International treaty examination of the United Nations Industrial Development Organization (UNIDO) Report of the Foreign Affairs, Defence and Trade Committee Contents Recommendation 2 Introduction 2 Reasons for withdrawal 2 Labour Party minority view 3 Green Party minority view 4 Appendix A 6 Appendix B 7
International treaty examination of the United Nations Industrial Development Organization (UNIDO) Recommendation The Foreign Affairs, Defence and Trade Committee has conducted the international treaty examination of the United Nations Industrial Development Organization, and recommends that the House take note of its report. Introduction The United Nations Industrial Development Organization (UNIDO) is a specialised agency of the United Nations with a mandate to promote and accelerate sustainable industrial development in developing countries and work towards improving living conditions in the world s poorest countries. New Zealand has been a member since the UNIDO constitution was signed and ratified in 1985. Membership entails the payment of an annual contribution, the amount set by each biennial UNIDO General Conference. In 2012 the cost of New Zealand s membership was $456,900. The Government is now proposing that New Zealand withdraw from membership of UNIDO. Reasons for withdrawal The majority of us believe that New Zealand s withdrawal is in the national interest, as it would mean the funds now invested in UNIDO could be invested in United Nations agencies that can demonstrate effective delivery and meet expectations. The proposal to withdraw also reflects UNIDO s marginal role in the international aid system and the reduced relevance of its work to New Zealand s aid priorities. A New Zealand withdrawal from UNIDO would also help minimise the dispersal of our international agencies engagements, targeting resources to places where New Zealand s support can achieve most, particularly in the Pacific. Withdrawal is preferred to the cessation of funding, which would adversely affect New Zealand s international reputation, and might encourage other nations to withdraw. Any risks are mitigated by the very small scale of New Zealand s financial contribution to UNIDO. New Zealand s ability to influence UNIDO s performance is also limited. A New Zealand withdrawal would not preclude future cooperation with UNIDO on specific programmes if this became appropriate. The Cook Islands and Niue have been consulted as both countries are bound by New Zealand s ratification of the UNIDO Constitution. No objections were articulated by either government, and they would remain eligible for UNIDO assistance; and many of New 2
Zealand s geographical and political neighbours have withdrawn, or are in the process of withdrawing, from UNIDO. On balance, the majority of us believe that the advantages of a New Zealand withdrawal are not outweighed by the potential disadvantages of its action encouraging other nations to do likewise, or that it may signal less engagement with the United Nations system. Withdrawal would involve depositing an instrument of denunciation of the UNIDO Constitution with the treaty s depository, the Secretary-General of the United Nations. We note that the proposal is for New Zealand to do so by 31 December 2012, and the withdrawal would then take effect on 31 December 2013. New Zealand would be required to fulfil its financial obligations until withdrawal takes effect. The National Interest Analysis for the proposal is attached as Appendix B to this report. Labour Party minority view Labour believes that the Government s decision to withdraw from membership of UNIDO is wrong. It is both wrong in terms of the value the organisation provides to developing countries, and strategically counterproductive in terms of how many countries may see New Zealand as a result of its withdrawal of support. Value of UNIDO The New Zealand Government has based its decision less on its own analysis than on one analysis by the British Government which had previously reported that UNIDO was one of the most effective institutions it had reviewed. It seems not to have considered UNIDO s rebuttal of most recent analysis. Nor has it considered reports such as that by the Norwegian Government which reaches the opposite conclusion. UNIDO s main strength, Norway said, was the provision of high quality technical expertise and ability to respond to urgent problems at country level. It said recipients with few exceptions were highly satisfied with the quality of the advice they received. Even the British report conceded it did useful work; its financial accountability was good; it shows keen control of staff overheads and programme costs; its Director-General is regarded as an effective, competent leader; it has a good reputation; it shows a positive attitude to reform; and its change management programme is expected to improve its performance. Strategically counterproductive The Government is withdrawing from an organisation whose strategic direction is consistent with New Zealand s development goals. UNIDO is a leading expert on poverty eradication through industrial development. It stresses development consistent with the need to be environmentally sustainable and tackle climate change issues. It emphasises integration of developing countries with international trade. It targets corruption and abuse of human rights. 3
The Government says withdrawal allows it to concentrate more on the Pacific, but organisations like UNIDO enable New Zealand to deliver assistance to, and show concern for, areas where we cannot effectively deliver assistance bilaterally, such as Africa. To get elected to the UN Security Council in 2014, we need to show interest in and concern for the problems of countries beyond our own region. The Government s intended action sends the wrong message. Withdrawal using as a justification that we are following the example of the US, UK, Canada and Australia brands us in a negative way. It suggests that we are part of a small, privileged grouping, that we follow rather than lead and don t take an independent stance reflecting our own judgement and values. This detracts seriously from the impression we need to create to win support for our 2014 bid to be elected on the Security Council. It also damages our branding more generally. It signals New Zealand is less engaged in the UN system. All of this damage is sustained for the saving of a meagre amount of money, less than $500,000. Green Party minority view The Green Party opposes the apparent decision of the New Zealand Government to withdraw from UNIDO. Such a move casts doubt on New Zealand s international standing and is reprehensible on substantive grounds. The decision also reflects poorly on procedural method within the Ministry of Foreign Affairs and Trade. The decision casts doubt on New Zealand s international standing. Imperfections within the UN require reform rather than repudiation. The decision to withdraw comes at a time when New Zealand promotes its candidacy for the UN Security Council a sad and ironic juxtaposition of self-interest. The withdrawal has the potential to jeopardise New Zealand s bid for a seat other member states tend to have regard, in making their judgements, not for what we invite them to consider but what they choose to consider. This applies with greatest force to those countries on which New Zealand will depend most for success. It will not be lost on them that the cost-savings New Zealand makes in pulling out of UNIDO are tiny in comparison to the money the New Zealand Government is spending on a new embassy in Beijing, $7 million. The decision is reprehensible on substantive grounds. The signal New Zealand will be sending to the international community is that it is indifferent to United Nations programmes that assist in aid and development around the world. The developmental objectives of UNIDO are in fact closely consonant with those of the New Zealand Official Development Assistance programme. If the Government harbours concerns over the way some UN organisations are run, then it needs to work with other member states to investigate and reform the organisation rather than cutting and running. Nordic states pursue this approach, and have considerable international influence on UN reform as a result. It needs to be acknowledged, however, that such a policy is coterminous with a strong commitment to international development through a sizeable ODA programme in each case from 0.8 percent to 1.0 percent of ODA/GNI, compared with New Zealand s meagre 0.27 percent. 4
The decision reflects poorly on MFAT s procedural methods. It appears to have been taken on the basis of a critical UK examination and report on UNIDO. It seems there exists a separate New Zealand report within MFAT which mirrors the British report, though despite requests from the Committee this was not forthcoming. Officials were unaware of (i) a study undertaken by Denmark on UNIDO, and (ii) a written response to the British report by UNIDO s Director-General. It is clear that MFAT failed to undertake a thorough and comprehensive examination before coming to its conclusion. 5
Appendix A Committee procedure The treaty examination was referred to the committee for examination on 25 July 2012. We met on 16 August, 27 September, and 18 October 2012 to hear evidence and consider it. We heard evidence from the Ministry of Foreign Affairs and Trade. Committee members John Hayes (Chairperson) Hon Phil Goff Kennedy Graham Hon Tau Henare Dr Paul Hutchison Su a William Sio Lindsay Tisch 6
Appendix B National Interest Analysis Withdrawal from the United Nations Industrial Development Organization (UNIDO) 1. Executive summary 1 It is proposed that New Zealand withdraw formally from membership of the UNIDO. UNIDO is a specialised agency of the United Nations. Its overall mandate is to promote and accelerate sustainable industrial development in developing countries and economies in transition, and work towards improving living conditions in the world's poorest countries. UNIDO s thematic priorities are: poverty reduction through productive activities; trade capacity building; and environment and energy. 2 New Zealand has been a member of UNIDO since signature and ratification of the UNIDO Constitution in 1985. 3 Membership entails the payment of an annual, assessed, contribution towards the regular budget. This amount is set by the biennial UNIDO General Conference. The New Zealand contribution for the 2012 (1 January 31 December) UNIDO fiscal year (this corresponds to the New Zealand 2011/12 financial year) is 289,492 Euros (NZ$456,900). New Zealand s assessment rate for 2012 was 0.415 percent. 4 A New Zealand withdrawal is in the national interest as it means the funds allocated to the International Agencies Programme of the New Zealand Aid Programme can be invested in agencies that are able to demonstrate effective delivery on the ground and meet expectations around value for money and performance. It also reflects UNIDO s marginal role in the international aid system and the reduced relevance of its work to New Zealand s aid priorities. 2. Nature and timing of proposed treaty action 5 New Zealand has been a member of UNIDO since signature and ratification of the UNIDO Constitution in 1985. The formal date that New Zealand s membership took effect was 19 July 1985. The UNIDO Constitution entered into force when at least 80 states, having deposited instruments of ratification, acceptance or approval, had notified the United Nations Secretary-General that they had agreed, after consultation among themselves, that it should enter into force. For those states, the Constitution entered into force on 21 June 1985. 6 Under Article 6 of the UNIDO Constitution, withdrawal is executed by depositing an instrument of denunciation of the UNIDO Constitution with the treaty s Depository, the Secretary-General of the United Nations. Withdrawal takes effect on the last day of the UNIDO fiscal year (1 January 31 December) following that during which the instrument was deposited. It is proposed New Zealand deposit notification of its withdrawal by 31 December 2012. Under the UNIDO Constitution, this withdrawal would come into force on 31 December 2013. 7
7 Under the UNIDO Constitution, members are required to fulfil their financial obligations until withdrawal takes effect. This means New Zealand would be required to pay the assessed contribution for the 2013 UNIDO fiscal year (New Zealand s 2012/13 financial year). The assessed contribution for 2013 will be identical to that for 2012. The Government has advised UNIDO that it will honour its financial obligations under the UNIDO Constitution. 8 New Zealand has consulted with the Cook Islands and Niue as both countries are bound by New Zealand s ratification of the UNIDO Constitution at the time of ratification, both Governments requested that the Constitution should also extend to Niue and the Cook Islands. 9 No concerns were articulated by either Government. The Cook Islands noted their interest in UNIDO s energy work, and indicated that they would consider the costs and benefits of membership in their own right (the Cook Islands are already a member of the United Nations Educational, Scientific and Cultural Organization, the World Health Organisation and the Food and Agriculture Organization of the United Nations for instance). Niue did not indicate any intentions with regard to its own future relationship with UNIDO. Regardless of their future membership status, the Cook Islands and Niue would remain eligible for UNIDO support, although the level and quality of any assistance could be affected by membership status. 3. Reasons for New Zealand withdrawing from the Treaty 10 It is proposed that New Zealand withdraw from the UNIDO Constitution. This proposal is based on an assessment that UNIDO s role in the international aid system is marginal and less relevant to New Zealand s current priorities, its Pacific footprint and relevance is minor, and its overall performance is mediocre. 11 Withdrawal will help ensure that the funds allocated to the International Agencies Programme of the New Zealand Aid Programme are invested in agencies that are able to demonstrate effective delivery on the ground and meet expectations around value for money and performance. UNIDO s role in the international aid system, and its relevance to New Zealand s international development and broader foreign policy interests, is more marginal than that of other United Nations system agencies supported under the International Agencies Programme. UNIDO s Pacific footprint and relevance is minor; and both MFAT and a number of other donor assessments indicate overall agency performance and impact is mediocre. 12 Withdrawal, as opposed to the cessation of funding, is preferred. If a country ceases to pay its annual contribution to the regular budget but does not withdraw, nonpayment is treated as an outstanding contribution in UNIDO s financial reporting. Nonpayment for over two years will result in the relevant member s voting rights being suspended. Such a scenario would entail adverse reputational implications. 13 The United States (withdrawal effective from the end of 1996), Canada (withdrawal effective from the end of 1993) and Australia (withdrawal effective from the end of 1997) are no longer members. The United Kingdom and Lithuania are withdrawing from UNIDO (these withdrawals effective from the end of 2012). A number of other states have 8
never been members of UNIDO these include Singapore, Iceland, Estonia, Latvia, and in the Pacific: Kiribati, Solomon Islands, Palau, Micronesia, Marshall Islands and Nauru. 4. Advantages and disadvantages to New Zealand of the treaty action. Advantages 14 UNIDO s role in the international aid system, and its relevance to New Zealand s interests is more marginal than that of other UN agencies supported under the International Agencies Programme. UNIDO s Pacific footprint is minor, and MFAT and other donor assessments indicate agency performance is mediocre. New Zealand s ability to influence agency performance is limited. A New Zealand withdrawal from UNIDO would also contribute to the reduced dispersal of our International Agencies engagements targeting resources to where New Zealand s support can achieve the greatest impact, particularly in the Pacific. 15 A New Zealand withdrawal would not preclude the possibility of future appropriate non-core cooperation with UNIDO on specific programmes. A possible example of this includes a proposal to support UNIDO work on seaweed processing in the Maluku province in eastern Indonesia which is currently being assessed. UNIDO may also continue to derive benefit from New Zealand support in those instances where programme contributions are directed towards broader UN programmes. A recent example where UNIDO has benefitted from such support is represented by funding to the United Nations Development Programme (UNDP) led conflict reconstruction programmes in Maluku where UNIDO implemented some of the programme activities. 16 Consultation with the Cook Islands and Niue indicates that a New Zealand withdrawal will not entail any detrimental consequences for either country. Regardless of future membership status, the Cook Islands and Niue would remain eligible for UNIDO assistance. Disadvantages 17 174 nations are currently members of UNIDO. There is a risk of an adverse reaction from some member states, in part because of the possibility that a New Zealand withdrawal may encourage a number of other member states to withdraw. In addition, some of UNIDO s developing country members may perceive a withdrawal as signalling less engagement by New Zealand in the UN system. 18 These risks are mitigated by the very small scale of the New Zealand financial contribution to UNIDO; our recent decision to allow UNIDO to retain for future use unspent New Zealand funds in contrast to the approach adopted by most members on this; a history of limited New Zealand engagement with UNIDO, including in its governance bodies; continued strong New Zealand core funding support to other, more critical, components of the UN development and humanitarian system; continued, appropriate outreach to UN member states reinforcing our commitment to the UN system: and the increase in the overall New Zealand aid programme. 19 On balance, the various advantages of a New Zealand withdrawal outweigh the disadvantages, and therefore withdrawal is proposed. 9
5. Legal obligations which would be imposed on New Zealand by the treaty and an outline of the dispute settlement mechanisms 20 These are confined to the requirement under the UNIDO Constitution for members to fulfil their financial obligations until withdrawal takes effect. This means New Zealand would be required to pay the assessed contribution for the 2013 UNIDO fiscal year (New Zealand s 2012/13 financial year). The assessed contribution for 2013 will be identical to that for 2012. 21 The most recent UNIDO financial situation report (31 March 2012) advises that assessed contributions outstanding from current members total 74.9 million. The arrears of 39 members were of sufficient duration to entail the suspension of their voting rights (members affected by suspension include Argentina, Costa Rica, Papua New Guinea, Ukraine and Vanuatu). In addition, UNIDO is pursuing arrears owed by one former member, the United States (for 1994 1996) totalling almost 69.07 million and those of the former Yugoslavia (about 2.08 million in total). 6. Measures which the Government could/should adopt to implement the treaty action 22 The instrument of denunciation would be deposited with the UNIDO Depository after the Parliamentary treaty examination process is completed. This would occur by 31 December 2012. 7. Economic, social, cultural and environmental costs and effects of the treaty actions 23 In general, no costs or effects pertaining to the above categories are foreseen. New Zealand nationals or permanent residents seeking employment or contract work with UNIDO may be disadvantaged, but numbers affected are likely to be low. 8. Costs to New Zealand of compliance with the treaty. 24 None. 9. Completed or proposed consultation with the community and parties interested in the treaty actions 25 No consultation has been undertaken or is proposed in a domestic context. The relationship with UNIDO is managed by MFAT. No other New Zealand Government agencies have articulated any interest in UNIDO in recent years. Treasury has been consulted on the proposal to withdraw. The Ministry of Economic Development has also been advised of the proposal to withdraw and had no comment. 26 The Government, via the mission in Vienna, has advised UNIDO and several Vienna-based missions (the United Kingdom, Netherlands, Japan, Austria, Republic of Korea and the European Union delegation) of the proposal to withdraw. 27 The Government, via our resident missions, consulted with the Cook Islands and Niue of the proposal to withdraw, including the reasons for this. 28 Public approaches to date have been confined to one overseas media inquiry. 10
10. Subsequent protocols and/or amendments to the Treaties and their likely effects 29 Not applicable. 11. Withdrawal or denunciation 30 Under Article 6 of the UNIDO Constitution, withdrawal is executed by depositing an instrument of denunciation of the UNIDO Constitution with the Depository. Withdrawal takes effect on the last day of the UNIDO fiscal year following that during which the instrument was deposited. Under the UNIDO Constitution, members are required to fulfil their financial obligations until withdrawal takes effect. 12. Agency disclosure statement 31 Not applicable. 11