1. Moldova: Managing Food Safety and Agricultural Health An Action Plan Kees van der Meer (SPS specialist; consultant) Agriculture and Rural Development Department The World Bank Presented by video conference on January 31, 2008

2. 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

3. Part 1 Food Safety and Agricultural Health Management in CIS Countries Part 2 Specifics for Moldova

4. 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

5. Diversity: Country groups Group I Belarus, Kazakhstan, Russia, Ukraine Group II Armenia, Azerbaijan, Georgia, Moldova Group III Kyrgyz Rep., Tajikistan, Turkmenistan, Uzbekistan Economic development level Moderate – highLow – moderateLow 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

6. GOST vs. international standards GOSTInternational standards Responsibility of food safety Public sectorPrivate sector Focus of controlProduct ‘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

7. 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

8. 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

9. 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)

10. 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)

11. 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

12. Country groups: different options Group I Belarus, Kazakhstan, Russia, Ukraine Group II Armenia, Azerbaijan, Georgia, Moldova Group III Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan SPS capacitiesRelatively strongWeakVery weak Available financial resources Relatively richScarce Main marketInternal market, EU Russia, EUSouthern Siberia, China and South Asia SPS requirementHigh-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

13. 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

14. 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

15. Part 1 Food Safety and Agricultural Health Management in CIS Countries Part 2 Specifics for Moldova

16. Moldova’s Agricultural Potential Agricultural growth potential not fully realized Exports main driver for growth However, export performance is relatively weak in the region

17. Export value 2004 in percent of 1997 EU15CEECCIS Total Export Azerbaijan150100293285 Georgia560250232264 Moldova11583155138 Ukraine155240148196 Estonia2271792286 Hungary18614956138 Lithuania35943569174 Latvia46237865173 Poland29938861195 Slovakia31630143240

18. Reasons for Weak Export Performance Late start with reforms Many changes in policies  Poor investment climate Moldova is member of WTO, but not yet fully benefited from international trade

19. Market Access Challenges Growth of domestic supermarkets and their requirements Increased competition from imports Rapid increase of international requirements  Difficulty in penetrating EU market  WTO accession of Russia and Ukraine and harmonization with EU standards  EU enlargement: reduced access to CEEC markets (example: Romania) Market with GOST standards will decline in volume and price

20. Main Issues and Recommendations for Future Actions

21. 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)

22. 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)

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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%

32. 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