UN CAPITAL MASTER PLAN: INTRODUCTORY STATEMENTS

UNCLAS USUN NEW YORK 002222

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: AORC UNGA KUNR
SUBJECT: UN CAPITAL MASTER PLAN: INTRODUCTORY STATEMENTS



1. SUMMARY: On November 30 and December 4, the Fifth
Committee (Administrative and Budgetary) considered the
Capital Master Plan, with several speakers emphasizing the
need to take an early decision on the financing of the Plan
so the project could move forward quickly. The UN acting
under-secretary-general for management, Warren Sach, said
although the project was slated to be completed by 2014,
every month of delay was costing nine to 10 million dollars.
The Secretary-General's report on the Plan also recommended
approval of scope options, such as security measures, costing
an additional 230.4 million dollars, raising the total
project cost to 1.88 billion. Ambassador Wallace said the
U.S. supported the Plan and looked forward to technical
issues being discussed during informal consultations. South
Africa (on behalf of the G77 and China) accused the host
country of causing delays in the project by not offering a
no-interest loan and failing to follow through on an offer to
construct a swing space for the UN. Finland (on behalf of
the European Union) stressed the importance of making a
decision on financing for the project. Most speakers
supported the Secretary-General's plan to pay for costs
through assessments, but Japan advocated for a one-time
payment to avoid any possibly cash flow problems. END
SUMMARY.

-------------- --
CAPITAL MASTER PLAN: INTRODUCTION OF STATEMENTS
-------------- --


2. On November 30 and December 4, the Fifth Committee
considered the Capital Master Plan, with several speakers
emphasizing the need to take an early decision on the
financing of the Plan so the project could move forward
quickly. Introducing the Secretary-General's report on the
issue, the acting under-secretary-general for management
updated the Committee on the status of the project. He said
although the project was slated to be completed by 2014,
every month of delay was estimated to cost an additional nine
to 10 million dollars. Rent was rising precipitously, as
well as the costs of outfitting rental offices, and it was
more difficult to find the space to accommodate the
approximately 1,000 staff that would have be relocated by the
end of next year. The report strongly recommended
incorporating several scope options, including security
measures and back-up systems, which would cost approximately
230.4 million dollars, bringing the total project budget to
1.88 billion. The Secretary-General recommended that the
Assembly approve the funding of the Plan through multi-year
assessments on Member States, an internationally syndicated
letter of credit facility for the duration of the
construction, and a working capital reserve fund to cover
temporary cash-flow deficits.


3. Ambassador Wallace said the U.S. supported the Capital
Master Plan and appreciated all the work done to date to
ensure that the project would continue to move ahead. He
noted the USG's readiness to make important decisions on the
project budget and financing during the current session of
the General Assembly. He noted there were technical issues
related to those decisions that needed to be resolved during
informal consultations. He expected that the
Secretary-General would take all steps needed to ensure the

SIPDIS
project was managed within the presented project budget. He
noted the Secretary-General himself recommended that the
General Assembly approve a project to be completed in the
period 2006-2014, and with a budget not to exceed 1.876
billion dollars. It was important for the UN to be
transparent and continually seek ways to contain costs and
achieve greater efficiencies and use sound project management
processes to control scope and schedule, he said.


4. South Africa (on behalf of the Group of 77 and China)
said the G77 regretted delays to the Plan, but singled out
the host country (U.S.) for being one of the main causes for
any setbacks, especially considering the benefits accrued by
hosting Headquarters. She blamed the U.S. for not offering
the UN a no-interest loan or enabling construction of a
swing-space building for UN staff. Regardless, she said it
was time to take action on a financing strategy to avoid
further delays and cost escalations. She also underlined the
General Assembly's wish that the Secretary-General find ways
to increase procurement opportunities for vendors coming from
developing countries.


5. Finland (on behalf of the European Union) noted that the
state of the building, which was completed in 1952, was well
below New York City safety standards and suffering from
deterioration. She said the issue of the Plan had been under
discussion since 2000, and the negotiations had taken a
considerable amount of time. The Fifth Committee had taken a
decision on a Plan strategy last June, she noted, but now it
was necessary to build on that progress and put the financing
in place so that construction could begin on schedule.
Regarding financing, the EU expressed preference for

multi-year direct assessments as the simplest method and
expressed interest in the possibility of making the
assessments broadly proportional to the needs in different
phases to avoid unnecessary payments in advance. It made
sense to have a mechanism in place to cover contractual
obligations, she said. The EU understood the need for a
letter of credit to demonstrate the full financial capability
of the project. In agreement with the report of the Advisory
Committee on Administrative and Budgetary Questions (ACABQ),
the EU was of the view that an envisaged working capital
reserve was an integral part of financing arrangements for
the Plan.


6. Guyana (on behalf of the RIO Group) agreed that funding
the Plan via assessed contributions offered the simplest
option, but noted that the RIO Group preferred that payment
of associated costs be done through a number of installments.
He opposed on principle the introduction of interest on
arrears in the payment of Member States, and called for
careful study of the proposed mechanism for credit
utilization charges. Appropriate care must be exercised by
the Secretariat in the handling and preservation of
artifacts, gifts and other valuable works contained in the
building, which expressed the variety and uniqueness of the
cultures of all Member States, he said. He also reiterated
the comments made by South Africa regarding the host country.


7. Switzerland's representative said although the scope of
such a large-scale project as the Plan could not be entirely
determined in advance and needed to be adapted periodically,
his delegation wanted to further examine the circumstances
that led to additional requirements of 69.4 million dollars,
in particular with regard to additional redundancy measures.
The Secretary-General had indicated that those options could
not be completed as stand-alone projects, and the Plan would
offer a unique opportunity to incorporate the latest
technology in a state-of-the-art solution. Bearing in mind
the time horizon of the project, he supported the inclusion
of the scope options in the base project.


8. Japan's representative called for containing costs and
ensuring the cost-effectiveness of the Plan. Japan was ready
to discuss projected costs, including scope options, as long
as they were reasonable, but regretted that delays had
increased total expenses to 1.88 billion dollars. He sought
more persuasive reasons for the increased cost. Japan
strongly supported the mix of one-time and multi-year
assessments for the Plan, saying that in pursuing such an
option it was necessary to secure sufficient cash in the most
practical manner and also make it less likely that a letter
of credit would be needed. A one-time payment was useful,
which would help the Organization avoid a cash-flow deficit,
minimize the need to use credit facilities and offer Member
States discounts through future interest earnings, he said.


9. The Australian delegate (on behalf of CANZ) favored
financing the Plan with equal multi-year cash assessments
over five years. Such an approach would balance the needs of
Member States to spread out payments over a number of years
with the Plan's cash requirements. CANZ understood that
multi-year assessments required the General Assembly to
authorize the Secretary-General to enter into a letter of
credit for the duration of the project, which he believed was
an unavoidable commercial reality for such a large project in
New York. He pledged to carefully consider the
Secretary-General's proposed mechanism for attributing

SIPDIS
charges accrued by utilization of the credit facility. He
warned that decisions on the scope could no longer be
deferred, and noted there had been a four percent escalation
in the cost of the Plan due to delays. He was also
disappointed the Secretary-General had been unable to appoint
an advisory board for the Plan, as requested by the General
Assembly, ACABQ, and internal and external auditors.


10. The Republic of Korea's delegate advised the Committee
to move with urgency on the Plan, since cost estimates had
continued to rise. He wanted the Secretariat to elaborate in
more detail on the monetary impact delays had on the Plan.
He said Korea supported the ACABQ recommendations for the
approval of the renewed Plan budget of 1.88 billion dollars,
including the scope options. Several issues needed to be
addressed, including the waiving of financial regulations,
assessment options, the composition of the advisory board,
and the recommendations by the Board of Auditors on
amendments to procurement contracts, he said. He recommended
that the possibility of a private donor should also be
explored per General Assembly resolution 60/256.


11. The Chinese delegate recounted developments to the Plan
since 2000, noting that in his view strategy IV (a phased
approach to renovation) was the most realistic and cost
effective proposal. However, the project still remained on
paper and costs had increased at an annual rate of eight to
12 percent. Funding was key to successful implementation of

the Plan, and for this reason China was in support of direct
cash assessments among Member States, whether they were
one-time or multi-year. He hoped the host country would
respond to the appeal of the majority of Member States to
help implement the Plan per GA resolution 60/282. China also
hoped the Secretary-General would increase procurement
opportunities for vendors from developing countries and
economies in transition.


12. The Russian Federation said that the City and State of
New York were unwilling to cooperate with the UN despite the
fact that the UN was a major part of the City's economy. He
also stated that the host country had not offered an
interest-free loan and that the Organization should have
greater participation from the host country with regard to
the overall financing of the project. The Russian delegate
noted that it was unprecedented to require a letter of credit
and was solely due to U.S. construction industry standards.
He believed that those Member States that paid in full and on
time should not bear the costs of using a letter of credit.
The delegate was interested in considering benefits to
encourage Member States to pay their assessment up front.

BOLTON