TWN Info Service on Climate Change (Mar13/04)
22 March 2013
Third World Network  

Green Climate Fund: Poser over administrative framework for independent secretariat

Berlin, 22 March (Meena Raman) - The issue of what administrative framework the independent secretariat of the Green Climate Fund (GCF) should opt for, became a matter of controversy at the recently concluded meeting of its Board, which took place in Berlin, Germany from 13th to 15th March.

In a document prepared by the interim secretariat on the ‘Administrative policies of the independent secretariat’, three options were provided for the Board’s consideration as follows: (a) United Nations (UN) common system administration; (b) multilateral development bank (MDB) –type administration or (c) non-UN/MDB administration.

In what appeared to most observers to be a ‘UN vs. MDB fight’, many developing country Board members supported option (a) which is for a UN system, while most developed country Board members, (with the exception of Sweden), supported option (b) for an MDB-type system.
A very lively exchange ensued when this matter was discussed on the second day of the meeting, with some developed countries like the US arguing that an MDB-type system would attract “financial experts”, given higher remuneration for employees as compared to the UN-system. In response, developing country Board members, led by India stressed that the GCF was not a “Wall Street institution”.
Jan Cedergren (Sweden) was supportive of following a UN common system of administration. Others who also were in favour of this option included Omar El-Arini (Egypt), Dipak Dasgupta (India), and Tosi Mpanu Mpanu (Democratic Republic of Congo), 

Matthew Kotchen (US) preferred the MDB-type system. Hong-Sang Jung (Republic of Korea) also supported the MDB-type system, saying that the UN system pays 40% lower salaries than the MDBs and it was important to secure quality staff. Others who preferred this option included the representatives from Australia, Norway and Japan.

Tosi Mpanu-Mpanu (DRC) in response did not agree that giving better pays will ensure better talent. He said that it was surprising that developed country Board members talk about ‘best value for money’ and the need for developing countries to pass the ‘tax-payers test’ but were prepared to pay 40% more salaries for the staff of independent secretariat.

Omar El-Arini (Egypt) said that the UN system can provide more benefits than the MDBs if one took into account staff with families. Setting up a UN common system will require very little time and bureaucratic procedure which could be implemented immediately, compared with the MDB-type system, he argued further.

Matthew Kotchen (US) stressed that the Board was creating a financial institution with hundreds of billions of dollars. Since it is a financial institution, the second option was needed to have experts in the financial sector. Dasgupta (India) responded saying that the Board was not creating a “Wall Street institution”.

Rod Hilton (Australia) while proposing the second option suggested that perhaps a hybrid option should be considered. Nicholas Dyer (UK) said that based on what he heard, he was more attracted to the idea as to what works in the (Asian) region and there could be a further option. (The independent secretariat will be located in Songdo, Republic of Korea).

Bambang Brodjonegoro (Indonesia) said that the GCF was similar to the International Fund for Agriculture Development (IFAD), which is based in Rome. It was called a ‘fund’ and is part of the UN system and is managed similar to an MDB.
Manfred Konukiewitz (Germany) responded that the Board may want to look at the IFAD system to find a solution. He said further that the GCF would be competing for “experts”. There was lower job security in the MDBs but the pay packet was higher.

Alexey Kvasov (Russia) said that it might be good to look at a regional development bank (referring to the Asian Development Bank) as a reference point as it might be closer to the second option while “removing the stigma of the World Bank”, making the discussions  easier.

At this juncture, co-chair Zaheer Fakir (South Africa) invited a representative from the civil society organisations to speak.

A representative of the Third World Network took the floor and said that it appeared as if some Board members were under-valuing the UN system which had much expertise, including in disbursing large amounts of money to developing countries such as the United Nations Development Programme (UNDP) that managed a multi-donor trust fund. She added that the GCF was an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC), and it was only natural to follow the UN common system of administration. She agreed with India that the GCF was not a “Wall Street” institution.

Fakir then suspended discussions on the issue, and tasked the Japanese and Indonesian Board members who were from the Asian region to have a discussion on what was in the best interest for the GCF and take up the matter again the following morning on the final day.

When the meeting resumed on March 15, Bambang Brodjonegoro (Indonesia) reported that  IFAD followed the UN system of administration. He said that he and the Japanese Board member discussed various options and would like to propose a hybrid model combining the characteristics of IFAD and the ADB. He said that the GCF independent secretariat could follow an ADB remuneration package, with the benefits of the UN system of subsidies.

In response, Omar El-Arini (Egypt) asked if it was feasible for the independent secretariat to follow such a hybrid system. He also wanted members to be mindful of the fact that the GCF was not a bank which is in the business of making money, while the GCF is about spending money.

Matthew Kotchen (US) reiterated that it was very important to get the right high quality staff and strongly supported the MDB-type system. He said this was not a political issue of “MDBs vs. the UN” but was about getting high qualified staff. He said there was need for more information in respect of how the ADB compared with the MDB standards. He was unclear about the hybrid system. 

The interim secretariat clarified that a hybrid model would require the development of a completely new administrative system which would be intensive work, as it was not just about adopting a remuneration package of rules and regulations.  As regards the ADB structure, he said it comprised 98% of the MDB remuneration scale with additional benefits as support for the families of staff members. He said the ADB sits between the UN and MDB system.

Fakir then asked Board members if they could look at a hybrid option. He said that more information could be got if this was feasible and for the co-chairs, through the intersessional process to get agreement on the matter. 

Omar El-Arini said he was prepared to go along with the proposal but stressed that it was important for the secretariat to start as an “independent secretariat”. Matthew Kotchen (US) also supported the proposal of the co-chairs for more information.

Fakir clarified that if there was no agreement during the intersessional session, then members can decide at the next board meeting in June.

The Board then adopted a decision requesting the interim secretariat to further explore the feasibility of the options presented in its document, including a UN common system, a MDB system and a UN-MDB hybrid option based on IFAD and the ADB, in its further work on preparing the administrative policies of the independent secretariat and prepare a working document for an intersessional decision by the Board on a no-objection basis.

They also agreed that should the Board not agree instersessionally to an option for the administrative policies of the independent secretariat, the matter will be brought forward to the Board for consideration at its June 2013 meeting.