VZCZCXYZ0022
OO RUEHWEB

DE RUEHUNV #0199/01 1241316
ZNR UUUUU ZZH
O 041316Z MAY 09
FM USMISSION UNVIE VIENNA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9385
RUCNDT/USMISSION USUN NEW YORK IMMEDIATE 1620
INFO RUEHXX/IO COLLECTIVE
RUEAEPA/EPA WASHDC
RHEBAAA/DOE WASHDC
RUCPDC/USDOC WASHDC

UNCLAS UNVIE VIENNA 000199 
 
SIPDIS 
SENSITIVE 
 
EPA FOR COUNCIL ON ENVIRONMENTAL QUALITY 
 
E.O. 12958: N/A 
 
TAGS: ETRD EIND ENRG EAID UNIDO UNDP UNEP AORC KUNR KGHG
UN 
 
SUBJECT: UNIDO PRIORITIZES ENERGY, ENVIRONMENT, AND REFORMS IN NEW 
BUDGET PROPOSAL 
 
REF: 08 UNVIE VIENNA 000622 
 
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SUMMARY 
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¶1.  (U) UNIDO Director-General Kandeh Yumkella on April 7 briefed 
member states on his 2010-11 budget proposal, which maintains zero 
real growth overall while increasing funding for poverty reduction, 
energy and environment programs, and further efficiency-enhancing 
measures.  Member states reacted positively to the proposal, lauding 
especially the DG's decision -- in light of the global recession -- 
to scrap his proposed 20 percent budget increase and thus forestall 
a protracted budget debate.  Some member states, however, were wary 
of his plan to reinvest funds from collected arrears into 
efficiency-enhancing reforms and requested more information.  Member 
states will review the budget proposal and submit comments to the 
Secretariat in advance of the Program and Budget Committee meeting 
on May 5-7. 
 
¶2.  (U) The U.S. withdrew from UNIDO in 1996 because of 
mismanagement, inefficiency, and a sprawling mandate that overlapped 
other UN programs, but in the last decade UNIDO has implemented 
major reforms that have streamlined its operations and instilled a 
culture of innovation and accountability (reftel). End summary. 
 
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Efficiency Gains 
Paying Dividends 
---------------- 
 
¶3.  (U) UNIDO's technical cooperation expenditure nearly doubled 
between 2000 and 2008, and the organization now delivers the same 
amount of technical cooperation as it did in 1993, but with half the 
staff.  The organization has squeezed its budget, reinvented its 
focus, and implemented cost-cutting and efficiency-enhancing 
measures (reftel).  Yumkella said that the doubling of funded 
programs since 2000 had demonstrated UNIDO's ability to design and 
deliver programs.  UNIDO was selected to host a major inter-agency 
meeting in April 2010 on UN system-wide coherence, an initiative to 
improve the coordination of UN programs, suggesting that it is 
earning respect within the UN system as well as with member states. 
 
¶4.  (U) There is still work to be done, however, particularly in 
upgrading information technology and modernizing business practices. 
 UNIDO, for example, is one of only two UN agencies still using 
mainframes for payroll, and one of the last to begin a comprehensive 
efficiency review of business practices.  The new budget prioritizes 
integrating and updating all major support functions and simplifying 
reporting and monitoring. 
 
¶5.  (U) Director of Finance Amita Misra explained that UNIDO was 
under tremendous pressure from key donors, such as the Global 
Environment Facility (GEF), to cut its overhead costs from 13 
percent to 8 percent, the norm for other UN agencies.  The proposed 
operational budget reduces support costs roughly 3 percent, while 
increasing technical cooperation delivery by 12.5 percent. 
 
¶6.  (U) The recent efficiency gains have allowed UNIDO to devote a 
larger portion of its budget to its core thematic priorities: 
poverty reduction, trade capacity building, and energy and 
environment, which together will get roughly EUR 79 million in the 
2010-11 budget, up roughly 4 percent from the previous biennium. 
The Energy and Environment Program's share of the budget will 
increase from 14.4 to 16.1 percent, due to increasing demand from 
member states. 
 
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Paying Arrears Forward 
---------------------- 
 
¶7.  (U) The UNIDO Secretariat, after much effort, has recouped 
roughly EUR 14 million in "unencumbered balances" (unpaid arrears) 
from Brazil and Argentina, according to the Chief of Cabinet.  The 
DG proposed reinvesting these funds to streamline business practices 
and fulfill under-funded mandates, such as agro-industrial reform 
and promotion of renewable energy in industry, but member states 
were surprised by the proposal and most withheld their support 
pending further information.  The Secretariat was preparing a 
separate report on the unencumbered balances including their 
proposed use, to be distributed in mid-April. 
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Staffing Increased 
at Field Offices 
------------------ 
 
¶8.  (U) The proposed budget foresees a staffing increase from 622 to 
633 full-time equivalents.  Thirteen new posts will be funded for 
field offices, a 10 percent increase, while headquarters staff will 
be reduced by two posts.  The Chief of Finance emphasized that the 
demographic composition of UNIDO's personnel necessitated staff 
rejuvenation.  One-third of UNIDO's staff is over 55 years old 
(compared to 23 percent in the UN system as a whole) and one-fourth 
will retire within five years.  Many vacated senior professional 
posts are being split to create multiple junior posts and the Young 
Professionals Program is enjoying success in recruiting high-quality 
entry level staff. 
 
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Japan, U.K., and 
Other Members Pleased 
--------------------- 
 
¶9.  (U) Member states welcomed the budget proposal, and many 
expressed appreciation for the proposed zero real growth in the 
budget, which probably will prevent a protracted debate over the 
size of the budget and allow the Program and Budget Committee to 
focus on improving UNIDO's programs and technical cooperation 
delivery.  The Japanese ambassador called UNIDO a very useful 
organization and a very effective delivery mechanism for development 
assistance.  He noted in particular UNIDO's performance indicators, 
which he called among the best in the UN because they were 
quantifiable and verifiable.  The U.K. likewise welcomed the 
results-based management format of the budget.  Austria praised the 
Director General for anticipating a tighter funding environment, and 
called for some deference to the Secretariat with regard to the 
allocation of unencumbered balances, because these funds were 
secured largely due to the Secretariat's own efforts.  Argentina and 
Mexico called for the unencumbered balances to be devoted to 
technical cooperation in Latin America, but the Director-General and 
Japan correctly noted that the arrears belong to the general fund 
rather than particular states or regions. 
 
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Comment 
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¶10.  (U) UNIDO's increasing effectiveness and its improving 
reputation among UN agencies and member states supports our 
recommendation (reftel) that the U.S. consider increasing its 
engagement with the organization, particularly on energy and 
environment issues.  The proposed budget demonstrates UNIDO's 
responsiveness to member state needs, continues its efforts to 
improve efficiency, and further consolidates the organization's 
niche in the provision of poverty reduction, energy, and environment 
programs in the industrial sector.  The pressure of key funders to 
further cut overhead costs should prompt UNIDO to seek further 
efficiency gains and enable it to devote larger proportions of its 
budget to its key thematic priorities in future budgets.  End 
comment. 
 
 
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