WORLD TRADE ORGANIZATION

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1 WORLD TRADE ORGANIZATION RESTRICTED 20 October 2003 ( ) Committee on Budget, Finance and Administration REPORT OF THE MEETING HELD ON 11 JULY, 14 AUGUST AND 25 SEPTEMBER The WTO Committee on Budget, Finance and Administration met on 11 July, 14 August and 25 September 2003 under the chairmanship of Mr. Joshua C.K. Law from Hong Kong, China. The terms of reference and composition of the Committee are set out in document WT/L/44/Rev.1. The agenda contained in documents WTO/AIR/2142 and WTO/AIR/2142.Add.1, WTO/AIR/2142/Add. 1/Corr.1 and WTO/AIR/2158 were adopted with one additional point regarding the letter from the Chairman of the Working Party on Domestic Regulation. I. ADMINISTRATIVE UP-DATES AND PROGRESS REPORTS A. CASH SITUATION AND STATEMENT OF OUTSTANDING CONTRIBUTIONS B. INSTALMENT PAYMENTS FOR COUNTRIES IN ARREARS (CONTRIBUTIONS FROM 1987 AND EARLIER YEARS) C. CONTRIBUTIONS OF OBSERVER COUNTRIES TOWARDS THE COST OF SERVICES PROVIDED BY THE SECRETARIAT D. HUMAN RESOURCES E. EXTRA-BUDGETARY CONTRIBUTIONS: - TECHNICAL ASSISTANCE ACTIVITIY IN DOHA DEVELOPMENT AGENDA GLOBAL TRUST FUND 2. A member of the Secretariat presented the cash situation, the statements of outstanding contributions as at 30 June, and 31August 2003, the progress reports of payment by instalments for countries in arrears (arrears from 1987 and earlier years), and the contributions of Observer countries towards the cost of services provided by the Secretariat. As at 31 August 2003, the total contributions received from Members amounted to CHF 112,893,368 while those from the Observers amounted to CHF 474,634. The Capital Working Fund stood at CHF 9,009,540 as at 31 August Since 31 August 2003, the following Members had made payments: (i) Bangladesh, (ii) Chile, (iii) Costa-Rica, (iv) Gabon, (v) Oman, (vi) Sierra Leone, (vii) St-Vincent & Grenadines, and (viii) USA. In addition, one Observer, Azerbaïjan, had paid it contribution in the month of September. 1 This report should be read in conjunction with document WT/BFA/67 which contains part of the recommendations to this report and was approved by the General Council on 26 August 2003.

2 Page 2 3. The Secretariat informed the Members that, twice a year, reminder letters were sent to the Members as well as Observers requesting for payments of their respective arrears. Members and Observers with arrears, nevertheless, still receive one copy of all documents. 4. A member of the Secretariat introduced documents CRP(03)29 and 35. He reported that the Management Board of the Pension Plan had interviewed the four short-listed firms for the position of investment analyst/consultant and had mandated a small group to negotiate a contract with the preferred candidate. With regard to internship, some 60 students had taken up regular budget internships, of whom 49 per cent had come from developed countries and 51 per cent from developing countries, LDCs and economies in transition. 5. Another member of the Secretariat presented, on 11 July 2003, documents WT/BFA/SPEC/96 and CRP(03)30. He drew the attention of the Members to the trust fund on the Trade Policy Courses in Africa, which recorded a substantial savings. The donors of the fund would have to consider the use of the balance. With regard to the Doha Development Agenda Global Trust Fund (DDAGTF), the total pledges registered as at end of June 2003 totalled CHF 20.2 million. Taking into account part of the earmarked funds to the extent they could finance activities included in the 2003 TA Plan, the pledges would reach approximately CHF 22 million. Therefore, additional pledges of some CHF 2 million were required to reach the target amount of CHF 24 million for the DDAGTF in The cash balance as at end of June stood at CHF 2.2 million. 6. With regard to the Trust Fund to facilitate the participation of the Least Developed Countries (LDCs) in the Ministerial Conference at Cancun, the Secretariat had received written confirmation of pledges from several Members. Information on all contributions received under this fund will be made available at the next meeting of the Committee. 7. Subsequently, the Secretariat presented, on 25 September 2003, documents WT/BFA/SPEC/99 and CRP(03)36 giving an update on the situation of the extra-budgetary funds financing WTO Technical Assistance Activities in 2003 and the update on the DDAGTF as at 31 August He drew the attention of the Members to the expenditures of the Programme Support Fund (PSF) and indicated that the fund, based on the year's expenditure rate, may be overspent by the end of the year. With regard to the DDAGTF, the total pledges registered as at end of August amounted to CHF 23.4 million. Taking into account part of the earmarked funds to the extent they could finance activities included in the 2003 TA Plan, the pledges would exceed the target amount of CHF 24 million. Cash wise, significant payments had been received after the end of June. 8. One Member considered that the Technical Assistance activities should be re-evaluated further to the Cancun Ministerial Conference in order to see whether the activities initially planned for 2003 should still be fully implemented. The evaluation is needed prior to the discussion on the WTO technical assistance plan for The Committee took note of the various progress reports and the comments from the Members and requested the Secretariat as well as the Member in question to convey the view of the need to re-evaluate Technical Assistance to the CTD. II. FINANCIAL MATTERS: DIRECTOR-GENERAL'S BUDGETARY AND FINANCIAL REPORT FOR 2002 AND REPORT OF THE EXTERNAL AUDITOR THEREON; DIVISIONAL REPORTING ON OBJECTIVES AND EXPENDITURES FOR 2002 AND REPORT ON EXTRA-BUDGETARY FUNDS FOR A member of the Secretariat gave a preliminary presentation on: (i) the Director-General's Budgetary and Financial Report for 2002 and Report of the External Auditor thereon (WT/BFA/W/97), (ii) the Divisional Reporting on Objectives and Expenditure in 2002

3 Page 3 (WT/BFA/W/98), and (iii) Report on Extra-budgetary Funds for 2002 (WT/BFA/W/99). He highlighted the accumulated deficit in the Surplus Account of CHF 1 million, which was covered by a transfer from the Working Capital Fund, in accordance with Financial Regulation 26, paragraph 4. With regard to the budgetary situation, there was an over-expenditure on personnel-related costs amounting to CHF 3.3 million, and budgetary savings totalling CHF 2.1 million on administrative and other cost. Therefore, the overall budgetary over-expenditure amounted to CHF 1.1 million. With regard to the Appellate Body and its Secretariat, there was an overall budgetary savings of CHF 49, Further, the Secretariat drew the Members' attention to the report of the External Auditors' comments and recommendations regarding (i) maintaining and expanding information in the WTO Administrative Manual, (ii) the inventory system, (iii) extra-budgetary funds, and (iv) internal control. He indicated that the reporting on extra-budgetary funds would be further discussed with the External Auditors in order to see in specific terms the areas where the former recommend elaboration. 12. The Secretariat also indicated that document WT/BFA/W/98 provided, on a divisional basis, information regarding allocations and expenditures, and assessment of the attainment of the objectives. The information could provide a valuable tool for both Members and the Secretariat to assess performance, and for Members to provide valuable input and advice with regard to priorities and activities on a divisional basis. 13. With regard to the Extra-budgetary funds, the report WT/BFA/W/99 provided detailed information on all extra-budgetary funds in the WTO, both in aggregated and on a fund-by-fund basis. 14. In reply to query, the Secretariat informed the Committee, that the home leave entitlement of an internationally recruited staff member was once every two years. In accordance with Administrative memorandum No. 937, a staff member was provided with an option of a lump sum payment for home leave in lieu of the entitlement to the payments of air fare, terminal expenses, travel subsistence allowance, miscellaneous travel expenses, excess baggage and unaccompanied shipment of personal effects in connection with home leave. The lump sum is based on 80 per cent of the full economy-class return airfare for the authorized travel by the most direct route, taking into account the age of any dependent children at the time of travel. 15. The Committee took note of the reports and recommends to the General Council to approve the transfer between WTO budgetary sections as mentioned in paragraph 32 of document WT/BFA/W/97 amounting to CHF 5,388,701, and between Appellate Body budgetary sections as mentioned in paragraph 45 amounting to CHF 44,258 which are necessary in order to cover excess expenditures over approved appropriations. 16. The Committee further recommends that the General Council approves the audited accounts for 2002 and conveys to the external auditor their thanks for the valuable assistance provided in the audit of these accounts. III. RESULTS-BASED BUDGETING 17. The Delegate of Belgium, speaking on behalf of the Netherlands, the United Kingdom and Canada presented the document CRP(03)31 on the Results-Based Budgeting. He highlighted that the document served to take the Results-Based Budgeting process implemented by the Secretariat one step further that would allow the organization as a whole to identify real priorities and to gain an accurate impression at the end of the year in question whether those targets and objectives had been met. He further referred to the concept that achievements should be "specific, measurable, achievable, relevant and time-bound" (SMART) as indicated in the report of the human resources consultant WT/BFA/W/70. In addition, a concise description of how a division intended to organise

4 Page 4 the work needed to achieve these targets, and the activities would allow the divisions to explain the specific context of their work. 18. Members thanked the delegates who prepared the document. Some Members questioned the extent to which the targets for the Organization are measurable and quantifiable. Some Members considered that the Results-Based Budgeting was a process and that the best way to go about it was to learn through implementation. 19. The Committee took note of the paper CRP(03)31 and the comments form the Members, and requested that the Secretariat take into consideration the suggestions presented in preparing the Budget Estimates for the next budgetary period. IV. WTO SALARIES: CALCULATION OF ALPHA ADJUSTMENT TO NET SALARIES, AND ADJUSTMENT TO DEPENDENCY ALLLOWANCES 20. A member of the Secretariat presented the documents WT/BFA/W/101 and 102. He recalled the decision of the General Council in December 2002 on the review of the salary methodology, in particular the "alpha" adjustment from 1 July 2003 to restore parity with equivalent grades in the UN for all WTO employees in light of the results of the review of UN professional staff salaries, which was underway at that time. Document WT/BFA/W/101 was prepared for information purposes and showed the grades that required the alpha adjustment in order to bring the WTO to a comparable position with the UN. 21. Document WT/BFA/W/102 provided information on the proposed adjustment to the WTO dependency allowances to reflect the new salary levels as of 1 July The adjustment would require an amendment to Annex 2 of the WTO Staff Rules. 22. See Recommendation I, paragraph 1 of document WT/BFA/67. V. BIENNIAL BUDGET 23. A representative of the Secretariat presented document WT/BFA/W/92/Rev.1, which had been prepared taking into consideration of the comments from the Members on the subject during the previous meetings. He highlighted the possible advantages and disadvantages of biennium budget and the possibility of a revision to the second year of the biennial budget. The Secretariat further drew the attention of the Members to the legal implications of a move to a biennial budget. The delegate of the United Kingdom distributed a Non-paper on the view of his country on the possible biennial budgeting in the WTO. 24. Subsequently, the Secretariat prepared document WT/BFA/W/104 addressing different possible legal approaches to moving from annual to biennial budgeting in the WTO. In addition, the Secretariat also prepared documents WT/BFA/W/105 and WT/BFA/W/105.Rev.1 in response to the various considerations expressed by the Members. 25. See Recommendation II, paragraph 2 of document WT/BFA/67. VI. REVIEW OF THE SECRETARIAT RESOURCES 26. A member of the Secretariat introduced the document CRP(03)37 recalling that, at the request of the Committee in 2001, an external consultant had been requested to undertake a review on the structure, staffing resources and other processes of the WTO Secretariat. Recommendations, which were within the control of the Secretariat, have been implemented, namely (i) the reduction of divisions, (ii) the provision of equipment for video conferencing, (iii) the use of CD-ROMs to provide

5 Page 5 information on the WTO, (iv) the use of for internal circulation of information, and (v) the move from annual to a biennial approach in the budgeting process. It was noted that the evolution of the organizational structure of the WTO was an on-going process. 27. It was also agreed that informal consultations with the Deputy Directors-General on the resources of the WTO Secretariat would be organized prior to the discussions on the budget estimates. 28. The Committee took note of the report. VII. APPELLATE BODY OPERATING FUND 29. A member of the Secretariat introduced document WT/BFA/W/106, recalling that the replenishment of the Appellate Operating Fund (ABOF) which had been included in the originally proposals, had not been retained in the 2003 budget. The Committee indicated at the time of finalizing the budget for 2003 that it would monitor on a regular basis the needs of the Appellate Body Operating Fund, and if needed, investigate alternative sources of funding. In March 2003, the Committee was informed that the balance of the ABOF would be insufficient to finance the activities until the year's end. It was suggested that, at the appropriate time and closer to the end of 2003, the Committee could consider the following options: (i) should the budgetary situation so permit, the deficit could be covered by an extra-ordinary expenditure under the 2003 regular budget, or (ii) the use of the Working Capital Fund in accordance with WTO Financial Regulation 30 would be considered. 30. One Member suggested studying the possibility of integrating the expenditures into the regular budget. Another delegate indicated her preference to option (i) (above), while another delegate considered that one option would not exclude the other, and that one could consider combining both options for a solution if necessary. 31. The Committee took note of the report and the comments of the Members. VIII. REVIEW OF THE GUIDELINES ON VOLUNTARY CONTRIBUTIONS FROM NON-GOVERNMENTAL DONORS 32. A member of the Secretariat recalled that the Committee discussed the matter earlier this year based on the document WT/BFA/W/95. There were only two donations presented since the time of the formulation of the guidelines. 33. Some Members suggested that the process of accepting voluntary contributions could be streamlined and that the Committee could look into the criteria for accepting voluntary donations. 34. The Committee took note of the comments from the Members and requested that the Secretariat prepare a document for discussion at a future meeting. IX. OTHER BUSINESS 35. The Chairman referred to the letter dated 10 July 2003 addressed to him by the Chairman of the Working Party on Domestic Regulation (WPDR) requesting the financing of the participation of two representatives from each developing country WTO Member to the Workshop on Domestic Regulation, scheduled to be held in Geneva from 6-7 October The event could not be included in the current Technical Assistance Plan due to the very long lead times required, and therefore had to be regarded as an ad hoc activity. The estimated cost for the event was CHF 1.8 million, assuming all invitees would participate; responding to the question of a Member, the Secretariat indicated that the

6 Page 6 final cost would most probably be much closer to CHF 1 million, if past experience was of any guidance. 36. Members did not object to the holding of the workshop, provided its financing could be accommodated within the global envelope of CHF 24 million approved for the DDAGTF in 2003, taking into account any dedicated funding that would have been identified for the event. They felt, however, that the CTD should look into the matter, as it had responsibility for monitoring the implementation of the WTO technical assistance plan. 37. The Committee noted that the request of the Chairman of the WPDR was presented according to a decision of the General Council of 15 November 1995 which read: "When considering any decision which may have financial implications for the WTO, WTO Bodies shall, before a decision is taken, so inform the Chairman of the CBFA, identifying, in so far as possible, areas in their sphere of competence where compensatory savings could be achieved." This decision pre-dated the creation of the DDAGTF and the move to annual technical assistance plans. As a result, some Members felt that it might be necessary to re-examine the 1995 decision of the General Council in the light of this new context. It could be more appropriate to consult the CBFA only if a decision would have financial implications exceeding the funds available in the DDAGTF. Within the limits of the funds available in the DDAGTF, the CTD should be responsible for setting priorities. POINTS FOR DECISION: Paragraphs 15 and 16