED BY DONORS; TRANSFER OF A SHARE OF
FUNDS FROM THE DIRECT OPERATING COST RECOVERY ACCOUNT.) IS
IT IMPORTANT TO NOTE THAT FAO IS ASKING TO SPEND MONEY THEY
DON'T REALLY HAVE YET? UNDER DISCUSSION OF THE COSTS OF
THE WFS5YL (SOME USD 2 MILLION IN REGULAR BUDGET RESOURCES,
USD 2 MILLION IN VOLUNTARY CONTRIBUTIONS),AUSTRALIA
SUGGESTED THAT MEMBERS ASK ABOUT THE IMPACT ON THE REGULAR
PROGRAM AS A RESULT OF HAVING DIVERTED ACTIVITIES IN SUPPORT
OF WFS5YL. MEMBERS ALSO NOTED THAT CONTRIBUTIONS FOR (NON-
EMERGENCY) TECHNICAL COOPERATION ACTIVITIES HAVE DECLINED
AND OTHER CHAPTERS OF THE BUDGET WERE BEING CALLED ON TO
ABSORB THE FIXED COSTS NO LONGER COVERED BY SUPPORT COST
INCOME. THIS IS A LONG-TERM PROBLEM WHICH MUST BE
ADDRESSED.
(THERE WAS ALSO THE DISCUSSION HERE OF THE LONG TERM PROBLEM
OF BUILDING UP THE INFRASTRUCTURE FOR ALL THESE FIELD
OPERATIONS, BUT NOT HAVING THE BUDGET TO SUPPORT THEM)


6. UNDER "BUDGETARY MATTERS," A TOUR DE TABLE OF GENEVA
GROUP MEMBERS SHOWED THAT THE U.S., JAPAN AND AUSTRALIA HAD
A ZERO-NOMINAL-GROWTH (ZNG) POSITION. GERMANY SAID THAT ITS
POSITION WAS UNCHANGED FROM LAST YEAR (ZNG),NOTING THAT THE
VERY SMALL DIFFERENCE BETWEEN ZNG AND ZERO-REAL-GROWTH (ZRG)
IN THE 2002-2003 BUDGET HAD ULTIMATELY MADE IT EASIER TO
"SWALLOW" A ZRG BUDGET IN 2001. THE NETHERLANDS AND
SWITZERLAND WERE "OPEN TO ZRG." FRANCE NOTED THAT THERE WAS
NO CONSENSUS IN THE EUROPEAN REGIONAL GROUP (ERG) ON ZNG;
FRANCE AND BELGIUM WERE WITHOUT INSTRUCTIONS: THEY HAVE
"SYMPATHY FOR ZNG" BUT WERE "DISPOSED TO CONSIDER ZRG." THE
U.K. WAS SIMILARLY WITHOUT INSTRUCTIONS, BUT UNLESS ADVISED
OTHERWISE THE POSITION WAS ZNG. NEW ZEALAND WAS WITHOUT
INSTRUCTIONS, NOTED THAT WELLINGTON WAS LOOKING AT ALL UN
AGENCIES ON A CASE-BY-CASE BASIS BUT NEW ZEALAND'S
ACCEPTANCE OF ZRG IN 2001 HAD BEEN WITH THE UNDERSTANDING
THAT THEY WOULD REVERT TO A ZNG POSITION FOR THE 2003-2004
BUDGET.


7. UNDER THE ITEM ON THE SPLIT CURRENCY ASSESSMENT, THE
U.K. ARGUED THAT IT NEEDED TO BE SETTLED THIS YEAR, AND
STATED THAT THE SECRETARIAT RECOMMENDATION WAS A GOOD ONE.
THE U.S. NOTED THAT THE SPLIT CURRENCY PROPOSAL MOVED
EXCHANGE RATE RISK TO MEMBERS AND ADVISED THAT WASHINGTON
DID NOT SUPPORT THE CHANGE. THE NETHERLANDS RECALLED THAT
THE EU COORDINATION GROUP POLICY WAS TO HAVE UN AGENCIES
BASED IN EUROPE CAST THEIR BUDGETS IN EUROS, BUT THEY "COULD
GO" WITH A SPLIT ASSESSMENT. UNDER SCALE OF ASSESSMENTS IT
WAS NOTED THAT COUNTRIES THAT HAD OBJECTED TO THEIR NEW
ASSESSED RATE WOULD PROBABLY RAISE THE ISSUE AGAIN.


8. UNDER "HUMAN RESOURCES MATTERS" MANY DELEGATES
COMPLAINED ABOUT THE LACK OF COMMUNICATION WITH APPLICANTS
AND THE LACK OF TRANSPARENCY IN THE FAO RECRUITMENT PROCESS
WHICH THEN OBLIGED PERMANENT REPRESENTATIONS TO SEEK ANSWERS
TO QUESTIONS THAT APPLICANTS COULD NOT THEMSELVES OBTAIN
FROM THE FAO PERSONNEL OFFICE. THE NETHERLANDS NOTED THAT
PERMANENT REPRESENTATIONS NEEDED TO BE ASCERTAINING WHETHER
THE FAO "IS FOLLOWING ITS OWN RULES." THE U.S. SAID THAT
IT WOULD NOT SUPPORT A PROPOSED CHANGE OF THE METHODOLOGY
FOR DETERMINING GEOGRAPHIC DISTRIBUTION, NOTING THAT THE
PROPOSAL NUMBER TWO WOULD VASTLY INCREASE THE NUMBER OF
COUNTRIES THAT WERE "EQUITABLY REPRESENTED" AND SHRINK THE
NUMBER OF "OVERREPRESENTED" COUNTRIES. THE U.S. ALSO
QUESTIONED THE CRITERIA FOR SEEKING "EQUITABLE REGIONAL
REPRESENTATION." JAPAN SUPPORTED THE SECOND METHODOLOGY,
ARGUING THAT IT WOULD RENDER EVEN MORE DRAMATIC JAPANESE
UNDERREPRESENTATION. OTHER COUNTRIES DID NOT COMMENT, BUT
APPEARED TO BE COMFORTABLE WITH THE SUGGESTION OF THE UK
THAT A DECISION WAS UNLIKELY TO BE REACHED AT THE CURRENT
FINANCE COMMITTEE SESSION.

PROGRAM COMMITTEE
--------------

9. GG MEMBERS FOCUSED ON THE PROGRAM OF WORK AND BUDGET AND
THE QUESTION OF SETTING PRIORITIES. THE NETHERLANDS NOTED
THAT THERE SEEMED TO BE CONSENSUS WITHIN THE MEMBERSHIP THAT
NORMATIVE ACTIVITIES SHOULD BE STRENGTHENED (SUCH AS THE
CODEX ALIMENTARIUS COMMISSION AND THE INTERIM COMMISSION ON
PHYTOSANITARY MATTERS (ICPM)); THE REAL GROWTH BUDGET
RESPONDED TO THIS CALL BY MEMBERS, BUT THE SECRETARIAT
THREATENED TO CUT BACK THOSE ACTIVITIES IF FORCED TO MOVE TO
ZRG OR ZNG: WAS THIS AN APPROPRIATE REACTION TO THE
PRIORITIES EXPRESSED BY MEMBERS? THE U.K. AGREED THAT
PRIORITIES SHOULD BE "BUDGET BLIND," I.E., YOU SET YOUR
PRIORITIES AND THEN APPLY IT TO WHATEVER BUDGET LEVEL TO
WHICH YOU FINALLY AGREE. AUSTRALIA NOTED THE NEED TO LINK
PRIORITIES WITH RESULTS AND EVALUATION. NEW ZEALAND ARGUED
THAT MEMBERS HAD STATED CLEARLY THROUGH ALL OF THE
APPROPRIATE BODIES AND MECHANISMS THAT ICPM NEEDED MORE
RESOURCES: HOW COULD THE FAO'S ZRG BUDGET REDUCE THIS
ACTIVITY? HOW ELSE WERE MEMBERS TO PRIORITIZE? IN
DISCUSSION OF THE FAO PAPER ON "PRIORITY SETTING", MEMBERS
AGREED THAT IT WAS A VALID BASIS TO START FROM BUT NEEDED TO
BE TAKEN MUCH FURTHER.


10. UNDER THE FOLLOW-UP TO THE EVALUATION OF THE SPECIAL
PROGRAM FOR FOOD SECURITY (SPFS),PC MEMBERS NOTED THAT THEY
HAD VERY CLEARLY TOLD THE SECRETARIAT TO TIGHTEN UP THE
IMPLEMENTATION BEFORE EXPANDING; THE SECRETARIAT HAD
EXPANDED IT NONETHELESS. THE NETHERLANDS ARGUED THAT THERE
WAS SO MUCH G-77 SUPPORT FOR THE PROGRAM, THE BEST WE CAN DO
IS MAKE SURE THAT THE ADMINISTRATION IS APPROVED, AND KEEP A
CAP ON THE BUDGET LEVEL. THE UK STATED THAT THE PC -- THE
APPROPRIATE BODY WITHIN FAO TO ADDRESS SUCH AN ISSUE -- HAD
BEEN IGNORED. THIS AND OTHER POINTS RAISED IN PARA 10 RAISED
THE QUESTIONS OF WHO SETS PRIORITIES FOR THE ORGANIZATION
AND HOW TO ACHIEVE STRATEGIC CHANGE WITHIN FAO.

JOINT MEETING OF FINANCE AND PROGRAM COMMITTEES
-------------- --

11. UNDER THE ITEM "INDEPENDENCE OF THE EVALUATION UNIT",
SWITZERLAND ARGUED THAT THE RECENT CHANGE AT IFAD IN THIS
REGARD GAVE A POSITIVE EXAMPLE TO WORK FROM. SWITZERLAND
SAID THAT HE COULD NOT ENDORSE THE PAPER AS WRITTEN: THE
EVALUATION UNIT SHOULD REPORT DIRECTLY TO COUNCIL, SHOULD
WORK CLOSELY WITH THE PROGRAM COMMITTEE, SHOULD HAVE ITS OWN
BUDGET, FULL RESPONSIBILITY FOR STAFF, AND THE DIRECTOR
SHOULD BE CHOSEN BY THE FAO COUNCIL. ALL GG MEMBERS AGREED
THAT GREATER INDEPENDENCE WOULD BE GOOD; THE NETHERLANDS
NOTED THAT THE INTERNATIONAL FINANCIAL INSTITUTIONS (IFI'S)
HAD THIS, BUT WITHIN THE UN SYSTEM IT WAS HARD TO FIND A
MODEL. HE ALSO NOTED THE IMPORTANCE OF THE "FEEDBACK LOOP"
TO PROGRAM MANAGEMENT. MEMBERS AGREED THAT THE THERE WAS NO
NEED TO MERGE THE AUDIT AND EVALUATION UNITS. THE UK ASKED
ABOUT THE RELATIONSHIP BETWEEN AN EVALUATION UNIT AND THE
CONTINUAL "AUTO-EVALUATION" THAT PROGRAM MANAGERS ARE
SUPPOSED TO BE PERFORMING.


12. THE GG DISCUSSED "REFORM OF DEBATE" AT THE GENERAL
CONFERENCE (GC). NEW ZEALAND (WHOSE MINISTER WILL CHAIR THE
GC) SAID THAT HIS DELEGATION STRONGLY SUPPORTED AN
INTERACTIVE FORMAT. HE SAID THAT ROUNDTABLES SHOULD BE ON
INTERESTING TOPICS, SMALL, AND GIVE MINISTERS AN OPPORTUNITY
FOR GIVE AND TAKE. THE NETHERLANDS SAID THAT HE WAS
"GENERALLY SUPPORTIVE" BUT NOTED THAT SOME ERG MEMBERS HAD
HAD PROBLEMS COVERING THE PROLIFERATION OF SIDE EVENTS AT
THE WFS5YL. IN CONCLUSION, MEMBERS AGREED THAT THEY WOULD
ASK FOR MORE ALTERNATIVES THAN THE TWO PRESENTED BY THE
SECRETARIAT IN THE DOCUMENT.

SIPDIS


13. TURNING TO THE JIU REVIEW OF FAO MANAGEMENT, THE U.S.
CALLED ATTENTION TO THE CRITICISM OF FAO REGIONAL OFFICES
(PARTICULARLY GERMANE GIVEN THAT THE FAO WAS SEEKING MORE
MONEY FOR FAO LOCAL REPRESENTATIVES.) THE NETHERLANDS
STATED THAT FAO MIGHT LEARN FROM UNDP, WHICH HAD A GOOD
PROCESS FOR SELECTING LOCAL REPS; WHO HAS A COUNTRY "FOCUS
INITIATIVE" WHICH COULD BE EMULATED. THE GROUP AGREED THAT
THE JIU RECOMMENDATIONS COULD WELL FORM THE BASIS FOR FUTURE
FINANCE AND PROGRAM COMMITTEE AGENDAS, GIVEN THE FUNDAMENTAL
ISSUES RAISED CONCERNING STAFF SELECTION, HUMAN RESOURCES
MANAGEMENT, DECENTRALIZED OPERATIONS AND FINANCES AND
PERFORMANCE BASED ALLOCATION. MEMBERS AGREED THAT THE
REPORT OF THE JOINT COMMITTEE SHOULD BE AS CLEAR AS POSSIBLE
IN STATING THAT THE MANAGEMENT RESPONSE WAS NOT SATISFACTORY
AND ASKING FOR A PLAN OF ACTION (WITH TIMING) ON
IMPLEMENTING THE RECOMMENDATIONS. HALL


2003ROME01884 - Classification: UNCLASSIFIED