2. By definition, ZNG implies that the budget Appropriation for the next biennium should remain at the same total level as that voted by the FAO Conference for the present 1998-99 biennium, i.e. US$ 650 million. It, therefore, entails the full absorption of anticipated cost increases.

3. Whereas a preliminary estimate of US$ 34.7 million for these cost increases was indicated in the SPWB document – at the current budget rate of exchange of Italian Lire 1,690 to US$ 1 – the Committees requested the Director-General to take account of the latest developments affecting the likely cost increases for the next biennium, and the impact of current Italian Lira/US$ exchange rate.

4. In recent months, this rate of exchange has been fairly consistently above 1,800 Lire to US$ 1. Therefore, in the development of a ZNG scenario, a budget rate of 1,800 Lire has been assumed and the estimate for cost increases revised accordingly. In particular, this higher rate has a favourable impact on standard costs for Rome-based staff, thereby reducing budgetary requirements to meet salary costs. It also permits a reduction in the US dollar-denominated provisions for non-staff costs incurred in Lire. Coupled with other minor adjustments, this favourable impact leads to a reduced estimate for cost increases that should range from US$ 10 to 15 million.

6. In the first instance, the principle of full protection was upheld for a number of key areas of the programme of work. These are as follows:

• Forestry
• Fisheries
• Genetic Resources for Food and Agriculture
• Codex Alimentarius
• Women-in-Development and Gender Mainstreaming; and
• the World Agricultural Information Centre, particularly as regards its role in dissemination.

7. The same principle of protection was applied to the two "windows" of the Regular Budget which fund direct operational activities in countries, i.e. the Technical Cooperation Programme (TCP) and the central provision for the Special Programme for Food Security (SPFS) under Programme 2.5.6.

8. The full protection afforded to the above areas entailed that proportionately higher reductions were required to be identified under the other programmes of the Organization. Regrettably, it was not feasible to avoid cuts to valuable programmes within Chapter 2 of the Programme of Work and Budget (i.e. other substantive programmes than those listed above). In the search for the least damaging course of action, the capacity to attract extra-budgetary support was borne in mind, to compensate for eventually reduced resource levels under the Regular Budget.

9. A paramount factor was the need to minimize, to the extent possible, negative impact on serving staff. Given the substantial reduction of 584 posts experienced in the recent past, it was deemed especially pertinent to minimize post abolitions. For those abolitions of encumbered posts which might still prove necessary, and in order to avoid extra-ordinary separation costs, use will be made to the extent possible of attrition and redeployment opportunities. Where incremental separation costs need to be incurred, it is proposed that these be funded from arrears payments as in 1998-99.

10. The ZNG scenario would imply the elimination of a certain number of posts in the Professional category, presently estimated at 30 to 40. Although not an absolute criterion for decision-making in this regard, the incidence of vacant posts was taken into account, again to minimize hardship on staff and avoid separation costs.

11. In addition, cuts would be necessary under other budget components such as consultancies and travel. In many areas, this would lead to reductions in the budgetary provisions under these components by as much as 20 percent.

12. As intimated to the Programme and Finance Committees, a complete and fully substantiated ZNG scenario is to be provided in the full PWB document to be issued in August 1999. All concerned FAO units would investigate the impact of the above staff and non-staff reductions on their planned activities for the next biennium. It is clear that the attendant weakening of technical capacity and the lower provisions for consultancies and travel will translate into downward adjustments to the programme entities included in the Summary Programme of Work and Budget – technical projects, continuing programme activities and technical service agreements – along with the necessary reduction and/or elimination of outputs. The details will be illustrated in the Programme of Work and Budget 2000-01 in a similar manner as the impact of ZNG was described in the current Programme of Work and Budget document.

13. At present, administrative workload in support of the Organization's activities at Headquarters is shared between central units in the Administration and Finance Department (which primarily ensure overall consistency and guidance) and Management Support Units (MSUs) in the various departments (which prepare and post the bulk of administrative transactions in corporate systems).

14. The introduction of Oracle-based and associated systems in replacement of FINSYS – and in a second phase of PERSYS – represents a major development, which, it was foreseen, would significantly affect working arrangements in the administrative area. In particular, the easier access by non-specialized staff and the enhanced reporting capacities which are key features of the Oracle system are expected to lead to a different distribution of administrative tasks, and provide an opportunity to make significant economies. This was planned to be put into effect progressively, in the light of experience with the new computerized systems.

15. Given prevailing budgetary constraints, the Director-General has decided to bring forward the implementation of related adjustments to administrative procedures and organizational arrangements. This involves the transfer of much of the Headquarters MSU staff to a central servicing structure, subject to resources availability and the concurrence of the Council, with a view to full implementation by 1 January 2000. The full details are still being worked out, but it is possible to tentatively estimate that these new arrangements could lead to savings in the order of US$ 6 million.

16. Subject to the same conditions, a similar approach of bringing together servicing functions into a single unit and thus maximising synergies will also be pursued where the possibility of merging the MSUs and existing operating structures would, where appropriate, allow the consolidation of all service functions.

17. These savings will permit the correction of a number of instances of serious under-budgeting which remained even under the ZRG scenario (e.g. improved language coverage, communication costs with decentralized offices, etc.) – corrections which will necessarily be reflected also under the ZNG scenario.

18. The above operation is not devoid of risks, in view of the lack of operational experience with the Oracle system so far. Ideally, it would have been preferable to wait until the Programme of Work and Budget 2002-03 before making adjustments to structures and capturing the anticipated savings. However, in view of present budget guidance, the Organization would have no other choice but to take the risk of accelerating a programme which, under normal circumstances, would have required a carefully phased implementation.

19. The Summary Programme of Work and Budget document included a table following paragraph 30, listing a number of priority activities worthy of additional resources beyond ZRG. These were consistent with recommendations from FAO Governing and Advisory Bodies. While the attendant incremental costs were thus indicated, the document did not elaborate on how and to what extent the same priorities were already addressed in the ZRG proposals.