VZCZCXYZ0009
PP RUEHWEB

DE RUCNDT #2222/01 3402328
ZNR UUUUU ZZH
P 062328Z DEC 06
FM USMISSION USUN NEW YORK
TO SECSTATE WASHDC PRIORITY 0887

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. 
 
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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 
 
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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 
 
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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