TWN Info Service on WTO and Trade Issues (May24/03)
4 May 2024
Third World Network

Trade: WTO hits CHF 4.8 million surplus, despite DG’s call for budget hike
Published in SUNS #9998 dated 3 May 2024

Geneva, 2 May (D. Ravi Kanth) — Despite repeated calls for hiking the World Trade Organization’s budget during 2022 and 2023, the WTO Director-General, Ms Ngozi Okonjo-Iweala, on 29 April admitted that “the organization will have a budgetary surplus of CHF 4.8 million (close to USD 5 million)” for 2023, an increase that prompted her to seek “stepping up our recruitment to hire the very best staff.”

In a restricted letter (JOB/BFA/102) sent to the new chair of the WTO’s Committee on Budget, Finance, and Administration (CBFA) on 29 April, the DG wrote that the very best staff will be hired “utilizing the strategic staffing competency and mapping frameworks that we are developing.”

It may be recalled that since she took over the reins at the WTO on 1 March 2021, the DG has embarked on reforming the WTO Secretariat based on a report prepared by the management consulting firm McKinsey & Company.

The controversial reform process generated considerable turmoil in the organization, said several people familiar with the reform-related development.

Against this backdrop, in her letter, seen by the SUNS, the DG told the CBFA chair, Ambassador Jose R. Sanchez-Fung of the Dominican Republic, “I am reaching out to you at this time because we have closed the books for 2023, and our External Auditors are in the process of auditing our Financial Statement. That statement and the audit report will be provided to Members for discussion at the July CBFA meeting.”

The DG said that “before the audited statements are released to us and to Members,” she wanted “to provide some informal insight to you as to our budgetary result for 2023. I do so in the interest of making sure that you and our Members have pertinent information as quickly as possible.”

She said, “As we could begin to see in the 3rd Quarter Report issued to Members last year, the Organization will have a budgetary surplus of CHF 4.8 million for 2023.”

Ms Okonjo-Iweala admitted that “it may seem counter-intuitive that we had a budget surplus in 2023 at the same time that we were asking for an increase in budget for the 2024 and 2025 biennium.”

Behind this development, she said, “last year, we were facing considerable uncertainty as to whether Members would provide us with a budget increase as we faced inflationary pressures as well as certain unavoidable mandatory and essential expenses.”

She said, “I am gratified that Members granted us a modest increase, but that decision was not made until mid- December.”

The DG maintained that “we have seen a record number of Members in arrears or quite tardy in making the required contributions.”

Ms Okonjo-Iweala said that “we were forced, in the interest of sound financial management, to defer necessary expenditures, to the extent we could, until this year because we did not know if we could afford to take on those longer-term liabilities.”

The DG claimed that “the lion’s share of the surplus is due to the record number of vacant posts that we felt was prudent to maintain so we could avoid making staffing commitments that could not be supported by our available resources in the coming biennium given that Members had not made the final decision on our budget.”

Further, “related to this point are the delays in the recruitment process that we faced and the turnover in key Director and Human Resources positions, which are now being addressed,” she said.

Though the DG acknowledged that “we are seeing the highest level ever of staff who have left the WTO, especially voluntary (i.e., non-retirement) departures,” she did not provide any reasons as to why the “highest level ever of staff” left the organization.

It appears that several directors left the organization out of frustration and resentment over her alleged personnel policies that seemingly undermined independence and impartiality at the highest level, said a staffer, who asked not to be quoted.

Ms Okonjo-Iweala told the CBFA chair that “the large number of vacant posts has caused us to rely disproportionately on short-term staff, which cost less,” suggesting that “we are affirmatively addressing this disparity.”

The DG acknowledged that “the increase in voluntary departures is of concern, as is the increase in external applicants who are declining offers of employment.”

Besides, she cited “two underlying problems, based on feedback we have received.”

The first problem, according to the DG, is that “the WTO grade structure is lower than that of comparable international organizations.”

Consequently, “prospective staff members are understandably reluctant to accept a position with the WTO that they perceive as a lateral move or sometimes, a reduction in grade level,” she said.

“At the same time, staff already at the WTO are being offered positions in other organizations that are, at times, two or three grades higher,” she argued, pointing out that “a related problem is that the more attractive packages (salaries and benefits) that were once a sales point of the WTO are no longer on offer. Both of these factors help to explain why staff are leaving and prospective staff are declining offers.”

In conclusion, she said, since “the Members have graciously increased our budget for the 2024-2025 biennium, we have considerably more certainty to plan and spend our resources in 2024 in the manner that we set forth in our final budget request last year.”

“To that end, we are committed to stepping up our recruitment to hire the very best staff within the ceiling set by Members, utilizing the strategic staffing competency and mapping frameworks that we are developing,” she maintained.

She said that she wants to “undertake the essential security, information technology, and infrastructure projects that we detailed to Members last year.”

In her letter to the CBFA chair, the DG said that she will “provide a recommendation to you and the Members under Financial Regulation 23 as to how to utilize the surplus, for your consideration and decision.”

MODEST BUDGET INCREASE FOR 2024

Last year, members approved a modest hike of 3.6 percent in the WTO’s regular budget, from CHF 197.2 million in 2023 to approximately CHF 204.29 million in 2024, after rejecting a separate proposal for increased contribution to the WTO Pension Fund of CHF 4.4 million (around USD 4.5 million).

The proposed increased contribution to the WTO Pension Fund was turned down by India, Indonesia, and the Russian Federation until the WTO Secretariat carried out substantial reforms, said people familiar with the development.

The WTO budget proposal was worked out by the European Union, said people familiar with the development.

The meagre hike in the WTO’s budget is a setback of sorts for the DG, who had asked for a “modest budget increase of CHF 14.56 million (around $15 million) for 2024”, and an additional CHF 1.94 million for 2025, said people familiar with the development.

As previously reported in the SUNS late last year, despite the near rejection of her first budget-hike proposal in 2022, DG chose to come back again with a new 43-page proposal, which came up for a first reading at the CBFA on 18 July 2023.

Nigeria, Cameroon on behalf of the African Group, Singapore, and Switzerland among others seem to have supported the DG’s proposal seeking a 7.4 percent budget hike for 2024, from CHF 197.2 million in 2023 to CHF 211.76 million in 2024, and a 0.9 percent increase in 2025, i.e., from CHF 211.76 million in 2024 to CHF 213.70 million in 2025.

But several other countries including India, Bangladesh, Nepal, the United States, and some South American countries had raised numerous questions on the need for a budget hike at this current juncture when nations are continuing to face grim economic problems, said people familiar with the discussions.

However, several EU members changed their positions from a complete rejection of an increase in the WTO budget to a meagre increase, as proposed in their proposal (Job/BFA/95), seen by the SUNS.

The big contributors to the WTO’s budget like Germany, the Netherlands, and Sweden among others, who had rejected the DG’s budget hike proposal for 2023, seemed to have changed their positions, said people familiar with the discussions.

The United States, given its overall share in international trade both in goods and services, will have to pay CHF 23.70 million in 2024 as compared to its contribution of CHF 22.80 million in 2023.

China, according to the EU’s proposal, will be required to pay CHF 23.20 million in 2024 as compared to CHF 21.03 million in 2023.

Germany would be required to pay CHF 14.84 million in 2024, as compared to CHF 14.06 million in 2023.

Japan, which contributed CHF 7.4 million in 2023, will be required to pay CHF 7.6 million in 2024.

India’s contribution will go up by almost CHF 400,000 in 2024, from CHF 4.57 million to CHF 4.96 million, while Malaysia’s contribution will go up by about CHF 100,000, from CHF 1.83 million in 2023 to CHF 1.927 million in 2024, according to the EU’s proposal.

As reported in the SUNS, privately, several members had cast doubts on the DG’s proposal, saying that some of her allegedly lavish expenditures on her travels with a big Secretariat team of officials and expenditure for convening the Joint Statement Initiatives, which were not approved multilaterally by members, as well as the expenses incurred for the transformation exercise at the WTO Secretariat, with a nearly one million Swiss franc payment to McKinsey and Company, appeared to contribute to the crunch.

“If she is carefully managing the Secretariat, we will not be in this crisis,” said a Secretariat official, who asked not to be identified. “Asking for more money to promote over 60 people a year is absurd,” the official said. +