Annan said in September the UN had reached "a fork in the road"
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United Nations Secretary General Kofi Annan has appointed a 16-member panel to examine reform of the organisation.
Mr Annan said the panel's aim was to recommend clear and practical measures for effective action against threats to global peace and security.
The panel, comprising diplomats and officials, will be headed by former Thai Prime Minister, Anand Panyarachun.
In September, Mr Annan called for debate on how the UN could address threats posed by global terrorism.
'Difficult year'
Mr Annan said in a speech to the UN in September that the organisation had reached a "fork in the road, a moment no less decisive than 1945 itself when the United Nations was founded".
He said the UN had to review its fundamental policy issues in order to address the increasing threats of global terrorism, weapons of mass destruction and nuclear proliferation.
Mr Annan also addressed the controversial issue of pre-emptive strikes in his speech.
He said the UN may need to discuss the terms under which collective action through a Security Council resolution might authorise a pre-emptive strike against a threat posed by any terrorist groups armed with weapons of mass destruction.
BBC correspondent Greg Barrow at the UN says the panel is partly in response to a difficult year, during which the Council found itself divided and paralysed when confronted with the issue of how to disarm Iraq.
Other officials on the commission include Arab League Secretary General Amr Moussa of Egypt, the former UN high commissioner for refugees, Sadako Ogata, and Britain's former ambassador to the UN, Sir David Hannay.