Cash crunch at UN; China now 2nd largest contributor

By John J. Metzler

UNITED NATIONS — Is the United Nations going broke? Well yes and no.

The 193-member multinational organization is facing a serious cash crunch which has hampered the day to day operations of the world body but nonetheless may be resolved relatively soon when the United States, the major donor state, pays its dues along with sixty other countries.

In a jarring letter to heads of departments, Secretary General Antonio Guterres outlined the precarious financial shortfalls stating, “The resulting liquidity crisis could disrupt operations globally and ultimately threaten the Organization’s ability to fully implement its mandates.”

UN General Assembly. / Flickr / CC BY-SA 2.0

Naturally, some countries such as Australia and Canada always pay on time. So do states such as Estonia, Singapore and Switzerland.

Typically the U.S. pays its dues “late” because Washington’s Federal budget fiscal year only starts in October, not when the payments are due in January. Thus this situation is nothing new but nonetheless reflects the bottom line that the USA remains the largest contributor to the UN system and the shortfall thus is felt disproportionally.

Historically the United States has carried the burden since the UN’s founding by the “Big Five” Allied powers at the end of WWII. Back in the late 1940’s the budget assessment stood at a whopping 40 percent, a significant 33 percent in the 1950’s, and then 25 percent throughout the 1970’s and 1990’s. A positive change came in 2001 when Washington’s annual assessment was cut to 22 percent where it stands today.

As a longtime UN correspondent, the informal rule was that the U.S. paid the leading assessment $674 million followed by Japan, Germany, the United Kingdom and France. There’s another way to analyze this; the European Union (EU), the group of 28 countries have a combined contribution which outweighs the USA.

But the world has quietly changed and the once Tectonic financial obligations here at Turtle Bay, have decisively shifted eastwards, towards China. The People’s Republic of China is slated as the second largest contributor to the system with an assessment of 12 percent which translates to $335 million. Japan is now the third largest contributor with $239 million.

China’s quiet ascendancy at the United Nations has become manifest in peacekeeping operations, senior staff posts, and a widening political clout. Beijing paid its dues back in May.

But look how Beijing’s numbers have changed. In 1999, China was assessed at 0.9 percent of contribution, by 2009 the number was 2.6 percent (about the same as Canada), and by 2017 the assessment grew to 8 percent. In the current budget China’s assessment has reached 12 percent which naturally reflects the Mainland’s high growth economic status.

The all powerful Committee on Contributions sets the assessment numbers based on a complex formula of Gross National Product, current accounts, etc. The “regular budget” reflects this assessment. The burgeoning peacekeeping budget, a totally different issue, will be addressed at a later date.

Add “voluntary contributions” for specific humanitarian crises and this really adds up.

Despite the high-profile payments for many European countries, there’s a typical mid-scale assessment such as $9.5 million for Malaysia. Typically the least developed countries pay 0.001 percent the minimum or $27,883 annually. Samoa and Sierra Leone fall into this category.

Beyond having to pay one’s proverbial “fair share” the assessment also reflects political clout and power. The old adage “he who pays the Piper, calls the tune.” Think about that now that Beijing is the number two contributor.

“This month, we will reach the deepest deficit of the decade,” António Guterres warned the General Assembly. This could impact UN specialized agencies delivering food and refugee assistance.

According to the UN, in early October member states had paid $1.99 billion towards the 2019 regular budget. The outstanding sum for the regular budget stands at $1.38 billion.

The U.S. owes $1 billion, Mexico $36 million, Iran $27 million and South Korea $10 million. The U.S. is in arrears $674 million for 2019, and $381 million from previous years.

This is hardly the UN’s first budget crisis; back in the 1990’s the organization came to the brink.

In the past the UN was rightly critiqued for a “bloated bureaucracy” which pulled down the organization’s effectiveness and ran up costs. Today the issue actually rests with widely expanded mandates, especially in peacekeeping missions, as well as taking on far too many issues. In other words, the UN is trying to cover too many bases and fails to focus on what it does best such as humanitarian aid and economic assistance.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism the Diplomacy of Separated Nations: Germany, Korea, China (2014).

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