Moldova: Managing Food Safety and Agricultural Health

An Action Plan

Kees van der Meer (SPS specialist; consultant)

Agriculture and Rural Development DepartmentThe World Bank

Presented by video conference on January 31, 2008

Background of this study

• Food safety and agricultural health are challenge for participation in international trade

• Sanitary and Phytosanitary measures (SPS) part of WTO agreement

• World Bank SPS Action Plans: Vietnam, Laos, Armenia, Moldova

• Peculiarities of transition economies (CIS): shared institutional legacy

Part 1Food Safety and Agricultural Health

Management in CIS Countries

Part 2

Specifics for Moldova

Common issues in CIS countries

• Recovery from post-independence shock

• Further growth depends increasingly on product quality and diversification

• Present GOST-based system constrains competitiveness

– Incompatible with international standards (WTO SPS/TBT), not recognized by OECD countries

– Costly for enterprises and consumers

– Sometimes stifles innovation

• Food safety, animal and plant health outcomes unsatisfactory

Diversity: Country groupsGroup I

Belarus, Kazakhstan, Russia, Ukraine

Group II

Armenia, Azerbaijan, Georgia, Moldova

Group III

Kyrgyz Rep., Tajikistan, Turkmenistan, Uzbekistan

Economic development level

Moderate – high Low – moderate Low

Food safety situation*

Good–Moderate

DALY rate: 33-101

Good–Moderate

DALY rate: 31-440

Moderate–Poor

DALY rate: 147-1103

Animal health situation

Perceived increase in zoonotic diseases from smallholder farms although official databases give strong decline in tuberculosis and brucellosis in Moldova, Russia and Ukraine. Emergence of HPAI.

Rise in Echinococcosis and other zoonotic diseases

Plant health situation

Threat of introduction of pests due to weakened border control

Good or moderate capacity to detect mycotoxin and pesticide residues, to deal with disease and pest outbreaks; moderate plant quarantine

Weak capacity to detect mycotoxin and pesticide residues, to deal with disease and pest outbreaks; weak plant quarantine

Very weak capacity to detect mycotoxin and pesticide residues, to deal with disease and pest outbreaks. Very weak plant quarantine

* DALY = Disability adjusted life year

GOST vs. international standards GOST International

standards

Responsibility of food safety

Public sector Private sector

Focus of control Product

‘End-of-pipe’

Process

‘Chain’

Nature of requirements

Highly prescriptive and mandatory

Safety is mandatory

Quality is voluntary• Inconsistent procedures, methodologies, criteria

• Incompatible laboratory facilities, equipment and tests

• GOST has many deficiencies for a market economy

Why not simply replace GOST by international standards?

Difficulties

• High budgetary cost

• Limited technical capacity, including language – especially in area of risk-based management

• Need for double system (Russia and other CIS still require GOST)

• Vested interest in maintaining old system

• Potential impact on large informal sector

Reforming food safety and agricultural health management: Central and Eastern Europe (CEE) and CIS

• Similarity:– Common heritage of GOST standards and institutions

• Difference in reform objective: – CIS:

• compliance with WTO principles;

• compatibility with market economy;

• improved food safety and agricultural health;

• improved competitiveness of agro-food industry

– CEE: • full adoption of EU Acquis Communautaire

Reform cost

• Reform in food safety and ag health in EU accession programs

– SAPARD investment agro-processing and marketing (2000-6) for CEE

• Equivalent to 2.5% of agricultural GDP annually for 7 years

– EU funds under PHARE for SPS-related activities (2000-2006)

• Poland: € 115million (0.4% of ag GDP/year)

• Lithuania: € 24million (0.8% of ag GDP/year)

• Action plans for SPS capacity building in Armenia and Moldova - estimated external funding (6 years)

– Armenia: US$ 7.7million (0.20% of ag GDP/year)

– Moldova: US$ 9.7 million (0.45% of ag GDP/year)

Institutional challenges

• In CIS: too many institutions, too many inspections; institutions (and staff) depend on income from inspections

• Many “GOST” skills no longer needed• Experience of consolidation of services and labs

– Poland• Ministry of Health labs fell from 248 to 66

– Lithuania: • 3 former agencies for food control merged into the State Food

and Veterinary Service (SFVS) reporting directly to the Prime Minister

• consolidation of SFVS labs: from 50 in 1994 to only 10 in 2001, and further consolidation anticipated (1 central and 4 regional)

EU accession experience: economic impact of compliance

• Consolidation of food industry Bulgaria– Of 237 slaughterhouses in 1999, 144 were closed down by the middle

of 2006. Only 22 of those remaining were fully in line with the EU requirements, 71 have been extended a transition period

– Out of the 312 meat processing operations in 1999, 146 were closed down by the end of 2006

– Out of 512 units in the milk industry in 1999, 341 were closed down by the middle of 2006

Poland – Meat industry declined from about 7,000 companies in 2001 to 3,000 in

2006 – Slaughterhouses from 2,600 to 1,200

• Cost for consumers may rise if informal markets are wiped out

Country groups: different options

Group I

Belarus, Kazakhstan, Russia, Ukraine

Group II

Armenia, Azerbaijan, Georgia, Moldova

Group III

Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan

SPS capacities Relatively strong Weak Very weak

Available financial resources

Relatively rich Scarce Scarce

Main market Internal market, EU

Russia, EU Southern Siberia, China and South Asia

SPS requirement High-medium High-medium Relatively low

Reform options Adopt international standards; all-around capacity in testing, risk assessment

Selectively adopt international standards; adopt EU standards only for products with good export potential

Reform standard system to be WTO-compliant; give priority to reducing public health risks

Improving international assistance

Weaknesses in donor projects

• Due to absence of strategy and political leadership on demand side

– Low cost-effectiveness

– Poor sustainability

Recommendation for future activities

• Assistance in formulating comprehensive food safety and agricultural health strategy

• Better donor coordination based on strategy

• Early support for analysis of risks, costs, benefits

• “Twinning” proven effective for capacity building

Concluding remarks on CIS• Present system and capacities form constraints on

– human and agricultural health outcomes

– agricultural growth, market access and competitiveness

• Replacement of GOST is part of – transition to market economy

– integration into the international trade system

• Russia’s WTO accession poses challenge to small CIS countries

• Careful selection of reform goals and prioritization is needed

• Different options for each country, based on geographic, economic, commercial, technical, and political conditions

• More effective donor support is needed

Part 1Food Safety and Agricultural Health Management in CIS

Countries

Part 2Specifics for Moldova

Moldova’s Agricultural Potential

• Agricultural growth potential not fully realized

• Exports main driver for growth

• However, export performance is relatively weak in the region

Export value 2004 in percent of 1997

EU15 CEEC CISTotal

Export

Azerbaijan 150 100 293 285

Georgia 560 250 232 264

Moldova 115 83 155 138

Ukraine 155 240 148 196

Estonia 227 179 22 86

Hungary 186 149 56 138

Lithuania 359 435 69 174

Latvia 462 378 65 173

Poland 299 388 61 195

Slovakia 316 301 43 240

Reasons for Weak Export Performance

• Late start with reforms

• Many changes in policiesPoor investment climate

• Moldova is member of WTO, but not yet fully benefited from international trade

Market Access Challenges

• Growth of domestic supermarkets and their requirements

• Increased competition from imports

• Rapid increase of international requirementsDifficulty in penetrating EU marketWTO accession of Russia and Ukraine and harmonization

with EU standardsEU enlargement: reduced access to CEEC markets

(example: Romania)

• Market with GOST standards will decline in volume and price

Main Issues and Recommendations for Future

Actions

Institutional Framework

• Overlap of responsibilities

• Too many inspections

(Example: Vet and food safety inspection at marketplaces)

Future direction: choice from two alternatives– Delineation of responsibilities and better alignment

of functions among agencies– Single food agency (as in Lithuania)

Regulatory Framework

• Laws are WTO compliant, but no implementation

• GOST regulations still used in practice despite official abolition -- few regulations and standards have been developed

Recommended Actions

• Train staff in risk analysis as a base for policy making and design of implementation programs

• Prepare a work program for the development of new regulations and standards consistent with international standards and suitable for market economy

• Prioritization based on risk assessment and cost-benefit analysis (first: main health risks and products with good export potential)

Certification and Accreditation

• Current system adds unnecessary cost of doing business

Recommended actions

• Repudiate mandatory conformity assessment for food products

• Ban conformity assessment at borders

• Allow accredited private certification bodies to play a greater role

• Seek mutual recognition between the Moldova Accreditation Center and EU

Inspection, Monitoring, Surveillance

• System still largely based on GOST not on risk assessment, cost benefit analysis

• Should be better targeted on human and agricultural health and market access

Recommended actions

• Redesign inspection, monitoring and surveillance programs based on priority setting and cost effectiveness

• Make one agency responsible for food safety in domestic marketplace and sales points for food and beverages

Laboratory system• Each SPS agency has a system of central and regional labs

• Same testing repeated by different labs for same product – waste of public resources and extra costs to private sector

• Laboratories are under-funded and use outdated technologies and equipments

Recommended actions

• Design a program for consolidation of lab system

• Veterinary labs need to be reorganized

• Provide training in lab management and testing method

• Upgrade equipment

Border Control• Border control procedures WTO-compliant or not?

• Veterinary and phytosanitary services unable to keep up with the Customs’ upgrading of technology and efficiency

• Government monopoly in fumigation

Recommended actions:

• Assess border procedures and bring them into compliance with international requirements of nondiscrimination

• Improve computers and ICT of veterinary and plant inspection and quarantine services at border posts

• Privatize fumigation services for plant quarantine

Plant health

• Contents testing needed for pesticides in market

Recommended actions:

• Assign testing of contents of pesticides to lab with best capacities

• Registration policy for pesticides should accept information and registration from neighboring countries

• Modernize the Central Plant Inspection and Quarantine Laboratory and district lab equipment

Animal health

• Present system of stamping out needs improvement

• Restocking support should be added

• Overstaffing of veterinary services

Recommended actions:

• Design a better system to support the stamping out of livestock diseases; and initially focus on a limited number of diseases

• Separate public and private functions in veterinary services

Information and Education

• Awareness raising and education in improving food safety and agricultural health appears to be neglected

• Hygiene, botulism, mushroom poisoning are issues for education

Recommended actions:

• Develop and disseminate public programs for awareness raising and education

• Expand anti-parasitic disease campaigns carried out by CPM and include preventive actions with domestic animals (especially dogs) and livestock

Private Sector

• Outdated structures, technologies, practices

• Small-scale, under-capitalized

Recommended actions

• Develop a comprehensive plan for the convergence toward EU principles of hygiene in food processing

• Provide processors with training in good manufacturing practices (GMP), HACCP, etc.

• Improve water treatment for overall hygiene and food safety of processing plants

Summary of Action Plan

• A total of 32 recommended actions over 3-5 years

• Estimated cost:

– Public sector about US$ 9.7 million *

– Private sector > US$ 3 million

– Pesticides, water > US$ 5 million

• Initial investment push needed with support from donors

* Tentative estimated ERR for public sector is 11-14%

Concluding remarks

• Present capacities form constraints on– market access and competitiveness

– human and agricultural health

• Standards reform is part of transition to market economy

• Given scarce resources, careful sequencing and prioritization is needed

• Regular consultation with all stakeholders required

• Effective support from donors is needed

• Basic principle for reform: the SPS system should be used to facilitate business and trade while protecting human and agricultural health, not to tax producers and exporters