I have pleasure in submitting to the Council, through the Programme and Finance Committees, the Summary Programme of Work and Budget (SPWB) for the biennium 2004-05. In the light of the reactions of the above Bodies, and also drawing on the advice of the Technical Committees of the Council about future programme requirements, the proposals will be further elaborated in the full Programme of Work and Budget, to be considered by the FAO Conference later this year.
As could be anticipated, this document is fully in line with the enhanced planning process set in train by the FAO Conference at its November 1999 session. This process is now firmly entrenched, being distinguished essentially by a family of complementary documents covering various time horizons, and a programming model which is consistent with results-based budgeting principles.
Accordingly, the proposals in this Summary PWB continue, in the first instance, to adhere to the longer-term orientations contained in the FAO Strategic Framework 2000-2015. They, moreover, build on the main programme parameters set out in the Medium Term Plan (MTP) 2004-09, the substance of which was endorsed by the FAO Council at its October-November 2002 session.
The "entities" described in the MTP have been analysed in more detail, with a view to formulating concrete outputs, and assessing resource requirements for 2004-05 under Chapter 2: Technical and Economic Programmes and Major Programme 3.1: Policy Assistance. Technical units have also ensured that the entities under their responsibility include due contributions to the sixteen Priority Areas for Inter-disciplinary Action (PAIAs), which were singled out in the MTP 2002-07 and which are, of course, pursued in the MTP 2004-09.
Finally, another dimension of the analytical effort incumbent on all units, was to take account of the blueprints for action provided in the same MTP 2004-09 in relation to the Strategies to address Cross-organizational Issues, which influence both "technical" and "non- technical" activities.
Turning to the main inter-governmental guidance which has influenced this SPWB, this stems naturally from the outcomes of the World Food Summit: five years later (WFS: fyl) and the World Summit for Sustainable Development (WSSD), which were held respectively in Rome and Johannesburg in June and August/September 2002. Another important source was the set of global challenges which have come to be recognized as the Millennium Development Goals (MDGs) endorsed by the General Assembly of the United Nations. The MDGs have loomed large among background considerations, as their relevance is so pervasive to the mandate of this Organization.
FAO Members, no doubt, wish that their Secretariat formulate concrete responses both to these important international pronouncements as well as to their individual requests. I am at the "front line" of exposure to these multi-faceted requests, and very often able to appreciate their pressing nature. On the other hand, I am bound to sympathize with the difficulties facing my colleagues throughout the Secretariat in all locations, as they seek to distil this guidance into cogent programmes and activities, while being acutely aware of the need for budgetary restraint.
In practice, the whole PWB formulation process must indeed be seen as the "honest attempt" to reconcile two imperatives: on the one hand, the programme of work should translate the major expectations and the recognized substantive priorities of Members into a coherent whole; on the other hand, this should be done at a cost which they are prepared to meet.
Clearly, one of these expectations is that FAO shoulder its responsibilities in alerting the international community in a timely and objective manner at times of crises, and in assisting the many Members affected by emergencies. This critical task cannot be performed effectively, if the Organization is not able to rely on two key assets: a strong multi-disciplinary technical capacity with its accumulated store of knowledge and experience, and a well-functioning regional and country level network.
Another general expectation of the membership is that FAO should pursue, and expand as vigorously as possible, the implementation of key instruments developed under its aegis, such as the International Plant Protection Convention, Codex Alimentarius or the International Treaty on Plant Genetic Resources, and of the various action plans and initiatives it has pioneered or supported in the key sectors of fisheries and forestry. The increasingly forceful calls in this direction reflect a world evolving under the combined influence of globalization and expanding trade. While no-one would question the need for a strong normative role from this Specialized Agency in such a context, the increased demand must be backed up by sufficient resources under its Regular Budget.
Yet another general expectation is assuredly that FAO continue to provide policy and technical advice to Members, to meet extensive demands at both national and regional levels. This goes hand in hand with an effective capacity to formulate, implement and backstop technical cooperation and investment projects, in both developing countries and countries with economies in transition. This is becoming particularly challenging in a context of greater complexity in project design, and diversification in the requirements of recipient countries and in the interests and demands of funding sources.
In addition, the programme of work must factor in demonstrable improvements in other areas of legitimate interest to Members such as language balance, while ensuring that technical work is able to rely on adequate administrative systems, telecommunications facilities and other infrastructures, an area which is too often taken for granted. In this regard, the External Auditor and the Finance Committee have repeatedly underlined the deleterious impact on many support areas of prolonged under-funding in past biennia. This sober assessment is shared by the reputed consultancy firm from which advice was sought. As a consequence, significant additional resources have had to be provided to the programme for administrative support services.
In this connection, it is important to point out that the very welcome payment by the largest contributor of its substantial arrears to the Organization at the end of 2002, cannot be part of the solution. As authorized by the pertinent Resolution of the Conference, the portion of these resources which can be used after mandatory liabilities have been met, is for one-time costs. The resources from arrears are thus not amenable to correcting structural shortfalls in budgetary allocations, as may exist in non-technical areas.
The Medium Term Plan 2004-09 included estimates of resources for the entire six-year period, and thus also for the first biennium 2004-05, which could enable the Organization to meet the above expectations to a very large extent, while also accommodating the main priority areas identified by Members. The Council, however, could not arrive at a consensus and hence was not in a position to endorse the real growth in resources recommended in the MTP.
I must stress again in all candour that I cannot see how this Organization would be able to give satisfaction to the demands from the membership - which invariably call for more work to be done - and operate in a satisfactory manner, if it continues to be subjected to the budgetary constraints it has experienced in the past decade. The current approved budget of US$ 651.7 million is less than the one approved by the FAO Conference in 1993 (i.e. 10 years ago) of US$ 673.1 million. Moreover, this figure means much less in real terms, as inflation - if more moderate than in earlier periods - regrettably did not stop at the end of 1993.
It is undoubtedly some consolation that the current budget of US$ 651.7 million technically represented Zero Real Growth (ZRG), as a welcome departure from so-called Zero Nominal Growth (ZNG) decisions in previous biennia. However, it is still only slightly above the figure of US$ 650 million, which has been the artificial lid put on the budget since 1995. It is clearly up to Members to address the stark reality inherent in these figures. The Secretariat's duty is to advise on the consequences of decisions of the Governing Bodies.
I have, therefore, pondered about what type of resource scenarios could be presented in this document, bearing in mind that Members have expressed interest in alternative choices. This Summary Programme of Work and Budget is a "two-scenario" document, as it embodies two sets of proposals, at a Real Growth (RG) level, and at the Zero Real Growth (ZRG) level. It includes explanations as to the impact of the lower ZRG level, vis-à-vis the RG resource estimates.
It is emphasized that the proposed RG level, representing a net increase of 5.5 % over the current approved budget (at comparable costs and exchange rate), is lower than the 8.4% indicated in the MTP 2004-09 for the first biennium 2004-05, in the desire to limit the burden of increased assessments on Members, while still seeking to fund major priorities at appropriate, if not optimal levels. At the same time, it must be stressed - as explained in the document - that the ZRG level does not exactly correspond to the same "purchasing power" for the share of the substantive programmes financed by Appropriations as in the present biennium, since allowance had to be made for certain unavoidable additional costs, including the strengthening of administrative support as mentioned above, responding to the needs of enhanced field security, the decline in support cost income, etc.
The justifications provided in the document should clearly demonstrate that, among many other priorities, the following would be more effectively met by the RG provisions:
Needless to say, these features of the RG scenario make it the one which the Secretariat would most sincerely hope the Governing Bodies could approve and which must be seen as my specific proposal to you, the Membership.
Turning to financial aspects, it is recalled that the SPWB traditionally anticipates on cost increases for the next biennium. All of the above figures are stated in constant costs and at the exchange rate adopted for the PWB 2002-03 (i.e. € 1=US$ 0.880). However, the reality of rising costs needs to be taken into account if we are to maintain our capacity to deliver programmes at current levels. Cost increases calculated using approved methodologies amount to US$ 33.6 million or 5.2% of the biennial budget at the 2002-03 level. When combined with the needs of the real growth scenario, the net percentage increase in assessments would be 11.0%.
However, this is before the Membership addresses the issue of the unfunded liability for After Service Medical Care which is a legal liability to retirees and staff but which is not adequately funded and which, if not attended to shortly, will have a severe debilitating effect on the finances of the Organization in the coming years. As proposed in the MTP, I am asking the Membership to accommodate this by increasing assessed contributions by US$ 14.1 million or a further 2.2%.
Finally, the remaining financial aspect concerns the impact of the current strength of the Euro versus the US dollar. At recent rates of exchange (i.e. € 1-US$ 1.100), the budget expressed in US dollars would be approximately US$ 56 million more than stated above. I have not factored this into the above figures as proposals are currently before the Finance Committee and the Council concerning the introduction of split assessments where each Member would meet the Organization's estimated Euro obligations in Euro assessments and the balance in US dollar assessments. These proposals would eliminate the need for any adjustment to the appropriation or to assessed contributions because of the effect of exchange rates. Given that such an approach:
In conclusion, the Secretariat has, I believe, put the case for increased resources for this Organization in clear enough terms. I recognize the concern that many Members may have when faced with the prospect of increased assessed contributions but we are reaching a point where we must increase them or withdraw from certain major areas of activity. I await the reactions of the Committees and the Council, so as to be able to embark on the finalization of full Programme of Work and Budget proposals for the Conference.
Jacques Diouf
Director-General
