The 12th General Assembly approved the establishment of a United Nations Special Fund, in part as an alternative to a much more ambitious proposal for a Special United Nations Fund for Economic Development (SUNFED). Detailed recommendations on the organizational, administrative and financial arrangements of the Special Fund have now been unanimously agreed upon by the members of the Economic and Social Council (ECOSOC), including the United Kingdom, the United States, France, the USSR and Canada. It is expected that these recommendations will be approved substantially in their present form by an overwhelming majority of the United Nations at the current Assembly and that the Fund will begin operations in 1959.

In the past Canada has supported a Special Fund in principle but has stressed that Canada could not support the actual setting up of the Fund unless the backing of the United Kingdom, the United States and other contributors assured adequate financial and administrative support for the Fund. Originally the sponsors of SUNFED had pressed for a capital aid fund with resources of about $250million annually; last year the United States advanced a new but related proposal for a Special Fund of a much more modest size, to be devoted to resources surveys, technical training, demonstration projects, etc., rather than to capital aid.

On December 9, 1957, Cabinet authorized the Canadian Delegation to the United Nations General Assembly to take an active role in the debate on this matter and to seek an effective compromise between the SUNFED resolution and the United States proposal for a Special Fund.⁸⁴ Canadian Delegation was authorized to indicate that if a sound, realistic and broadly acceptable plan emerged from discussions the Canadian Government would give sympathetic consideration to asking Parliament to make an appropriate financial contribution. In due course, a public statement to this effect was given in the Second Committee by the Secretary of State and has been reiterated by Canadian representatives at subsequent international gatherings.

The Canadian Delegation subsequently played an important role in debates and negotiations on the Fund in the United Nations and at meetings of a Preparatory Committee set up by the Assembly. Our Delegation and Delegations of like-minded countries succeeded in having accepted proposals incorporating the minimum objectives set by the Canadian Government. These are the proposals which have recently been approved unanimously by ECOSOC.

The present plans provide that the Fund will concentrate on relatively large projects, so as to avoid undue dispersion of its resources. A target figure of $100million has been mentioned for the Fund but it is most unlikely that contributions will come close to this amount at least this year. The Fund will be controlled by a Governing Council consisting of eighteen states elected from members of the United Nations and its Specialized Agencies, and will provide for equal representation of economically more developed countries and under-developed countries. Provision has been made for a close working association with the International Bank. Of particular importance to Canada are the provisions that contributions shall be made in currencies readily usable by the Fund and that projects will be carried out without interference of any sort from donor countries. Not only is this feature of the Fund necessary for its effective administration but it is also essential to prevent interference by Communist governments. The USSR has only reluctantly agreed to several provisions of the present report and is expected to try to reopen the debate in the 13th Assembly.

A United Nations Pledging Conference will be held during the 13th Assembly, at which members of the United Nations will be invited to indicate the amount of their contributions to the Fund for 1959. In view of the fact that Canada is publicly pledged to make an appropriate contribution if the Fund is set up in a manner acceptable to Canada, and assuming that this condition will be fulfilled at the Assembly, it would seem desirable and important that authority be given for the Canadian Delegation to the 13th Assembly to make a precise pledge as to the contribution Canada will make in the next fiscal year, subject, of course, to the approval of Parliament.

The Canadian contribution should bear some relation to our participation in other comparable voluntary United Nations programmes, in particular to the Expanded Technical Assistance Programme, and also to contributions of other major donor countries. In this connection it should be noted that Canada's contribution to these programmes, in relation to capacity to pay, has been greater than that of the United States. Most of our aid has been concentrated in Commonwealth programmes; assistance through the United Nations is the only form of aid which we offer to other under-developed countries. Thus UN aid is a complement to our own bilateral programmes.

Last year Canada contributed $2million to ETAP out of a total budget of about $32million. The ETAP will probably secure approximately $30million next year. It is unlikely that the Special Fund will go significantly over that amount this year and it would therefore be appropriate for the Canadian contribution to the Special Fund to be of the same order as our contribution to the ETAP.

According to the latest information, United Kingdom authorities have in mind a contribution of the same proportion of the total Special Fund budget as the United Kingdom contribution to the ETAP bears to the total ETAP budget. This was 7% last year, i.e., $2.24million. The United States are prepared to give up to $38million to the ETAP and the Special Fund taken together, on condition that the U.S. contribution is not more than 40% of the total pledge to both programmes. TheNetherlands have indicated that they will make a contribution of $2.4million, while France has mentioned a contribution of the order of $2.78million. Italy and Japan will each pledge $600,000. The German Delegation has recommended a German contribution of $2.5million, and is expecting authority to announce a contribution of more than $1.5million. Although in some cases these pledges are not yet firm, and some are made on a matching basis, there is clear indication that other countries will give effective support to the Fund and, therefore, justify an initial Canadian contribution of $2million. At the same time it would be prudent for our Delegation to make clear that we are announcing a firm contribution for the first year in order to assist the Fund to be inaugurated on a sound and forward-looking basis, but that our future contributions will be reviewed in the light of the financial response of the full UN membership to the new programme.

It is therefore recommended⁸⁵ that the Canadian Delegation to the 13th General Assembly of the United Nations be authorized to state that, subject to the approval of Parliament, Canada will contribute $2million (U.S.) to the Special Fund in 1959-60, and that future Canadian contributions will be subject to review and adjustment to take into account the extent to which readily usable contributions substantially exceed or fall below a total budget of $30million.

SIDNEY SMITH

⁸⁴ Le Cabinet s'est penché sur cette question le 29 novembre 1957, et non le 9 décembre 1957.
Cabinet dealt with this issue on November 29, 1957, not December 9, 1957.

⁸⁵ Approuvé par le Cabinet le 1 octobre 1958.
Approved by Cabinet on October 1, 1958.