42. Discussions were based on document WO/PBC/1/3 ("Policy on Reserve Funds and Surpluses").
43. The Secretariat recalled that the last session of the Assemblies had before it two documents for review, one on reserve fund policy and one on budget surplus. It was also recalled that the Assemblies had decided to defer discussion of a number of proposals to the current session of the Program and Budget Committee. The unfolding of events and the subsequent comments received from Member States on the issues involved made it advisable for the Director General to adjust the initial proposals. These were in front of the meeting in document WO/PBC/1/3. The document provided a detailed description of the current situation on reserve funds and surplus. The Secretariat noted that the document presented a number of proposals for discussion and review, including the following: first, it was proposed to merge the presentation of the nine working capital funds in the Financial Management Report in order to reflect adequately the reality of consolidated treasury operations. Second, it was recommended to maintain the arrangement for the reserve fund of the contribution-financed Unions, the Madrid Union and the Hague Union. Third, an increase of the PCT Union Reserve Fund was suggested, which only amounted to just over one month of budget expenditure. Fourth, it was proposed to rename the Separation Reserve the "Separation Provision" since this facility, unlike other reserve funds, had on-going credits and on-going expenditure. Fifth, the Special Reserve Fund for Additional Premises and Computerization should be renamed the "Capital Projects Reserve Fund" to reflect adequately the purpose of this reserve. Finally, it was proposed to utilize possible PCT surpluses by applying half to PCT fee reduction and half to capital project activities. The Secretariat emphasized that the Director General did not ask for a decision on the proposals. Rather, the document was intended to provoke discussion and solicit comments from Member States. Following this review process, it was intended to present final proposals for decision to the next meeting of the Program and Budget Committee and the Assemblies. The preparation of this document would reflect the advice received from the Committee. The Secretariat also intended to invite the technical contribution from a small group of financial experts in order to ensure that the proposed arrangements were founded on solid and professional justifications.
44. The Director General noted that the date of decision on the issues involved should remain open since the process of consultation might not be concluded in time for the meeting of the Assemblies in September 1999.
45. The Delegation of Japan, speaking on behalf of Group B, welcomed the document on the Policy on Reserve Funds and Surpluses. It was considered that the document would enhance further the transparency and understanding of WIPO. Since Group B had received the document only a few weeks ago, the Group needed to study the proposals further. In general, the Group believed that a long-term approach to PCT fee reductions and the way of handling the surpluses would need to be found. Note was taken of the several proposals contained in the document and the expectation was expressed that the issues would be discussed further.
46. The Delegation of Mexico emphasized the position it stated during the consideration of the Program and Budget, namely that the Delegation was in favor of strengthening cooperation programs with surpluses from the PCT instead of continuing a policy of reducing contributions and PCT fees. The Delegation noted the content of paragraph 28 of document WO/PBC/1/3 that gave a succinct summary of the different approaches to this matter. On the possible long-term policy for reducing PCT fees and the use of income from patent registrations, it was felt that it would be important and useful to look at the approaches adopted by national and regional patent and industrial property offices. The Delegation requested the Secretariat to collect such information and to make it available to the Member States. It also stated that any long-term policy on PCT fees should take into account that a fee is a payment for a service, while also considering national and regional specificities. In this particular case, WIPO offers a service in the generic frame of intellectual property protection, which would not be relevant if it were not linked to greater efforts in supporting the consolidation of intellectual property protection systems across the world. A long-term policy should take into account that the last goal of an application is to obtain effective protection; it is this protection and not a mere fee reduction what it is of interest to users. Accordingly, WIPO should invest all efforts and resources necessary to ensure that this effective protection is attained.
47. The Delegation of the United States of America expressed its support for the Group B statement and noted that the following issues were amongst those that required further clarification prior to the next session of the Assemblies. First, explanations were requested on the rationale to reduce the funding of the separation reserve from 6 per cent of the gross salaries to 1.5 per cent, starting in the year 2000. Second, the need to maintain an additional separation reserve was questioned, since the separation cost could be covered under the budget. Third, information on the status of and repayment modalities for the 10 million Swiss francs loan for the CAM building was requested. Fourth, more explanations were sought on the obligation of WIPO to maintain fee-funded operations after Member States had decided to discontinue the activity. Fifth, rather than using reserve resources, it was questioned why expenditures were not reduced in response to income reductions, in particular when those expenditures were unrelated to preserving the income streams of the Organization. Sixth, it was noted that only PCT surpluses were utilized to fund capital expenditures, which were of benefit to other areas of the Organization. Such an approach was seen to interfere with true accountability. The Delegation argued that capital costs, such as a new building, should be attributed to all programs which benefited and not only to PCT. Seventh, it was noted that the Special Reserve Fund would support WIPOnet activities by 28.2 million Swiss francs for 2000-2001 and also support PCT system automation. The question was raised whether the unused allocation for PCT automation in 1998-1999 would be carried over to 2000-2001. Finally, the Delegation requested that the new document on reserve funds and surpluses should contain a detailed cash flow analysis, which should identify the exact status of the collective reserve funds at any stage. In particular, the drawdown of the reserves in response to the renovation and construction activities should be fully reflected in this analysis.
48. The Delegation of Germany associated itself with the Group B statement and gave its appreciation to the intention of the Secretariat to convene a working group on the reserve fund and surpluses during the summer. Whereas the need for working capital was acknowledged to ensure liquidity, it was noted that the total amount of Union reserves of 57 million Swiss francs appeared to be too high. The justification of this level in terms of risk assessment, as outlined in paragraph 8 of document WO/PBC/1/3, was considered to be not very convincing. The Delegation stressed the need to consolidate the presentation of project budgets covered under the Special Reserve Fund with the regular budget of WIPO. In accordance with the statement made by the Delegation of the United States of America, the Delegation argued that there did not appear to be a need for a separation reserve. Actual separation costs should be covered under the regular budget and a separation reserve would only be required if the Organization would close in the near future, which appeared unlikely. The Delegation emphasized that the issue of reserves and surpluses warranted serious consideration since considerable amounts were involved, exceeding 300 million Swiss francs.
49. The Chairman suggested having informal consultations on the issue of reserves and surpluses rather than a working group as this approach would be more cost effective.
50. The Delegation of Ecuador stressed the need for WIPO to have a single reserve fund and not to focus only on reducing contributions of Member States and PCT fees. Rather than changing the name of the Special Reserve Fund for Additional Premises and Computerization to Capital Projects Reserve Fund, the Delegation recommended the maintenance of the initial name since this would describe more appropriately the nature of activities funded from the reserve. The Delegation stressed that the proposed automatic utilization of surplus resources for the reduction of PCT fees, as outlined in paragraphs 30, 32 and 34 of document WO/PBC/1/3, should be considered thoroughly in the forthcoming period.
51. The Chairman noted that the purpose of the document on reserve funds and surpluses was to solicit comments from Member States as a basis for further informal consultations. He also noted that it appeared appropriate to have another meeting of the Program and Budget Committee prior to the next meeting of the Assemblies to discuss more specific proposals on the subject.
