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Food Safety and Agricultural Health Management in CIS Countries: Completing the Transition

THE WORLD BANK

REPORT NO. 40069-RU

Agriculture & Rural Development DepartmentWorld Bank1818 H Street, N.W.Washington, D.C. 20433http://www.worldbank.org/rural

THE WORLD BANK

AGRICULTURE AND RURAL DEVELOPMENT DEPARTMENT

Food Safety andAgricultural HealthManagement in CIS Countries:Completing the Transition

© 2007 The International Bank for Reconstruction and Development / The World Bank1818 H Street, NWWashington, DC 20433Telephone 202-473-1000Internet www.worldbank.org/ruralE-mail [email protected]

All rights reserved.

This volume is a product of the staff of the International Bank for Reconstruction andDevelopment/The World Bank. The findings, interpretations, and conclusions expressedin this paper do not necessarily reflect the views of the Executive Directors of The WorldBank or the governments they represent. The World Bank does not guarantee the accu-racy of the data included in this work. The boundaries, colors, denominations, and otherinformation shown on any map in this work do not imply any judgment on the part ofThe World Bank concerning the legal status of any territory or the endorsement or accept-ance of such boundaries.

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A C R O N Y M S A N D A B B R E V I AT I O N S vii

F O R E W O R D ix

A C K N O W L E D G M E N T S xi

E X E C U T I V E S U M M A RY xiii

Introduction 1International Trading System 1SPS Management 2Transition Economies and the GOST Standards System 4Objective of the Study 5Method 5

Agriculture and Markets in CIS Countries 7Differences among CIS Countries 7Agricultural Production Since Transition 8Consumption and Markets 9International Trade in Agro-Food 11Summary: Country Group Characteristics 18

GOST System and Its Implications for Health and Competitiveness 21

GOST-Based Standards 21GOST-Based Systems and Systems Based on WTO Principles 22Food Safety and Agricultural Health 23Standards and Other Constraints to Market Access in the OECD 27Governance Issues 30Summary: SPS Issues and Country Groups 32

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Contents

Replacing GOST-Based Systems by Systems Based on WTO Principles 33

Choices to Be Made 33Evolving Principles for SPS Management in Market Economies 34Adjusting the Institutional Architecture 36Experiences of Reform 39Legal and Regulatory Reform in CIS Countries 42Diagnostic Capacity 44The Private Sector 45Regional Cooperation 49Costs and Benefits 51International Assistance for Food Safety and Agricultural Health 55

Conclusions and Recommendations 61Conclusions 61Principles and Considerations for SPS Management Reform 63Recommendations for Reform Implementation 66International Support for SPS Reform in CIS 68

A P P E N D I X E SAppendix 1. Russian Bans on Agro-Food Imports 71Appendix 2. New Agricultural Health Challenge in

Plant Health 73Appendix 3. Zoonotic Disease and Socioeconomic Impacts:

Integrating Human and Animal Health Measures 77

Appendix 4. Identified Risks from CIS Food and Feed Exports to the EU Market 81

Appendix 5. World Bank Activities in CIS 85Appendix 6. Estimating Costs and Benefits of

SPS Management 89Appendix 7. Cost Estimates for Animal Identification

and Registration 99Appendix 8. Spending on SPS under EU Accession Programs 101Appendix 9. Armenia’s Live Crayfish Exports to the EU 103

G L O S S A RY 1 0 5

N O T E S 1 0 9

R E F E R E N C E S 111

Boxes1 WTO Principles on the Use of SPS Measures 22 Some Terms Explained 33 Elements of an SPS and Agricultural Health Management System 3

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iv Contents

Contents v

4 Market Segments 125 Features of Modern Retailing and Implications for Producers

and Processors in CIS 146 Sanitary Compliance by Smallholder Livestock Farmers 267 Ukraine’s Kefir and Sour Cream Standard as Compared to Codex

and EU Standards 288 EU GSP for Moldova and Ukraine 299 Requirements for Third Countries Exporting Animal Products

to the EU 2910 Issues on Governance 3111 Integrated Agricultural Health Safeguarding System 3512 Canada’s Creation of a Single Food Inspection Agency: CFIA 3813 Ukraine’s Legislative Efforts 4314 Streamlining Kazakhstan’s Veterinary Laboratories 4515 Small Farms, Food Safety, Agricultural Health, and Competitiveness 4716 The Private Sector in Armenia 4817 Milk Quality and Safety Improvement in a Dairy Supply Chain

in Poland 4918 Regional Cooperation in Southeast Asia 5019 Cost of Capacity Building for SPS Management 5220 Economics of Animal Identification and Registration,

Including Tracing Animals 5521 The European Union and the CIS Countries 5822 Developing Food Safety and Agricultural Health Action Plans for

Lao PDR and Vietnam 60

Figures1 Role of Agriculture in CIS Economies, 2003 82 CIS Production of Major Crops, 1992–2005 103 CIS Production of Major Animal Products, 1992–2005 104 Share (percentage) of Agro-Food Trade in Total Trade,

Selected CIS Countries, 2004 155 DALYs Lost to Diarrheal Diseases, 2002 25

A2-1 Distribution of WCR in Europe after Introduction in 1991 73A3-1 The Global Extent of Echinoccocus 78A9-1 Live Crayfish Exports from Armenia 103

Tables1 CIS Membership in WTO and SPS Bodies 42 Agricultural Value Added, Constant 2000 93 Change in Per Capita Food Supply in CIS 114 Agro-Food Export and Import of CIS Countries, 2004 155 Agricultural Exports Relative to Agricultural GDP, Average 166 Agro-Food Export Markets: CIS vs. CEE10 167 Origins of Agro-Food Imports: CIS vs. CEE10 168 Agro-Food Export, 1997 and 2004, Selected CIS and

CEE Countries 179 Food Export Destinations for Selected CIS Countries, 2004 17

10 Export of SPS-Sensitive Products by Exporting Country, 2005 1811 Characteristics of Three Groups of CIS Countries 1912 Estimated Wage Loss Due to Food- and Water-Borne Diseases 25

13 SPS Issues for Country Groups 3214 Country Group Capacities and Options 68

A1-1 The Russian Federation’s Import Bans on Agricultural and Food Products 71

A2-1 Estimated Average Annual Losses to the Maize-Growing Industry from WCR 74

A3-1 Echinococcosis Disease Burden 79A4-1 Notifications Involving CIS Consignments 81A4-2 Hazards Identified from CIS Consignments 82A5-1 World Bank SPS-Related Studies, 1996 to the Present 85A5-2 World Bank SPS-Related Lending, 1996 to the present 86A5-3 World Bank SPS-Related Lending, in Preparation 87A6-1 Moldova Agro-food Exports 89A6-2 Estimation of Costs with Various Standards Regimes

for Moldova 90A6-3 Estimated Costs for the Public Sector 91A6-4 Proposed Budget for Vietnam Action Plan 92A6-5 Results of Cost-Benefit Exercises 93A6-6 Cost-Benefit Assessment for Lao PDR 95A6-7 Cost-Benefit Assessment for Armenia 96A6-8 Cost-Benefit Assessment for Moldova 97A7-1 Derivation of Cost Estimates 99

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ARD Agriculture and Rural Development Department

ASEAN Association of Southeast Asian Nations

BEEPS Business Environment and Enterprise Performance Survey

BNPP Bank Netherlands Partnership Program

BRC British Retail Consortium

BSE Bovine spongiform encephalopathy

CAC Codex Alimentarius Commission

CARDS Community Assistance for Reconstruction, Development, and Stabilization

CEE Central and Eastern Europe

CFIA Canadian Food Inspection Agency

CIS Commonwealth of Independent States

CMEA Council for Mutual Economic Assistance

Codex Codex Alimentarius

CSF Classical swine fever

DALY Disability-adjusted life year

DDP Development data platform

EASC Euro-Asian Council for Standardization, Metrology, and Certification

EBRD European Bank for Reconstruction and Development

EC European Commission

ECA Europe and Central Asia

EFSA European Food Safety Authority

ELISA Enzyme-linked immunosorbent assay

ENP European Neighbourhood Policy

EPPO European and Mediterranean Plant Protection Organization

EU European Union

EUREPGAP European Retailers Produce Working Group good agricultural practices

FAO Food and Agriculture Organization

FAOSTAT FAO Statistical Database

FMD Foot and mouth disease

FSU Former Soviet Union

FVO Food and Veterinary Office (European Commission)

Acronyms andAbbreviations

GAO Government Accountability Office (United States)

GAP Good agricultural practice

GDP Gross domestic product

GLP Good laboratory practice

GMP Good manufacturing practice

GOST Gosudarstvennyy standart, or state standard

GOST-R Standards of the Russian Federation

GPAI Global Program for Avian Influenza

GSP Generalized system of preferences

HACCP Hazard analysis and critical control points

I&R Identification and registration

IPPC International Plant Protection Convention

ISO International Organization for Standardization

ISPA Instrument for Structural Policies for Pre-Accession

MARD Ministry of Agriculture and Rural Development (Vietnam)

MFN Most favored nation

MRL Maximum residue level

OECD Organisation for Economic Co-operation and Development

OIE Office International des Epizooties, or World Organization for AnimalHealth

PCA Partnership and cooperation agreement

PHARE Poland and Hungary: Assistance for Restructuring Their Economies

RASFF Rapid Alert System for Food and Feed

RFID Radio frequency identification

SAPARD Special Accession Program for Agriculture and Rural Development

SFVS State Food and Veterinary Service (Lithuania)

SPS Sanitary and phytosanitary

STDF Standards and Trade Development Facility

TACIS Technical Aid to the Commonwealth of Independent States

TBT Technical barriers to trade

TCP Technical Cooperation Program (FAO)

USAID United States Agency for International Development

USSR Union of Soviet Socialist Republics

WCR Western corn rootworm

WHO World Health Organization

WTO World Trade Organization

Currency Equivalents(as of May 1, 2007)US$ 1 = 0.7342 €

viii Acronyms and Abbreviations

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Sanitary and phytosanitary (SPS) standards provide an impor-tant means of protecting human health from unsafe food and ofshielding crops and livestock from pest and disease hazards.Lack of compliance with international standards can be an ob-stacle to successful participation in international trade for tran-sition countries.

In 2002, the World Bank initiated research on the implica-tions of public and private food safety and agricultural healthstandards for development of country trade. The resulting re-port, based on country case studies focusing on differentproducts, examined stakeholder responses and costs incurredto comply with international SPS standards. Its conclusionsemphasized the countries’ need for advice and assistance intheir efforts to strengthen their SPS management capacity.Subsequent work thus focused on preparing country strate-gies for building SPS management capacity, based on assess-ments of current capacity and potential trade opportunities.These studies examined capacity in Armenia, Lao People’sDemocratic Republic, Moldova, and Vietnam.

The work on Moldova and Armenia brought to the fore theunique situation of transition countries. Transition countries en-counter challenges similar to those faced by other developingcountries, but their participation in global trade is complicatedby the persistence of standards systems inherited from the for-mer Soviet Union—the so-called GOST system—which differfrom the standards used in the WTO-based global trading sys-tem. Indeed, the eventual transition away from GOST standardshas implications for market access, public health, plant and an-imal health, and the domestic market.

Cognizant of the World Bank role in capacity building fortrade and development, its ability to deal with concerns that cutacross disciplines and borders, and the dearth of pertinent stud-ies applicable to transition countries, this study was undertakento provide a comprehensive review of issues relevant to thetransition from GOST to international standards on food safetyand agricultural health. This study aspires to offer guidance topolicy makers in transition economies charged with developingSPS policies and to the staffs of the development agencies thatprovide them with support.

This sector work represents a broader application of the

Foreword

country strategies previously developed. It seeksto examine the constraints on but also the capaci-ties and responses of the member countries of theCommonwealth of Independent States, both as in-dividual countries and as a region, as they deal

with the unfamiliar tenets of the internationalstandards system they encounter in their transi-tion toward the market economy.

Mark CacklerActing Director

Agriculture and Rural Development

x Food Safety and Agricultural Health Management in CIS Countries

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This report was prepared by a team led by Kees van der Meer (formerWorld Bank staff and presently consultant, ARD) and consisting ofDon Humpal (consultant, Development Alternatives, Inc.), Cees deHaan, Laura Ignacio, and Xin Qin (consultants, ARD). Throughoutthe preparation of the report, Tjaart Schillhorn van Veen provided ad-vice and information. Additional research was provided by CaterynVucina Banjanin (consultant, ARD). The team is grateful for valuablecomments received from peer reviewers,* including Alain Dehove(OIE), Stephen Mink (AFR), Steven Jaffee (ARD), Julian Lampietti(ECA), and Tom Billy (International Food Safety Consulting, LLC).The report also benefited from valuable comments by Csaba Csaki(consultant, ARD), Lee Travers (ECA), William Sutton (ECA), MichaelFriis Jensen (PRMTR), and Richard Burcroff (consultant, ARD).Comments on the concept note were given by the ARD ManagementCommittee, Doina Petrescu (ECA), and Iain Shuker (EAP).

The team is grateful to the Bank staff and to the interviewees** whoshared their time and information during field visits to Poland andLithuania.

The team expresses its appreciation to Renate Kloeppinger-Todd(Task Team Leader), Mark Cackler (acting Director, ARD), SushmaGanguly (former Sector Manager, ARD), Kevin Cleaver (formerDirector, ARD), and Juergen Voegele (Sector Manager, ECSSD) fortheir support and guidance.

The development and preparation of the report was supported bythe Bank Netherlands Partnership Program (BNPP).

* The report is a product of the staff of the International Bank for Reconstruction andDevelopment/The World Bank and does not necessarily represent the views of thepeer reviewers or of the organizations that employ them.

** A list of interviewees is included in References.

Acknowledgments

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Commonwealth of Independent States (CIS) countries continue touse the standards established by the Soviet Union and modified bythe individual nations after independence, known as GOST-basedstandards, which are not WTO compliant and are not recognized bymost of the world’s trading countries. This use forms an increasingconstraint on CIS participation in international trade, trade diversifi-cation, and competitiveness in agriculture and food production.

Although the GOST system provided adequate health protectionin the Soviet Union’s planned economy, the standards systems, aspresently applied, provide insufficient protection for human health,plant health, and animal health. Deficiencies stem in part from thestandards’ inflexibility, lack of upgrades and modernization, and lim-ited recurrent funding.

Human health food safety outcomes in both Central Asia and theEuropean CIS countries lag behind those in OECD countries. Controlof animal diseases and plant pests is weak, leading to increases insome zoonoses and to increased risk of the spread of pests and dis-eases due to insufficient quarantine.

Transition economies have already made considerable progress inreplacing the institutions appropriate to a planned economy with in-stitutions appropriate to a market economy. They all still face impor-tant challenges, however, in their efforts to replace their formerstandards systems with systems that comply with the 1994 WTO SPSand TBT agreements.1 Even CIS countries that have already joined theWTO—Armenia, Georgia, Kyrgyz Republic, and Moldova—haveonly begun the considerable amount of work required.

This study draws four main conclusions:

1. Replacing GOST-based systems with WTO-compliant systemshas proven more complex and difficult to achieve than ex-pected, and WTO members among CIS countries have experi-enced major problems with their transition processes because ofthe inherent difficulty of the SPS shift as well as their unresolvedinstitutional problems, limited human and financial resources,and the dominance of intra-CIS trade relations, in which com-pliance with GOST standards is still the general reality.

There is a general misperception among senior policy mak-ers and public sector managers in most CIS countries about therequired scope, timeframe, and extent of the process required tochange from GOST to international standards. Few realize the

Executive Summary

significant legislative reforms and institu-tional reorganizations needed.

2. The capacity to implement the changes inquality and safety management required foraccess to OECD markets varies across the CIScountries. CIS countries, with the exception ofthe Russian Federation and, perhaps,Ukraine, have limited human skills and finan-cial resources. The difficulty of making thetransformation is clear from the experiencesof the WTO CIS countries Armenia, Georgia,Kyrgyz Republic, and Moldova. They still, forthe most part, lack the capacities needed tobenefit from WTO membership.

3. CIS countries have diverse opportunities forintegrating into trade systems beyond CIS.The Russian Federation’s comparative advan-tage in agriculture is weak, and the nation re-mains a major food importer. For CentralAsian countries, the market requirements fortrade in neighboring areas such as southernSiberia, China, and South Asia are more im-portant than are those in distant OECD mar-kets. Countries bordering the European Unionand in the Caucasus have more opportunitiesto access the better paying market segments inthe EU and the Russian Federation.

4. The Russian Federation is the major tradingpartner with the CIS countries, and thus itsdecision to join the WTO and its timing indoing so will be a dominant factor in their eco-nomic futures. It is important that CIS coun-tries anticipate the changes that will followfrom the Russian Federation’s WTO member-ship and adopt SPS standards that meet WTOrequirements. Consultation and coordinationamong countries in the region can contributemuch to a smooth transition that avoids tradedisruption. The principles and concepts of theinternational standards system are still new, ifnot alien, to the legislation and regulatory sys-tems in place in CIS countries.

OBJECTIVE AND AUDIENCEThe overall objective of this study is to contribute toefforts at improving food safety and agriculturalhealth, market access, competitiveness, and eco-nomic growth in transition economies. The directobjective of this study is to provide general analysisand recommendations for policy makers in transi-tion economies undertaking the progressive adap-

tation of existing food safety and agricultural healthmanagement systems to comply with internationalstandards. The study is also expected to be useful toprofessional staff in bilateral and multilateral agen-cies providing support on trade policies and SPS ca-pacity building. The needs of CIS countries are themain focus of this study, but many of the findingswill be relevant to other transition economies, andseveral generic issues covered will have relevancefor developing countries as well.

ADJUSTMENTS AND IMPACTAfter the dissolution of the Soviet Union, the CISeconomies went through drastic adjustments. Withthe removal of subsidies, many enterprises and lo-gistic chains collapsed. Without regional subsidies,major adjustments occurred in the geographicspread of production. Declining incomes and abo-lition of subsidies resulted in drastic declines inconsumption levels, especially of animal products.As a result of liberalization and privatization, manyenterprises collapsed, and many workers lost theiremployment. With the privatization of land, manyformer employees of large enterprises becamefarmers on small, fragmented holdings. Their aimwas often mainly for subsistence production. Thisproduction contraction bottomed out in the late1990s, and since then many CIS countries have ex-perienced increasing economic growth, in severalcases at high rates.

The economic decline, however, severely af-fected the countries’ capacities to manage foodsafety and agricultural health. Budgets for mainte-nance and renewal of laboratories and quarantinefacilities are very limited, staff numbers are declin-ing, and salaries are low. In various cases, thebreakdown of the water-supply and sewage infra-structure has increased the occurrence of food- andwater-borne diseases. The structure of livestockholdings changed drastically with the emergenceof large numbers of small farms, and the composi-tion of livestock populations has changed as well,with increased numbers of sheep and goats.Veterinary services have had difficulties adjustingto changing animal health risks and, as a result,zoonotic diseases on smallholder farms have in-creased. Some private enterprises, especially indairy and poultry, have introduced their own vet-erinary services. The risk of pest introduction hasincreased due to weakened border control and co-ordination within the region.

xiv Food Safety and Agricultural Health Management in CIS Countries

Executive Summary xv

Most food companies in CIS countries use old fa-cilities inherited from the Soviet era that do not meetmodern structural and hygiene requirements. Tocomply with international good manufacturingpractice (GMP) requirements, major investments areneeded in structures, equipment, water, and sewage.In addition, major efforts are needed to improve hy-giene practices, management, and worker trainingand to introduce food safety and quality manage-ment systems, such as use of hazard analysis andcritical control points (HACCP). Because of the smallscale of farms, quality control is difficult, but it is es-sential for meeting quality and safety requirementsin the demanding markets of the EU and, increas-ingly, in the CIS countries. Parts of the food industryhave already undergone thorough upgrading, andmany of the modernized companies have success-fully introduced coordinated supply chains linkingto small farms (World Bank 2005d). Direct foreign in-vestment has played a major role.

PRINCIPLES FOR MODERN FOODSAFETY AND AGRICULTURALHEALTH SYSTEMSIn response to food scandals, increased demand forsecuring food safety, and WTO principles on trans-parency, many countries have reassessed their sys-tems and made various reforms. Maininternational trends in managing SPS measures in-clude the following:

1. Risk assessment and analysis of costs andbenefits are the main building blocks for pol-icymaking on and management of food safetyand agricultural health, both in governmentand in private enterprises.

2. Food safety management has shifted fromend-of-pipe controls imposed by governmentto prevention throughout the supply chain,and basic responsibility for food safety com-pliance has shifted to the private sector, withthe government taking on advisory, oversight,and enforcement roles.

3. Separation of policy making, policy imple-mentation, and policy evaluation increasestransparency and helps avoid conflicts ofinterest.

4. Close cooperation among government, theprivate sector, and civil society has emergedas a cornerstone of food safety and agricul-tural health management.

EXPERIENCE REPLACING GOSTSTANDARDS SYSTEMSBased on the experiences of the Central and EasternEuropean countries that have joined the EuropeanUnion and of countries such as Vietnam, the transi-tion from a GOST-based system to a WTO-compliant system involves a large amount of work.This work, which has generally been underesti-mated in initial planning, includes the following:

• A complete overhaul of laws and regulations. Thisoverhaul requires between 5 and 10 years ofwork by teams with thorough knowledge offood safety, plant health, and animal healthregulations as well as international experienceand language skills.

• Capacity building in risk assessment. The WTOdiscipline requires that risk assessment beused as the scientific basis for standards andmeasures. Expertise in these areas is not gen-erally available and must be built up fromscratch. In the short and medium term, lessformal risk evaluation can be a good second-best tool.

• A thorough overhaul of inspection and monitoringprograms. New inspection and monitoringprograms must be based on new regulationsand prioritized according to degrees ofproven old and perceived new risks.

• Adjustment of testing facilities. Originally de-signed for Soviet-era GOST conformity test-ing and animal disease surveillance on amassive scale, and poorly maintained and re-paired since, testing facilities require majorupgrades and modernization and a new focussuited to their new tasks. This effort will in-clude a major consolidation of infrastructureand functions, which may be politicallydifficult.

• Staff training. Staff skills in all policy units andservices must be upgraded and adjusted forthe new tasks. In addition, staff attitudes mustchange to reflect their units’ new advisory, su-pervisory, and enforcement (as opposed tocontrol) roles. Experience in new EU memberstates has shown these changes to be essentialbut difficult to accomplish.

Several CIS countries see convergence with ECregulations as an important policy goal, and somehave applied for EU membership. Cost levels forreplacing standards systems have proven to be

high. Action plans for selectively introducing WTOcompliance in Armenia and Moldova suggest pub-lic investment levels of about US$3 per capita, andproject duration has been estimated at four to sixyears. The Baltic countries and other new EU mem-ber countries in Central Europe went through re-form processes with much higher requirementsthan those needed for WTO compliance, since theyhad to adopt the entire EC legislation, the so-calledAcquis Communautaire. The investment on publicsector reform and capacity building is about 1 to 2percent of agriculture GDP annually for a period ofsix to seven years.

The cost for the private sector of achieving com-pliance with international requirements is muchhigher than for the public sector. The cost level willdepend on the extent to which requirements areimposed on different market segments, such as de-manding export markets, upcoming domesticurban food markets, and traditional markets. ForEU accession, the fundamental requirement is thatall aspects of legislation harmonize with the AcquisCommunautaire, and experiences in the new mem-ber countries show that, despite high levels of ac-cession support, many food enterprises had to beclosed. CIS countries may also decide to follow adifferentiated approach for the different marketsegments. By doing so, they will be able to managethe different risks in each segment effectively with-out unnecessarily raising public expenditure or theburdens on small enterprises or increasing foodprices for poor consumers.

CHALLENGES FOR THE CIS COUNTRIESMarket outlets for CIS countries’ food and agricul-tural products are changing rapidly. Countries inCentral Europe, the traditional export markets for theCIS countries, have entered the European Union, andtheir imports from CIS countries have been in de-cline, in part because CIS-country producers cannotmeet EU standards. Moreover, as indicated above,commercial requirements for the EU market are highand are increasing rapidly in the urban markets ofCIS countries. Because of import liberalization, localproducers in CIS countries must compete heavilywith foreign suppliers for a market share in the rap-idly growing quality segment. Those who can meethigher public and private requirements can captureprice premiums. Producers who cannot meet compe-tition can only supply shrinking traditional food

markets, the prices in which are likely to be increas-ingly depressed.

All CIS countries that are not yet WTO members,except Turkmenistan, have applied for WTO acces-sion. Of dominant importance for the region is theexpected accession of the Russian Federation. Thiswould result in a progressive replacement of itsGOST-R standards by international standards, re-quiring the other CIS countries to adopt interna-tional standards as well in order not to lose accessto the Russian market. In the medium term, pro-ducers in these countries must prepare for the dis-solution of the GOST-based systems.

For countries in Central Asia, the challenge is tocomply with evolving SPS requirements in theirnot very sophisticated export markets and withtheir limited product mix. This requires periodicconsultation with authorities in their main exportmarkets. Their transition from GOST- to WTO-based systems would best be guided by what hap-pens in the Russian Federation and other marketsin the region. Their challenge will be to manage agradual change process with priorities based ontrade interests, sanitary and phytosanitary risks,and domestic public health risks.

Countries bordering the European Union andthose in the Caucasus face the more dynamic andmore remunerative market segments in theEuropean Union and the Russian Federation, withhigher requirements for at least part of their prod-ucts. Export diversification is attractive to them, andthe ability to compete with exporters from EU coun-tries and Turkey in their traditional export marketsis crucial. Their initial focus will likely be only onmeeting SPS standards for a few products with ex-port potential to neighboring countries. Selectivityand priority setting here require, in addition to mit-igating domestic sanitary and phytosanitary risks, afocus on products with export potential. Since im-ports compete in urban markets with domestic pro-duction, attention is needed to differentiate policiesfor the domestic market in such a way that com-plaints of discrimination can be avoided.

RECOMMENDATIONS FOR THECIS COUNTRIESThe following are the main recommendations forCIS countries:

1. A smooth and cost-effective transition from aGOST-based system to a WTO-compliant sys-

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Executive Summary xvii

tem requires strong political leadership fromthe government level and major consensusbuilding among all stakeholders, guided by aclear strategy and an implementation plansupported by donors and trading partners.

2. Since costs of transition are high and benefitswill only gradually emerge, CIS countries,while taking into account their longer-termpreferences for economic integration, will bebest served by implementation sequences andpriorities based on careful assessment of costs,benefits, trade opportunities, and health risksfor their population, crops, and livestock.

3. Similarities in inherited systems, similarities inagro-ecosystems, dominance of intraregionaltrade, and common use of the Russian lan-guage among political, business, and profes-sional leaders are compelling reasons for CIScountries to explore synergies in cooperativeactivities at the regional and subregional levelsfor achieving successful transition from GOST-based systems to WTO-compliant systems.

IMPLEMENTATION The pending transition from GOST and related an-imal and plant health systems to systems compliantwith WTO and other international standards hasmajor implications for institutions and staff. To pre-pare for major complex choices and to guide thework ahead, assignment of a high-level task forceis recommended. Since different ministries are in-volved, it is recommended that the task force bemandated by the government with the consent ofthe parliament. Important elements of the task-force mandate include the following:

• Involving all stakeholders in the process ofchange, including the private sector and civilsociety.

• Prioritizing legislative tasks based on stake-holder consensus regarding market opportu-nities and major health and commercial risks.

• Designing the architecture of the new system,based on the priorities established, with clearroles and mandates for all institutions in-volved. Overlapping tasks should be elimi-nated, and institutional mandates realigned.Especially for the smaller countries, consoli-dation of inspection services in a singleagency—the organizational model used byLithuania and Slovenia—is an interesting op-tion, though not the only one.

• Providing an action plan and road map withcost estimates, a schedule, and a frameworkfor coordinating the work ahead. This isneeded to render transparent the choicesavailable to government, parliament, stake-holders, and donors.

• Mobilizing domestic and donor resources,based on the action plan and roadmap: it isundesirable to have individual agencies com-peting for donor funding.

• Operating, in general, as change managers,paying particular attention to changing the at-titude of staff in the agencies.

The following are important steps inimplementation:

• Progressively abolish inspections and certifi-cations not aligned with international SPSstandards, incompatible with internationaltrade, and not serving clear health or eco-nomic purposes;

• Achieve institutional alignment and institu-tional reform;

• Start the process of legislative and regulatorychange; and

• Plan for consolidation of laboratory infra-structure and mandates.

RECOMMENDATIONS FORTRADING PARTNERS, DONORS,AND INTERNATIONAL AGENCIES

1. Effectiveness of external support for SPS ca-pacity building could be improved by provid-ing more support to governments forplanning and strategizing their SPS transition.SPS action plans and roadmaps would alsoform a basis for more effective donorcoordination.

2. Donor support for the simplification and con-solidation of food safety and SPS institutions inthe smaller and lower-income CIS states wouldhelp to improve the sustainability of their ownand national investments. In this effort, donorscould provide greater emphasis on:– early support for risk analysis and cost-

benefit assessments of policy, regulatory,and enforcement options; and

– sequencing of investments to ensure thatpriority risks, whether domestic or trade-related, are considered first.

3. Smooth transition of systems for managingfood safety and agricultural health in CIScountries could be enhanced by linking insti-tutions and exchanging staff between donorand former transition countries.

The costs of adjustment for compliance with in-ternational standards are much higher for the pri-

vate sector as compared to the public sector. Inlower-income countries, donors will need to workclosely with national governments to identify theproper mix of business environment improve-ments, incentives, and subsidies needed to inducethe rapid change in the food value chains requiredto restructure farms and firms to compete in do-mestic and international marketplaces.

xviii Food Safety and Agricultural Health Management in CIS Countries

1

After the dissolution of the Soviet Union, gradually all countries ofthe former Soviet bloc and other socialist countries opted for marketeconomy systems and went through a period of economic contractionand adjustment. Their transition has progressed well, and theireconomies have by now largely recovered. Yet, except for the coun-tries that joined the European Union (EU), they have not yet fully in-tegrated into the global economy, which thwarts their economicdiversification and keeps them from reaping the full benefit of theircomparative advantages and trade opportunities. A primary obsta-cle to further integration is the standards system these countries in-herited from the former state-planned economy. This study exploresthe challenges faced by the Commonwealth of Independent States(CIS) in making their standards systems more compatible with thedemands of a market economy and more consistent with the princi-ples of the World Trade Organization (WTO).

INTERNATIONAL TRADING SYSTEMThe international trading system is the multilateral trading system ac-cepted by most trading countries in the world, and the rules of tradeare the principles laid down in the agreements of the World TradeOrganization. Given our focus on food and agricultural products, theagreements most relevant to this report are the 1994 Agreement onSanitary and Phytosanitary (SPS) Measures (see box 1) and, to some ex-tent, the Agreement on Technical Barriers to Trade (TBT). Sanitary andphytosanitary measures ensure food safety and protect animal andplant health (see box 2). The standards recommended by the interna-tional trading system, referred to in this report as international standards,were established by international standards setting bodies: the jointFAO/WHO Codex Alimentarius Commission (Codex) for food safety;the World Organization for Animal Health (also Office Internationaldes Epizooties, or OIE) for animal health; and the International PlantProtection Convention (IPPC) for plant health. Many countries or re-gional blocs, such as the European Union, have established their ownstandards for certain products. The SPS and TBT agreements providediscipline on the use of SPS standards and measures, preventing theirinappropriate use as non-tariff barriers. The SPS agreement allowscountries to implement SPS standards and measures more stringentthan the international standards if these measures are based on scienceand are consistent with principles of nondiscrimination, equivalence,and transparency (box 1).

Introduction1

SPS MANAGEMENT Many developing and transition countries, in partic-ular the small and poor ones, face serious difficultiesestablishing new SPS measures. Building the SPSmanagement capacities requires sustained efforts fora range of services over extended periods of time aswell as the infusion of significant amounts of money,technical expertise, and management skills.Capacities are needed for surveillance and control ofdomestic markets and for surveillance of the coun-try’s pest and disease situation. These capacities arecrucial to achieving import controls compliant withthe SPS agreement. Box 3 summarizes the elementsincluded in SPS and agricultural health management.

The need for SPS management capacities extendsto export facilitation. Exporting companies must in-vest in quality and safety management systems thatcomply with both public requirements and privatebuyer specifications in export markets. In manycases, exporting countries are required to provideadequate information on their pest and disease situ-ation so that importing countries can assess risks re-lated to imports. Exporters also require certain

control and certification capacities to ensure thatfood and agricultural products meet internationaland trading partners’ norms for pests, pathogens,and dangerous contaminants. Exporters have achoice of markets: they can focus on high-end mar-kets with high requirements and high prices, or theymay go to less demanding but also less remunera-tive markets. Their choice, however, is often limitedby logistics and by the capacities of their govern-ments to meet international and bilateral require-ments for groups of products. Governments, in turn,must choose the products and countries for whichthey want to improve market access, given the lim-ited availability of skills and financial resources.Hence, countries (and exporters) with weak capaci-ties may be forced to compete in lower-end markets.

SPS management capacities are therefore im-portant in ensuring both adequate protection ofhuman and agricultural health and market access.

Integration in global trading systems requiresmore than adopting international standards sys-tems and meeting the requirements of OECD andother main trading countries. It also implies tradeliberalization, including the possibility that better-

2 Food Safety and Agricultural Health Management in CIS Countries

Box 1 WTO Principles on the Use of SPS Measures

The WTO Agreement on the Application of Sanitaryand Phytosanitary (SPS) Measures was adopted in1994. Its purpose is to enable member states to protecthuman and agricultural health (animal health andplant health) against risks of hazards related to trans-border trade of agricultural and food products whileavoiding unnecessary trade interruptions. The agree-ment set up the following rules for adopting SPSmeasures:

Harmonization. The agreement encourages gov-ernments to establish national SPS measures consis-tent with international standards, guidelines, andrecommendations. These include international stan-dards adopted by Codex in the area of food safety, byOIE in the area of animal health, and by IPPC in thearea of plant health. These international standards arebased on scientific analysis of health risks.

Transparency. Governments are required to notifyother countries of any new or changed sanitary andphytosanitary requirements affecting trade and to set

up offices (called enquiry points) to provide responsesto requests for more information on new or existingmeasures. Governments must also allow scrutiny ofthe manner in which they apply their food safety andanimal and plant health regulations.

Scientific basis. The agreement allows governmentsto use standards different from international standards.If the national requirements result in greater restrictionof trade, however, the country must provide scientificjustification.

Nondiscrimination. Member states’ SPS standardsand control measures must be no less favorable forimported products than for domestic products andcannot discriminate between foreign exporters or ex-porting countries.

Equivalence. An acceptable level of risk can oftenbe achieved by alternative means. One countryshould accept another country’s measures as equiva-lent if they provide the same level of healthprotection.

Source: WTO Agreement on the Application of Sanitary and Phytosanitary Measures.

Introduction 3

Box 2 Some Terms Explained

Food Safety deals mainly with microbial or chemicalcontamination, levels of natural toxins, zoonotic dis-eases, food additives, allergens, the indirect additionof residues of chemical substances (for example, pesti-cides, heavy metals, antibiotics, hormones, and otherdrug or animal-feed additives), and decomposition ofthe food product.

Agricultural health includes animal health and planthealth. Animal health refers to issues pertaining to dis-eases of fish, bees, and livestock and the preventionthereof. Plant health refers to issues pertaining to pestsand diseases affecting plants and the prevention thereof.

GOST standards. GOST is acronym of gosu-darstvennyy standart, or “state standard.” GOST stan-dards were originally developed in the Soviet Unionand are now administered by the Euro-Asian Councilfor Standardization, Metrology, and Certification(EASC), a standards organization chartered by theCommonwealth of Independent States (CIS).

SPS management capacities include capabilities toenact a proper regulatory framework for control ofpests, diseases, and harmful substances in food andagricultural products, including enforcement, preven-tion, detection, monitoring, surveillance, inspection,control of outbreaks, sharing information with tradingpartners, and risk assessment (or risk evaluation).

Transition economy is the term applied to a countryformerly organized under a state-planned economybut that has now opted to establish a market econ-omy. These countries are in the process of changingtheir laws, institutions, trade regimes, and enterpriseownership. This process is largely finished in the newEU member states, and these countries’ economies areno longer considered to be transitional. Countries cur-rently in economic transition include CIS, Mongolia,and several countries of the Balkans; several countriesin Asia and Africa also share some of the relevantcharacteristics.

Source: The authors.Note: A fuller Glossary appears at the end of this report.

Box 3 Elements of an SPS and Agricultural Health Management System

Good agricultural practice (GAP) and good manufac-turing practice (GMP). The know-how and technol-ogy needed by farmers and processors to produceproducts that meet food safety requirements.

Legislation and regulations. Government-generatedspecifications regarding requirements for food safety,plant health, and animal health and requirements andauthority for services necessary to policy making, im-plementation, and enforcement.

Surveillance and monitoring. The detection of theincidence and spread of plant pests, animal diseases,and potential food safety hazards.

Inspection. The detection of hazards affecting thefood chain, crops, livestock, fish, and traded agricul-tural products.

Quarantine. Isolation procedures to prevent contactbetween healthy and possibly infected animals, crops,and products.

Response (emergency). Reaction to a hazard bycontainment, seizure, and destruction.

Conformity assessment. Testing, calibration, in-spection, and certification to determine whether prod-ucts, processes, systems, and people meet specifiedrequirements.

Establishing and operating laboratories. Resourcesneeded for testing food safety, plant health, animalhealth, and the quality of feed and agrochemicalsused in the production process.

International negotiation. Efforts needed for market-access agreements with trading partners for manyproducts.

Participation in international bodies. Key organiza-tions include the WTO-SPS Committee, CodexAlimentarius, IPPC, and OIE.

Education and training. Efforts needed for aware-ness and improved skills at all levels.

Source: The authors.

quality imports may crowd local products out ofthe domestic market.

Enforcing international standards in the domes-tic market is often difficult. Effectively controllingthe thousands of small enterprises in informal localmarkets is, in most cases, impossible, and efforts todo so may lead to high costs for taxpayers, in-creased food costs for poor consumers, and, possi-bly, only limited gains in food safety and humanhealth. Obligations under WTO membership, how-ever, require that countries adhere to principles ofnondiscrimination between importers and domes-tic producers and that negative disease spill-over isprevented. This requires balancing domestic inter-ests and international requirements.

TRANSITION ECONOMIES ANDTHE GOST STANDARDS SYSTEMTrade in CIS countries is still dominated by intrare-gional trade with other former Soviet republics, withparticular focus on the Russian Federation. At theirindependence, the CIS countries and other transitioneconomies inherited the GOST (gosudarstvennyystandart, or “state standard”) system of standardsused in the Soviet Union’s central planned economy.This system and subsequent updates of it comprisethousands of standards, including a mixture of tech-nical prescriptions, quality parameters, agriculturalhealth standards, and safety standards. Not only dothe GOST standards differ from international stan-

dards, so do their systems of implementation, the or-ganization of their inspection services, and their re-quirements for testing facilities.

While suitable for the top-down implementationof the Soviet planned economy, the GOST system inits present form does not provide optimal food safetyand agricultural health protection for the populationand its agriculture. Moreover, GOST standards, ingeneral, because they are not recognized in marketeconomies, form an obstacle to access to markets be-yond those of other former Soviet countries. GOSTstandards restrict producers’ ability to respond tomarket trends and changing consumer tastes,thereby reducing export competitiveness. They alsoinvolve costly inspections throughout productionand trade channels. In addition, the market segmentin which GOST standards are accepted is declining:the former Eastern Bloc countries that joined theEuropean Union now require that their imports meetEU standards, and the Russian Federation andUkraine, the region’s main economies, will have amixture of international and GOST standards in thenear future as a phase toward WTO accession.

Four CIS countries have joined the World TradeOrganization: Kyrgyz Republic (1998), Georgia(2000), Moldova (2001), and Armenia (2003). Theremaining CIS countries, except Turkmenistan,have applied for membership, and accession talksare in progress.2 Most CIS countries have alsojoined the international SPS bodies: CodexAlimentarius, IPPC, and OIE (see table 1). Their


Table 1 CIS Membership in WTO and SPS Bodies

Country WTO Membership Codex OIE IPPC

Armenia Yes; 2/2003 Yes Yes YesAzerbaijan Applied No Yes YesBelarus Applied No Yes YesGeorgia Yes; 6/2000 Yes Yes YesKazakhstan Applied Yes Yes NoKyrgyz Republic Yes; 12/1998 Yes Yes YesMoldova Yes; 7/2001 Yes Yes YesThe Russian Federation Applied Yes Yes YesTajikistan Applied No Yes No Turkmenistan No; no application No Yes NoUkraine Applied Yes Yes YesUzbekistan Applied Yes Yes No

Sources: Websites of the respective organizations.

Note: Most CIS states were represented in international standards bodies by the Soviet Union until independence and had to reapply for mem-bership following independence. Budgetary constraints have delayed or hindered full membership by several states.

Introduction 5

transitions from systems based on GOST standardsto systems based on international standards havebeen very slow or have hardly begun, even in coun-tries that are already WTO members.

Finally, requirements in consumer markets, es-pecially in OECD countries but also in the urbanmarkets of developing economies, are evolvingrapidly in response to developments in consumerpreferences, quality and safety requirements, andprogress in modern retail systems.

OBJECTIVE OF THE STUDY The overall objective of this study is to contributeto improving food safety and agricultural health,market access, competitiveness, and economicgrowth in CIS countries, in particular, and in tran-sition economies, in general. The direct objective ofthis study is to provide general analysis and rec-ommendations for policy makers in CIS countriesseeking to adapt existing systems of food safetyand agricultural health management to complywith WTO principles. The study also is intended toserve professional staff in bilateral and multilateralagencies providing support to countries on tradepolicies and SPS capacity building. The main focusof this study, again, is the situation and needs ofCIS countries, but many of the findings will be rel-evant to other transition economies and severalgeneric issues have relevance for developing coun-tries as well.

METHODThe study draws on earlier analytical work and pro-jects in CIS countries carried out over the past tenyears by various organizations, donors, and theWorld Bank in the areas of food safety, animalhealth, and plant health. Earlier World Bank workproduced basic documentation consisting of aglobal study on the impacts of food safety and agri-cultural health standards on exports from develop-ing countries (World Bank 2005b), followed by aseries of studies on individual countries’ strategicoptions and plans for future action. Particularly rel-evant to smaller transition economies are the WorldBank’s food safety and agricultural health actionplans for Armenia, Lao People’s DemocraticRepublic (Lao PDR), Moldova, and Vietnam (WorldBank 2007a, 2007c, 2007b, 2006b, respectively).

These plans provide guidance for capacity buildingfor each country based on comprehensive assess-ments of their food safety and plant and agriculturalhealth situations, their trade potential, and the stateof their SPS management capacities. Relevantlessons are also drawn from the experiences of EUaccession countries that adopted and transposedthe Acquis Communautaire into their national legis-lation and underwent rapid transformation withEU support. Reports on accession were studied, andstudy visits were made to Lithuania and Poland,which became EU members on May 1, 2004.

Country groups Although the SPS managementsystems of the CIS countries are similar in manyways, they also show major differences dependingon country size, income level, institutional capaci-ties, market orientation, and logistics. This studytherefore distinguishes three groups:

Group I: Belarus, Kazakhstan, the RussianFederation, and Ukraine

Group II: Armenia, Azerbaijan, Georgia, andMoldova

Group III: Kyrgyz Republic, Tajikistan,Turkmenistan, and Uzbekistan.

The main characteristics of these groups and theways in which these characteristics define their pol-icy options for food safety and agricultural healthwill be discussed in subsequent chapters.

Structure of the report The report starts with anoverview of agricultural production and trade inCIS countries (Chapter 2). Chapter 3 describes theGOST standards system, which remains the basisfor the national standards systems in CIS countries.It also examines the food safety and plant and ani-mal health situations in these countries. Chapter 4describes lessons and experiences to date with ef-forts made in various countries to transform GOST-based standards systems into WTO-basedstandards systems. The main examples areLithuania and Poland and the Asian transitioncountries Lao PDR and Vietnam. Chapter 4 alsoanalyses the further work to be done by the CIScountries in achieving transition and the costs, ben-efits, and impacts of transition on the various stake-holders. Chapter 5 summarizes the report’s mainconclusions and recommendations.

7

The dissolution of the Soviet Union had dramatic impacts on theeconomies of the former Soviet republics. The shift from central plan-ning to a market economy and the decollectivization of farms broughtabout major changes in the agricultural sector. Initially, agriculturaloutput dropped to levels far below those of the pre-independenceera, but the contraction bottomed out in the late 1990s, and the agri-cultural sector is now on track for recovery and growth. Structures ofprimary production are adjusting to better fit individual countries’comparative advantages. Most CIS countries run deficits in the tradeof agro-food products, and both export and import are dominated bytrade with other CIS countries, making them vulnerable to politicalrisks and economic fluctuations within the region. As other transitioneconomies in Central and Eastern Europe join (or prepare to join) theEuropean Union and shift their trading relations toward the west, CIScountries face the risk of a shrinking market, with the resulting fail-ure to tap their full potentials in agricultural production and export.A few countries have joined the World Trade Organization, and oth-ers are in various stages of accession. All transition countries are try-ing to adapt to the new realities of international competition andrapidly evolving supply chains.

DIFFERENCES AMONG CIS COUNTRIESAt the onset of its disintegration, the Soviet Union’s republics hadmajor differences in income and levels of development. Its north-western republics were highly developed while its southern and east-ern states were in many respects far behind. The Baltic countries andareas in the western part of the Russian Federation and Ukraine, es-pecially, had experienced centuries-long commercial and scientific in-teraction with Western and Central Europe with fair transportpossibilities. The areas of the Caucasus, Central Asia, and much ofRussia’s hinterland, on the other hand, were landlocked, mostly pop-ulated by non-Russian ethnic groups with distinctly different cultures,and had limited exposure to the most developed parts of the world.Within the Soviet Union much effort was made to connect and eco-nomically integrate these parts with the more developed parts of theUnion through investments in transport and infrastructure and sub-sidies for production, but this process was far from being completed.The command economy and the subsidies provided by the SovietUnion had also created specialization among the republics, which wasnot always based on comparative advantage. After independence,

Agriculture and Markets in CIS Countries2

many of the infrastructural achievements provedunsustainable without subsidies and effective pol-icy coordination. At their independence, therefore,these countries had highly different heritages andassets available for their further development.

AGRICULTURAL PRODUCTIONSINCE TRANSITIONAgriculture is an important sector for the CISeconomies. Agricultural value-added accounts forover 10 percent of the gross domestic product(GDP) for all CIS countries, except for Kazakhstanand the Russian Federation. With the exception ofthe Russian Federation, agriculture also employs alarge share of the working population in CIScountries—as high as 40 to 50 percent in Armenia,Georgia, Kyrgyzstan, Moldova, Tajikistan, andTurkmenistan. Figure 1 illustrates the role of agri-culture in CIS economies in terms of its share inGDP and total employment.

The figure shows that in almost all CIS countries,the percentage of agricultural employment in totalemployment is significantly higher than the contri-bution of agriculture to GDP, pointing to its lowproductivity as compared with other sectors. The

high rate of employment in agriculture is partly thelegacy of Soviet-era artificial ”full-employment”and restrictions on internal migration and partlythe result of many people turning to subsistencefarming following the collapse of industries andformer state-owned enterprises during the transi-tion and the distribution to households of smallplots of state and cooperative land. As the agricul-tural labor force declines with increased emigra-tion, economic recovery, and increasing jobopportunities in other sectors, this problem is grad-ually being corrected, as can be observed in a num-ber of CIS countries over the last few years. Forinstance, agriculture in Moldova, the RussianFederation, and Ukraine dropped from 50, 12.7,and 20.5 percent of employment, respectively, in2000 to 43, 10, and 18.9 percent in 2003.3 Since therewere no smallholder farmers in the Soviet Union,many independent states struggled with the ques-tion of whether and how to support small farmers.Some of the issues will be discussed in the nextchapters.

Agricultural production contracted sharply inthe early years following the break-up of the SovietUnion. By 1997, most countries had seen a dramaticfall in their agricultural production (see table 2).


Figure 1 Role of Agriculture in CIS Economies, 2003

0%

10%

20%

30%

40%

50%

60%

Belarus

Russian

Fed.

Ukrain

e

Kazak

hstan

Armenia

Azerb

aijan

Mold

ova

Georgia

Tajikist

an

Turkm

enistan

Kyrgyz

Rep.

Uzbekist

an

Agriculture value added as % of GDP

Employment in agriculture as % of toal employment

Source: World Bank Development Data Platform (DDP) Time Series; CIA, The World Factbook.

Note: Data from 2003 on agriculture employment in Armenia, Belarus, Tajikistan, Turkmenistan, and Uzbekistan are not available. The mostrecent data available (2001 or 2002) have been used instead.

Agriculture and Markets in CIS Countries 9

Georgia and Moldova suffered a contraction ofaround two-thirds in their agricultural output fromthe pre-independence level. Agricultural produc-tion in Ukraine, the “bread basket” of the formerSoviet Union, declined by half between 1990 and1999. Essentially, the decline was the result of theeconomy-wide collapse. Moreover, some factorsspecific to the agriculture sector also contributed tothe decline, such as the reduction and eliminationof government subsidies on agriculture, the dis-mantling of state and collective farms, and the dis-integration of previous channels for the supply ofinputs and the marketing of products under thecommand economy.

CIS countries have different product mixes as aresult of their varied agroclimatic conditions andhistories.4 The main agricultural products inRussia, Ukraine, and Belarus are grains, potatoes,and meat and dairy products. Moldova andTranscaucasia (Armenia, Azerbaijan, and Georgia)have favorable conditions for growing vegetables,fruits, and grains. Wine is the most important high-value agricultural product in this region. Mainagro-food products in the countries of Central Asiainclude wheat, animal products, cotton,5 vegeta-bles, and fruits. Figure 2 and figure 3 illustrate theoutput of major crops and animal products of theCIS, as a whole, from 1992 through 2005.

For most crops and animal products, the down-ward trend in production flattened out around1999, after which production began to grow or sta-

bilize. It is worth noting that crop production hasrecovered to levels close to or even above the pro-duction level immediately following the start of thetransition, while for animal products, particularlymeat, production has stabilized far below the 1992level. The contraction in the livestock sector ispartly the result of the removal of Soviet-era subsi-dies for livestock production and a related declinein effective protection.

CONSUMPTION AND MARKETSAs shown in table 3, consumption of animal prod-ucts, especially meat, fell during transition becausepeople’s real income fell, and the price went up dueto the elimination of government subsidies, asnoted above. The consumption of fruits alsodropped significantly, because fruits, like meat, aremore income-elastic than, say, cereals. By contrast,potatoes were the only food item for which con-sumption increased. As overall economic condi-tions improve and people’s real income rises, theconsumption of most food products, particularlyanimal products, fruits, and vegetables grows. Thistrend emerged in the CIS countries after 2000.

As in many other countries, domestic markets inCIS countries consist of different markets, eachwith varying levels of safety and quality require-ments, catering to consumers of differing incomelevels; these include traditional local markets, mod-ern urban retail markets, and export markets (see

Table 2 Agricultural Value Added, Constant 2000 (US$M)

1990 1991 1993 1995 1997 1999 2001 2003 2004

Russian Federation 21,085 20,305 17,738 14,361 13,940 13,254 16,641 18,098 18,624Ukraine 7,867 6,500 6,173 5,303 4,737 4,041 4,992 4,588 5,478Kazakhstan 2,978 2,305 2,762 1,649 1,553 1,533 1,737 1,832 1,834Belarus 2,185 2,105 1,964 1,611 1,546 1,414 1,563 1,730 1,971

Armenia 451 442 380 408 397 455 496 531 546Azerbaijan — — 855 694 665 757 942 1,059 1,107Georgia 1,988 1,395 1,349 784 717 716 682 741 688Moldova — 1,017 558 362 355 320 342 318 361

Kyrgyz Republic 432 398 354 317 410 457 503 534 556Tajikistan 440 420 295 234 199 218 274 345 —Turkmenistan 872 787 745 616 358 560 805 — —Uzbekistan 3,825 3,910 3,712 3,657 3,649 4,008 4,305 4,874 5,366

Source: World Bank DDP Time Series.

box 4). For the transition countries, the traditionallocal markets, with low quality and safety require-ments, dominate. The export market segment serv-ing the demanding OECD markets is still verysmall. The most dynamic and rapidly growingmarket segment in CIS countries is the emergingmodern urban retail segment. Starting around

2000, modern retailing has grown very fast in CIS,particularly in the Russian Federation and Ukraine,but also in other CIS countries (Dries, Reardon, andSwinnen 2004).6 The share of food products sold inRussian cities through modern retailing channels isestimated to have been over 20 percent in 2004(Kaipio and Leppanen 2005). In Ukraine, also for


Figure 2 CIS Production of Major Crops, 1992–2005

0

20

40

60

80

100

120

140

160

180

200

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Pro

du

ctio

n (m

illio

n M

t.)

Cereals Potatoes Vegetables Fruits

Source: FAOSTAT.

Figure 3 CIS Production of Major Animal Products, 1992–2005

0

2

4

6

8

10

12

14

16

18

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Egg

and

mea

t pro

du

ctio

n (M

illio

n M

t.)

0

10

20

30

40

50

60

70

80

90

100

Milk

pro

du

ctio

n (M

illio

n M

t.)

Eggs Meat Milk

Source: FAOSTAT.


2004, supermarkets and hypermarkets are esti-mated to have accounted for 34 percent of food re-tail (A.T. Kearney 2005). A survey on consumers’shopping habits at the end of 2006 found that 49percent of Russian consumers choose supermar-kets or hypermarkets as their primary place forfood shopping. This ratio is as high as 79 percent inKiev (INCOMA 2007).

Many features of modern retail chains havemajor implications for agro-food production (seebox 5). For one, sourcing by the leading chains atthe regional or even the global level imposes com-petition pressure on local producers. Many inter-national retail chains have their own privatestandards for product quality and safety, and thesecan be quite different from the existing standardsin the CIS countries. Foreign retailers in the centraland eastern European (CEE) countries are intro-ducing similar private standards as in their homecountries including the relevant BRC (British RetailConsortium) or EUREPGAP (European RetailersProduce Working Group good agricultural prac-tices) standard (FAO 2006a). This trend will posegreat challenges for food producers and proces-sors: they will need to adapt to the new standardsor risk exclusion from this growing marketsegment.

INTERNATIONAL TRADE INAGRO-FOOD The value of agro-food export and import of all CIScountries in 2004 is given in table 4.7 Belarus,Kazakhstan, the Russian Federation, and Ukraineare the largest exporters and importers. With theexceptions of Moldova, Ukraine, and Uzbekistan,8

all the other countries are net importers of agro-food products.

Among the CIS countries, the contribution ofagro-food trade to the economy varies from beingthe largest source of foreign exchange, in the caseof Moldova, to being virtually negligible, in thecase of the Russian Federation. As figure 4 shows,food accounts for over half of total export forMoldova and about one-third for Georgia.

Table 5 presents the value of agricultural exportsrelative to agricultural GDP of the CIS countries.Comparing these values with those of other transi-tion economies in Central and Eastern Europe (re-ferred to as CEE10), we find that despite the latter’slower share of agriculture in total GDP, the ratiosof their agro-exports to agro-GDP are generallyhigher than those of CIS countries, with the excep-tion of Moldova for the CIS group and of Romaniafor the CEE10 group.

Before the breakup of the Soviet Union, most ofthe foreign trade of the Eastern Bloc (the formerSoviet Union and the central and eastern Europeancountries) took place within the framework of theCouncil for Mutual Economic Assistance (CMEA)and was characterized by central planning andcommand. During the transition period, formerCMEA members have demonstrated distinctivelydifferent orientations in their foreign trade rela-tions. The central and eastern European countries,in line with their objective to join the EuropeanUnion, have shifted toward the markets in indus-trial countries in the West, while the CIS countriesgenerally have maintained strong economic tiesamong themselves, and particularly with theRussian Federation. This development in agro-food trade is consistent with the development of

Table 3 Change in Per Capita Food Supply in CIS (kg)

1989* 1993 1995 1997 1999 2000 2001 2002 2003

Cereals 160.5 171.5 166.9 164.0 156.6 156.3 158.4 162.7 161.9Vegetables 90.3 79.6 83.8 82.1 90.1 92.0 98.2 100.6 105.9Fruits 42.0 36.3 34.2 36.2 28.1 35.6 36.3 40.6 42.1Potatoes 97.8 112.7 104.6 110.7 100.9 104.0 107.1 106.1 110.6Meat 72.2 50.9 45.0 41.2 36.1 35.2 38.2 41.1 42.5Milk 182.4 130.9 143.2 146.6 153.9 150.1 150.4 157.7 154.6Eggs 15.0 11.4 9.6 9.2 9.6 9.8 10.2 10.8 10.9

Source: FAOSTAT, accessed July 2006.

*USSR average (including the three Baltic states).


Box 4 Market Segments

Markets in developing and transition countries exhibita continuum from traditional local markets on the onehand to highly demanding international markets in

OECD countries on the other, with emerging urbandomestic markets in between (World Bank 2006a;Van der Meer 2007).

Characteristics of Three Market Segments

Type of marketEmerging modern urban domestic Export markets in

markets (supermarkets, industrial countries Market Traditional tourist hotels/restaurants, (retail markets, characteristics local markets educated affluent consumers) modern food services)

ParticipationParticipation of – No constraints – Emerging constraints in – Only if well organized in out-small-scale meeting requirements of grower schemes and able to producers quality, safety, consistency guarantee safety and uniform

of product, regular supply quality

OrganizationSupply-chain – Usually none – Large producer or buyer, – Processing company or exporter; leader/ coordinator sometimes producer sometimes importer on behalf of

organization retailer; rarely the retailer directly

Supply-chain – Supply-driven – Efforts by retailers to control – Strongly demand-drivenorganization – Transaction-based quality, safety, and reliability – Durable relations within supply

– Little or no net benefit of supply chain, often on contractual basisfrom coordination – Net financial benefits from – Cooperation among buyers,

– Little durability in coordination still fragile exporters, and growers on relation among private – Emerging coordination, technology, information, and actors occasional technical support sometimes finance

– No technical cooperation

ResultsCompetitiveness – Supply at low cost – Sufficient quantity – Large quantitydepends mainly on – Improved quality – Efficient, effective coordinated

supply chains– Flexible response to changing

demand– Market and product innovation

Price level for – Relatively low – Moderate – Relatively high grower and – Limited willingness to – Moderate willingness to – High willingness to pay for consumer pay for quality and pay for quality and safety quality and safety

safety

Value added – Very low – Low to moderate – Moderate to high

Standardization, – Virtually absent – Emerging importance of – High requirements of grading, grading, supply – Irregular supply grading, stable supply consistency, supply schedule

Food safety control – Unreliable – Improving – Effective– Little consumer – Emerging consumer aware- – High consumer concern

awareness, concern ness, concern – High retailer requirements – Little private effort, – Retailers try to control and imposed on suppliers

limited public control sell “safety”

Source: The authors, adapted from World Bank 2006a.

(Box continues on the following page.)


overall merchandise trade patterns in the Europeand central Asia (ECA) region (Broadman 2006).

The next two tables compare the structures ofthe food-trade relations of the CIS and the group ofnew EU members (CEE10). Table 6 shows that CIScontinues to rely on the CIS market for export andthat its exports to the EU15 and CEE10 havedropped slightly in the last few years (except in2002, during which there was large cereal export tothe EU15). On the other hand, the CEE10 havegreatly reduced their exports to the CIS region andsubstantially increased exports to EU15 and otherCEE countries, showing a rise from 36 and 15 per-cent to 49 and 25 percent between 1996 and 2004,respectively. In terms of sources of import (table 7),the three groups’ shares in CIS imports remainedmore or less stable, while the CEE10 group importsless from the CIS countries but more from both theEU15 and other CEE countries.

Table 8 compares the change in export destina-tions between CIS and CEE countries at the coun-try level. Clearly, the CEE countries have shiftedtheir trading relations westward: their exports tothe European Union (old and new member coun-tries) have significantly increased while those toCIS countries declined in the last few years.

Within the CIS, however, trading relation devel-opment trends are not homogenous. Differentcountries have demonstrated different orienta-tions. Some emphasize developing markets in theWest, particularly in the enlarging EuropeanUnion. Others are becoming ever more dependenton the CIS and, especially, on the RussianFederation market. Table 9 compares the shares ofvarious markets for CIS countries’ agro-foodexports.

The table shows that while the CIS region re-mains the predominant destination for the food ex-ports of all CIS countries, the level of concentrationvaries. Belarus has the highest level of concentra-tion, with over 90 percent of its food exports goingto other CIS countries. Armenia, Azerbaijan, andKazakhstan also send over 80 percent of their foodexports to CIS markets. Georgia, the KyrgyzRepublic, and Moldova are slightly less concen-trated in CIS markets, but these nevertheless ac-count for over 70 percent of their exports. Georgiaand Moldova have managed to export a highershare of their food products to the EuropeanUnion, largely beverages, vegetables, and fruits.The Russian Federation and Ukraine have the mostdiverse trading partners as a result of their large

Box 4 Market Segments (continued)

Requirements and players in these market seg-ments differ widely. In traditional local markets,safety and quality requirements are low, with littlegrading. Production for these markets is supply-driven, and prices can fluctuate heavily with over-and undersupply, especially for less tradable per-ishable products. Prices are generally low andconsumers are price-sensitive. The highly de-manding foreign markets are demand-driven, andthe producers must supply on schedule. There aremany preconditions to acceptance as a supplier,and contractual arrangements include quality andsafety prescriptions and process-control require-ments. Buyers in this segment are paying premiumprices for services added to the physical product.The emerging domestic urban markets, consistingof supermarkets, parts of the food processing in-

dustry, restaurants, and the tourist industry, tend togo in the same direction as the markets in OECDcountries, but their requirements remain lower.The emerging urban markets encounter strongcompetitive pressure from traditional markets.

Enterprises usually specialize because cost struc-tures differ for each market segment. A fruit andvegetable exporter to the EU, for example, pro-duces at high levels of cost that generally cannot berecovered at domestic markets prices. Producers inlocal markets often cannot meet the quality andsafety requirements of emerging urban markets, al-though wholesalers will try to bulk up volume fromdispersed local sources for distant urban markets.Producers who specialize in emerging urban mar-kets usually cannot meet the quality and safety re-quirements of demanding export markets.

Sources: World Bank 2006a; Van der Meer 2007.


Box 5 Features of Modern Retailing and Implications for Producers and Processors in CIS


Modern retailers’ procurement practices differ widelyfrom those of traditional stores or open markets.Supermarket chains often have centralized procure-ment systems: procurement is no longer the businessof individual stores; rather, it is handled by centralizedbuying offices, and large distribution centers handleproduct movement. This practice lowers transactioncosts by reducing the number of suppliers and, at thesame time, lowers purchase prices because of thelarge volumes purchased. Moreover, central procure-ment helps chains control the quality, safety, and con-sistency of purchased products. The use of distributioncenters is already very common in Central and EasternEuropean countries such as the Czech Republic andPoland; supermarket chains in the Russian Federationand Ukraine are also shifting in this direction. ThePyaterochka chain in Russia has built large distribu-tion centers in Moscow and St. Petersburg and hascontinued to expand facilities. At the end of 2005, 50percent of the products at its stores were delivered di-rectly from the distribution centers, and the companyplans to increase the share to 75 to 80 percent by2007–08 (Pyaterochka 2005, accessed March 2007).

Such procurement systems, especially those undermultinational supermarket chains, often operateacross national borders. The distribution center in onecountry may serve the chain’s stores in several coun-tries in which it operates. EU enlargement has greatlyfacilitated the regionalization of procurement inCentral Europe, as new EU members become part ofthe European single market. Multinational chains incountries farther to the east also apply this approach.For instance, it is estimated that 70 to 80 percent ofthe products sold in supermarkets in Moscow and St.Petersburg are imported from the European Union.

Since supermarkets in these countries are still com-peting for consumers with traditional open markets,they use high quality and safety standards for productdifferentiation. Many retail chains have private stan-dards. Experience with food retailing developments inthe CEE countries shows that the private standardsused in these countries were transferred from the re-tailer’s home country by replicating the company’s

own guidelines or by applying the relevant BRC orEUREPGAP standard (FAS 2006).

For food producers and processors in the CIS coun-tries, the rapid growth of modern retailing and its asso-ciated new procurement practices pose greatchallenges. Producers and processors must competewith their colleagues in other areas of the country orin foreign countries. The private standards adopted bythe leading chains are expected to have increasing in-fluence as the retail market continues to consolidateand personal income continues to grow in the leadingCIS economies, mainly Kazakhstan, the RussianFederation, and Ukraine. If producers in the CIS coun-tries cannot meet the modern retailers’ requirementsfor product quality, food safety, volume, consistency,and others, it will be very difficult for them to partici-pate in this growing market segment.

Conversely, the market changes also offer new op-portunities. Those who can make quick adjustments,adopt new practices, and improve product quality andsafety will have the chance to benefit from the ex-panding modern food retail segment: they can sell notonly into the high-end domestic market, they will alsohave access to foreign markets through the supermar-ket chains’ procurement networks. This is especiallyimportant to countries with good potential in high-value food products, such as fruit and vegetables, fish-eries products, and meat and dairy products.

The agroprocessing industry plays a critical role inthe new market environment. Many food products,such as dairy, meat, bakery, and others, must beprocessed. Even for fresh products such as fruit andvegetables, the market trend is to sell them with someprocessing, such as cleaning, cutting, and packaging,since consumers increasingly demand ready-to-eatfoods. The challenges faced by the agroprocessors arethree-fold. The first is organizational: they must ensurea reliable supply of raw materials of high levels of qual-ity and safety. Second, they must seek and develop newmarketing channels, as processors often play an impor-tant role in modern supply-chain coordination. Finally,processors face a major challenge regarding physicalfacilities, technology, and modern management.


Table 4 Agro-Food* Export and Import of CIS Countries, 2004 (US$ 000)

Export Import Trade balance

Russian Federation 2,461,085 12,486,519 �10,025,434Ukraine 3,400,641 1,854,695 1,545,946Kazakhstan 805,394 911,681 �106,287Belarus 1,155,764 1,701,652 �545,888

Armenia 81,532 276,835 �195,302Azerbaijan 153,991 411,224 �257,232Georgia 200,851 386,898 �186,047Moldova 521,873 206,926 314,948

Kyrgyz Republic 79,423 126,962 �47,539Tajikistan** 46,376 133,169 �86,793Turkmenistan** 4,338 101,228 �96,890Uzbekistan** 333,965 215,728 118,237

Total 9,245,233 18,813,517 �9,568,281Total extra-CIS trade*** 3,790,545 13,733,867 �9,943,321

Source: UN COMTRADE.

Notes: * Unless otherwise indicated, agro-food trade data in this report refer to the total of trade in the SITC categories food and live animals,beverage (both alcoholic and non-alcoholic) and tobacco, oil seeds, and animal and vegetable oil/fat/wax (SITC Code 0+1+22+4).

** Export and import data are actually other countries’ import and export figures.

*** CIS export to and import from the rest of the world.

Figure 4 Share (percentage) of Agro-Food Trade in Total Trade, Selected CIS Countries, 2004

0%

10%

20%

30%

40%

50%

60%

Russian Fed. Ukraine Kazakhstan Belarus Armenia Azerbaijan Georgia Moldova Kyrgyz Rep.

Shar

e

Export Import

Source: WITS UN COMTRADE.


Table 5 Agricultural Exports Relative to Agricultural GDP, Average, 2001–2003 (%)

CIS CEE10

Russian Fed. 9.5 Czech Rep. 57.0Ukraine 43.1 Estonia 123.1Belarus 49.2 Hungary 128.3Kazakhstan 30.1 Latvia 70.6Armenia 10.2 Lithuania 68.3Azerbaijan 12.1 Poland 60.3Moldova 120.3 Slovakia 52.6Georgia 17.8 Slovenia 70.0Kyrgyz Rep. 18.0 Bulgaria 40.0Turkmenistan 12.6 Romania 8.7Uzbekistan 28.8Tajikistan 41.8

Source: FAO 2005a, 176.

Note: Agricultural exports refer to agriculture products in the narrow sense, excluding forestry and fisheries products.

Table 6 Agro-Food Export Markets: CIS vs. CEE10

Destination Exporting of Share in total export value (%)

region export 1996 1997 1998 1999 2000 2001 2002 2003 2004

CIS CIS 64 58 55 60 57 53 42 54 59EU15 12 13 13 10 13 13 19 11 9CEE10 9 9 7 6 6 6 5 6 6

CEE10 CIS 30 34 25 15 14 12 12 13 11EU15 36 33 35 41 40 41 43 43 49CEE10 15 17 21 23 24 25 24 25 25

Source: UN COMTRADE, accessed July 2006.

Table 7 Origins of Agro-Food Imports: CIS vs. CEE10

Origin Importing of Share in total import value (%)

region import 1996 1997 1998 1999 2000 2001 2002 2003 2004

CIS CIS 28 21 19 21 28 23 19 25 27EU15 26 29 26 24 23 23 26 23 23CEE10 9 10 11 8 8 6 7 8 8

CEE10 CIS 5 3 3 2 3 3 2 3 2EU15 45 44 45 45 46 46 47 46 50CEE10 13 15 17 19 20 21 20 22 22

Source: UN COMTRADE, accessed July 2006.


agricultural economies and geographic locations.Both countries send around one-fifth of their foodexports to the EU market. Much larger shares (38percent and 32 percent, respectively) go to marketsoutside the European Union and the United States,such as the Middle East, South Asia, and East Asia.

The composition of CIS countries’ agro-food ex-ports varies. The most important items include ce-real (Kazakhstan, the Russian Federation, andUkraine),9 beverages (Armenia, Georgia, andMoldova), fruit and vegetables, and meat and dairy

products (Belarus and Ukraine). Table 10 looks atthe export of several products particularly sensitiveto SPS concerns: meat and meat preparations, dairyproducts and eggs, fish and shellfish, and vegeta-bles and fruit. For these products, Georgia andMoldova seem to rely least on the CIS market; bothexport a considerable quantity of vegetables andfruits to the European Union. But the remainingcountries (except for the Russian Federation) all ex-port over half of their SPS-sensitive productswithin the CIS region.

Table 9 Food Export Destinations for Selected CIS Countries, 2004

Exporting country (share of total food export value, %)

Export Russian destination Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Rep. Moldova Federation Ukraine

CIS 83.3 83.5 91.2 78.8 87.7 73.2 75.6 43.2 46.9EU25 6.1 4.8 4.0 16.7 5.2 5.8 18.8 17.5 20.5

EU15 3.8 3.7 2.0 14.1 2.1 1.9 8.9 12.1 12.0CEE10 2.3 1.0 2.1 2.6 3.1 4.0 9.9 5.3 8.5

USA 4.6 0.6 0.1 1.7 0.2 0.0 2.1 1.2 0.8Rest of the world 6.0 11.2 4.6 2.7 6.9 20.9 3.4 38.2 31.8


Note: Tajikistan, Turkmenistan, and Uzbekistan are not listed in this table because of poor data quality. Approximate data show that agro-foodexports from these countries go almost exclusively to CIS markets.

Table 8 Agro-Food Export, 1997 and 2004, Selected CIS and CEE Countries (US$ Million)

Export to EU15 Export to CEEC Export to CIS Total export

1997 2004 1997 2004 1997 2004 1997 2004

Armenia 1 3 0 2 21 68 23 82Azerbaijan 4 6 2 2 44 129 54 154Georgia 5 28 2 5 68 158 76 201Moldova 40 46 63 52 255 395 378 522Kazakhstan 18 17 10 25 717 706 790 805Ukraine 263 407 121 291 1,074 1,594 1,731 3,401

Czech Rep. 413 956 417 1,005 229 97 1,199 2,261Estonia 77 175 73 131 305 66 477 410Hungary 1,071 1,995 526 786 570 318 2,675 3,694Lithuania 123 441 72 313 356 247 607 1,056Latvia 21 97 41 155 162 105 232 402Poland 1,174 3,507 275 1,066 1,333 819 3,169 6,193Slovakia 99 313 217 654 87 37 438 1,051Slovenia 79 128 12 17 18 14 328 431


Generally speaking, CIS countries’ current pat-terns of agro-food trade are far from optimal. Heavyreliance on the CIS market renders them extremelyvulnerable to regional economic fluctuations andborder control risks, as demonstrated by the 1998ruble crisis and the Russian Federation’s import bansin recent years. The Russian Federation has bannedimports from a number of countries in the EU, theCIS, and elsewhere. In many cases, bans were trig-gered by limited violations, such as forged docu-ments, occasional non-compliance with sanitary andphytosanitary standards, and errors in inspectionprocedures in exporting countries. Several bans havebeen sector-wide and very long lasting, with some-times profound economic impacts on the exporters.10

Appendix 1 provides some examples of import bansimposed by the Russian Federation. Trading part-ners complain that the Russian Federation’s use ofbans is disproportionate and could be applied onsimilar grounds to other products and countrieswhenever inspections are intensified. This has cre-ated the perception among CIS countries that theRussian Federation market presents high risks,prompting them to diversify their trading relations.

SUMMARY: COUNTRY GROUPCHARACTERISTICS Following the three-group classification intro-duced in chapter 1, table 11 provides a summary of

the features of the CIS countries and groups. Thecountries of Group I, especially the RussianFederation, are the most developed economicallyand the countries in Group III are the least.Statistical data for Group III countries are relativelyweak. Citizens in CIS countries have high levels ofeducation. Even the poorer CIS countries performvery well in this respect, as compared to develop-ing countries with comparable income levels.

CIS countries have divergent opportunities for in-tegration into trade systems outside CIS. The RussianFederation is by far the biggest and wealthiest of theCIS countries in the region. Its comparative advan-tage in agriculture is limited, making it a major im-porter. These factors give it considerable marketpower, as it can set requirements for its imports whileremaining independent of other countries’ require-ments. Thus, the Russian Federation’s incentives aremeager for making the transition to a WTO-compliant standards system for agriculture and foodtrade. Kazakhstan is well positioned to export meatand a variety of products to markets both within andoutside the region. For Central Asian countries, thenatural markets are neighboring regions such assouthern Siberia, China, and South Asia; the require-ments of these markets are more important. For them,requirements in the demanding OECD countrieshardly play a role, other than for a few products.

For countries bordering the European Unionand in the Caucasus, the situation is different. For


Table 10 Export of SPS-Sensitive Products by Exporting Country, 2005 (US$’000)

Share of SPS-sensitive

products Export of CIS share in SPS-sensitive in total

SPS-sensitive food products total products SPS-Fish, Vegetables food to other sensitive

Meat and Dairy shellfish, and Total export CIS exportpreparations and eggs etc. fruit Total agro-food (%) countries (%)

Russian Federation 53,418 152,271 517,099 201,651 924,440 3,881,509 24 357,352 39Ukraine 167,613 554,118 21,839 265,914 1,009,483 4,232,209 24 748,644 74Kazakhstan 4,744 19,530 53,636 60,903 138,813 669,221 21 74,275 54Belarus 289,226 501,811 60,452 47,089 898,578 1,319,129 68 864,528 96Armenia 1,015 4,097 3,184 8,039 16,335 112,230 15 11,781 72Azerbaijan 1,078 598 7,276 192,446 201,398 325,142 62 118,760 59Moldova 3,215 14,000 202 111,684 129,101 580,790 22 58,563 45Georgia 562 2,619 1,004 84,006 88,192 302,069 29 23,969 27Kyrgyz Republic 400 16,235 19,711 36,345 75,663 48 23,163 64


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19

them, the European Union offers real opportunitiesfor market diversification and access to better- pay-ing market segments, provided they can meet EUrequirements. Moreover, they face increasing com-petition in their own markets and in their tradi-tional export markets, the Russian Federation andother CIS countries, from countries meeting highinternational safety and quality standards, such asthe OECD countries, Latin American countries,and Turkey. Moldova and Ukraine have the high-est potential to export to the EU and the most togain from integration with trading partners in theWest. The Caucasus countries (Armenia,Azerbaijan, and Georgia) have similar potential,but they are also close to the markets in the MiddleEast. For all countries, the main export products arevegetables and fruit and some animal products.

To increase access to other markets, especiallythe demanding food markets of the OECD coun-tries, the CIS countries must overcome many ob-stacles and improve their competitiveness. One keychallenge is to strengthen their SPS managementcapacities and to adopt standards and practicescompatible with international norms.

The ability of these countries to make the neces-sary changes in quality and safety management foraccess to OECD trading partners differs widely.With the exception of the Russian Federation and,perhaps, Ukraine, CIS countries have limitedhuman skills and financial resources for a smoothtransition within a five-year time span. They espe-cially need to gain knowledge and skills fromabroad and, in most cases, financial support aswell. On the private sector side, the modernizedprocessors and retailers in the Russian Federationand Ukraine are best prepared to meet the newchallenges in terms of access to capital and experi-ence with modern consumer markets. The diffi-

culty of making the transformation is clear from theexperiences of Armenia, Georgia, Kyrgyz, andMoldova. They have not gained much more bene-fit in the SPS area than they could have achievedwithout WTO membership. Their laws were ad-justed to meet formal WTO requirements, whereasa start has hardly been made on the long and diffi-cult reforms needed on the regulatory and institu-tional levels to move from GOST to internationalstandards. The capacities these nations need to ben-efit from WTO membership are still largely lacking.

Only the two largest and most economically di-versified countries seem to be making reasonablyrapid progress toward modification of their sys-tems; these are the Russian Federation andUkraine. The Russian Federation has the finances,the tradable natural resources, and the clout as amajor buyer of agricultural products to set its owncourse and to insist that sellers to its markets followits regulations and interpretations of its regula-tions. The Russian Federation can deal with regu-latory authorities and commercial buyers in foreignmarkets on an equal footing. It can also afford to fi-nance the scientific and enforcement institutionsthat give its arguments before international regula-tors and standards bodies a “voice,” as it is termedby a World Bank report (2005b). In this case, thevoice is strong and carries far. Ukraine, thoughmuch smaller than the Russian Federation and hav-ing a lower per capita income, also has a voice be-cause of the size of its market and its exportpotential; it also has many of the resources neededto actively participate in trade negotiations and inthe technical committees in which internationaland regional standards are developed. In exportmarkets, these two countries have most of the re-sources needed to manage SPS requirements to ex-pand or maintain levels of exports.


21

The GOST-based standards system inherited by the CIS countriesfrom the planned economy of the Soviet era forms the core of theirfood safety and agricultural health management systems. CIS coun-tries are responsive to the challenges of today’s global economy, butthey still have a long way to go to adapt their food safety and agri-cultural health management systems to meet international require-ments. The rate of change—especially for the smaller CIScountries—is slow. This chapter examines the current status of foodsafety and agricultural health within CIS, from the perspectives ofboth public health and agricultural competitiveness. Major weak-nesses and deficiencies in management systems or capacities areidentified to provide insights into the key challenges facing the CIScountries as they complete the transition to new systems compati-ble with their new market economies and with the global tradingsystem.

GOST-BASED STANDARDSAfter the economic transition started, the Commonwealth ofIndependent States commissioned the Euro-Asian Council forStandardization, Metrology, and Certification (EASC) to maintain theGOST standards. A series of the standards were eliminated from re-gional and national use, but EASC members currently accept about20,000 GOST standards in addition to national standards.

In many former Soviet republics, GOST standards were transposedinto national standards with minor modifications. The RussianFederation, for example, created the GOST-R standards, Moldova es-tablished the Moldova Standard, Ukraine instituted UkrSEPRO,Kazakhstan has GOST-K, and Belarus has RB. Hence, the fundamen-tally prescriptive nature of the Soviet-era GOST standards wasmaintained.

Significant intraregional trade perpetuates the existence of theGOST-based system and complicates the transition to a market-basedsystem. A CIS country exporting to another CIS country requiringGOST-based certification must be able to comply, even if the export-ing country is changing to a system that complies with internationalstandards. Also, vested interests, combined with bureaucratic inertia,help maintain the GOST system to justify the existence of bureaucra-cies and, possibly, to protect some domestic industries.

GOST System and Its Implications for Health

and Competitiveness

3

GOST-BASED SYSTEMS ANDSYSTEMS BASED ON WTOPRINCIPLESDeveloped in the USSR to serve its planned econ-omy, GOST standards are incompatible with a mar-ket economy and with the principles of the WTOinternational trading system.

• GOST standards are highly prescriptivemandatory standards that specify the materi-als, processes, analytic methods and tech-niques, and final product characteristics,including packaging, for all processed prod-ucts. They were intended to provide almostcomplete compatibility and interchangeabil-ity of domestically manufactured productsand their distribution systems and to set asingle quality standard for each processedproduct. This conflicts directly with the mar-ket principles informing the internationalsystem, which permits each country to definea set of mandatory regulations covering prod-uct safety and acceptability for entry into itscommerce and a set of voluntary standardspermitting different qualities and types of thesame product to be produced according tomarket demand.

• Because of its prescriptive nature and manda-tory requirements, the GOST standards sys-tem is very rigid and stifles innovation. Overtime, it often supports retention of anachro-nistic technologies, analytic methods, andmanagement practices, and it cannot keep upwith the new industrial developments andemerging issues in product safety. In Ukraine,for example, the GOST-based food safetystandards require checking milk and meatproducts for the traditional pathogenic bacte-ria only; they do not require tests for bacteriaof emerging concern, such as Listeria mono-cytogenes and E. coli O157 (GFA ConsultingGroup 2006).

• In modern food safety systems, such as thoseof the European Union and the United States,the primary responsibility for food safetycompliance lies with the private sector—producers and processors—and not with thestate, as under the GOST system. End-of-pipecontrol through conformity assessment by in-spection services is, to a significant extent,

being replaced by preventive controlsthroughout the supply chain, for which theprivate sector has the primary responsibility,with the government in advisory, oversight,and enforcement roles.

• Most GOST health and safety standards areimplicitly included in its prescriptions andtechnical standards. They are not necessarilybased on transparent scientific criteria, andthey have little basis in the type of risk as-sessment and other scientific principles thatunderlie WTO provisions.11 Under GOSTprovisions, food safety requirements areoften lower than those of the CodexAlimentarius and other international stan-dards. Standards for plant and animal health,in part, differ from IPPC and OIE standardsbecause they overlap with other technicalrequirements.

• Standards bureaus played a major role in thestate-planned economy, and they still play amuch more important role in transitioneconomies than do standards bureaus in mar-ket economies.

• In the area of public inspection, the systemused in the OECD countries is participatory,and inspection fulfills advisory and verifica-tion functions. The GOST applies a top-down,hands-on control function. The inspection andconformity assessment programs are basicallydesigned to ensure that production and distri-bution activities follow the prescriptions im-posed by the planned economy. The numberof required inspections for the domestic, im-port, and export markets in the CIS countriesis much larger, and the inspections themselvesmore comprehensive, than comparable over-sight in market economies. GOST inspectionsare carried out by a range of agencies, the ser-vices and mandates of which often overlap.

• The existence of more than 20,000 detailed,mandatory standards makes it almost impos-sible for private companies to comply with allof the requirements or for government agen-cies to supervise compliance. As a Russian ex-pert observed: “We have found ourselves inan absurd situation when requirementsdeemed mandatory cannot be promptly andfully registered by those expected to fulfillthese requirements, nor by supervisory au-thorities” (Rybtsov 2006).



FOOD SAFETY ANDAGRICULTURAL HEALTH Food safety and agricultural health managementhave multiple dimensions. Most directly, food safetyis a public health issue and agricultural health hasimmediate impact on agricultural income and pro-ductivity. On the other hand, these issues include anagro-food industry competitiveness dimension. Thissection looks at the public and agricultural health di-mension; the following section focuses on the effectof food safety and agricultural health issues on thecompetitiveness of the food industry, particularlywith regard to exports to the neighboring EU market.

Impacts of the disintegration of the Soviet Union

The disintegration of the Soviet Union and themember nations’ transition to market economiesresulted in a number of food safety and agriculturalhealth management challenges.

• The break-up of the Soviet Union resulted, inmany of the smaller countries, in the break-down or deterioration of transport and logis-tic systems and in reduced access to theadvanced scientific and technological centersof the Russian Federation. Widespread infra-structure breakdown, affecting, for example,the decrepit water-supply and sanitation sys-tems and the weak power supply and trans-portation systems, had direct impact on foodsafety and public health.

Contaminated water and poor sanitationare largely responsible for the region’s in-creased risk of infection with diarrheal dis-eases and parasitic infections. In Moldova,one of the reasons identified in a 2005 nation-wide household health survey for the coun-try’s sharp increase in food- and water-bornediseases since 2000 was the failure of one-third of the nation’s urban water-supplypipelines (World Bank 2007b). – Authorities are understandably reluctant to

seal off contaminated shallow wells inurban and rural areas with no alternativewater supply.

– The erratic and expensive power supplymakes it less likely for households and foodprocessors to follow proper hygiene prac-tice in food handling.

– Poor roads, which increase collection andtransport time (and cost) for raw materials,such as milk, and for finished products,such as chilled meat and dairy products,combined with the use of nonrefrigeratedvehicles, increase the risk of microbialgrowth and spoilage.

• Transition adjustments have, likewise, ad-versely affected government programs, espe-cially for the low-income CIS countries,bringing about a deterioration of the publichealth system.– Insufficient public resources have weak-

ened the surveillance, diagnostic, and re-search capacities of public healthdepartments, leading to increased incidenceof illnesses.

– In Tajikistan and Kyrgyzstan, reduced pub-lic budget to control livestock diseases re-sulted in an increase in the incidence ofbrucellosis (mainly transmitted through theconsumption of infected goat and sheepmilk) among the population (WHO 2003).

• Decollectivization in the agro-economy re-sulted in the emergence of a large number ofsmallholders, who move varying but impor-tant amounts of food through informal sup-ply chains to sales in towns and urban centers.

• Increases in vertical integration in the agro-food industries have improved delivery of fi-nance, services, and markets to smallholdersand have boosted productivity in EasternEurope and, to a lesser extent, in middle-income CIS countries, such as the RussianFederation and Ukraine, but these processesare still developing slowly in the lower-middle-income and lower-income CIS states(World Bank 2005d).

• Privatization of state-owned enterprises andat least one wave of restructuring in theirownership and management have created “is-lands of excellence” that are turning aroundportions of some important agro-food indus-tries. They represent a small core of compa-nies that maintain high hygiene standards,use food safety management systems (such asHACCP) to ensure food safety, and, in somevertically integrated industries (such as poul-try and wine), apply advanced codes of agri-cultural and manufacturing practices auditedby third parties.

Impacts of the GOST system

Several notable weaknesses of the GOST systemhave implications for the food safety and agricul-tural health system.

• As a legacy of the command economy, thesystem lacks transparency with regard to reg-ulations: there is no consultation with stake-holders. As will be discussed in later chapters,this may lead one or both of to two things: (a)legislation that does not respond to market re-quirements; and (b) excessive discretion forofficials implementing the law, opening theway to rent-seeking.

• One of the problems cited in EC veterinary as-sessment missions to CIS states is the weaknessof animal quarantine systems (DG-SANCO2005). Some national animal quarantine centersfunction more like collection centers and lackthe facilities needed to adequately segregatedifferent batches of animals for long enough pe-riods to fulfill quarantine needs. A similar con-cern was expressed when Poland and Hungaryacceded to the EU, and major efforts were madeto reinforce the eastern border. In addition, CIScountries importing breeding stock do not usu-ally perform disease risk analysis; the only live-stock screening is a check for its source on theOIE list of epizootic disease outbreaks.

• In those countries that have become WTOmembers, confusion arises among inspectionservices as to which national regulations arecurrent and valid.

Food safety and public health

The belief remains widespread among technicalspecialists in transition economies that GOST stan-dards are inherently safer because they are moreprescriptive in defining methods of production.Although with adequate funding the system pro-vided adequate health results in the Soviet-eraplanned economy, evidence shows that the presentGOST system is not very effective in protecting thewell-being of the domestic populace.

The main concerns in food safety are food- andwater-borne diseases, such as shigellosis, hepatitisA, and E. coli enteritis; food poisoning due to bot-ulism and chemical agents; and zoonotic diseasessuch as brucellosis, salmonellosis, and echinococ-cosis.12 Food-borne and water-borne diseases maybe encountered in homes, schools, and restaurantsand canteens. They are generally caused by inade-

quate reheating of food and contamination of foodand water by infected persons and animals. Casesmay involve ready-to-serve meals, milk products(brucellosis from infected milk), or egg products.The high incidence of ascarid parasite infections inMoldova suggests significant cycling of parasitesthrough households and their environment. Theconcentration of livestock among rural householdsmay also explain the occurrence of these diseases;salmonellosis is linked to poultry, for example, andechinococcosis is caused by tapeworms in sheep.

The incidence of food- and water-borne diseasescan serve as a key indicator of food safety.13 A rela-tively well-accepted international measure of dis-ease impact combines incidence of illness(morbidity) and of death (mortality) into a stan-dardized indicator called the Disability-AdjustedLife Year (DALY).14 One DALY may be thought ofas one year of “healthy” life lost to illness or death.DALYs are estimated only for the most importantglobal diseases. This report uses the DALYs on di-arrheal diseases (either food- or water-borne) as acrude proxy indicator for the relative food safety sta-tus among CIS countries.15 Figure 5 shows the largespread across CIS countries of DALYs caused by di-arrheal diseases (see the third column of table 12).

The countries in the lower range (Belarus,Ukraine, Georgia, the Russian Federation, andMoldova), at a DALY rate averaging about 38, arestill a third above the EU15 average rate of 28 per100,000 (the rate for the United States and Japan is29). The next three countries (Kazakhstan, Armenia,and Uzbekistan) have an average rate of 121 DALYsper 100,000—more than 4.3 times the EU15 averagerate. The last four (Azerbaijan, Kyrgyz Republic,Turkmenistan, and Tajikistan) have DALY rates 15to 40 times higher than the EU15. These results ap-proximately correspond to the three groups in table11, with the exception of Moldova, Georgia, andUzbekistan, which have relatively better rankingsthan other countries in their groups. The economicmagnitude of food- and water-borne diseases canbe illustrated by multiplying DALYs by estimatedannual wage data (table 12).16

The rise in the incidence of zoonotic diseases (dis-eases transmitted from animals to humans) as a resultof smallholder livestock rearing is a major concern forpublic health. Under family-based animal manage-ment (as opposed to concentrated industrial manage-ment), herds and some flocks (ducks and geese) areaggregated for grazing during the day and redistrib-uted and held at family homesteads at night. These



Figure 5 DALYs Lost to Diarrheal Diseases, 2002

0

200

400

600

800

1,000

1,200D

ALY

s p

er 1

00,0

00 p

eop

le

Country

Russian Fed.Ukraine

KazakhstanBelarusArmenia

Uzbekistan

Azerbaijan

Georgia Moldova

Kyrgyz Rep.

Turkmenistan

Tajikistan

Source: Prepared from WHO Burden of Disease Statistics 2002 data.

Table 12 Estimated Wage Loss Due to Food- and Water-Borne Diseases

Total DALYs lost to Estimated Estimated economic

diarrheal disease DALYs per annual loss for Country (proxy measure) 100,000 pop. wage (US$) total DALYs (’000 US$)

The Russian Federation 55,000 38 1,386 76,230Belarus 3,000 31 1,152 3,456Ukraine 16,000 33 732 11,712Kazakhstan 16,000 101 1,488 23,808

Azerbaijan 37,000 440 684 25,308Armenia 4,000 114 360 1,440Georgia 2,000 38 600 1,200Moldova 2,000 52 300 600

Kyrgyz Republic 26,000 512 372 9,672Tajikistan 68,000 1,103 151 10,268Turkmenistan 39,000 812 360 14,040Uzbekistan 38,000 147 180 6,840

Source: DALYs for 2002 are from the WHO Burden of Disease statistics Website.

Annual wage estimates are based on interviews and from statistics on the ILO LABORSTA Website (http://laborsta.ilo.org).

practices have increased the contact between live-stock and wildlife and between humans and wildlifein ways that have contributed to the emergence orreemergence of some zoonotic diseases, such as tu-berculosis, rabies, brucellosis, and internal parasites.A recent survey in CIS countries in Central Asia re-ported that human incidence of echinococcosis is wellover 10 cases per 100,000 population, far above the 1to 5 cases per 100,000 level during the Soviet period(Torgerson et al. 2006) (see appendix 3). A more scat-tered poultry sector, with many households involvedin free-range production and small flocks, togetherwith larger units of poultry production, has increasedthe risk of infection from and the spread of the highlypathogenic H5N1 bird flu.

Agricultural health status

Given the extremely diverse set of animal and plantspecies in agriculture and the diverse points of viewabout what constitutes a healthy agricultural sys-tem as compared to an unhealthy one, there is noglobally accepted quantitative indicator for agricul-tural health. In the CIS countries, however, as theircropping patterns shifted to less pest-sensitive ce-real crops, no major changes seem to have occurredin the crop pest and disease situation. Some excep-tions are related to pest control capacity beingswamped by outbreaks of locusts and rats in somecountries and the threat posed by the introductionand spread of quarantine pests, such as the westerncorn rootworm in Eastern Europe (see appendix 2).

Under transition practices in pesticide use haveimproved. There has been a sharp decrease fromthe elevated and environmentally unsound levelsof pesticide applications practiced in the Soviet

Union, although disposal of banned and out-of-date pesticide stocks remains a serious problem.

Emerging and reemerging disease problems ap-pear to exist more generally in the livestock sector,despite decreased livestock populations. In theearly transitional period, after the crash in livestockpopulations, some countries and donors importedbreeding stock in an effort to rebuild herds and im-prove local breeds. In Armenia, the importation ofpure breed dairy goat stock17 appears to have led tothe introduction of caprine arthritic encephalitis, aviral disease in goats; this nonlethal disease ofsmall ruminants has no human health impact, butit is a drain on the productivity of infected juvenileand adult animals. This incident indicates weak-nesses in Armenia’s animal quarantine system.

Fragmentation of livestock holdings and lack ofadequate compensation for culling diseased animalscomplicates official efforts at veterinary supervision(see box 6). It is often believed that small farms havemore problems with animal diseases and plantpests. This is generally not true. Some pests and dis-eases, such as the western corn rootworm, representa greater problem for large-scale production unitsbecause of their greater epidemiological vulnerabil-ity. Other diseases arise from the inadequate hy-giene on small farms, and, therefore, are moredifficult to eradicate; these include brucellosis andechinococcosis. No matter the source or circum-stances, key to an effective response is the provisionof necessary support services and the establishmentof quarantine policies. In many cases, state veteri-nary and extension services have failed to developeffective systems of support for smallholders.Responsibility for supporting animal health and im-


Box 6 Sanitary Compliance by Smallholder Livestock Farmers

Because of intense economic pressure, mandatorytesting and vaccination efforts are occasionally frus-trated by the active resistance of smallholders who donot want their animals tested for fear the diseased ani-mals will be culled with little or no compensation orthat low quality vaccines will infect the animals. Insome cases, farmers have beaten inspectors and dri-ven them from their villages. Dairy processors indicate

that producers will feed contaminated milk to theirother animals, pigs, for example, sometimes boiling itbut at other times not. As happens in many countries,it is very likely that herders in Armenia slaughteredand sold the meat of diseased animals to avoid eco-nomic loss during the anthrax outbreak in 2001, possi-bly causing the large number of human anthrax casesthat appeared at the time.

Source: World Bank 2007a.


plementing quality assurance programs at the farmlevel is increasingly assumed by private companiesand cooperatives. The impact of these arrangementsis limited, however, given the relatively low level ofpenetration of vertical coordination.

STANDARDS AND OTHERCONSTRAINTS TO MARKETACCESS IN THE OECDWhile located close to Western Europe’s high-priced, premium-paying market for agriculturalproducts, intra-CIS trade dominates the agricul-tural exports of all CIS countries. Moreover, ascountries in Central and Eastern Europe join theEuropean Union and implement the strict EU re-quirements, CIS countries find themselves losingshare in the CEE market, which had traditionallybeen easy to access. More than half of the CIS ex-ports rejected by the EU were intercepted at theborders of these CEE countries (see appendix 4).

As a result, dependence on the CIS markets in-creases while opportunities to benefit from exports toa larger market likely to offer higher returns decline.

Many factors constrain CIS countries’ market ac-cess to OECD countries, and to EU countries, inparticular. Some are due to the GOST system, someto protectionism, and some to weaknesses in thepublic and private sector.

The GOST system and the competitivenessof the agro-food industry

The GOST system weakens competitiveness ofagribusiness in different ways.

• The GOST system of standards is not recog-nized in OECD markets. It makes use of dif-ferent measurements and classifications forgrades and standards, among other factors,and, thus, restricts the acceptability of prod-ucts in non-GOST markets. Box 7 illustratessome differences between GOST-based stan-dards and international standards, takingUkraine as an example.

• The laboratories cannot meet many of the sur-veillance, certification, and inspection re-quirements for the European Union and otherindustrial countries. The facilities, equipment,and analytical methods were designed tomeet the inspection and certification require-ments of the GOST system.

• The rigidity of the GOST standards systemthwarts product and process innovation sinceit requires difficult-to-obtain approvals ofnew standards. Since quality upgrading is animportant aspect of market access to theEuropean Union, the existing standards sys-tem constitutes a liability.

• The transaction costs are high for a number ofreasons. – Many inspection agencies have responsibil-

ities for parts of production processes.Overlap in responsibilities often leads to re-peated inspections and laboratory analysesfor certifications or approvals.

– Large numbers of mandatory requirementsexpose companies to excessive multiple in-spections by various government agencies.

– The complexity of the GOST standardsgives supervisory bodies great discre-tionary power. Combined with a weak ruleof law and limited scope for appeal incourts, this leads to a high level of arbitrari-ness in law enforcement and provides muchroom for administrative rent seeking (seethe section on governance issues below).

Tariffs constrain entry into the EU market

Agriculture remains the EU’s most heavily protectedsector. While EU tariffs for industrial goods are gen-erally low (below 4 percent), they remain high foragricultural products (about 20 percent).18 TheEuropean Union provides reduced tariffs on selectedproducts from developing countries through variouspreferential trade arrangements, such as theGeneralized System of Preferences (GSP) for all de-veloping countries and the “Everything But Arms”program for the Least Developed Countries.19 TheGSP scheme covers 7,200 products, classified as ei-ther nonsensitive or sensitive. Nonsensitive productsenjoy duty-free access, while sensitive products ben-efit from a tariff reduction of 3.5 percentage points onthe “most favored nation” (MFN) tariff. All CIS coun-tries are beneficiaries of the GSP scheme; however, itexcludes certain agricultural and food products im-portant to CIS countries, such as wine, meat, anddairy products. For products eligible for GSP tariffs,the actual utilization is relatively low, largely due tothe rules of origin requirement: if the cost involved insatisfying these requirements exceeds the margin ofpreference, there is no point to utilize the GSPscheme—and in some cases, the processors do needto use raw materials from other countries. Box 8 il-

lustrates the limitations of the benefits provided bythe GSP for agricultural products.

Regulatory constraints

For many products, CIS countries cannot access EUmarkets because the CIS legal system and institu-tional capacities are considered insufficient. For ex-ports of most livestock products and fish, the ECrequires a third-country status (see box 9). WhenArmenia, Azerbaijan, Georgia, and Moldova be-came WTO members, they changed their generalfood safety and agricultural health laws to complywith WTO requirements. Implementation and en-forcement of these laws are lacking, however, be-cause the needed regulatory system has not beendeveloped and the necessary institutional reformswere not carried out.

Certain requirements in animal health, livestockproduction, animal welfare conditions, milk and

meat handling and transport must be met to re-ceive EU authorization for animal product entry,for example. A surveillance program is neededwith regard to the animal health situation. InMoldova, no new cases of foot and mouth disease(FMD) have been diagnosed in the course of sur-veillance of imported animals and animals in bor-der zones since the last outbreak in 1980 andfollowing a long campaign of vaccination and con-trol that ended in 1994. Although OIE doesn’t indi-cate any FMD risk for Moldova, the EC does notaccept exports of animal products from Moldovafor other reasons. An EC Food and VeterinaryOffice (FVO) report on Moldova (DG-SANCO2005) noted that FMD and classical swine fever(CSF) surveillance programs are limited, and thequality-control system for raw cows’ milk and thestunning methods used in slaughtering animals donot meet EU requirements.


Box 7 Ukraine’s Kefir and Sour Cream Standard as Compared to Codex and EU Standards

Under the EU TACIS project “Ukraine: Establishmentof an Agricultural Standards Certification and ControlMechanism in Line with WTO-SPS Requirements,” ex-perts conducted detailed assessments of Ukraine’sstandards for kefir, sour cream, wheat, and sausage.Significant differences were identified between theGOST-based Ukrainian standards and those of theCodex and the EU. The following is a partial list of thedifferences in the kefir and sour cream standards.

Raw milk • Ukraine has three grades of raw milk versus one

grade for raw milk in the EU.• Even the highest grade (≤ 300.000/ml) of raw

milk in Ukraine does not comply with EU re-quirements (≤ 100.000/ml).

Food contaminants • Pesticides. Ukraine’s limited list of pesticides is

not in accord with the extensive Codex list ofpesticides.

• Antibiotics. – Ukraine checks for three types of antibiotics;

the Codex and EU standards include a muchmore extensive list.

– Ukraine’s measurements are expressed inunits; Codex and EU standards are expressedin µg/kg.

– If expressed in the same unit of measure, allthree of Ukraine’s maximum residue levels(MRLs) differ from those of the Codex andEU, which have two with lower limits andone with higher limits.

– Ukraine checks antibiotics in both raw mate-rials and finished goods. The purpose ofchecking antibiotics in fermented products re-quires justification.

• Nitrates. Ukraine checks on nitrates as a safetyparameter in raw milk; the question arises as tothe scientific evidence for the need to check onnitrates in milk. Neither the Codex nor the EUmakes reference to checking nitrates in milk.

Food hygiene• Ukraine’s dairy standard makes no clear refer-

ence to the application of HACCP. Both theCodex Codes of Hygiene Practices and EU di-rectives represent solid documents that makereference to the implementation and applica-tion of HACCP.

Source: Sonneveld 2006.


Box 8 EU GSP for Moldova and Ukraine

Moldova. In 2002, almost 73 percent of Moldova’s ex-ports to the European Union were eligible for GSP, butthe preference quotas were not fully utilized. Only 60percent of the eligible preferences were actually re-quested, which means the remaining 40 percent en-tered the European Union with full MFN tariff. Inagriculture, 67 percent of the exports requested prefer-ences. There were big variations within agriculture,however. For instance, 84 percent of shelled walnutexports requested preferences, but only 22 percent offruit juice exporters did so. The underutilization islargely due to the rules-of-origin requirements. As aresult, a large proportion of Moldovan fruit juice ex-ports actually paid the full MFN tariff of over 22 per-

cent, and they had to compete with products fromCentral and Eastern European countries, Turkey, and anumber of Balkan countries able to enter the EU mar-ket duty-free.

Ukraine. Preferences play a very small role inUkraine’s export to the European Union. Products ofprimary importance to Ukraine, such as cereal, meat,and dairy, are excluded from the GSP scheme. Theonly Ukrainian agricultural products that receive pref-erences are animal and vegetable oils and processedvegetables and fruits. GSP is of so little value toUkraine that some analysts have observed that no-body even talks about GSP in Ukraine.

Sources: World Bank 2004a, 2005a; Aslund 2003.

Box 9 Requirements for Third Countries Exporting Animal Products to the EU

To obtain EU approval for exporting certain animalproducts from a non-EU member state (the third coun-try), a national institution should be accepted as thecompetent authority. The competent authority shouldbe able to demonstrate satisfaction of the followingprinciples:

• The animal health situation in the third countrysatisfies EU requirements for imports of the ani-mals or products in question.

• National authorities in the third country canprovide rapid, regular information on the exis-tence of certain infectious or contagious ani-mal diseases on its territory, in particular thosediseases on the former OIE list A (OIE list ofanimal diseases requiring notification to theOIE).

• There is effective legislation in the third coun-try on the use of certain substances (for exam-ple medication), particularly concerning theprohibition or authorization of substances,their distribution or release onto the market,

and rules covering their administration andinspection.

• There is an acceptable program in the thirdcountry to monitor the presence of certain sub-stances and the residues thereof in live animalsand animal products for which export approvalis sought.

• The veterinary services in the third country arecapable of enforcing the necessary health con-trols. (This emphasizes the importance of a com-plete chain of command.)

• Effective measures exist in the country to preventand control certain infectious or contagious ani-mal diseases.

In addition, and more relevant to the producers ofmeat products in third countries, the national authori-ties must guarantee that the processing establishmentat which products intended for human consumptionare produced satisfy EU requirements. This means thatthese establishments must comply with requirementssimilar to those for establishments within the EU.

Source: Moody 2005.

Currently, few establishments in CIS countrieshave received approval for exporting to theEuropean Union. Kazakhstan has a few establish-ments allowed to export fish and fishery products;the Russian Federation has approved establish-ments in fish and fishery products, milk and milkproducts, and rabbit and farmed game meat. Allother approved establishments are for low-valueproducts, such as gelatin (Belarus) and animal cas-ing (Turkmenistan, Ukraine, and Uzbekistan).20

Prior reviews have shown that the EC FVO animaland animal product inspection teams usually find alarge gap between EC requirements and current CISpublic and private sector food safety infrastructure,skills, and transparency in monitoring and reporting(Schillhorn van Veen 2004). Despite this major gap,many smaller CIS states continue to seek approval toexport fish, meat, and dairy products to the EC, al-though the public and private sector investmentcosts to achieve compliance are high and returnsfrom that investment may come only slowly, espe-cially because of the relatively low productivity inlivestock sectors and the low potential to generatesignificant amounts of products for export.

Compliance problems

Compliance with the SPS requirements of theEuropean Union can constitute an obstacle. The twomost frequently cited reasons for rejection of foodand feed consignments at the EU border inspectionposts are the presence of mycotoxins and residues ofveterinary chemicals (RASFF 2005). Shipments offood and feed from CIS countries to EU markets ex-hibit the same pattern, with the top two reasons citedin the rejection notifications involving mycotoxins(aflatoxins, specifically) and veterinary antibiotics inhoney (see appendix 4). It may well be that insuffi-cient diagnostic capacity is contributing to the com-pliance problem. In many laboratories, the capacityto analyze pesticide and veterinary residues and my-cotoxins is absent or deficient. With the possible ex-ceptions of the Russian Federation and Ukraine,many of the CIS veterinary and public health labora-tories do not have the equipment and methods inplace to accurately test for these residues.

Notifications of mycotoxins in nuts and raisins,important products from Azerbaijan andUzbekistan, have increased to about two dozen casesin recent years. There were nine cases of border in-terceptions for Azerbaijan hazelnuts in 2005 repre-senting about 2.5 percent of its total hazelnut exportto the EU or about US$ 1.7 million (see appendix 4).

For certain products, intercepted shipments undergotreatments and are then allowed to enter the EU mar-kets or are sold to other markets at lower prices.

Weak private sector capacities

In many cases, it is not SPS constraints but the lack ofcompetitiveness that may be the main reason for lackof market access. Most CIS countries cannot generatean exportable surplus of meat, and, consequently, theRussian Federation imports large amounts of meatfrom Latin American countries and elsewhere. So inthis case, the lack of exports to the EU is not caused bythe high tariffs. Wine represents a similar case. Themarket share in CIS countries of wine from Australia,South Africa, and Latin America has increased(Development Alternatives, Inc/Bizpro 2004; CNFA2004) because producers in these countries are morecompetitive than those in Georgia and Moldova. To im-prove their competitiveness, experts recommend up-grading quality while keeping production costs low.

In particular, fresh produce producers in CIScountries have major difficulties meeting the volume,quality, and consistency requirements of modern re-tailers, not only in the European Union but also in thehigh-end markets of Moscow and other cities in theRussian Federation and Ukraine. In the case of fruitand vegetables, meeting EU SPS requirements is al-most solely in the domain of private enterprises,since it requires organization of competitive coordi-nated supply chains. Although much progress hasbeen made in this area (World Bank 2005d) few com-panies have been able to generate exports and muchof the demand of the region’s supermarkets is met byimports from outside the region.

GOVERNANCE ISSUESIn many countries in the world, food safety and an-imal health inspections and customs are riddledwith governance problems. The root of the problemis the inspectors’ large measure of discretionary en-forcement powers and the systems’ lack of trans-parency. During field work on food safety andagricultural health, analysts and researchers comeacross many examples of rent seeking, bribery, andextortion. Examples include (i) inspection programsthat focus on inspections for which fees can be leviedrather than on inspections addressing health risks;(ii) informal payments required for each formprocessed; and (iii) inspections waived for payment.

CIS countries also offer many examples. In a se-ries of surveys of business establishments in



Europe and Central Asia,21 bribery is presented asa problem in doing business, during transport andinspections, for example (see box 10). As itpresently functions, the GOST system providestypical opportunities for rent-seeking and bribery.It requires far more tests than capacity allows, and,in many cases, enterprises cannot meet all require-ments, providing inspectors with considerable dis-cretionary power. Moreover, in CIS countries thathave joined the WTO there is no clarity aboutwhich regulatory system should apply.

A survey done in Ukraine revealed more casesof briberies involving inspections on safety (specif-ically those by the fire departments and sanitationservices) than inspections on business matters (IFC2005c). Herein lies a dangerous aspect of corrup-tion: the ultimate losers are not the business people

dealing with corrupt officials but the consumerswho end up with unsafe food. Undoubtedly, thispattern also seriously undermines the protection oflivestock and crop health.

Some external factors have proven more suc-cessful than anticorruption drives in helping tospur change in these countries (Anderson and Gray2006). Accession to the European Union has moti-vated changes in governance. Strong leadership isessential in the push for reforms. Trade liberaliza-tion, particularly membership in the WTO, exposescertain domestic law enforcement activities to thescrutiny of trading partners and international or-ganizations. On the other hand, the greater empha-sis on market reforms and inadequate attention toinstitutional reforms to promote accountability andtransparency was thought to be a contributing fac-

Box 10 Issues on Governance

Sources: Various sources, as cited.

Some documented examples of corruption include:• As much as 20 percent of the costs of domestic

truck transport in Tajikistan are due to informalpayments at checkpoints (World Bank 2005e).

• Local authorities in Kazakhstan organized so-called vegetable trains to supervise delivery offruits and vegetables and to avoid corrupt po-licemen (World Bank 2005f). There was a reportof a Kazakh Minister of Interior who rode with adelivery truck, after which the government tookaction and removed many of the internal check-points (World Bank 2005e).

• In Ukraine, a correlation exists between a firm’searnings and the likelihood it will be inspected,rather than between violations and penalties andinspections. Inspections thus do not serve thepurpose of preventing violations (IFC 2005a).

• It has also been noted that business managers inUkraine sometimes opt for the less costly alter-native of making an unofficial payment ratherthan eliminating a violation (IFC 2005a).

The main causes of corruption may be found inweaknesses in institutional and legislative frameworks.

• An example of multiple agencies can be seen inGeorgia, where numerous state and local inspec-tors and inspectorates are involved in sanitation:

a. Inspectorate for State Supervision of Sanitaryand Hygienic Norms, under the Ministry ofHealth, Labor, and Social Security

b. State Inspectorate for Sanitary Surveillance atBorder Checkpoints, under the Ministry ofHealth, Labor, and Social Security

c. State Inspectorate of Sanitary Surveillanceunder the City Services of the CityGovernment of Tbilisi

d. Central and Regional Services of the StateCentral Sanitary Inspectorate under theMinistry of Health, Labor, and SocialSecurity.

For these inspectorates and agencies, ac-tivities are prescribed in eight laws and morethan 15 intraministerial norms, rules, and de-crees, only a few of which are made public(IFC 2004a).

• The laws in Belarus prescribe sanitary inspec-tions but do not specify procedures, frequency,or duration (IFC 2005b).

• The sanitary and epidemiological stations inUzbekistan have extrabudgetary funds from finesarising from violations of sanitary regulations; 15percent of this fund is allocated as bonuses tothe staff (IFC 2004b).

tor to the rise of corruption among transition coun-tries (Anderson and Gray 2006).

Despite the complexities involved, a solution canbe found by establishing transparency in the regula-tory system, both in the process of drafting regula-tions and in the conduct of inspections according toclear procedures and guidelines. In Tajikistan andBelarus, some enterprises have used an InspectionsRegistration Book to deter unauthorized inspections(IFC 2003 and 2005b). Inspection systems should bebased on risks; this will provide incentives to thosewho comply and penalize violators (IFC 2005a).Indeed, to design a sound regulatory and institu-tional framework that minimizes the room for cor-ruption is one of the biggest challenges in the reformof food safety and agricultural health management.

SUMMARY: SPS ISSUES ANDCOUNTRY GROUPS Food safety and agricultural health situations aresummarized in table 13 according to country

groups. Using the DALY rate to compare the coun-tries’ food safety situations, and considering theoutliers, the third group shows the least favorablecondition, with Turkmenistan and Tajikistan hav-ing the highest DALY rates.

With regard to agricultural health, changes re-sulting from the break-up of the Soviet Union giverise to certain concerns: the shift to smallholderlivestock rearing has caused increases in zoonoticdiseases due to more frequent contact among hu-mans, livestock, and wildlife; weakened bordercontrols may permit entry of plant pests that affectcrops.

The standards systems in CIS countries pose di-rect and indirect constraints on the competitivenessof potential exporters. Lack of capacity to complywith SPS requirements, however, is only one causeof the lack of market access. In some cases, thecausality may be the reverse: lack of competitive-ness is caused by other factors, and, in fact, lack ofcompetitiveness constrains the ability to make theinvestments necessary to improve compliance.


Table 13 SPS Issues for Country Groups

Group I: Russian Federation, Group II: Armenia, Group III: Turkmenistan, Ukraine, Kazakhstan, and Belarus Azerbaijan, Georgia, and Moldova Uzbekistan, Tajikistan, and Kyrgyzstan

Food safety situation Good to moderate Good to moderate Moderate to poor DALY rate: 33–101 DALY rate: 31–440 DALY rate: 147–1103

Animal health • Perceived increases in zoonotic diseases from smallholder farms, • Rise in Echinococcosis and situation although official databases show strong decline in tuberculosis and other zoonotic diseases

brucellosis in Moldova, the Russian Federation, and Ukraine • Emergence of HPAI

Plant health Threat of introduction of pests due to weakened border controlssituation • Good capacity to detect • Weak capacity to detect • Very weak capacity to detect

mycotoxin and pesticide mycotoxin and pesticide mycotoxin and pesticide residues residues residues

• Moderate capacity to deal with • Weak capacity to deal with • Very weak capacity to deal emergency outbreaks of pests emergency outbreaks of with emergency outbreaks of and diseases pests and diseases pests and diseases (locust,

• Moderate plant quarantine (locust, rats) rats)• Weak plant quarantine • Very weak plant quarantine

Capacity to meet Moderate to low Moderate to low Lowrequirements in OECD markets for sensitive products

Competitiveness in Moderate to weak Weak Very weakOECD and top-end CIS markets

33

CIS countries have already made a number of key choices for the fu-ture. They have decided to adopt market-driven economic systems,and they have applied for WTO membership. Many choices remainto be made about how best to proceed, however. This chapter firstdiscusses the options, paying special attention to evolving thoughtsabout how to manage SPS and organize the relevant institutions.Next, it considers the general experiences of transition countries thatjoined the European Union, the experiences of Lao PDR and Vietnam,and EU reforms of food and feed policies. The chapter proceeds to an-alyze thematic issues relevant to the change from GOST to interna-tional system, including legal and regulatory systems, diagnosticcapacities, issues relevant to the private sector, and options for re-gional cooperation. The last section of this chapter discusses the costsand benefits of reforming standards systems and the international as-sistance provided to CIS countries.

CHOICES TO BE MADE Most CIS countries have successfully recovered from adjustments totheir economies due to their market transitions following indepen-dence. In recent years, they have experienced encouraging growth ratesfor their economies and agricultural sectors, in particular. The challengefor sustained agricultural growth ahead is to develop comparative ad-vantages further, upgrade product quality, and seek product and mar-ket diversification. Since all CIS countries, except Turkmenistan, haveeither joined the WTO or applied for membership, their decisions toshift toward a market economy and to integrate further into the globaltrading system are implicitly fixed. But the question of how to transformfrom GOST to a WTO-compliant system is complex.

As indicated in the previous chapter, with the abolition of the stateplanned economy the GOST system ceased to be suitable and will in-creasingly become an obstacle to obtaining international market ac-cess. The former transition economies that have joined the EU havereplaced GOST with new systems as a result of their adoption of theAcquis Communautaire and now apply EU requirements to their im-ports. This means that CIS countries’ access to their traditional exportmarkets in Central and Eastern Europe is at risk and has already beendisrupted in several cases. Two emerging major changes within theCIS region form equally big challenges. First, the main economies inthe region, the Russian Federation and Ukraine, are moving closer to

Replacing GOST-BasedSystems by Systems Based

on WTO Principles

4

the conclusion of WTO accession negotiations.Although no date for accession has yet been set, it isto be expected that in about five years from now theRussian market will have a mixture of internationaland GOST standards. Countries that don’t move inthe same direction risk losing market access there aswell. The second factor is the rapid growth of mod-ern retail systems in urban areas of the RussianFederation and other CIS countries. It should be ex-pected that retail chains, just as in the OECD coun-tries, will increasingly require the use of quality andsafety assurance systems based on good practice.As a consequence, there will be increasing differen-tiation among market segments within the transi-tion economies, with lower prices paid in theshrinking market segment for which GOST stan-dards are accepted.

The effective management of sanitary and phy-tosanitary measures requires capacities for bordercontrol, surveillance, diagnosis, inspection, certifi-cation, and appropriate responses to stop or con-tain threats to food safety and agricultural health.The basic requirements for SPS management areappropriate institutions, legislations, and regula-tions. Sound technical capacities are required toformulate appropriate regulations and for their ef-fective enforcement. Human skills, in fact, are fun-damental in all aspects of SPS management. All ofthese capacities entail costs and choices must bemade based on priorities in trade, emergingthreats, and identified risks of health hazards.

To more fully integrate into the European andglobal markets, the CIS countries need to work onmultiple fronts, including improvements to theregulatory environment, business facilitation, gov-ernance, product quality, and, very importantly,improving SPS management. These changes areimportant for improving their competitiveness intheir domestic and intraregional markets and arecrucial to increasing actual access to the EU market.The European Union (currently with 27 members)has an economy almost 30 times as large as that ofthe CIS and should become a more important trad-ing partner for CIS.

EVOLVING PRINCIPLES FOR SPS MANAGEMENT IN MARKETECONOMIESTwo factors have profound effect on the way inwhich market economies manage and organize

their food safety and agricultural health systems.The first is the 1994 WTO SPS agreement, whichbrought new disciplines to the trade relations be-tween countries. The second is the increased sensi-tivity of consumers in OECD countries about foodsafety in reaction to many recent food scandals andfood scares. The result is that major principles inthe management of food safety and agriculturalhealth have evolved in many countries, includingan integrated agricultural health safeguarding sys-tem, the farm-to-table concept, and the use of riskanalysis.

• An integrated agricultural health safeguardingsystem covering the entire disease and pestcontrol process from quarantine, surveillanceand control to export certification protectscrops and livestock (and the food chain) frompests and diseases (see box 11).

• The farm-to-table concept provides the basis fora comprehensive management of risks at allstages of production, marketing, processing,retailing, and consumption.

• The use of a risk analysis framework, includingrisk assessment, risk management, and riskcommunication to recognize and incorporatedifferences in risks, provides guidance to pol-icymakers with regard to priorities and al-lows resources to be used efficiently.

To effectively manage food safety and agriculturalhealth, therefore, countries must have in place insti-tutions and legislations supporting the effort andtechnical facilities equipped to make accurate diag-noses on which evaluations of risks will be based.

Legislative and regulatory framework

A good legislative and regulatory framework forfood safety and agricultural health should be basedon modern principles for market economy andmeet the following conditions:

• It should be compliant with the internationalrequirements to which the country has com-mitted or is planning to commit itself. Thisimplies that laws should be compliant withWTO agreements; with the requirements ofOIE, Codex, and IPPC membership; and withbilateral, regional, or other multilateral tradeagreements, such as those with the EU.

• Laws can only be effective if regulatory frame-works and public—and often also private—capacities are adequate to implement them.



• The legal and regulatory framework shouldbe broadly endorsed by all public agenciesand private stakeholders or should at leasthave broad legitimacy. If this condition islacking it will be very difficult for the govern-ment’s services to implement it effectively.

• The regulatory system should provide rule oflaw, limit the discretionary powers of imple-menting agencies, and reduce rent-seekingbehavior by services and individuals.

Effective legislation must not only institute lawsand regulation ensuring food safety and agricul-tural health, it should also allow authorities to inte-

grate preventive measures. Responsibilities amongthe different institutions should be clarified and de-lineated and the measures of interaction defined.Provision should be made for checks and balances,and enforcement and control measures should in-clude effective and proportionate penalties.

Functions

SPS management requires the performance of threedifferent functions:

• Policy making, legislation, and determinationof a system architecture;

• Implementation of the system, including thethree elements of the risk analysis framework,

Box 11 Integrated Agricultural Health Safeguarding System

The integrated agricultural health safeguarding sys-tem aims to prevent the introduction and establish-ment of alien pests and diseases and to reduce theeconomic impact of established pests and diseasesthrough exclusion, detection and surveillance, in-

spection and certification, and control and eradica-tion. The system supports and is supported by riskassessment. Information gathered by the system isused to assess risks that, in turn, guide appropriateinterventions.


Pest/disease

exclusion

Surveillance Diagnostic

inspection

capacity

Disease/pest

control

Certification

Risk analysis framework

The risk analysis framework forms a critical part of foodsafety requirements currently requested by OECDcountries. It can also be a most valuable tool in theprocess of national priority setting to decide which foodsafety and agricultural risks require most immediate at-tention. It is comprised of three components: risk as-sessment, risk management, and risk communication(FAO 2003).

• Risk management is the process of weighing pol-icy alternatives using input from risk assessment.The function extends to inspection and interven-tion in cases of emergency.

• Risk communication is the interactive exchange

of information among risk managers, risk asses-sors, consumers, industry, the academic sector,and other interested parties throughout the entireprocess of risk analysis.

• Risk assessment involves the identification andcharacterization of hazards, an evaluation oflikely exposure to the hazard, and the charac-terization of risk. The setting of standardsshould be based on assessed risks. Risk assess-ment receives the most attention during capac-ity building, not because it is more important,but because it requires specific procedures,skills, training, and data requirements.

integrated safeguarding, and the farm-to-table concept; and

• Evaluation of the system and its performance.

Consensus is growing that these functions shouldbe separated to a significant degree to promotetransparency and to reduce conflicts of interest,which can undermine the credibility of food safetyand agricultural health management systems.

• A basic issue in food safety is the potentialconflict between supporting agricultural pro-ducers and protecting consumers; thus thesedifferent functions should at least not residein one department or service. Most countriesdelegate the political responsibilities for con-sumer protection to the ministry of health andfor producer support to the ministry of agri-culture.

• Policy making, implementation, and evalua-tion functions may also require separation.Inspection services should not set policies,only implement them, and evaluation of foodsafety and agricultural health managementshould be independent of both policy makingand implementation.

• Risk assessment and risk management instandards setting and adoption of measurescan also be clearly distinguished. Risk assess-ment should be science-based and, prefer-ably, independent of government agenciescharged with policy making and inspection; itis often charged to specialized teams in re-search institutes or in dedicated agencies.Risk management is a function of governmentagencies with the responsibility of decidingwhat risks are acceptable and how to dealwith diseases. These agencies should adoptmeasures based on the findings of risk assess-ments. An efficient risk analysis framework isan iterative interaction between risk man-agers and risk assessors. The integrity of thisentire process depends on the independenceof the two functions and on transparency.Risk communication constitutes a separatespecial role of providing the transparency thatsustains trust in regulators by consumers andtrading partners.

In practice, food safety and agricultural healthsystems differ greatly from country to country, andadjustment to these principles is often slow andpartial because of cost, the complexity of the re-quired reorganizations, and opposition from

vested interests. Some systems are far from opti-mal, but without a major crisis demand for reformis often lagging. Since CIS countries must make sig-nificant adjustments to adopt standards systemsbased on international principles, however, theyare well advised to look at broader options forchoosing policies and institutional architecture.

Small, low-income countries may not need full-scale risk assessment capacity of their own; theycould use internationally recognized resources toperform the risk assessments needed. However,they need a capacity to do less rigorous risk evalu-ations for tasks such as resolving questions aboutallowing certain imports, designing preventivemeasures, and developing information for publicpolicies and priority setting.

Effective systems require policy and operationalcoordination starting at the national level and ex-tending to implementation and enforcement at thedistrict and local levels. Food inspectors are betterable to do their jobs when guided by adequate reg-ulations. Laboratories can do more efficient analy-sis if sample specimens are properly obtained byinspectors; and these results, in turn, will bettersupport policy making (FAO 2003). Policy makingoffices at the national level will be better able tomake appropriate decisions (which may save livesor resources) when local authorities promptly re-port occurrences of diseases.

ADJUSTING THE INSTITUTIONALARCHITECTUREAt the national level, several public institutions areinvolved in managing food safety and agriculturalhealth, for example, ministries of public health,trade, and agriculture, and several services withinthese ministries, such as veterinary services and in-spection, plant inspection, food safety inspection,laboratories, and research units. Different levels oflocal government can also have various roles.

Proper functioning of and coordination amongresponsible offices are critical to the implementa-tion of a food and agro-health safety system. Manycountries have long had problems in their foodsafety systems, however, such as lack of coordina-tion among government agencies, insufficient ruleof law, contradictory regulations used by differentagencies, and high cost of implementation as a re-sult of multiple inspections. Typical problems areoverlaps and conflicts between food safety regula-tors in public health ministries and veterinary ser-



vices in agricultural ministries. Plant protectionservices have less overlap with other agencies and,therefore, are less often involved in interagencyconflicts, but in the interests of efficiency and con-sistency, an integrated approach to food safety andagricultural health is desirable. Rivalries lead tocostly duplication of effort, but they are also dan-gerous when they lead to a lack of clarity in leader-ship in response to calamities, such as food hazardsor disease outbreaks. These problems became morevisible and calls for change became more urgentwith the signing of the WTO SPS agreement, re-quiring harmonization with international stan-dards and greater transparency in membercountries’ regulations and practices, and with ris-ing consumer awareness and demands for foodsafety and environmental protection in the wake ofa series of food scandals.

Organizational options for food control system

OECD countries and other countries have tried toreform their food safety and agricultural healthmanagement systems in recent years. There arethree possible institutional arrangements for a foodsafety and agricultural health control system: amultiple agency system, a single agency system,and an integrated system.22 The choice depends onthe country’s situation and characteristics, includ-ing, but not limited to, the size of its export sector,domestic health issues, and the capacity of the var-ious agencies involved.

Multiple agency system. This is the common setupin most countries, resulting from the varying sec-toral objectives—public health concerns with food-borne diseases, a trade ban on animal productsfrom countries with certain animal diseases, nego-tiations about pest-free status, and so on. The re-sponsibilities for food control and agriculturalhealth are shared by a number of government of-fices at the national level and often with subna-tional-level agencies. Coordination among thedifferent agencies is crucial for this arrangement tofunction efficiently; otherwise, possible problemsinclude duplication or gaps in regulatory activities,fragmentation among the offices, uneven imple-mentation due to varying degrees of capacitiesacross agencies, and conflicts and confusion in im-plementation of laws. On the borders, three unitsperform separate inspections on food safety, ani-mal health, and plant health.

Single agency system. In this system, responsibil-ity for animal health and food safety inspections is

consolidated into a single food control agency. Insome cases, this includes phytosanitary controls aswell.23 Policy making and standards setting usuallyremain in the ministries of health and agriculture.Although consolidation of food inspection func-tions has merit, its acceptability will depend on thecountry’s history and political environment.

Integrated system. In this setup, a national au-tonomous food control agency coordinates, moni-tors, and audits all food control activities;formulates all policy; performs and manages riskassessments; and develops standards and regula-tions. The responsibilities for food inspection andenforcement, education and training, and other im-plementation functions remain with the existingagencies at the national, regional, and local levels.In the European Commission, the DG SANCO per-forms such a role; its mandate includes phytosani-tary controls. The autonomous food control agencyassures an integrated approach that provides co-herence to the whole food control system. Thesetup is also more politically acceptable since itdoes not deviate too much from agencies’ existinginspection and enforcement roles.

Examples of single agency food control systems

In the last decade or so a number of countries havestreamlined and consolidated their systems for ef-fectiveness and efficiency, that is, food safety func-tions formerly scattered among several agencieswere transferred to a single agency. Examples in-clude Canada, Denmark, Ireland, and NewZealand among industrial countries and Lithuaniaand Slovenia among former socialist countries nowmembers of the EU. The U.S. GovernmentAccountability Office (GAO) conducted two stud-ies on the experiences of these countries24 andfound the net effect of consolidation to be generallypositive. Reported improvements in food safetymanagement include better service delivery due tothe single contact point for consumer and industryclients; more consistent or timely enforcement offood safety laws and regulations; reduced overlapin inspections; streamlined communications; andso on. Box 12 describes one consolidation effort: thecreation of the Canadian Food Inspection Agency(CFIA) as Canada’s single food agency has made itone of the most successful food safety managementmodels around the world.

No one “best system” exists that fits all coun-tries; after all, each country must undertake insti-

tutional reforms and restructuring in accord withits own historical and political context. The neededreforms are complicated as they will involve real-location of resources and staff, and they are essen-tial to the effective implementation andwell-functioning of the food safety and agriculturalhealth systems. There are difficult issues thatshould be considered at the outset.

• The absence of strategic guidance by the po-litical leadership is one of the reasons for in-teragency rivalry, delayed adjustments, andslow performance by legislative institutions.It has also contributed to confusion, uncer-tainties on the validity of the regulations, andineffective enforcement.

• The clarification and alignment of responsi-bilities among government agencies deservefirst priority in the restructuring of food safetyand agricultural health management systems.It is essential to define clearly the tasks to beperformed and the functions of each agencyinvolved.

– This is the key to reducing overlaps andreplications in the system to make better useof scarce public resources and reduce thecosts for the private sector.

– A clear division of responsibilities allowsthe public to know what to expect fromevery agency, and thus to hold them ac-countable for meeting their responsibilities.

• CIS countries’ food safety and agriculturalhealth systems generally need some consolida-tion. A common problem in most CIS countriesis the presence of too many agencies with weakcapacities and few resources. Consolidation ofcertain functions and resources not only im-proves efficiency by reducing repetition in in-spections and testing but enables moretargeted capacity building and technologicalupgrades.

• Competition among agencies involved infood safety is a general issue in many coun-tries, but it is especially serious in CIS coun-tries. The transformation process from GOSTto a WTO-compliant system involves redistri-


Box 12 Canada’s Creation of a Single Food Inspection Agency: CFIA

Before Canada consolidated its food safety system, itsfood safety responsibilities were shared by three fed-eral ministries: Health Canada, Agriculture and Agro-food Canada, and Fisheries and Oceans Canada. Inthe mid-1980s, when officials from the three min-istries tried to work out a pesticide policy together, itbecame evident that they had very different interests:Health Canada had an interest in the impact of pesti-cides on humans; Agriculture had an interest in theimpact on soil, water, crops, and animals; andFisheries had an interest the impact on fish. It becameclear that such problems, caused by several depart-ments having divided authority, were to be found inall aspects of government regulation of the food sup-ply chain. In the ensuing years, food regulations weregradually rationalized between Agriculture Canadaand Health Canada. To further clarify responsibilities,improve effectiveness, and reduce federal spending,the Canadian Food Inspection Agency (CFIA) was cre-ated in 1997 to take over all responsibility for foodsafety inspection activities, including inspection of im-

ported and domestic products, as well as export certi-fications. It is also responsible for animal health andplant disease control.

Responsibility for standards setting relating to pub-lic health, including research, risk assessment, andsetting acceptable residue levels, are consolidatedwithin Health Canada, in line with the principle of theseparation of risk assessment (Health) and risk man-agement (CFIA). Standards not related to human, ani-mal, or plant health continue to be set by AgricultureCanada; for example, quality standards for gradingcrops (color, shape, size), animals (percentage of fat inmeat), and food (size of eggs).

It is reported by some officials that the creation of asingle food agency has reduced government expendi-ture on food safety control operations. Moreover, theconsolidation has been well received by stakeholders,who cite benefits of improved communications, easierinteraction with regulators through the single enforce-ment contact point, and fewer inspectors visiting pro-cessing plants.

Sources: GAO 2005 and authors’ discussion with Canadian officials.


bution of authority and resources and in-creases competition between institutions.

EXPERIENCES OF REFORM

Completed transitions

Lithuania and Poland, both Central and EasternEurope countries and western neighbors of the CIS,are now members of the European Union. In a pe-riod of four to seven years, both countries were ableto harmonize their food safety and SPS laws, regu-lations, and enforcement practices with those of theEuropean Union, although small enterprises andsome sectors are being allowed transition periods.In Poland, for example, the smaller meat processorshave been granted a grace period lasting untilDecember 31, 2009. These countries’ primary andsecondary food industries, distribution systems,and wholesale and retail organizations had to reno-vate their facilities and operations to comply withthe broad set of market regulations that is part of theAcquis Communautaire. A significant part of the costof these changes was borne by the European Union.

EC pre-accession instruments. Before 2007, the fol-lowing pre-accession support programs were avail-able to acceding and candidate countries: PHARE,ISPA, SAPARD, the Turkish pre-accession instru-ment, and CARDS (for the Western Balkans).25 ThePHARE program involved measures on institutionbuilding and economic and social cohesion. TheISPA program provided large-scale environmentand transport investment support. The SAPARDprogram supported agricultural and rural develop-ment. Starting January 1, 2007, all pre-accession as-sistance instruments were replaced by a singleInstrument for Pre-accession Assistance.

Poland. The initial fear that the agro-food indus-try would suffer from the entry of WesternEuropean food products proved unfounded.Poland developed from being a food importer be-fore the transition into a food exporter at present. Ithas fully integrated the Acquis Communautaire intoits legislation. A major restructuring and consoli-dation took place in both the public and the privatesectors and is continuing as some slaughterhouseswere given grace periods through the end of 2009.The number of labs under the Ministry of Healthfell from 248 to 66, not including consolidation withanimal health district labs.

• The number of slaughterhouses declinedfrom 2,600 in 1999 to 1,200 in 2006.

• The meat industry declined from about 7,000companies in 2001 to 3,000 in 2006.

• The new system, which delegated more re-sponsibility to the producers and processors,required fewer veterinarians for meat inspec-tions.

These adjustments were financed by supportfrom the European Union:

• The cumulative EU investment to upgradethe public food safety and SPS capacity beforeaccession in 2004 was about €175 million,while the cumulative EU investment in the re-structuring of private industry totaled about€1.2 billion.

• The total PHARE budget for strengtheningagricultural administration institutionsamounted to about €178.5 million, of which 26percent (€46.7 million) covered veterinary ser-vices and 17 percent (€29.9 million) coveredimprovements in plant protection institutions.

• The food and agriculture sector has receivedabout €450 million in annual transfers to com-plete the transition since joining the EU. Thesetransfers offset the costs of a major consolida-tion in the national food industry.

Experiences derived from the transition inPoland’s standards system and perhaps relevant toCIS countries indicates the need for the following:

• Careful sequencing and timing of activities.Inventorying regulations and the status offood processing facilities was the first step,followed by development of plans for adapt-ing existing institutions, with emphasis ontraining, and then by introduction of new leg-islation and regulations.

• Clarity and transparency in drafting the legis-lation in local language. This requires skilledtranslators. It also requires lawyers with un-derstanding of the technical issues involved.Mistakes can have undesirable practical im-plications. For example, the supermarket sec-tor was not covered properly in the newlegislation, and hence its supervision was in-cluded both within retailing (which fallsunder the Ministry of Health) and food prepa-ration (under the Ministry of Agriculture).

• Adequate time for industry to adapt to newregulations, with strong emphasis on capacitybuilding. Poland suffered from the inexperi-ence of both government staff and private

consultants on the technological aspects of thenew quality systems of good agriculturalpractice (GAP), good manufacturing practice(GMP), and hazard analysis and critical con-trol points (HACCP).

• Major attitude changes undergirding the pub-lic inspection system as inspectors changetheir function from top-down supervisionand control to a much more advisory roleunder the HACCP, GAP, and GMP systems.

Lithuania. Lithuania has actively sought integra-tion with the European and global market ever sincegaining its independence from the Soviet Union in1990. It joined the WTO in 2000 and became a mem-ber of the European Union in 2004. Great effortshave been made to improve its food safety and SPSmanagement to meet accession requirements andfulfill its obligations as a member of the WTO.26

Major achievements include the following:

• Acquis Communautaire was fully transposedinto domestic legislation.

• A reorganized and streamlined administrativeframework for food safety and agriculturalhealth, with a very clear division of responsi-bilities among all the agencies involved, wasestablished. A State Food and VeterinaryService (SFVS) was also created to serve as thesingle official food control agency.

• Necessary administrative capacities werebuilt up.

• The HACCP system was introduced in allfood establishments. HACCP is applied in lev-els: bigger companies adopt the full system,while small enterprises employ either a sim-plified system or the list of “13 Good HygienePractices” as formulated by the government.

• The laboratory system was consolidated. • Modern, effective border controls were insti-

tuted.

The EU provided large amounts of financial sup-port and technical assistance for Lithuania’s transi-tion. Nearly €30 million was spent in new andrenovated laboratory facilities and equipmentalone. From 1997 to 2003, the PHARE program al-located roughly €40 million to agriculture inLithuania, of which nearly €30 million was used forprojects related to SPS. Below are a few examples ofSPS projects funded by PHARE.27

• Assessment of needs related to veterinary andphytosanitary control, €0.15 million;

• Veterinary and phytosanitary control, €1.7million;

• Veterinary and phytosanitary border controlmeasures, €3.5 million;

• Strengthening and enforcement of EU foodcontrol system, €3 million;

• Strengthening of control on infectious animaldiseases in Lithuania, €6.11 million;

• Strengthening of food safety control and foodcontrol laboratories, €2.9 million; and

• Strengthening the implementation of policiesand procedures for plant protection and plantvariety identification, €1.47 million.

Knowledge gleaned from the transition ofLithuania’s standards system perhaps relevant toCIS countries includes the following:

• In July 2000, three separate agencies for foodsafety control—the State Hygiene Inspection,the State Quality Inspection, and the StateVeterinary Service—were merged into theState Food and Veterinary Service (SFVS), re-porting directly to the Prime Minister.

• The functions and responsibilities of variousministries and agencies were more clearly de-fined: the Ministry of Health establishesmandatory requirements for food, such as max-imum residue levels (MRLs), and monitorsfood safety and food-borne diseases, for whichit uses expertise from research institutions; theSFVS is responsible for the implementation andenforcement of food safety and veterinary con-trols, both for domestically produced and im-ported products; and risk assessment isundertaken at the Center for Risk Assessmentand Information at a university institute.

• The number of inspections required was sig-nificantly reduced, and the total number ofgovernment staff performing inspections de-creased. Employment in parts of the Ministryof Agriculture charged with implementationof EU policies increased, however.

• Laboratories inherited by SFVS from the previ-ous separate agencies were consolidated. Thenumber of labs was cut from 50 in 1994 to only10 in 2001, and further consolidation is antici-pated, with the goal of cutting down to onecentral lab and four regional ones. With fewerlabs, the limited resources for lab renovation,equipment upgrading, and training are uti-lized with better targeting and focus. TheNational Veterinary Laboratory, a reference



lab for the diagnosis of animal diseases andfood safety testing, received EU accreditationin 2000; its three branches and a county SFVSlaboratory were accredited by the EU in 2005.

• Throughout the accession process, Lithuanianauthorities had good understanding of the is-sues and were determined to resolve the prob-lem of overlapping government responsibilitiesand to establish agencies adequately organizedto implement the Acquis Communautaire.Political drive and leadership were importantfactors in Lithuania’s success.

Lessons learned. It is important to note that beforeaccession Poland and Lithuania were already rela-tively advanced trading economies within the for-mer communist bloc. Yet the transition from GOSTstandards to EU standards was a major and de-manding project. Some important lessons can bedrawn for CIS countries facing this transition:

• Strong political leadership is an importantfactor for success in the transition process.

• Officials and industry representatives in bothcountries describe the process of transition ascausing tremendous changes in the regula-tory framework, institutional alignments,training, and industrial and marketing man-agement; but more than all these, it caused ahuge shift in the “way of thinking” aboutmanaging food safety and agricultural health.

• The transition required a huge investmentand enormous operating expenditures beforecompliance with the EU standards could bereached, allowing the free circulation of goodswithin the EU and establishing a new easternfrontier for the common market.

• Major consolidations took place in diagnosticcapacity.

• Access to relevant information and the needfor specialized language skills constituted themain bottlenecks.

• Standards bureaus were relegated to back-ground roles.

• Transposition was gradual, and both countriesretained significant numbers of GOST-basedregulations, standards, and enforcement pro-cedures until the late 1990s.

Transition of standards systems in Southeast Asia

Vietnam and Lao PDR were both socialist coun-tries that have now adopted a system of market

economy. In both countries, the socialist planningsystem and GOST were much less developed thanthey had been in countries of the former SovietUnion. But several control principles of a state-planned system, similar to Soviet GOST princi-ples, had been implemented and consequentlyhad to be replaced by WTO principles. Vietnambecame a WTO member in 2007; Lao PDR has ap-plied for membership. WTO membership in bothcases requires extensive legal and institutional re-forms and capacity building. Both countries offerexamples of achieving success in internationaltrade by adopting standards compatible withprinciples of the market economy; by allowing,and even promoting, the development of the pri-vate sector; and by complying with the SPS re-quirements of their trading partners (World Bank2006b and 2007c).

EU food safety system

Reform of food safety regulation is also on theagenda of OECD countries. The European Unionfundamentally reworked its food and feed legisla-tion in 2004, with most provisions entering full ef-fect as of January 2006. The system is based onWTO principles, but it includes many other princi-ples not part of the WTO system. It was introducedafter much discussion with other WTO memberswho voiced many concerns about various require-ments. This shows that the WTO system is far fromunambiguously prescribing the precise form andparticularities of a food safety or SPS system.

The new rules on food safety, known as the “hy-giene package,” included five pieces of legislation.28

Covering certain products of animal origin in-tended for human consumption, the legislation ap-plies systems approaches to risk management infood hygiene and health conditions and lays downspecific rules for organizing official controls for pro-duction and marketing. Following the principles ofthe international system, producers are recognizedas having primary responsibility for food safety,and food policies are based on risk analysis. The fol-lowing important concepts are also included:29

• Food and feed establishments should havetraceability systems enabling them to identifybusiness supplying them with input and busi-nesses to which they in turn supply theirproducts. Importers must be able to identifyfrom whom products were obtained in thecountry of origin. 30

• HACCP controls31 must be implemented byall food establishments other than those oper-ating at the primary level.

• The legislation imposes the same hygiene re-quirements on food imported into the EUfrom third countries as on food producedwithin the EU.

Over the past few years, more EU regulationshave been instituted that affect the production, pro-cessing, and marketing of many products as the ECimplements its farm-to-table approach. This hasmeant substantial changes in general principles(for example, abandonment of the principle thatmycotoxins in animal feed could be diluted to safelevels before feeding) and an increasing level ofconcern about the risk of chemical contaminantsand the migration into food of metals from pack-aging, cookware, and tableware, among severalothers. The range of products and materials regu-lated under food safety and agricultural, especiallyanimal, health regulations is increasing.

LEGAL AND REGULATORYREFORM IN CIS COUNTRIESThe change agendas of CIS countries include legalreform. In late 2002, the Russian Federation passedthe Federal Law on Technical Regulation (effectiveJuly 2003) to bring its standards regime into closercompliance with WTO norms and to streamline theadoption of standards and the certification processfor imported goods. The provisions of this lawmade many once mandatory standards voluntary.

Reform processes

Many other CIS countries have also started to reformtheir GOST-based standards systems, mostly withassistance from bilateral aid agencies and interna-tional organizations (USTR 2006). Ukraine passed adraft law in late 2005 aimed at meeting the require-ments of the WTO on technical barriers to trade andamending its law titled On Quality and Safety ofFood Products and Food Raw Materials to complywith the SPS agreement (see box 13). In Kazakhstan,the law titled On Technical Regulations, which be-came effective in May 2005, defines the division ofresponsibilities between the state and the privatesector: the government is responsible for productsafety while responsibility for quality control resideswith the private sector. The government ofUzbekistan is also in the process of drafting a new

law on technical regulation designed to bring itsstandards system in line with WTO requirements.

The four CIS states that have joined the WTO(Armenia, Georgia, Kyrgyz Republic, and Mol-dova) had modified the language of their frame-work laws to make them more generally compliantwith broad WTO principles, although they haveyet to modify many of their industry and productregulations. In addition, they are only beginning tochange the way their public health, veterinary, andphytosanitary services administer and enforce reg-ulations. Armenia formally abandoned the GOSTstandards in January 2005, but it has only partiallydeveloped the regulations, voluntary standards,and enforcement practices needed to replace theGOST system. This has created a legal void that isbridged, in practice, by the continued use of GOSTstandards in inspections and of GOST methods intesting, accompanied by new regulations estab-lished by decree and administrative order at all lev-els of government.

Not only are new laws required for food safety,plant protection, veterinary services, and metrol-ogy, the primary task is to reassess the thousands ofpersisting GOST standards. The Russian Federationlaw discussed above includes a seven-year transi-tion period for reform of technical regulations, dur-ing which time mandatory requirements must betransformed into technical regulations and the re-maining standards will become voluntary (USTR2006). Current technical regulations will remain ineffect until new ones have been developed and ap-proved by the government or until the end of theseven-year transition period. The law enables theRussian Federation to prolong application of anyunmodified veterinary and phytosanitary regula-tions for an additional two years, however. Foreigntrading partners consider this effort to be a monu-mental task requiring the development and enact-ment of several thousand laws and regulations. Theobjective is to have 87 percent of all regulations incompliance with international standards by the endof the transition period (Kalinova 2005). Currently,some foreign observers believe that between 25 and30 percent of Russian laws and regulations complywith international standards (Becker 2006).

It is expected that the Russian market in 2010will still employ a mixture of international andGOST standards. If 75 percent or more of theRussian Federation’s regulations do converge withinternational standards by that time, CIS states thatretain older transposed versions of GOST stan-



dards (for example, dating from the mid-1970s tothe early 1990s) and related analytical methods willrisk losing market access and especially access tothe Russian Federation’s higher-value differenti-ated market segments (that is, those likely to be ap-plying the private standards of supermarketchains).

The situation is made more complicated becauseCIS countries that are not yet WTO members stillapply GOST standards, and exporters from otherCIS countries must meet these requirements. In ad-dition, continued government services for confor-mity assessment are required to facilitate thisongoing trade among CIS countries. This meansthat while the whole regulatory system is beingtransformed, the GOST system remains intact, atleast as voluntary standards, with government en-dorsement.

Language issues

Lack of language proficiency also sometimes causesregulatory staff and other stakeholders to work fromdifferent and sometimes mistaken versions of thesame information. This was reportedly one of themajor issues faced by the acceding CEE states as theyworked to achieve legislative and regulatory en-forcement convergence. Poland found that the lackof translation capacity, and particularly the lack oftranslators who also understood the basics of foodsafety and agricultural health, was a major con-straint in its transition to the Acquis Communautaire.One cannot transpose what has not been under-stood. Translation capacity, though basic, is madedifficult by the numerous technical terms and thelack of corresponding words or concepts in the tar-get language. Particularly for CIS countries, food

Box 13 Ukraine’s Legislative Efforts

GOST standards According to the Derzhstandart, the State Committeeof Ukraine on Technical Regulations and ConsumerPolicy, about 16,000 GOST standards are still in effect(Garcia 2006).

Harmonization On December 2004, the Cabinet of Ministers estab-lished the Department for Legislative Approximationunder the Ministry of Justice to manage the approxi-mation of Ukrainian legislation to EC legislation in allareas, including food safety. The progress in foodsafety, however, has been slow because both theDepartment for Legislative Approximation and theMinistry of Justice lack expertise in food safety(Halloran 2006). It was suggested that a food safetysection be created within the Department.

Priorities For the domestic food safety, the TechnicalCommittee on Regulatory Reform recommends thatpesticides and food contamination be priorities in thelegislative approximation because of concerns thatdomestic laws are less strict than EU laws, which mayallow products rejected in EU into Ukraine (Halloran2006). To encourage exports of dairy, meat, and ce-real products, the Committee recommends making

food products—especially milk and meat products—and control of imports and exports priorities.

Food law Ukraine’s new Food Law includes adjustments in in-stitutions, import documentation, and border controlprocedures (Garcia 2006). The law has given rise tosome concerns, however, including:

• Several offices oversee food safety, among themthe Ministry of Health, the Ministry of AgrarianPolicy, and a number of directorates. Even withthe delineation of responsibilities among the vari-ous offices, the law does not provide for overallcoordination of monitoring and auditing activities.

• The Food Law requires implementation ofHACCP among food manufacturers. It is notclear, however, whether the private sector’s ca-pacity to adopt HACCP has been taken into ac-count. At present, only a few companies haveHACCP in place, and understanding of the sys-tem is limited in the private sector and evenamong public officials.

• The state plays the primary role in ensuring thesafety and quality of food products, not the pri-vate establishments, as recommended in the in-ternational system (Moody 2006).

Source: Various sources, as cited.

safety experts have grown familiar with a system,terminology, and language remote from that used inOECD countries.

Language also plays a role in participating in themultilateral rules-based system. The four CIS WTOmembers have so-called enquiry points that receiveSPS notifications; states that are members ofCODEX, IPPC, and OIE also receive various notifi-cations in the official languages of those institutions.While the notifications in Russian are communi-cated readily, communications in English, French,and Spanish create real problems, because these en-quiry points generally lack personnel with sufficientforeign-language proficiency to read and translatethese notices for distribution to the relevant techni-cal staff. Service directors and technical specialists inArmenia who receive WTO SPS notifications inEnglish or French often ignore them until a transla-tion in Russian is provided by the RussianFederation or by the regional CIS bodies.32 Sincecomment periods are limited, lack of timely techni-cal translations constitutes a weakness that slows orexcludes CIS reactions to changes in SPS regulationsand standards. Apart from a general lack of capac-ity, lack of language skills has been a primary expla-nation for the CIS countries’ limited participation inthe WTO, a limitation reflected in the very few SPSnotifications submitted to the WTO: as of December2006, three had been submitted by Armenia, none byKyrgyz, and two by Moldova; Georgia was doingbetter, with 22 notifications.33

DIAGNOSTIC CAPACITYFood safety and agricultural health managementrequires laboratory facilities for testing. The formerSoviet Union had an extensive system of labs. Afterthe demise of the Soviet Union, most of the inde-pendent states lacked budget to maintain and mod-ernize the remaining infrastructure. As a result, thestate of these countries’ testing capacities is poor.Many of the central reference laboratories are out-dated, and some have unsafe designs and con-struction. In general, public health laboratories arebetter equipped and operated, but even some ofthese have substantial infrastructure problems.Moving to the subnational level, laboratory facili-ties and quality decline rapidly. Basic laboratorysafety and bio-safety requirements are not met inmany district laboratories. Few food safety and vet-erinary laboratories use internationally recognizedgood laboratory management practices. Budgetary

shortfalls often require staff to work in facilitiesneeding urgent repair, to use outdated equipmentand reagents, and even to resort to saving andusing broken glassware.

Some analytic mandates appear too broad andunnecessary from a food safety or SPS perspectiveand could be streamlined through some laboratoryconsolidation. There would appear to be no need,for example, for the plant quarantine laboratoriesto invest in pesticide residue detection capacity orpesticide compositional analytics. In the smallercountries, the public health laboratory would seemto be a more logical home for the former, and an in-dustrial chemistry laboratory for the latter.

The laboratory capacity in CIS countries is over-sized and in a poor state of maintenance. This wasalso the situation of the new member states at thetime of their adjustment and accession to the EU. Asubstantial consolidation of food safety, publichealth, and veterinary laboratories would thereforebe justified for the CIS countries. Box 14, using aWorld Bank study, illustrates the point in the caseof Kazakhstan. The use of centralized analytic ser-vices for some of the more costly analyses shouldbe considered as an alternative to investment in ex-pensive equipment with high annual operatingand maintenance costs.

But more than the inadequacy, the diagnostic ca-pacity of CIS countries is inconsistent with the stan-dards system required by the international tradingsystem: the CIS laboratories are designed andequipped to test GOST-based standards. To facili-tate trade with countries outside CIS, lab infra-structure, equipment, and methods must beadjusted to new requirements.

Surveillance of diseases

Surveillance and diagnostic capacity go hand-in-hand when determining a country’s status in termsof food safety and animal and plant health. As es-tablished by the former central government (andmaintained by the individual countries), the CIScountries usually have a network of epidemiologi-cal stations at the district or city levels to monitoroccurrences of food- and water-borne diseases.34

• At the local level, individual cases are regis-tered and investigated by local public healthauthorities. In Armenia, local hygienic andepidemiological centers have microbiologicallabs to perform confirmation tests. (Some cen-ters have chemical labs as well.)



• Some CIS countries have regional centers re-sponsible for regional strategies and the out-break management.

• The ministries of public health, the policy-making agencies at the national level, are no-tified in cases of outbreaks.

In Moldova, a separate and overlapping systemmonitors for salmonellosis under the StateVeterinary Service and the State SanitarySurveillance (the latter covers the food industry).

Technical skills

Another legacy from Soviet days is the emphasis ontechnology; thus, CIS countries have a strongertechnical infrastructure and more skilled humanresources than do most developing countries(Frienkman, Polyakov, and Raveneso 2004). Thetechnology and equipment needed for the tests per-formed in a WTO-based system, however, differfrom those available, and retooling and retrainingwould be necessary to equip and acquaint the stafffor these new methodologies.

THE PRIVATE SECTOROne legacy of Soviet-era economic planning is thedominance of public agencies and the weakness ofcivil society organizations. With regard to food safetyand agricultural health, this has led to over-relianceon government regulation and inspection, with thestate providing food of low, undifferentiated quality

with little consumer input. The private sector, only inits second decade of existence, is still engaged in re-habilitating, rebuilding, or building new enterprisesin a physical and managerial sense. Civil society isonly beginning to make its voice heard.

Stakeholder consultation and participation

The integrated safeguarding system and the farm-to-table concept of the international system empha-size the vital importance of including all players inthe food chain, from the agricultural inputproviders, farmers and processors, to consumers.SPS management is not the sole responsibility of thepublic sector; indeed, a more efficient and respon-sive system can be achieved through effective co-operation between the public and private sectors.As indicated above, it is preferable that the privatesector in market economies have primary responsi-bility for food safety compliance and that govern-ment agencies retain responsibility for oversightand for issues the private sector cannot address.

Government assumption of the dominant role infood safety inspection and certification is ineffec-tive and often too costly. A public sector persistingin a command and control mode will find it ex-tremely difficult to set priorities and mobilize theprivate sector and public opinion. It is also ex-tremely difficult to develop trust through one-waycommunication. The public sector’s role goes farbeyond inspection. It includes ensuring transpar-ent implementation of legislation and regulations;the provision of public goods, such as complemen-

Box 14 Streamlining Kazakhstan’s Veterinary Laboratories

A World Bank report on Kazakhstan’s livestock sectornotes that the country’s veterinary system has 44 zonaland 152 rayon laboratories and small market laborato-ries, a figure considered “excessive.” The report rec-ommends that Kazakhstan streamline its veterinary labservices by taking the following measures:

1. Review the caseload and cost structure of varioustypes of labs to gauge their accessibility and viability;

2. Clearly define the role of state, institute, and privatelaboratories in providing public and private services;

3. Develop guidelines on minimal lab standardsand cost recovery;

4. Reduce the number of laboratories while im-proving the capacity of the service; and

5. Expand lab quality control programs, includingISO 17025 and the associated good laboratorypractices (GLP).

The report emphasizes the need to consider cost-ef-fectiveness when reforming a lab system. For instance,given the low labor cost and long distance betweenfarms in Kazakhstan, a labor-intensive and widely dis-tributed diagnostic system would be more cost-effec-tive and offer easier access than would one withmodern, automated equipment.

Source: World Bank 2004b.

tary infrastructure for certification, transport,telecommunications, and energy; and the develop-ment of human skills (World Bank 2003).

Specialized private enterprises may providefood safety services to the food industry, includingproduct testing and certification, which in CIScountries are often provided by government agen-cies or their affiliates. Private provision is morecost-effective from a public expenditure perspec-tive. Moreover, improvements regarding import-export trade rule compliance issues and the equallythorny questions of domestic market regulation re-quire that all parties come to the table.

Consumer groups also have important roles inthe food safety system. They act as watchdogs alertfor food safety problems and augment the scope ofgovernment monitoring and surveillance pro-grams. Due to their political legacies, the CIS coun-tries, generally speaking, do not have many activecivil society groups, and government agenciesdon’t have much established contact with them.35

With the growing awareness of consumer rights,however, it is likely that more groups will form andthat they will seek a louder voice on matters of con-sumer protection, including food safety. Theyshould become integral partners in stakeholderconsultations on food safety policies, and theyshould be encouraged to monitor the performanceof government agencies and private businesses,thus improving their accountability.

Private sector capacities

As agricultural production in the region continuesto grow and becomes more and more open to for-eign competition as a result of WTO membership,the market for agricultural products is likely tochange. To participate in modern supply chains,small- and medium-scale producers will need thecapacity to produce foods that meet high qualityand safety standards. As in other countries, familyfarms in CIS can be competitive and develop overtime into small commercial farms (box 15).Supportive policies will be needed to encourageand facilitate the formation of producer organiza-tions both to reduce transaction costs and tostrengthen marketing capacities. This will be par-ticularly challenging in a region in which people re-call bad experiences with cooperatives andcollective farms and in which many public serviceofficers developed their experience and skill in thecontext of the large state and cooperative farms ofa planned economy.

With the privatization of state-owned enter-prises, many production and processing facilitiesmoved into private hands. The new owners, how-ever, often acquired degraded physical facilitiesand plant designs dating back to the 1960s (see box16). Many of these new owners are also unfamiliarwith modern codes of industrial sanitation and hy-giene and lack knowledge of the basic require-ments for use of HACCP approaches to food safetymanagement.

Infrastructure constraints

As discussed earlier, the widespread infrastructurebreakdown in CIS countries after transition has cre-ated additional difficulties for food safety manage-ment and has borne heavily on public health.Generally, greater access to improved water supplyand sanitation should lead to a decrease in food-and water-borne diseases. It would also reduce thecost to individual companies of developing theirown expensive water supply and sanitation sys-tems to meet national or international standards.Under current conditions, however, meeting pub-lic international standards, and those of privateclients, will almost always require CIS food pro-cessing firms to make substantial investments inthese two areas.

Progress is being made on the water supply andsanitation front, but in most CIS countries the in-vestment costs for rehabilitation and moderniza-tion are huge, and operations and maintenance arealso expensive. Poorer states have great difficultiesgathering the financial resources for such an in-vestment. Bilateral and multilateral donors pro-vide support in this regard, but the rate ofinvestment does not seem to have caught up withthe need.

Food safety management and coordinatedsupply chains

Modern agricultural product marketing is increas-ingly characterized by the development of coordi-nated supply chains. Large supermarket chainsand agro-food processors, to assure a steady andreliable supply of goods or raw materials that meettheir quality standards, often engage in variousarrangements with suppliers, traders, and produc-ers rather than rely on the traditional wholesalemarket to meet their sourcing needs. Comparedwith on-spot transactions, coordinated supplychains enable retailers and processors to obtain acertain level of control over the quality, safety,



quantity, consistency, and delivery schedule ofproducts (Van der Meer 2006).

Transition economies in Europe and CentralAsia have witnessed rapid supply-chain develop-ment in the agro-food sector since the collapse ofthe Soviet bloc. A recent World Bank study (WorldBank 2005d) reveals relatively more complex verti-cal integration arrangements in the transitioneconomies of Europe and Central Asia than in theindustrial countries and low-income developingcountries. At the end of the 1990s, 80 percent of thecorporate farms that dominated commercial farmproduction in the Czech Republic, Slovakia, andHungary sold crops on contract, and 60 to 85 per-cent sold animal products on contract.36 A surveyof food processors in five CIS countries (Armenia,Georgia, Moldova, the Russian Federation, and

Ukraine) found that the share of companies usingcontracts with suppliers grew from slightly overone-third of the total samples selected for the studyin 1997 to almost three-fourths by 2003.

Food safety management is often integratedwith general quality management throughout thecoordinated supply chains. As part of a contract orarrangement with dairy farmers, for example,dairy processors sometimes aid food safety man-agement by investing in milking equipment andmilk cooling tanks. In other subsectors, processorsmight provide producers with agricultural inputssuch as feed, veterinary drugs, fertilizers, and pes-ticides. Technical advice, including veterinary ser-vices, and monitoring and supervision of theproduction process can also be part of sucharrangements. Box 17 illustrates how the establish-

Box 15 Small Farms, Food Safety, Agricultural Health, and Competitiveness

Small family farms dominate much of the world’s agri-cultural production. They provide income and em-ployment for farming families, often functioning aseconomic safety nets as, in many cases, farm house-holds earn part of their income from outside sources.In the process of economic development, some farm-ers improve technology, specialize, and increase theirincome: they commercialize. Other farm familiesdraw an increasing part of their income from other op-portunities, and if no successor steps in the farm willultimately be given up and the land transferred to ex-panding commercial farmers.

Small farms are often efficient producers, but theyare weak in applying new technology and marketing.They are also vulnerable to contagious pest and dis-ease hazards. For many functions they are dependenton services provided by the private enterprises and bygovernment. There is a general need for governmentmonitoring, while taking into consideration character-istics of small farms, to detect potential hazards fromplant pests, animal diseases, environmental pollution,and unsafe pesticides.

The type of support needed depends partly on theproducts grown and partly on the markets. Some fruitand vegetables and animal and fish products are sensi-tive to conditions affecting food safety and plant and

animal health, and require much care, whereas otherproducts, such as grains, are not very sensitive. As ex-plained in chapter 2 and illustrated in box 4, privatecompanies play a relatively strong role in assistingsmall farms with technology, marketing, and safe-guarding quality and safety in the export market seg-ment. In the emerging urban market segment, theirrole is smaller, and in the traditional local markets it isusually insignificant. Government support for smallfarms should be differentiated by market segment andby product sensitivity. Government should encouragethe private sector and farmer groups to use good agri-cultural practice with the aim of producing safe foodand preventing pest and disease hazards, supplement-ing the private sector role in the three market seg-ments, as described in box 4.

The experience of OECD countries and developingeconomies shows that with good government policies,an agricultural sector consisting of family farms hasmany opportunities for growth and for achieving sus-tainable production (World Bank 2007, forthcoming).Small farms can very well produce safe food of goodquality while effectively safeguarding animal andplant health. What they require to do so are servicestailored to the specific needs of the health hazards andquality risks faced by the different groups of farms.


ment of a coordinated supply chain in Poland hasled to improvements in milk quality.

Foreign direct investment plays an importantand unique role in supply-chain development inCEE and CIS countries. The creation of coordinatedsupply chains requires financial resources, markets,and technology, for which, in many cases, foreigninvestors offer advantages. Foreign investors oftenbring with them advanced technology, equipmentand quality management systems. Companies withstrong export orientations will introduce foreign orinternational quality and safety standards, whichcannot be readily introduced using domestic publicand private support systems. Institutional innova-tion (such as contractual arrangements with farm-

ers and local cooperatives) has strong demonstra-tive and spillover effects, as the ICC-Paslek examplein box 17 shows. This means that investment cli-mate conditions can have important effects on agri-cultural modernization.

As experiences in the industrial countries andthe fast-moving transition economies of Centraland Eastern Europe have shown, coordinated sup-ply chains provide an effective mechanism for foodsafety control; their development should thereforebe encouraged and facilitated by appropriate gov-ernment policies. For coordinated supply chains tofunction smoothly, one crucial investment climatefactor, not yet available in most CIS countries, is ef-fective contract enforcement. Gataulina et al. (2005)


Box 16 The Private Sector in Armenia

Facility improvement Many fresh and processed food companies in Armenialack the infrastructure and organization needed tomeet the basic requirements for good manufacturingpractices (GMP) as recognized in the European Unionor the United States (World Bank 2007a). Many oc-cupy obsolete buildings with poor layouts, insufficientwater supplies, and inadequate toilet and sanitary fa-cilities for workers; in general terms, these facilitieswere not designed with solid and liquid waste man-agement as a fundamental criterion. A 2004 survey offood processing companies of all types found less thana handful that could meet ISO or HACCP certificationrequirements (Deeb and Graf 2004). Most of thesefirms use an incremental approach, however, improv-ing their facilities, equipment, and practices as theirbusiness volumes grow. During visits to some of thesame firms in early 2005, it was clear that a number ofthe export-oriented firms had improved their facilitiesand were accelerating their efforts to comply withpublic and private standards.

Veterinary functions The problem of a decline in the surveillance and inter-vention capacity of the government due to a major re-duction in the number of veterinarians and veterinarytechnicians has been met by the private sector, whichhas hired its own veterinarians and veterinary techni-

cians. Private operators in the Armenian commercialpoultry industry operate essentially independently ofstate veterinary services. They hire veterinarians andveterinary assistants, carry out their own monitoringprograms using ELISA (enzyme-linked immunosorbentassays) in their own mini-labs, vaccinate their own an-imals, and engage international experts to solve pro-duction and disease management issues.

The dairy and cheese processors have greater inter-action with the public veterinary service. They take ad-vantage of public services (testing and vaccination)when available, but they do not rely on them, given thenumber of endemic diseases and the uncertainties inthe amount and timing of public finance to supportpublic services. The dairy processors and cooperativeshave developed a program of intensive veterinary su-pervision to ensure the safety and quality of their rawmilk supply. Larger processors hire their own veterinari-ans and assistants and provide weekly services to theirsuppliers on small farms and cooperatives. Mostprocessors require their veterinary staff to work regu-larly with producers on inspection and milking hy-giene. Some small-volume processors top up thesalaries of local state veterinary inspectors to increasethe number of farm visits from twice yearly to monthly.In addition, quality controls are enforced by formal andinformal contracts with farmers that allow rejection oflow-quality milk and premiums for higher quality.

Source: World Bank 2007a.


observe, for example, that vertical integration in theRussian Federation’s agricultural sector has takenplace mainly through the creation of agro-holdingsand agro-firms supported by the authorities, whileintegration based on contractual arrangements arenot widespread due to poor legislation and thehigh transaction costs of contract execution.

One concern raised by researchers and policy-makers regarding the development of modern sup-ply chains is the ability of small producers toparticipate. For supply-chain leaders, dealing withsmall-scale producers often involves higher trans-action costs than does dealing with a small numberof large farms. Moreover, small producers oftenhave difficulty meeting quality, consistency, andsafety standards. As a result, they are more likely tobe excluded from such supply chains. Even if theyhave no problem meeting requirements and do par-ticipate, small producers have very little bargainingpower when dealing with large buyers, and theirbenefit from participation may be small. In the ex-perience of the Central and Eastern European andformer Soviet Union countries, however, no strongempirical evidence has emerged to corroborate thisargument, partly because it is still a supplier’s mar-ket for quality agro-food products in this region andin some cases processors have no choice but to workwith small producers, who represent the vast ma-

jority of the supply base (Csaki, Frogacs, andKovacs 2004; World Bank 2005d). This does notmean that all or most small producers can and doparticipate in such supply chains, however. Manysmallholder farms, created as a result of land priva-tization programs, operate for subsistence pur-poses, and commercial farming through investmentand adoption of new technology is not a priority formany smallholders. Nonetheless, many dairy facto-ries, wineries, food processors, and vegetable ex-porters have successfully established coordinatedsupply chains with small-scale producers and makegood use of their production efficiency (World Bank2005d).

REGIONAL COOPERATIONRegional cooperation and coordination is impor-tant to effective food safety and agricultural healthmanagement. This is true not only for the CIS, butalso for countries in other parts of the world. InSoutheast Asia, for example, many efforts are madeto address SPS problems at the regional level (seebox 18). This approach works because countries inthe same region, with similar agro-ecosystems andproducts and agricultural practices, often experi-ence similar animal and plant health and foodsafety problems.

Box 17 Milk Quality and Safety Improvement in a Dairy Supply Chain in Poland

In 1994, Land O’Lakes, a U.S. company, entered into a50–50 joint venture with a Polish dairy cooperative inPaslek, forming International Cheese Company–Paslek(ICC-Paslek). In the beginning, the milk supplied by thecoop’s farms—as everywhere in the region—was poor.Its shelf life was consequently very short, and the rangeof products it could be used for was constrained. ICC-Paslek developed a strategy to improve raw milk qual-ity. The cooperatives supplying its milk were requiredto install cooling tanks at milk collection points, andthe company invested in agricultural extension to raisefarmers’ awareness of the importance of milk qualityand teach them basic milk handling hygiene. ICC-Paslek also required germ count and cell count tests inaccordance with standards applied in the EU. Farmers

could have their milk tested for antibiotic residues freeof charge in the company’s laboratory, an especiallyimportant step to ensure no residues were left in themilk after the cows were given antibiotics for certaindiseases.

The practices instituted by ICC-Paslek provided anexample of an effective quality and safety improve-ment program. Very soon, other dairy companies inthe region were copying these practices, and milkquality improved throughout the region in the fol-lowing years. For most dairy companies in the re-gion, the share of extra-class milk (the highest qualityby EU standards) in total deliveries rose from lessthan 50 percent in the mid-1990s to over 80 percentin 2001.

Source: Dries and Noev 2005.

The CIS countries have an additional incentiveto seek regional coordination: they share the legacyof the GOST system and currently face the commonchallenge of reform; all will benefit from a timelyexchange of information and experiences.Coordination will also give them a stronger voicein the WTO and the international standards settingbodies, Codex, IPPC, and OIE.

Given the massive investment and high techni-cal capacity requirement for effectively managingfood safety and agricultural health, a regional ap-proach should be considered wherever appropri-ate. It could be cost-effective to design andimplement some projects and activities at the re-gional or subregional level (such as for theCaucasian and Central Asia regions).

Potential areas in which regional resource shar-ing might be beneficial include the following:

• Harmonization of standards At present CIScountries share many standards, which facili-

tates trade. This could be maintained by har-monization of the adoption of internationalstandards.

• Border control and quarantine measuresCooperation in this area could increase effec-tiveness and reduce costs.

• Monitoring, surveillance, and contingency plansControl of animal and plant diseases withcross-boundary spread requires cooperationin surveillance and control measures. For in-stance, it would be highly desirable to haveregional contingency plans for possible dis-ease outbreaks or a regional rapid-alert sys-tem for certain food safety hazards.

• Risk assessment While capacity for science-based risk assessment should be built up inCIS countries, it is not necessary for eachcountry to have its own strong risk assess-ment capacity. The smaller, poorer countriescould rely on regional resources for risk as-sessment needs or pool resources.


Box 18 Regional Cooperation in Southeast Asia

The Southeast Asian countries share similar agro-cli-matic conditions and SPS challenges. With supportfrom bilateral and multilateral donors, they have sig-nificantly strengthened regional cooperation and coor-dination in the SPS field in recent years, with most ofthis effort carried out through the Association of theSoutheast Asian Nations (ASEAN).

The ASEAN Cooperation in Food, Agriculture andForestry seeks to improve the effectiveness of pest andanimal disease control and to facilitate agriculturaltrade. Its activities include harmonization of quaran-tine procedures and MRLs for pesticides residues; de-velopment of a shared pest database; creation ofregional protocols for pest surveys; establishment ofregional FMD-free zones; development of equivalentanimal disease diagnostic technique among membercountries; formulation of common positions in Codex;and harmonization of ASEAN regulatory standardsusing Codex standards when appropriate.

The ASEAN Cooperation on Health Developmentprepared an ASEAN Food Safety Plan to map out ac-tivities for regional cooperation, including developinga model food legislative framework and farm-to-table

guidelines; sharing technical expertise; establishing alaboratory network; harmonizing diagnostic tech-niques; developing training programs for food inspec-tors and handlers; and promoting HACCP in smallbusinesses, among other efforts.

The ASEAN Consultative Committee on Standardsand Quality is involved with metrology, conformityassessment, and mutual recognition arrangements.One of its ongoing projects is the development of mu-tual recognition arrangements in various areas and thecompilation of accredited laboratories. A workinggroup on accreditation and conformity assessmentunder this committee is also assisting in capacitybuilding on accreditation and conformity assessmentfor the poorer countries of the region, such asCambodia, Lao PDR, and Myanmar.

An ASEAN Food Safety Network was created to fa-cilitate information sharing. The website (www.asean-foodsafetynetwork.net) provides information on theSPS measures of major trading partners and on issuesraised by international standards setting bodies, aswell as on the work of various ASEAN bodies relatedto food safety.

Source: World Bank 2007c.


• Reference laboratories While each country mayfeel tempted to upgrade its own food safety,veterinary, and plant health laboratory sys-tems, modern, sophisticated lab equipment isextremely expensive, and the operation of suchlabs requires advanced technical and manage-ment skills. Furthermore, in the smaller coun-tries the work load for such laboratories islikely to be quite limited. For a selective num-ber of expensive tests and diseases, a better op-tion might be to have a few labs to serve asregional or subregional reference labs. TheFederal Center for Animal Health of theRussian Federation, for example, serves as theOIE Regional Reference Laboratory for footand mouth disease for Eastern Europe, CentralAsia, and Transcaucasia.

In addition, many food safety and quality man-agement services for the private sector (producers,processors, and retailers), such as training, consult-ing, testing, and certification, could also be used byclients from other countries in the region. For in-stance, the International Institute for Food Safetyand Quality in Kiev, established with USAID sup-port in 2002, plays an active role in HACCP train-ing not only in Ukraine, but also in other countriesin the region, such as Azerbaijan, Georgia, andMoldova.

COSTS AND BENEFITSThe benefits derived from improved food safetyand agricultural health systems are numerous.Economic benefits include better market access,greater agricultural productivity due to mitigateddamage from plant pests and animal diseases, andthe improved well-being of the populace resultingfrom consumption of safer food. Improved foodsafety and agricultural health and improved mar-ket access contribute to reaching MillenniumDevelopment Goals 1, 4, and 5:

• MDG 1: “eradication of extreme poverty andhunger” through increased income growthfor farmers and workers in the agro-food sys-tems and safer food for consumers; and

• MDG 4 and 5: “reduce child mortality” and“improve maternal health” through saferfood.

Losses in agricultural production and produc-tivity will be reduced. Rejection and destruction ofexported products and bans in export markets will

be averted or reduced due to the diminished likeli-hood of outbreaks of pests or diseases in livestockor crops. The risk will be reduced of bans on live-stock and meat products due to animal disease out-breaks and the breakdown or failure of SPS controlsystems, including undetected prohibited levels ofveterinary pharmaceuticals or pesticide residues;undetected insect pests in fresh flowers, fruits, andvegetables; and inaccurate or falsified veterinary orphytosanitary certificates. These benefits to well-being and of reduced or avoided losses, however,are not easily perceived or quantified; moreover,the benefits to health and productivity, in particu-lar, are not realized at once but accrue (and are evencompounded) over time. In contrast, costs are,more often, immediate and tangible.

Compliance with public and private food safetyand SPS requirements in export markets poses achallenge, especially to small, low-income coun-tries (World Bank 2005b). These countries oftenhave constrained financial resources, technicalskills, and institutional and legislative infrastruc-ture that make it difficult for them to comply orprove conformity with these standards. Meetingthe modern SPS requirements is made more diffi-cult for low-income transition countries because ofthe necessity of maintaining dual capacities, at leastin the interim. Instituting the entire range of foodsafety and SPS functions—surveillance and moni-toring, diagnosis, risk management, legislation,and institution building—incurs significant costs.

The basic categories for public sector policy set-ting and investment may include the following:

• modifying or developing laws, regulations,standards, and enforcement procedures

• developing risk assessment or risk evaluationcapacity

• developing or improving programs for moni-toring, surveillance, and inspection

• consolidating laboratories and building up di-agnostic capacity

• reinforcing border inspection posts by im-proving animal and plant quarantine facilitiesand practices

• improving emergency response capacity• expanding capacity or services to treat, de-

stroy, and dispose of infested or diseased foodproducts, livestock, and plant materials

• improving communication and educationprograms

• addressing infrastructural deficiencies affect-ing food safety, such as deficiencies in water

and sanitation, poor transport, and lack ofcold chains

• supporting the elimination of bottlenecks toprivate-sector compliance, such as develop-ing GAP, introducing quality and safety man-agement systems (ISO standards andHACCP), and improving supply chain coor-dination.

The public sector has a responsibility in theseareas, but that does not mean it must cover all costsand carry out all activities. Many activities can becarried out by the private sector with public sectorsupport, including, where relevant, oversight andco-funding.

The breadth and magnitude of the changesneeded will determine the public-sector invest-ment cost of regulatory and enforcement reform.Recent World Bank research on the costs of com-pliance has focused primarily on the adjustmentsmade by developing countries to capture or main-tain market share for specific higher-value prod-ucts in high-value markets (World Bank 2005c).The research suggests that for selected export sup-ply chains total (public and private) investments tocomply with specific international SPS standards ison the order of 0.5 to 5 percent of the value of ex-port trade, with subsequent annual maintenancecosts of about 1 to 3 percent of annual export sales.Also, the World Bank has provided assistance forthe preparation of national SPS strategies and costsfor the short and medium terms (see box 19).

CIS countries, however, incur an additional setof costs from maintaining transposed GOST regu-

lations and procedures and adapting to the GOST-R regulatory requirements of the largest regionalmarket, the Russian Federation. Also, they face dif-ferent sectoral challenges as they converge towardWTO or EU standards on selected extraregionalmarkets. With the exception of new investments,their industries’ basic facilities do not meet inter-national standards. And, many people in govern-ment and industry lack foreign language skills andthe training in up-to-date technology needed to en-gage extra-regional partners and clients, leading toadditional lags and costs in regulatory and en-forcement upgrades. In light of these shortcomings,the public investment needed to shift to systemsbased on international standards for food safetyand agricultural health may be higher in CIS statesthan in developing countries with market economytraditions. Yet, given the poor state of private sec-tor facilities, private-sector investment costs maybe many times greater than public investmentcosts. A study by Deeb and Graf (2004) in Armeniarevealed major deficiencies even in leading foodenterprises (see box 16). In many cases, buildingsand equipment must be replaced to meet goodmanufacturing practices for hygiene.

Cost-benefits assessments

Estimating the costs and benefits of investing inSPS capacity building is methodologically and em-pirically very complicated, especially at the na-tional level (see appendix 6). Nevertheless, it isimportant to show under what conditions benefitswill cover costs. A model was made using assumed


Box 19 Cost of Capacity Building for SPS Management

Action plans to build SPS capacity have been pre-pared for Vietnam and Lao PDR and were adopted bytheir governments (see appendix 6). Action plans havealso been recommended for Moldova and Armenia.Estimations have been made of the costs to the publicsector, which include technical assistance, training orworkshops, and equipment and supplies. The esti-mated costs for SPS capacity building are US$9.7 mil-lion for Moldova, US$7.7 million each for Armeniaand Lao PDR, and US$53.8 million for Vietnam, rep-

resenting 0.5 to 3 percent of their respective agricul-tural GDP. For Lao PDR and Armenia, the biggestshare of the budget is allocated for technical assis-tance, followed by equipment and supplies for diag-nostic capacity. Moldova’s biggest allocation coversequipment and supplies for the laboratory system andborder control. For Vietnam, the biggest shares go todiagnostics and surveillance. Funding for these recom-mendations would come from government resourcesand from donors and international agencies.



benefits to simulate rates of return. The modelserves two purposes:

1. to encourage practitioners to make further ef-forts to estimate costs and benefits; and

2. to provide a framework for decision makersshowing the benefits assumptions that willcover costs.

For Armenia and Moldova, modest assumptionsabout benefits result in rates of return to public in-vestment ranging between 11 and 18 percent. InLao PDR, where human health costs of unsafe foodand water are relatively high, much higher returnsare possible if the proposed investments have aproportionately equal impact on food- and water-borne diseases.

Costs of institutional restructuring

The transition from GOST-based to WTO-compli-ant systems will require increased public invest-ment because, at least initially, two food safety andregulatory systems will be operating and becauseinvestment will be needed to rewrite laws and stan-dards, upgrade facilities and equipment, train staff,and adopt operating methods. CIS governmentsand the private sector can mobilize some savingsby abolishing redundant and low priority inspec-tions, retiring redundant capacities, and shifting toa system based on WTO principles. If the restruc-turing experience of high-income countries is an in-dicator, consolidation of food safety andagricultural health services can lead to substantialsavings. Cost savings from institutional restructur-ing in Canada (as discussed in box 12), for example,were expected to amount to about US$29 million(13 percent of its food safety budget) against start-up costs of about US$17 million (about 7 percent) tosupport reorganization and consolidation (GAO1999). A later review, however, showed annualsavings were more in the 10 percent range duringthe transition years (GAO 2005). In OECD coun-tries that have consolidated their food safety in-spection institutions, government and industrystakeholders most frequently cited the followingimprovements as helping to save costs:

• Improved service delivery by providing asingle contact for consumers and industryclients

• More consistent or timely enforcement offood safety laws and regulations

• Clearer responsibilities and reduced gaps inoversight

• Streamlined communications• Increased coordination among entities in-

volved in food safety• Reduced overlap in inspections• Frequency of inspections determined by risk• Improved accountability and transparency• Unified position for dealing with interna-

tional organizations or trading partners• Improved information systems. (GAO 2005)

While some of these benefits could accrue fromconsolidating food safety agencies in the CIS, theywould not contribute substantially to the massiverestructuring and upgrading needed to bring bothgovernment and private sector capacities up to parwith international standards for food safety andagricultural health. Many CIS states have alreadyreduced staff in their agriculture and health min-istries in line with reductions in overall state bud-gets. None of the CIS countries, however, hasundertaken fundamental reform or consolidationof its food safety and agricultural health institu-tions. Until fundamental reforms are made, juris-dictional authority and budget availability, not riskassessment or risk evaluation, will drive foodsafety regulation and enforcement.

Also, it seems likely that, until the RussianFederation is admitted as a WTO member, strongnational incentives will lead the CIS countries tomaintain GOST-based systems to maintain tradewith the Russian Federation and with the other CISstates. This suggests that the public sector is un-likely to realize any net budgetary cost savings,compared to current expenditure, as long as theyrun parallel or mixed GOST-based and interna-tional systems.

Similar to the effect in OECD countries, butproportionately more important, the CIS states’efforts to streamline and rationalize public rolesshould also result in savings in operating costs toprivate firms. These savings would follow fromabolishing redundant inspections and certifica-tions, reducing the cost of communication byeliminating agencies with overlapping concerns,improving the consistency of communicationfrom government on key regulatory issues, andreducing corruption through improved account-ability and transparency.

Sequencing reforms

The effectiveness of SPS investments dependsheavily on the sequence of their introduction.Laws, regulations, training, laboratories, and

quarantine facilities are to some extent a precon-dition for guarding food safety, for conductinginspections, for achieving market access for cer-tain products, and for making private effortsmore profitable. Yet, investments in the morebasic capacities may be wasted if private sectoreconomic activity and public sector implementa-tion efforts do not follow. The scope for discon-nect between investments and needs is great, andsome policy effort is required to avoid it. ActionPlans should indicate, however provisionally, thenecessary sequence of investments, but as plansare implemented, these sequences should be fine-tuned to reflect emerging needs and assessmentsof cost effectiveness.

Distribution of costs and benefits

As would be expected, most inspection and sur-veillance costs are incurred by the public sector,primarily due to the public goods nature of most ofthe required interventions, and most investmentand operational costs are incurred by the privatesector. The agricultural production sector derivesagricultural health benefits from both increasedproductivity and reduced disease control costs. Thedomestic populace gains from improved foodsafety, but it may encounter higher prices if pro-ducers and processors shift certain costs to con-sumers. More considerable benefits from marketaccess accrue to the commercial subsector, justify-ing the need for the greater involvement of privateenterprises, all the more so because of the limitedresources of the public sector.

On a smaller scale, different parties will gainfrom different interventions. Incidence of foot andmouth disease adversely impacts trade, for exam-ple, and thus more greatly affects the commerciallivestock sector, exports, and national economies;FMD is of lesser interest to smallholders, who aremore concerned with diseases affecting productiv-ity, such as caprine arthritic encephalitis. Improveddelivery of livestock services will benefit both largeand smallholders, but the focus of interventions de-pends on market access and the priorities of the na-tional government.

Options, costs, and trade-offs

Considering the substantial costs of the transitionprocess, policy makers must take into account thedirect or indirect impact of the changes on othersectors (including second-round effects, possiblyon prices) and the opportunity costs of the funds

used, weighing the impacts of actions that mayfavor one sector while hurting another.

The national income levels of CIS countries aremuch lower than those of the European Unionmember states. Full adoption of EU food safety andagricultural health regulations, as proposed bysome politicians in CIS countries, would force outof business a number of producers and processorsunable to meet the higher requirements. Thiswould increase the cost of food production, withmajor implications for consumers, particularly thepoor. Any interventions requiring large invest-ments by and imposing costs on smaller firmsshould be implemented only gradually, andsmaller firms should be allowed longer periods forimplementation.

• Gathering and analyzing relevant health in-formation for surveillance and monitoringwill provide input for government healthstrategies, but it is costly and must beweighed against investments in preventiveand curative care, such as the purchase andadministration of vaccines, drugs, and criticalfood supplements.

• The critical question for both public policy-makers and private investors is how to ensurethat food safety and agricultural health in-vestments are made in industries and prod-ucts that confer a comparative advantage ondomestic and export markets and that willyield substantial benefits over the near andmedium terms. Countries must be selective intheir investments. Moldova, for example, canonly meet EU import requirements on meatproducts if it achieves CSF-free status, whichwould require a change in the management ofswine, including increased surveillance ofwild boars, better operating guidelines, and afinancial plan to support disease surveillance,animal destruction, and slaughter. The coun-try would also need strong controls on im-ported pork and viscera, raw materialcurrently used by ham and sausage proces-sors. The costs of these activities could well betoo high for a relatively small domestic in-dustry with limited export potential and for adisease with no risk to food safety and humanhealth.

• Laboratories in CIS countries require substan-tial improvements in both facilities and equip-ment, but rebuilding and re-equipping all



laboratories is not practical. Expenses couldbe reduced by using a phased strategy forpublic laboratory modernization based on as-sessments of actual and projected diagnosticand analytic needs across the food safety andSPS areas and by outsourcing, consolidating,and rationalizing sampling, surveillance, anddiagnostic capacity.

• Because of the huge costs of food safety andagricultural health programs and the limitedavailability of funds, decision making regard-ing program priorities should involve bothrisk assessment or risk evaluation and evalu-ation of costs and benefits. The use of formalrisk assessment procedures, however, also en-tails costs, as it entails specific methodologiescalling for specific skills, training, and data. Inmost countries, the capacity for risk assess-ment is small, but that should not deter poli-cymakers from doing the risk evaluations thatwill make possible sensible, informed deci-sions on projects and priorities. Policymakerscan take into account current (or emerging)risks to food safety (the food- and water-borne diseases having the most significanthealth and economic impacts) and agricul-tural health (the important plant pests or ani-mal diseases requiring surveillance).

• A particular area of investment, with uncertainreturns for CIS countries, is the introduction ofanimal registration and traceability systemssimilar to those used in the European Union(see box 20). The cost of such systems is high,and it is doubtful they could be sustainedgiven the prevailing institutional and bud-getary conditions of the CIS countries. The ben-efits to producers and consumers are probablyvery low, such that investment in alternativeareas could have much more impact on humanand animal health. Unless a country has con-siderable comparative advantage for exportingbeef or pork products to the European Union,costs are likely to exceed benefits.

INTERNATIONAL ASSISTANCE FORFOOD SAFETY ANDAGRICULTURAL HEALTH Many international organizations and bilateraldonors have provided assistance in this broad area,including support for the private sector, foragribusiness, and for rural development.

The Asian Development Bank is an important con-tributor to development in the eight CIS countries inCentral Asia and the Caucasus: Armenia, Azerbaijan,

Box 20 Economics of Animal Identification and Registration, Including Tracing Animals

Animal recording systems are not new, whether usedfor breeding, animal theft prevention, or disease con-trol (Caja et al. 2004). Comprehensive national identi-fication and registration (I&R) systems that includeanimal tracing are mandated in the European Union(EU Council Regulation 1760/2000 for cattle and EC21/2004 for sheep and goats), in part also to adminis-ter their agricultural support systems. I&R systems arealso used in Australia, Canada, Japan, New Zealand,and some Latin American countries (all meat ex-porters). The costs and benefits of these systems arenot well documented, nor is the allocation of theircosts and benefits.

Apart from better farm record keeping and reducedrisks, the benefits of I&R for non-EU farmers derivemainly from a marketing advantage; farmers expect to

gain access to premium market segments and to re-ceive better prices (especially niche producers).Animal health officials see the main benefit as betteranimal disease control and faster, more effective dis-ease eradication. Mandatory I&R would enhance theroles of veterinary services, giving them better controlover animal health; farmers, however, see this as akinto the dominant power given government servicesunder the former state-planned system. The process-ing and marketing sector is ambivalent, depending onthe market segments they serve and the competitionthey face, but exporters expect that I&R will enhanceaccess to major export markets, such as the EuropeanUnion and Japan. Consumers may see lower risk offood hazards but also higher prices. Consumers’views differ between countries in which food safety is

(Box continues on the following page.)


Box 20 Economics of Animal Identification and Registration, Including Tracing Animals (continued)

mainly a consumer responsibility (that is, most low-income countries) and countries in which safeguard-ing food safety through oversight of production andmarkets is considered primarily a government respon-sibility (that is, Europe and North America). Finally, inthe EU acceding countries, animal identification isthe basis for the Common Agricultural Policy subsidypayments.

The costs of I&R to farmers are significant, varyingwidely according to the system used and herd size.Systems with radio frequency identification (RFID) areconsiderably more expensive than those using plasticear tags. Development costs quoted vary, fromUS$0.20 per head of cattle using plastic tags inNamibia (incremental costs only; Paskin 2004) to a re-ported US$30 per animal using RFID in Botswana(Campher 2004). Operating costs can be as low asUS$0.30 per head, as in Namibia (Paskin 2004), or ashigh as US$1.50 per head in Tunisia or US$3 forsheep and goats in Spain (Saa et al. 2005). Costs couldbe higher for small herds. In Slovenia, for example,running costs for identifying cattle are estimated to beequivalent to 150 to 200 liters of milk (Klopcic, Krek,and Osterc 2002) or about US$30–40 at farm-gateprices. RFID systems may be of greater benefit in largeherds. Blasi et al. (2003) calculated the high-end costsof the latter at US$4 per head for herds over 1000heads and over US$20 per head for herds less than100 (beef) cattle. These costs may be reduced with thewider adoption of RFID tools and wider experience inI&R. The costs to the processing and marketing sectormay also be significant, in terms of necessary im-provements to infrastructure and in record keeping.

With such a wide variety of data, cost per kilogramof product clearly varies as well. Paskin (2004) indi-cates that the total cost in Namibia is 0.3 percent oftotal beef production. Schillhorn van Veen calculatedcosts varying between US$0.004–0.008 per liter ofmilk and US$0.15–0.31 per kilogram of beef (see ap-pendix 7). Part of the total gross costs may be coveredby increased efficiencies in the production and supplychain, but the remaining net costs in many cases willbe paid by consumers and taxpayers. These costs ex-clude retracing systems managed by the state in mostcountries and, as such, charged to taxpayers.

The major issues and debates with respect to theeconomics of identification relate to the following:

(i) For countries with poor infrastructure and poor vet-erinary skills and in which proper managementof animal diseases would require a completeoverhaul of veterinary education, diagnostic fa-cilities, and livestock market structures, invest-ment in I&R systems may be a misplacedpriority.

(ii) Countries with informal markets would find imple-mentation difficult, and neither consumers norproducers would perceive a great benefit if I&Rwere to be required for local markets.

(iii) Countries lacking competitiveness in export mar-kets would benefit little from the trade perspec-tive. Benefits will be highest in premium marketsegments for high-income consumers and lowestin countries with low levels of income.

(iv) Countries with non-settled livestock systemswould also find implementation difficult. Currentidentification and retracing systems were devel-oped for European-type livestock systems, inwhich animals are generally confined in set pas-tures or are housed. Tagging and retracing arenot easily adaptable to systems involving largemobile herds, migrating animals, or herds shar-ing housing or pastures, as is the case in manyformer Soviet Union and African countries.

(v) I&R may not automatically render a country’s herdsacceptable in international trade. Having an I&Rsystem in place cannot guarantee undisturbedinternational market access; in a recent bovinespongiform encephalopathy (BSE) episode inCanada, for example, producers lost US$3–4 bil-lion in exports after a single case was found,even though an I&R system was in place and theanimal was rapidly traced (Le Roy, Klein, andKlvacek 2006).

(vi) Cost of enforcement. Enforcement is fairly costly indeveloped countries and may be much higher inpoor countries that lack infrastructure in animalhealth facilities, communication, or safe data-base management. Mandatory systems also tendto carry a greater risk of rent seeking and corrup-tion, further complicating acceptance and en-forcement.

(vii) Significant technical and institutional deficienciesin design, implementation and market participa-tion will lead foreign inspection services to dis-


Georgia, Kazakhstan, Kyrgyz Republic, Tajikistan,Turkmenistan, and Uzbekistan. An initiative on re-gional cooperation focused on transport, trade, andenergy, the Central Asia Regional EconomicCooperation, has as members Afghanistan,Azerbaijan, China, Kazakhstan, Kyrgyz Republic,Mongolia, Tajikistan, and Uzbekistan.

The European Commission has provided signif-icant support for the transition countries (see box21). Assistance intended to support access to EUmarkets invariably includes measures to improvefood safety and the management of veterinary andphytosanitary standards. Aid agencies of EU mem-ber states have also been active in supporting thetransition countries.

FAO, through its Technical CooperationProgram (TCP), has supported a number of pro-jects seeking to improve food safety and agricul-tural health. Projects include assistance inpreparing food safety strategy and action plans,drafting food safety legislation, and training foodcontrol staff for single countries (Azerbaijan) ormultiple countries (Armenia, Georgia, and theSouth Eastern European group that includesMoldova). A project in Ukraine (TCP/UKR/3003)aims to upgrade food safety laboratory and to pro-vide staff training.

USAID has focused on the promotion of privateagribusiness development, giving considerable at-tention to product safety and quality improvementin the food industry, particularly in the western CIScountries of Azerbaijan, Georgia, Moldova, andUkraine. Under the Partnership for Food Industry

Development Project, the International Institute ofFood Safety and Quality has been established inUkraine to serve as a regional center for food safetyand quality management services, particularlyHACCP training.

The World Bank over the past 10 years has car-ried out 40 studies and lending activities in theCIS covering aspects of SPS, including competi-tiveness (see appendix 5). The total amount oflending for SPS to CIS countries is close to US$90million. A relatively large part of these activitiesfocused on Azerbaijan, Kazakhstan, and the fourWTO member countries: Armenia, Georgia,Kyrgyz Republic, and Moldova. Most of the stud-ies were on competitiveness (see table A5-1); oth-ers were on food safety, livestock sectors, and labsconcerned with either food safety or livestockhealth. Most of the lending activities were compo-nents of larger projects on agriculture and com-petitiveness, sometimes with only small SPScomponents for which no separate cost is avail-able (see table A5-2). A major undertaking of theWorld Bank, in coordination with WHO, FAO,and OIE, is the Global Program for AvianInfluenza (GPAI). As of March 2007, investmentstotaling US$35.35 million have been approved forsix CIS countries; additional investments forUkraine and Uzbekistan are in the pipeline. Fourmore SPS-related projects are currently being pre-pared (see table A5-3). The Ukraine project in-volves strengthening its food safety system anddiagnostic capacity. A notable SPS project of olderdate (not listed in appendix 5) was the Standards

Box 20 Economics of Animal Identification and Registration, Including Tracing Animals (continued)

trust the I&R system; the whole system will thenbe useless and not create benefits.

(viii) Without farmer support, successful implementa-tion will be difficult to achieve. If farmers don’tsee a benefit to I&R, they may try to evade its re-quirements, thus undermining the system’s effec-tiveness.

Many developing countries, even those not in-volved in the meat trade, feel they may need to follow

the example of the large trading blocks, even thoughtheir herds are free of the diseases of concern (BSE, forexample) or have diseases of limited economic impor-tance (FMD, for example). Local consumers may notbenefit from I&R if it diverts funds from the control ofdiseases of greater concern for public health (such asbrucellosis, tuberculosis, and so on) or animal dis-eases of real economic importance (such as parasites,mastitis, and others).

Source: Prepared by T. W. Schillhorn van Veen for this report.

Development Project for the Russian Federation(started in 1995 and providing US$24 million).37

The project supported the Russian Federation’saccession to the WTO by contributing to the es-tablishment of the WTO TBT/SPS Enquiry Point,harmonizing more than 500 standards, and up-grading testing centers.

Most donor support seems to have gone to WTOaccession countries—Armenia, Georgia, Kyrgyz

Republic, and Moldova—and to countries thathave pursued economic reforms. The RussianFederation and Ukraine have requested relativelyless support. The Russian Federation, in addition tothe standards development project, only receivedsome technical assistance. For some countries, po-litical issues and lack of economic reform blockedexternal support (FAO 2005b). Currently mostdonor programs, projects, and activities are coun-


Box 21 The European Union and the CIS Countries

The European Union has shown its support of the CIScountries in their political and economic transition invarious forms of assistance. Bilateral relations betweenthe European Union and individual partner countriesare formalized in partnership and cooperation agree-ments (PCAs), which set out the political, economic,and trade relationships between the EU and its partnercountries. Currently, EU PCAs are in force with CIScountries, except for Belarus, Tajikistan, andTurkmenistan.

TACIS (Technical Aid to the Commonwealth ofIndependent States), established by the EU in 1991,provides grants, primarily of financed technical assis-tance, to the twelve CIS countries to support their tran-sition to market economies and democratic societies.Through TACIS, the European Union, together with itsmember states, is the largest provider of technical as-sistance to the CIS countries: €4.2 billion for1991–99, and €3.1 billion for 2000–06. TACIS activi-ties for 2000–06 focused on institutional, legal, andadministrative reforms; social consequences of transi-tion; the private sector; economic development; infra-structure networks; the rural economy; environmentalprotection and management of natural resources; andnuclear safety.

In May 2004, the European Commission introducedthe European Neighborhood Policy (ENP) to reinforcerelations with neighboring and partner countriesthrough cooperation and assistance. The ENP appliesto the EU’s immediate neighbors, including six CIScountries: Armenia, Azerbaijan, Belarus, Georgia,Moldova, and Ukraine. For the Russian Federation,the EU established cooperation within four “common

spaces”— economic; freedom, security and justice;external security; and research and education and cul-ture—under the EU-Russia PCA. As of 2007, financialsupport for ENP partner countries and Russia will beprovided through the European Neighborhood andPartnership Instrument (ENPI) rather than TACIS.About €12 billion is budgeted for period 2007–13,with allocation of funds depending on the individualcountry’s needs and absorption capacity as well as onimplementation of agreed reforms. Of this amount,about €1.2 billion are earmarked for country pro-grams benefiting the six CIS ENP partner countries andthe Russian Federation.

The ENPI will concentrate on sustainable develop-ment, approximation to EU policies and standards,regulatory convergence, institution building, andcross-border cooperation through targeted expert as-sistance and twinning arrangements with EU states’administrations.

A progress report on the ENP in December 2006describing its successes in supporting CIS partners’ re-forms included the following achievements related tofood safety and SPS:

• Partners agreed on priority areas for legislative andregulatory approximation, particularly where thiswill stimulate trade and economic integration.

• EC FVO made an overall assessment visit toUkraine resulting in a country profile to be usedas basis for further cooperation.

• Moldova began to develop an animal identifica-tion and traceability system.

• Partners enhanced their preparedness for possi-ble outbreaks of avian influenza.

Sources: http://ec.europa.eu/comm/external_relations/ceeca/tacis/index.htm; http://ec.europa.eu/world/enp/welcome_en.htm.Notes: The other partner countries in ENP include Algeria, Egypt, Israel, Jordan, Lebanon, Libya, Morocco, Palestinian Authority, Syria, andTunisia.


try-specific, since they are launched in response torequests made by individual governments.

Sustainability

Capacity building for food safety and agriculturalhealth in the context of the WTO SPS agreement is arelatively new area for foreign assistance. Capacitybuilding, in general, is at the core of the develop-ment process, and sustainability depends on manyfactors, but the most important is ownership by thereceiving countries (IEG 2005). The general experi-ence in SPS capacity building for developing andtransition economies alike is that sustainability ofdonor support is less than satisfactory.38

Experiences in CIS countries suggest a few specificfactors contributing to success or failure.

Experiences in EU accession countries showthat strong and sustained guidance from the polit-ical level is an important factor for success. One ofthe weak elements in SPS capacity building inmost CIS countries is that few decision makersfully realize the complexities, reforms, costs, andtime required for the transition from their GOST-based systems to systems based on internationalstandards. In general, understanding at the politi-cal level of the complexities of managing foodsafety and agricultural health is limited, guidanceis insufficient, and ownership for improvementsexists only at the level of services. In such cases, theeffectiveness of improvements is diminished byunresolved legal and institutional constraints.Moreover, the ministries of finance may not pro-vide the necessary follow-up support for funding

operational expenses. Support provided for in-vestment in laboratories and staff training mayhave low impact if the conditions needed for ef-fective use of these improvements are thwarted bylack of legal, regulatory, and institutional reformand sufficient operating budgets.

Most CIS countries lack a comprehensive strat-egy for transition and show little awareness of therequirements for WTO accession and the corre-sponding options vis-à-vis harmonization with theEuropean Union for trading purposes. Since clearnational strategies are lacking, political leadershipis weak with ineffective coordination among agen-cies. Currently, there is much competition betweenministries and agencies. Governments tend to re-quest assistance without having formed a clear vi-sion of what needs to be done and in whatsequence, limiting the effectiveness and sustain-ability of outside support and often resulting in du-plication and waste of resources and effort for boththe donors and the aid recipients. Especially diffi-cult are small projects with limited duration, whichoften ultimately contribute little. Projects targetingparticular improvements may have limited impactif the broader factors affecting sustainability are notsufficiently addressed. In the absence of a strategythe possibility becomes greater that countries willreceive conflicting advice for reform from donors.It is, therefore, important for donors and interna-tional organizations to assist the transitioneconomies to develop a medium- to long-termcomprehensive strategy to guide specific capacitybuilding and investment programs (see box 22).


Box 22 Developing Food Safety and Agricultural Health Action Plans for Lao PDR and Vietnam

Lao People’s Democratic Republic (Lao PDR) andVietnam are two fast-growing developing economiesin Southeast Asia. Both are faced with the challenge ofstrengthening SPS management capacities in their ef-forts to develop agricultural trade and improve domes-tic food safety and agricultural health. In the last fewyears, both countries received support from bilateraland multilateral donor agencies for SPS capacity build-ing, but neither had a clear medium- to long-term strat-egy. In 2005 and 2006, the World Bank worked with awide range of partners in these two countries and de-signed their food safety and agricultural health action

plans. The plans cover a comprehensive list of issuesthat include the public and private sectors, technicalcapacity needs and directions for institutional reform,and domestic food safety management and export-re-lated SPS capacities. These actions plans were adoptedby the respective governments and provide a roadmapfor Lao PDR and Vietnam in their policy design effortsfor managing food safety, agricultural health, and inter-national trade. At the same time, the plans also provideuseful information to external aid agencies and tradingpartners on the countries’ capacity-building needs andpriorities.

Source: World Bank 2007c; World Bank 2006b.

61

CONCLUSIONS

Transition and WTO

1. After the demise of the Soviet Union, the newly independentcountries all chose to replace central economic planning withmarket economy principles. The pace of transition has variedamong countries according to their location, opportunities, andpolitical situation. Change has been relatively rapid in the Balticcountries and relatively slow in several Central Asian countriesand in Belarus. In all countries, institutions typical of the centralplanning system gradually became obsolete and are being re-placed by the institutions required for market economies.

2. The countries’ decisions to integrate into global or regionaltrade systems were basically politically motivated andgrounded in a range of political and economic considerations.Accession to WTO involves many potential benefits, but it alsoentails a commitment to comply with WTO rules and obliga-tions. Sanitary and phytosanitary requirements generally playonly a minor role in decisions on WTO accession, but the bene-fits derived from accession can be significantly affected by gov-ernment and private sector capacities to manage theserequirements.

3. With the economic recovery and transition well underway, it istime for CIS countries to explore new sources of growth andnew challenges in this rapidly changing region. It is also time toconsider how best to modernize and upgrade the testing andquarantine infrastructure, which is generally worn out and in apoor state of maintenance.

Current standards systems

4. CIS countries’ current practice in the SPS field, largely based onthe GOST system of the Soviet Union, is not compliant with theprinciples of the WTO SPS Agreement. A heritage of the centralplanning system, the GOST standards are not based on scientificrisk analysis, lack transparency, and include mandatory qualityparameters that according to WTO rules should be voluntary.Since they are not recognized by the OECD countries, they in-creasingly constrain the ability of the CIS countries to diversifytrading relations.

Conclusions andRecommendations5

5. Although the GOST system provided ade-quate health protection in the Soviet Union’splanned economy, the standards systems aspresently applied provide insufficient protec-tion for human, plant, and animal health. Thelarge number of detailed standards makes itdifficult for the private sector to comply fullyand for government authorities to superviseand enforce. The system’s inflexibility makesprompt response to new and emerging foodsafety and agricultural health threats difficult.Government SPS agencies in small CIS coun-tries cannot keep their skills and facilities upto date due to lack of funding. Moreover, rentseeking and corruption further reduce the ef-fectiveness of control systems.

6. The standards system also constrains thecompetitiveness of the food industry in theCIS countries. The prescriptive nature ofGOST standards stifles innovation; the multi-ple inspections sanctioned by the system re-sult in high costs for the private sector as wellas for the government.

Evolving trends and experiences

7. The target for change of food safety and agri-cultural health systems is a moving one.Management of these systems in OECD coun-tries is changing also. Changes respond inpart to food scares and scandals, greater sen-sitivity of consumers and demand for moretransparency and better protection, and, inpart, to further adjustments in internationalrequirements.

8. Rapid changes in consumer preferences inOECD countries and in high-income urbanareas within CIS pose competitive challengesfor traditional producers and processors thatgo far beyond the application of public foodsafety standards. Increasing numbers of mod-ern food processors and retailers see foodsafety management as a crucial commercialrisk. Competition focuses increasingly on im-proved safety and quality, consistency, suffi-cient volume, and scheduled delivery.Enterprises try to control their supply chainsby combining food safety management withquality control and improved logistics, includ-ing application of good agricultural practice(GAP), good manufacturing practice (GMP),and, increasingly, independent certification.

9. Small family farms can meet these new chal-lenges. The experiences of OECD, transition,and developing economies show that, withgood policies, an agricultural sector consist-ing of small family farms has ample opportu-nities for growth, poverty reduction, andsustainable production (World Bank 2007,forthcoming). Small farms can very well pro-duce safe food of good quality while effec-tively safeguarding animal and plant health,provided public and private services are ade-quate and closely tailored to the needs of dif-ferent groups of farms.

Main conclusions of this study

10. Transition from GOST-based systems toWTO-compliant systems has proven to bemore complex and difficult to achieve thanexpected. Most experts in food safety, planthealth, and animal health under the formerstate planning systems have never been ex-posed to systems based on international stan-dards. International systems are based onvery different principles, and the expertise,work programs, and equipment needed tooperate them differ widely from those ofGOST. Therefore, a huge amount of difficultwork is involved in making the transition. Itrequires assessing thousands of regulations;comparing them with the principles of Codexand the regulations of other countries, espe-cially of the European Union, abandoning alarge part of the regulations, and replacing therest with rules and regulations compliantwith international systems. At the same time,much of the lab infrastructure and equipmentand the inspection and monitoring programsmust be adjusted and the staff trained. In thecases of Armenia, Georgia, Moldova, andKyrgyz Republic, the question of whethertheir regulatory framework was ready to ben-efit optimally from the WTO SPS agreementdid not receive sufficient attention. Moreover,since the main markets of these countries con-tinue to be CIS countries still operating underGOST-based standards with their mandatoryinspections, they must for some time maintaintwo parallel systems.

11. The ability to make the necessary changes inquality and safety management for access toOECD markets differs widely across the CIS


Conclusions and Recommendations 63

countries. With the exception of the RussianFederation and, perhaps, Ukraine, CIS coun-tries have insufficient human skills and finan-cial resources to achieve a smooth transitionwithin a five-year time span. In the private sec-tor, the modernized processors and retailers inthe Russian Federation and Ukraine are bestprepared to meet requirements of modernconsumer markets. The difficulty of makingthe transformation is clear from the experi-ences of Armenia, Georgia, Kyrgyz Republic,and Moldova. They have not gained anygreater benefit in the SPS area than they couldhave achieved without WTO membership.They still largely lack the capacities necessaryto benefit fully from WTO membership.

12. CIS countries have diverging opportunitiesfor integrating into trade systems outside CIS.The Russian Federation’s comparative advan-tage in agriculture is limited, making it amajor importer. The natural markets forCentral Asian countries are in neighboringareas, such as southern Siberia, China, andSouth Asia, and it is crucial that they meet therequirements of these markets. For them, therequirements of the demanding OECD coun-tries hardly play a role, except for a few prod-ucts. For countries bordering the EuropeanUnion and in the Caucasus, the situation isdifferent. Market diversification offers themreal opportunities for access to better-payingmarket segments. Moreover, they face in-creasing competition in their domestic andtraditional export markets in the RussianFederation and other CIS countries fromcountries that meet high international safetyand quality standards.

13. The Russian Federation’s decision to join theWTO, and its timing, will be a dominant factorfor all CIS countries, because Russia is theirmajor export destination. After the RussianFederation joins the WTO it will need to re-place GOST-based import requirements withthose compliant with the WTO rules. It is im-portant for non-WTO CIS countries to antici-pate these changes and to draw lessons fromthe difficulties encountered by Armenia,Georgia, Kyrgyz Republic, and Moldova inmaking the transition to WTO membership.Consultation and coordination among coun-tries in the region can contribute to a smoothtransition, without disrupting trade.

14. The principles and concepts of the internationalstandards system are still new, if not alien, to thelegislation and regulatory systems of CIS coun-tries, which are far from embracing the conceptthat the private sector should have primary re-sponsibility for food safety compliance. There islittle knowledge about the risk analysis frame-work and, although a basic WTO principle, it isnot applied even by the CIS WTO membercountries. Traceability systems are slowly beingintroduced among leading food companies inCIS, but it will take at least 15 to 20 years beforethey are common in the smaller, poorer CIScountries. Overambitious plans for introducingHACCP and I&R may result in disappointment,indicating the need for a gradual process.

15. A general weakness in most CIS countries isthe lack of understanding among senior poli-cymakers and public sector managers of thescope, timeframe, and size of the process re-quired to change from GOST to internationalstandards. Many people tend to believe themain tasks are writing a new law and adjust-ing laboratory capacities. Few realize the hugeworkload required to write the thousands ofregulations needed to implement the laws,make related adjustments in inspection pro-grams, and reorganize and realign institu-tions. Capacities available for this work aregenerally far short of what is needed.

PRINCIPLES ANDCONSIDERATIONS FOR SPSMANAGEMENT REFORM

Tasks

CIS countries changing their standards systemmust address the following tasks:

• Overhauling laws and regulations com-pletely. This requires many years of work forteams with thorough knowledge of foodsafety, plant health, and animal health regu-lation; international experience; legal skills;and language skills. Prioritization of legisla-tive tasks will focus on market opportunitiesand major health and commercial risks. Therule of law will need to be strengthened andtransparency increased to reduce the discre-tionary powers and rent-seeking opportuni-ties of the implementing agencies.

• Reducing the number of institutions involvedin SPS and quality management, realigningmandates, and abolishing overlaps of respon-sibility. Especially for the smaller countries,consolidating inspection services into a singleagency—the model applied by Lithuania andSlovenia—is an important option, althoughnot the only one (see chapter 4).

• Establishing risk assessment or risk evalua-tion as the basis for SPS policymaking. Formalrisk assessment is demanding in terms of dataand skills. Little expertise in these areas isavailable in the smaller CIS countries andbuilding it up will require a long and sus-tained effort. Less formal “risk evaluation” ofcommodity and hazard combinations can bea good next-best solution, and, in applying it,risk managers will better understand the dataneeded to carry out more formal analysis.

• Overhauling work programs for inspectionand monitoring thoroughly. These programsshould be based on new regulations and pri-oritized on the basis of risks, costs, andbenefits.

• Reorganizing and upgrading testing facilities.Laboratories in CIS countries were built upfor the massive testing required for Soviet-eraGOST conformity assessments and animaldisease surveillance programs. In general, thenumber of facilities is too large; a major con-solidation of infrastructure and functions ishighly desirable and should proceed in paral-lel with major upgrading, modernization, andrefocusing of staff on new tasks.

• Upgrading staff skills and adjusting staff ap-proaches to new tasks in all policy units andservices.

• Upgrading, in parallel with capacity buildingin public sector agencies, private enterprisecapacities in GAP, GMP, quality and safetymanagement, supply-chain management,sanitary practices, infrastructure, and market-ing. Tailored support is needed for small fam-ily farms.

International trends

In changing food safety, animal health, and planthealth management from GOST-based systems tosystems based on international principles, the fol-lowing international trends deserve to be takeninto consideration:

• Risk assessment and analysis of costs andbenefits are the main building blocks for pol-icymaking and for managing food safety andagricultural health, both in government andin private enterprises.

• Separation of public sector functions will pro-mote transparency and help avoid conflicts ofinterest. Policy making should thus be sepa-rated from policy implementation, especiallyinspection, and independent public sectorunits should play roles in auditing and evalu-ation. Separation of risk management (mainlya policy role), risk assessment (mainly a sci-entific role), and risk communication (alsomainly a policy role) will accomplish anotherimportant distinction in responsibilities.

• End-of-pipe control through conformity as-sessment by inspection services is, to a signif-icant extent, being replaced by preventivecontrols throughout the supply chain, forwhich the private sector has the primary re-sponsibility, and the basic responsibility forfood safety has thus shifted to the private sec-tor, with the government taking on oversightand advisory roles.

Political leadership

A smooth and cost-effective transition from aGOST-based system to a WTO-compliant systemrequires guidance from strong political leadershipfrom government. Guidance is needed for initiat-ing consensus building with all stakeholders, forpreparing a clear strategy and implementationplan, and for gaining support from donors andtrading partners. The pending transition involvesmultiple government agencies, and streamliningand consolidation of these agencies is likely to bean inevitable part of reform. Individual agencies inmany CIS countries devote considerable energy tostrengthening their respective institutional man-dates and to competing with other agencies, andmany of those involved will resist any change thataffects their personal or institutional interests.Since solutions will necessarily involve all institu-tions, the need is acute for leadership at a high levelthat provides an all-embracing perspective andvision.

Consultation

Close cooperation among governments, the privatesector, and civil society is a cornerstone for manag-



ing food safety and agricultural health. Most CIScountries require a rebalancing of public sector,private sector, and consumer responsibilities inmanaging food safety and agricultural health. Thecurrent dominance of public agencies is a legacy ofthe central planning system. In OECD countries, asnoted above, primary responsibility for food safetymanagement has shifted to the private sector, andthe government assumes a role of oversight andfinal responsibility. The role of civil society has in-creased as well. Therefore, CIS should focus onpublic-private consultations and on enhancing civilsociety participation, giving these efforts a higherprofile on the agenda for market development andstrengthening SPS systems.

Convergence or harmonization with the EU

Several of the CIS countries have expressed the de-sire to harmonize their standards with the EU.Some of them have even opted for EU accession, al-though chances for accession in the short andmedium terms are limited. Understanding of theoptions and their consequences is limited as well.For the CIS countries, even those intending to jointhe EU, complete harmonization with EU foodsafety and agricultural health legislations is neithernecessary nor, at present, realistic, considering thehigh costs involved. The new EU members re-ceived large-scale financial and technical supportfrom the EU for their accession process. As appen-dix 8 shows, new EU member states received, overa seven-year period, accumulated SAPARD sup-port for agro-processing and marketing of about 18percent of their agricultural GDP in 2000, or €357per person employed in agriculture in 2003, ofwhich the EU paid more than one-third. UnderPHARE they also received sizable EC support fortheir public sector for SPS-related expenses, withaccumulated amounts in the range of one-third ofthe EC support under SAPARD.39 For non-EU ac-cession countries, implementing the requiredchanges without such support would outstrip pub-lic and private capacities. Realistic options are se-lective convergence or obtaining third-countrystatus to EU accession, each of which has differentstrategic and resource implications. Selective con-vergence can mean that selected parts of the rele-vant legislation and regulations are used asspecimens for modernization or for harmonizationfor purposes of trade in particular products. Third-country status—used for livestock and fisheries

products—means that a country’s regulations, in-spection methods, and capabilities are consideredequivalent to those of the EC. EU accession, on theother hand, requires full adoption of the AcquisCommunautaire for domestic production, process-ing, and marketing. Experience of the new EUmembers during accession shows that, despite vastaccession support from the EU, large parts of theirfood industry were forced out of business, since theupgrades needed to meet the EC requirementswere not commercially feasible. Given the tremen-dous costs involved, it is therefore not realistic forCIS countries to pursue full adoption of EUstandards.

A gradual and differentiated approach to transition

Since the cost of transition is high and the benefitswill only gradually emerge, CIS countries, whiletaking into account their longer-term preferencesfor economic integration, will be best served bycarefully sequencing and prioritizing their effortsbased on assessments of costs, benefits, trade op-portunities, and health risks to their populations,crops, and livestock. A differentiated policy andstrategy is needed for exports, imports, and do-mestic markets. As explained in chapter 2 and box4, each market segment has different characteristicsand requires different government roles and, attimes, tailor-made interventions. Some market seg-ments have high demands for safety and qualitymanagement, such as the EU markets or the high-end markets in Moscow and other Russian cities;some products, such as fresh fruit and vegetables,animal products, and fish, are perishable and thushave relatively high sanitary, phytosanitary, andquality requirements. Markets for perishable foodscan be dynamic, with frequently changing require-ments, requiring that SPS management systems re-spond rapidly to the new demands.

Access to foreign markets requires compliancewith public regulations and private buyers’ speci-fications. Some export markets and market seg-ments have high quality and safety requirementsand offer higher prices than others, and commer-cial strategies and competitive capacities will indi-cate which market outlets are most profitable.Government policies can play important roles inimproving competitiveness. For imports, often theeasiest approach for a country is to follow Codexand OIE standards. The approach for the domestic

market is more complicated because of major dif-ferences between traditional market segments forlow-income buyers and emerging market segmentsin urban areas catering to middle-income buyers.Risks and possibilities for controlling health haz-ards differ significantly among market segments,requiring a differentiated approach. In local mar-kets, priority should be on targeting pests, diseases,and contamination constituting direct threats tohuman, animal, and crop health. Health risks in in-formal border trade are often similar to those in do-mestic markets, and control efforts can be the same,with the exception of the threat of an influx of newpests and diseases from neighboring countries. Inemerging urban segments, more emphasis isneeded on implementing and enforcing Codexstandards directly relevant to human health. In thismarket segment, the WTO SPS principle of nondis-crimination between domestic and foreign produc-ers requires that equal controls be applied to bothimports and domestic goods. This requirementusually directly affects only products and marketsin which domestic and imported productscompete.

RECOMMENDATIONS FORREFORM IMPLEMENTATION

General approach

To prepare for the major decisions and work aheadof them, governments undertaking SPS transitionare recommended to convene a high-level taskforce. Since a number of ministries will be involvedin the changes, the task force will be more effectiveif mandated by the government with consent fromthe parliament. Important efforts to incorporate inthis mandate include the following:

• Engage all stakeholders, including the privatesector and civil society, in the change process.

• Design the architecture of the new systemwith roles and mandates for all institutionsinvolved.

• Prepare an action plan and road map provid-ing cost estimates, a time schedule, and aframework for coordination of the workahead; this will provide transparent choices togovernment, parliament, stakeholders, anddonors.

• Mobilize domestic and donor resources basedon the action plan and roadmap. Most CIS

countries will need extensive support fromOECD countries in the form of knowledgeand information sharing, technical assistance,and funds for investment. It is undesirable tohave individual agencies competing fordonor resources.

• Change the way of thinking of the agencies’staffs from one suited to a GOST-based sys-tem to one suited to a market-based system.

Important implementation steps include thefollowing:

• abolish incrementally inspections and certifi-cations that burden enterprises without con-tributing meaningfully to health protection

• align and reform institutions• begin the process of legislative and regulatory

change• devise a plan for consolidating laboratory in-

frastructure and mandates.

Country group options

Big countries, such as the Russian Federation andUkraine, have broad and diverse interests andtherefore seek to change their SPS systems system-atically and fully. Their public facilities and agen-cies serve multiple interests. These big countriesalso have significant amounts of resources avail-able for making many of the changes themselves,with limited dependence on outside support. Smallcountries face potentially high costs relative to theirlimited resources and are likely to be more depen-dent on outside support. The need for selectivityand prioritization of investments is therefore moreacute for smaller countries than for big ones. Risksof losing market access for major products and op-portunities of gaining it are pervasive factors forpriority setting in small countries. The food safety,plant and animal health situation and potentialhealth risks a country faces are other important fac-tors for priority setting.

As already noted, the Russian Federation andUkraine have important programs underway togradually harmonize their systems with interna-tional standards. It may make good tactical sensefor the smaller CIS states to be late adopters of har-monized regulations and voluntary standards onproducts for which they have little comparative orcompetitive advantage in their new target EC orWTO markets or for regulations not important forprotecting their domestic industries and con-sumers. Smaller states may reduce their transi-



tional regulatory investment costs by studyingthese regulations and integrating into their nationallaws only those that fit with their strategic tradepriorities.

For individual CIS countries, the magnitude ofthe public investment needed to shift to a new sys-tem of food safety and agricultural health stan-dards depends on which and how manyinternational standards they elect to adopt and theextent to which they enforce them. While the WTOSPS Agreement indicates that acceptable standardsare those based on Codex Alimentarius and OIE andIPPC standards, most of the world’s larger, value-added markets have regulatory requirements thatgo beyond these requirements and that vary fromcountry to country. Countries can be selective inthe number of standards they adopt, depending ontheir export markets and their perceived risks forimports and domestic markets. For CIS countries,especially those with low income and low urban-ization, it makes sense to be very selective in en-forcing standards in local markets.

Group I countries

Regardless of targeted markets and the standardssystems to be adopted, Group I countries have themost resources and capacities for managing foodsafety and agricultural health (see table 14). Theycan initiate the creation of databases for monitoringand surveillance that will enable them to performrisk assessments to be used as the basis for policy-making. Their main challenge is to achieve greaterefficiency in their systems through consolidation.Yet, the efficiency of their efforts and their speed ofprogress may be much enhanced by employingtechnical assistance from abroad, for examplethough twinning arrangements.

Group II countries

Countries bordering the EU and those in theCaucasus have an interest in obtaining and main-taining access to the demanding EU and RussianFederation market segments, which pay betterprices for goods. Export diversification is attractive,and a crucial element will be the ability to meetquality requirements in those markets and to com-pete with exporters from EU countries and Turkeyin their traditional markets. Selectivity and prioritysetting here require focusing on products with thegreatest export potential. It is advisable that at thisstage Group II countries seek only what is called inEC terminology regulatory convergence and attempt

to meet EC import standards only for products forwhich they can identify good opportunities for ex-port to EC markets. This requires targeted invest-ment in the regulations, standards, andenforcement of procedures that can return sub-stantial near-term benefits, as shown by experiencewith some niche products, such as Armenian cray-fish (see box 16 and appendix 9).

From the perspective of protecting domesticfood safety and agricultural health, it would be bestto base policies on managing the primary healthrisks to humans and agriculture, using carefulanalysis of costs and benefits. Since a country’s im-ports compete in its urban markets with its own do-mestic production, policies for domestic marketsmust be differentiated in ways that avoid com-plaints of discrimination between importers anddomestic producers.

Group III countries

The challenge for countries in Central Asia is tocomply with their export markets’ evolving SPS re-quirements. These export markets are generally notvery sophisticated, and their product mix is lim-ited. It is important for Group III countries not to besurprised by sudden changes in the requirementsfor their main exports in their main markets. Thisrequires periodic consultation with authorities inthose markets. For Group III countries, the transi-tion from GOST- to WTO-based systems wouldbest be guided by events in the Russian Federationand other markets in the region. Change can begradual, with priorities based on trade interestsand sanitary and phytosanitary risks. Efforts arewarranted to address weaknesses in the domesticfood safety situations of Central Asian countries.

For the poorer countries in their present state,consumer and agricultural health can be effectivelyprotected by well-designed and functioning sur-veillance based on risks, which will almost cer-tainly place far greater priority on management ofinfectious and parasitic food- and water-borne dis-ease rather than on trying to meet the pesticide andveterinary pharmaceutical MRL standards of theEU or CODEX.

Regional cooperation

Countries in the region share the same institutionsand ecologies and use Russian as the primary lan-guage for communication and science. They facethe same transition challenges and can benefit fromone another’s experiences. By cooperating, they can

avoid unnecessary disruption of trade. In particu-lar, with the Russian Federation’s expected WTOaccession, regional cooperation during transitionseems of increased importance. It is, therefore, im-portant that CIS countries seek synergies throughcommunication and coordination.

INTERNATIONAL SUPPORT FORSPS REFORM IN CISGiven the tremendous challenges CIS countriesface in changing their SPS systems and their lack ofcapacities and resources, they will require exten-

sive support from their trade partners, donors, andinternational agencies.

• The effectiveness of external support for SPScapacity building could be improved by pro-viding more support to governments for plan-ning and strategizing their SPS transition. Theresulting SPS action plans and roadmapswould also form a basis for more effectivedonor coordination.

• Donor support to simplify and consolidatefood safety and SPS institutions in the smallerand lower income CIS states would help im-prove the sustainability of both donor and na-


Table 14 Country Group Capacities and Options

Group I: Group II: Group III: Belarus, Kazakhstan, Armenia, Kyrgyz Republic, Russian Federation, Azerbaijan, Georgia, Tajikistan, Turkmenistan,

and Ukraine and Moldova and Uzbekistan

SPS CapacitiesAvailable resource Moderate to high Low Low to very lowlevel (funds, human capital)

Present requirements Moderate to high Moderate Lowon imports

Capacity to handle SPS Moderate to high Low Low to very low

Strategic OptionsDatabases on food-borne Harmonize with recommen- Selectively harmonize, with Selectively harmonize,disease incidence, plant dations of standards setting priority given to health with priority given to do-pests, and animal diseases bodies and WTO problems with main economic mestic health problems

and human impact and main health risks in transborder trade

Risk and cost-benefit Develop and introduce Develop evaluation capacity Develop evaluation capac-evaluation evaluation as basis for legal selectively and apply ity and apply selectively;

transformation and policy reform progressively subcontract in other cases

WTO-compliant legislation, Progressively adopt full range Selectively and gradually Selectively and gradually regulations, and standards adopt, in line with require- adopt, with first priority to

ments in main (potential) main health risks and sec-markets and for main ond priority to developmenthealth risks of potential markets

Testing Consolidate labs and fully Consolidate labs and Consolidate labs and apply international standards selectively apply inter- selectively apply inter-

national standards; try to national standards; sub-share capacities with other contract expensive tests countries to others

Monitoring and Fully based on risk Selectively based on risk Selectively based on risk inspection assessment assessment and use of risk assessment and use of risk programs evaluation evaluation


tional investments. In this effort, donorscould put greater emphasis on the following: – early support for risk analysis and cost-

benefit assessments of policy, regulatory,and enforcement options; and

– sequencing of investments to ensure thatpriority risks, whether domestic or trade-related, are considered first.

• Smooth transitions of food safety and agricul-tural health management systems in CIScountries could be enhanced by twinning in-stitutions and exchanging staffs with donorand former transition countries.

• Donors must improve communication andcoordination among themselves to promotesynergy, to practice division of labor in pro-viding technical and financial assistance, andto avoid repetition and overlap.

• The costs of adjustment to international stan-dards are much higher in the private sector

than in the public sector. In lower incomecountries (Groups II and III), donors will needto work closely with national governments toidentify the proper mix of business environ-ment improvements, incentives, and subsi-dies needed to induce rapid change in thefood and beverage value chains and to enablefarms and firms to restructure and compete indomestic and international marketplaces.

Finally, most support offered by donors and in-ternational agencies is provided to meet formal re-quirements. By adhering to existing formalrequirements, donors and international agenciesmay advise countries to establish systems and un-dertake investments that may not be optimal or themost cost-effective options available for their par-ticular needs, circumstances, and goals. Ultimately,of course, the countries themselves must carefullyassess their own best interests.

71

Table A1-1 presents some examples of import bansimposed by the Russian Federation on agriculturaland food products from neighboring countries.

Appendix 1. Russian Bans on

Agro-Food Imports

Table A1-1 The Russian Federation’s Import Bans on Agricultural and Food Products

Date of Trade Reasons cited enforcement partner Products for imposing ban Additional information

April Moldova All meat and meat products Suspicion of re-export of Ban lifted in November 2006 2005 substandard products from

third countries

May Moldova Fruit and vegetables Phytosanitary concerns: The Russian Federation 2005 evidence of falsified phyto- accounts for over 70% of

sanitary certificates and the Moldova’s fruit and vegetables presence of soil on bare-root exportsplants

September Lithuania Animal products from two Forgery of veterinary docu-2005 cold warehouses ments

November Poland Meat products Food safety; Polish-Russian Ongoing negotiations with 2005 border crossing in Bezledy increased role of the EU

December Georgia Crop products, primarily Certificate forgeries and 2005 mandarins, persimmons, absence of phytosanitary

pomegranates, and greens control

January Ukraine All animal products Failure to comply with food 2006 (meat, eggs, fish, dairy, etc.) safety standards

March Armenia Fruit and vegetables delivered Forgery of phytosanitary 2006 via Georgia in transit certificates

April Moldova, Wine Failure to meet Russian 2006 Georgia sanitary standards, particularly

high level of pesticides and heavy metals

Note: The information in this table was collected from various mass-media sources. It serves an illustrative purpose only and is not a completelist of Russian food import bans with independently verified information.

73

AVOIDING LOSSES FROM EXOTICPEST INTRODUCTIONS: WESTERN CORN ROOTWORMThe western corn rootworm (WCR; Diabrotica vir-gifera virgifera) is known as the “billion dollar bug”in North America, because it can cause losses incorn (maize) production value of that magnitude inmajor outbreak years (GMO-Compass 2006). Itcauses an overall average of 10 percent or moreyield loss in the American corn belt, with yield lossin some areas and years reaching 30 percent. It wasfirst identified in Central Europe in 1991 after a sus-pected introduction via airplanes through theBelgrade airport and has since continued to spread

through much of Central and Western Europe (seefigure A2-1). Economic levels of damage have oc-curred repeatedly in Serbia, Hungary, Romania,and Italy (IWGO 2004). It is not spread by seed orgrain but by dirt, maize roots, or maize plants orplant parts. Adult beetles also spread by flying shortdistances, being wind-blown for longer distances,or being carried by airplanes to whose lights theyseem to be naturally drawn during sunset or nightloadings. Most initial findings in Europe are in thevicinity of airports. WCR has already found its wayinto CIS states (see Ukraine on the map) from itsoriginal entry point in the former Yugoslavia.

While control measures are being developedwith FAO and the European and Mediterranean

Appendix 2. New Agricultural Health

Challenge in Plant Health

Figure A2-1 Distribution of WCR in Europe after Introduction in 1991

Source: www.iwgo.org.

Plant Protection Organization (EPPO) assistance inCEE countries and Ukraine, it is likely that theWCR will easily establish itself wherever maize isgrown intensively in Western, Central, and EasternEurope (Furlan et al. 2001). Economic damage hasbeen limited to a smaller area than its overallspread, but high population densities can build uprapidly in monocropped maize, whether in large orsmallholdings.

CIS land privatization may have helped reducedthe rate of WCR spread by reducing large mono-culture fields to smallholder strip cultivation onsmall farms, with rotation among planted crops.40

Recent consolidation of land holdings may reversethe trend and cause WCR spread to accelerate. Incountries such as Ukraine, in which larger-scalemaize production is practiced, the impact on maizeproduction and value could be substantial. Usingthe results of FAO and EPPO coordinated field re-search in CEE countries and Ukraine, along withthe accumulated experience of the United States,

where WCR has been established since the earlytwentieth century, one can crudely forecast the po-tential impact of the spread of this pest throughoutthe major maize-growing regions of Ukraine, if leftunchecked.

Table A2-1 shows the projected economic im-pacts on the maize-growing industry in the Ukraineresulting from WCR spread with no national cam-paign to slow it. The total area over which WCR hasbeen found has grown from 60 km2 in 2001 to 3,000km2 in 2003. It takes about five years for WCR dam-age to reach economic damage thresholds.Assuming from North American experience thatabout 37 percent of the total maize area in theUkraine would eventually be affected (Alston et al.2003), the total present value of maize losses fromWCR establishment in Ukraine range from a low (10percent yield loss) of about US$24 million to a high(30 percent yield loss) of about US$72 million. Overthe same period, the present value of chemical treat-ment costs to control these losses would be about


Table A2-1 Estimated Average Annual Losses to the Maize-Growing Industry from WCR

Maize Maize area Value of yield loss ($’000) Discounted present infested suffering yield value ($,000)

Year area (ha) losses (ha) Low, 10% High, 30% Discount factor(1) (2) (3) (4) (5) @3.0% Low High

1 1,200 0 0.97002 11,500 0 0.94003 60,000 0 0.91004 122,113 0 0.88005 128,219 0 0.85006 243,188 654 19 56 0.8200 15 467 361,661 6,268 179 536 0.7900 141 4238 504,532 32,700 932 2,796 0.7600 708 2,1259 535,256 66,552 1,897 5,690 0.7300 1,385 4,15410 551,553 69,879 1,992 5,975 0.7000 1,394 4,18211 568,100 132,537 3,777 11,332 0.6700 2,531 7,59212 585,143 197,105 5,617 16,852 0.6400 3,595 10,78613 602,697 274,970 7,837 23,510 0.6100 4,780 14,34114 620,778 291,714 8,314 24,942 0.5800 4,822 14,46615 639,401 300,597 8,567 25,701 0.5500 4,712 14,136

24,084 72,251

Sources: USDA/FAS, APK-Inform Information Agency (Ukraine), IWGO 2004, CSL 2004.

Notes:

1. Maize-infested area (column 2) is assumed to be 20 percent of actual and projected gross natural area.

2. Economic damage levels (column 3) start five years after infestations build up and reach 0.545 of infested area (from experience of Hungary).Thus, the damage in year 6 (654) is 0.545 of the infested area of year 1 (1,200).

3. The value (columns 4 and 5) is derived using a yield of 3.8 mt/ha (average for past four years) and a farm-gate price of US$75/mt.

Appendix 2. New Agricultural Health Challenge in Plant Health 75

US$34 million, indicating the benefits from early de-tection and control of this insidious insect pest.Smaller CIS states, such as Moldova, are involved inmonitoring and surveillance programs, but theywould find it difficult to mount a large-scale re-sponse to extension of the WCR range from Ukraineor Romania. State, donor, and private sector in-volvement to intensify trapping and to educatefarmers on crop rotations, chemical treatments, and

biological control would be needed to manage thealien pest invasion. In the United States and Europe,active consideration is being given to the introduc-tion of transgenic corn resistant to the WCR as a partof pest suppression strategy (Alston et al. 2003), aswell as to biological control. This approach facessubstantial challenge outside the United States andCanada, however, where extensive areas of trans-genic corn are already grown.

77

Schillhorn van Veen (2004) in his review of veteri-nary health in the transition economies of EasternEurope and Central Asia indicated the rapidreemergence of three zoonotic diseases transmittedbetween animals and humans: rabies, brucellosis,and echinococcosis or hydatidosis. Some zoonoticdiseases are associated with dogs (such as rabies),but others are related to contact with farm animalsor consumption of animal products. Parasitologicalinvestigators in the region have sparked improve-ments in combined accounting of human and ani-mal health impacts, joining food safety andagricultural health analyses in ways that shouldimprove thinking about the cost-effectiveness ofdisease-control measures in CIS countries.

INTERNAL PARASITESThe primary internal parasites causing disease inhumans and animals are helminths (roundworms,tapeworms, and flukes) and protozoa. In the CIS,one of the more common helminth infections isfrom ascarid nematodes. Incidence is generallyhigher in children, who may contract it directlyfrom worm-infested pets or indirectly from playingin dirt infested with the worms from animalsources. Poor personal hygiene, especially the lackof toilets or well-designed latrines, increases fecal-oral transmission of ascarid roundworms andhookworms. Deworming treatments that targetchildren are effective in reducing roundworm andtapeworm loads, but failure to reduce environ-mental loading through better environmental hy-giene, greater separation between livestock and

households, and deworming of domestic animals,often leads to high rates of reinfection.

It is claimed (World Bank 1993; WHO 1998) thatdeworming children can improve their growthrates and cognitive development. Some re-searchers, however, suggest that while some bene-fits, such as growth rates, are confirmed, others,such as improved cognitive development, remainto be proven (Dickson et al. 2000). The broad bene-fits of simple tablet treatments to control worm in-fections have led to a worldwide program tocontrol soil-transmitted helminths and schisto-somes (WHO 2002) through the Global Burden ofDisease program, with a primary focus on childrenof school age. In tropical and subtropical settings,the cost effectiveness of community and school-based deworming is assigned benefit-to-cost ratiosof up to 30:1, when combined with hygiene educa-tion and other school-based health programs(Hotez et al. 2006). Overall improvement in sani-tary conditions is the key to long-term reduction inhelminth disease, but the public and private infra-structure required is expensive and takes years toput in place in developing and transitioneconomies. Annual public and private funding isneeded to sustain operations and maintenance.

Unfortunately, similar studies on the effects ofhelminth disease levels and treatments across CISstates are not available. Data from public healthagencies in CIS countries suggest that incidencerates are substantially higher than indicated in theGlobal Burden of Disease study, reflecting the broadproblems of rural poverty and poor rural and urbanenvironmental sanitation throughout the region.

Appendix 3. Zoonotic Disease and

Socioeconomic Impacts:Integrating Human and

Animal Health Measures

LINKS BETWEEN HUMAN ANDLIVESTOCK HELMINTHINFECTIONS AND THEIRSOCIOECONOMIC COSTS: THECASE OF ECHINOCOCCOSIS

Until recently, few studies have combined thehuman and livestock burden of helminth disease tolook at the costs and benefits of alternative man-agement strategies. National and local sanitary andveterinary authorities often have difficulty justify-ing the costs of their programs when they cannotreadily quantify the benefits or validate the lossesthat are avoided through public intervention.Methods are being developed to estimate the soci-etal impact of zoonotic helminthiases. A number ofrecent studies have analyzed the economic costs toboth human and animal health and productivityfrom echinococcosis (Schantz 2005).

The most common form of this disease is cysticechinococcosis (Echinoccocus granulosus), whichgenerally cycles between dogs and farm animals; asecond species (Echinococcus multilocularis) causesalveolar hydatid disease, which cycles amongwildlife. Both forms are widely distributed geo-graphically (see Figure A3-1) and cycle among

wildlife, livestock, and dogs, with humans being adead-end host. Both forms of the parasitic infectionin humans are difficult to diagnose because symp-toms may take years to develop. The cystic form af-fects children and adults. Farm animals mayexperience stunted growth as well as damage to in-ternal organs leading to condemnation at slaughterof livers, lungs, and other edible offal.

A primary disease management approach hasbeen promotion of hygiene through public and pri-vate investment in toilets and latrines, institution ofmeat and milk quality controls, construction offenced facilities for slaughtering, and discouraginghome and roadside slaughter. The latter two are es-pecially important in the control of echinococcosis.These efforts are being combined with pharmaceu-tical deworming of companion animals and im-proved offal disposal following farm animalslaughter; in addition, initial tests are underway oflivestock vaccines. Community approaches to de-worming have generally been viewed as the mosteffective, but a prolonged use of anthelmintics (cur-rently the most commonly used is albendazole) inbroad-spectrum treatment does carry the risk ofcreating drug-resistant strains of Echinococcus andother helminth parasites (Carabin et al. 2005).While the linkages among wildlife, livestock, do-


Figure A3-1 The Global Extent of Echinoccocus

Source: Budke, Deplazes, and Torgerson 2006.

Appendix 3. Zoonotic Disease and Socioeconomic Impacts: Integrating Human and Animal Health Measures 79

mestic animals, and human disease are well-known, evaluation of the costs of echinococcosis tonational economies has only recently been compre-hensively undertaken (Budke, Deplazes, andTorgerson 2006). These still indicative studies showimportant impacts on the worldwide and nationaleconomies, as seen in table A3-1.

Yet these impacts may still be substantially un-derreported, as demonstrated by a comparison ofnationally reported incidence levels of humanechinococcosis using cumulative records of hospi-tal visits in counties and districts throughout theCIS countries of Central Asia. The comparisonshowed levels of cyst removals at local surgeries tobe three to four times those reported in national sta-tistics. Human incidence levels during the Sovietperiod were from one to five cases per 100,000 peo-ple. The fragmentation of the livestock industry

into smaller herds; the increase in the farm dog (adefinitive host) population and in backyard androadside slaughtering; and the decline in veteri-nary public health capacity drive current incidencerates to well over 10 cases per 100,000. Ruralherders and dog owners and their families are mostat risk, with 50 percent or more of mature sheep in-fected (a 10-fold increase since the Soviet period;Bessonov 1974) and a 25 percent prevalence rateamong herding dogs across the region (Torgersonet al. 2006).

While cost-effective control strategies exist, thelack of national estimates of the disease burden andits total economic impact hinders its evaluation asa priority for human infectious disease control ef-forts, not to mention the competing demands onpublic and private resources for control of zoonoticand epizootic (epidemic animal) diseases.

Table A3-1 Echinococcosis Disease Burden

Economic cost DALYs lost Economic cost in livestock Total annual

from of human disease production cost Echinococcosis (US$ million) (US$ million) (US$ million)

World 1,009,662 764 2,190 2,954

Formerly socialist economies of Europe and the Russian Federation 61,369 47 — —

Western China, Tibetan plateau, Shiqu County 50,933 39

— —

Tunisia — — — 15

Jordan — — — 4

Uruguay 3–22

Sources: Budke et al. 2004; Budke, Deplazes, and Torgerson 2006; Torgerson, Carmona, and Bonifacio 2000; Torgerson and Dowling 2001;Torgerson, Dowling, and Abo-Shehada 2001; Majarowski et al. 2001.

81

The Rapid Alert System for Food and Feed(RASFF)41 is an information network operated bythe EU member states. It provides alert notificationsof risks identified in the EU markets that requireimmediate action and information notifications offood and feed shipments tested and rejected at theEU’s external borders.

Table A4-1 shows the breakdown of notifica-tions (of both types) involving shipments originat-ing in CIS countries. The table leads to thefollowing conclusions:

• the number of notifications from CIS is a smallpercentage of total notifications; and

• for 2005 and 2006, most notifications were forshipments from the Russian Federation,Ukraine, and Uzbekistan.

The RASFF weekly reports provide informationon the identified risks behind the notifications.

Table A4-2 provides details on the hazards identi-fied in 2005 and 2006.

Some countries have certain ongoing or recur-rent problems. For both 2005 and 2006, hazelnutsfrom Azerbaijan were found to contain aflatoxin;in Ukraine, insects or mites were found in seedsand antibiotics in honey; and numerous foodproducts from the Russian Federation have beenfound to contain illegal dyes. In 2005, Georgia hadproblems with its mineral water, while in 2006ochratoxin A was found in raisins fromUzbekistan.

The primary SPS concerns were mycotoxins(ochratoxin A and aflatoxin) and residues of vet-erinary drugs, such as chloramphenicol, in honey.In 2005, 14 mycotoxin notifications occurred,mostly involving nuts, raisins, and cereals, and in2006, there were 24. Antibiotics cases numberedseven in 2005 and four in 2006.

Appendix 4. Identified Risks from

CIS Food and Feed Exportsto the EU Market

Table A4-1 Notifications Involving CIS Consignments

Originating CIS country 2002 2003 2004 2005 2006

The Russian Federation 8 3 10 34 25Ukraine 14 — 6 20 17Uzbekistan 1 1 2 7 19Azerbaijan — — — 11 6Moldova 2 1 1 1 7Georgia — — — 5 3Belarus 2 3 1 1 —Armenia 1 — — — —Kazakhstan — — — — —Subtotal for CIS notifications 28 8 20 79 76Total of all notifications 1,520 2,358 2,596 3,178 2,874

Sources: Data for 2002–05 come from RASFF annual reports. The Website did not yet include the 2006 annual report (as of June 2007), and2006 figures were thus compiled from weekly reports.

Note: Total notifications refers to the total in the list of notifications classified by country of origin and thus may differ somewhat from total noti-fications for same year because products may originate from more than one country.


Table A4-2 Hazards Identified from CIS Consignments

2005 Hazards and number of cases

The Russian Federation • unauthorized color in spices, seasonings, sauces; 20• bad temperature control (rupture of the cold chain); 4• ochratoxin A in wheat; 1• high bacterial count in mayonnaise; 1• salmonella in feed yeast; 2• salmonella in fish; 1• mercury in fish; 1• polycyclic aromatic hydrocarbons in oil; 1• undeclared sulphites; 1• corrosion of bottle caps; 1• spoilage of preserved mushrooms; 1• damaged packaging of fish; 1

Ukraine • insects/mites in seeds; 7• suspicion of antibiotics in honey; 4• chloramphenicol in honey; 2• sulphathiazole in honey; 1• salmonella in feed; 2• lead in walnuts; 2• benzo(a)pyrene in oil; 1• unauthorized color in food; 1

Azerbaijan • aflatoxin in hazelnuts; 11

Uzbekistan • unauthorized color in spices; 3• ochratoxin A in sultanas; 2• molds in raisins; 2

Georgia • too high content of nitrite, fluoride, barium, or boron in mineral water; 5

Belarus • too high content of sodium benzoate in white cola; 1

Moldova • spoilage of dried prunes; 1


The Russian Federation • unauthorized color in spices, seasonings, sauces; 15• unauthorized substances in honey; 2• aflatoxin in hazelnuts; 1• ochratoxin A in wheat; 1• salmonella in feed yeast; 1• high content of iodine in canned salad; 1• too high content of benzoic and sorbic acid; 1• too high content of nitrite, barium in mineral water; 1• total basic volatile nitrogen in fish; 1• unauthorized establishment for butter; 1

Ukraine • insects/mites in seeds; 5• unauthorized substance in honey; 2• aflatoxin in buckwheat; 1• unauthorized food additives in candy; 1• benzo(a)pyrene in oil; 1• lead in walnuts; 1• salmonella in meal pellets; 1• atropine and scopolamine in buckwheat flour; 1 • too high level of radioactivity in frozen bilberries; 1• too high content of propylene glycol in cake; 1• methyl bromide in walnuts; 1• molds on walnuts; 1

Appendix 4. Identified Risks from CIS Food and Feed Exports to the EU Market 83

The weekly reports also provide useful informa-tion about the notifying country. In 2005, 39 of the79 notifications originated in Eastern Europeancountries that had recently acceded to the EU:Poland, Slovenia, Lithuania, Czech Republic,Estonia, and Slovakia; of these, 19 were fromPoland. In 2006, 36 of the 76 notifications camefrom these countries, including 12 from Poland and10 from the Czech Republic. All notifications fromPoland (except one) concerned shipments fromUkraine and the Russian Federation; all notifica-tions from the Czech Republic (except one) con-cerned consignments from Uzbekistan.

To be useful for comparisons, more complete in-formation on notifications is required; for example,the numbers of notifications have not been adjustedto reflect the volume of trade in the specific items.Ababouch, Gandini, and Ryder (2005), for example,made use of the measure “cases/100,000 tonnes” tocompare specific fish product rejections across orig-

inating countries. If the volume of affected ship-ments could be compared with total shipments tothe EU, implications about the extent of the problemfor each specific product could be drawn.

Consider the case of Azerbaijan hazelnuts: ninecases of border interceptions occurred in 2005 (allof which were information notifications). The totalAzerbaijan exports of shelled hazelnuts to EU25 in2005 were 7,235,600 kilograms, worth €50 million(US$ 69 million).42 Based on informal information,we assume that an average shipment weighs 20,000kilograms, giving an estimated total of 180,000 kilo-grams for the nine shipments intercepted, repre-senting about 2.5 percent of trade or about US$ 1.7million. It is to be noted, however, that interceptedshipments should not be assumed to be total losses.Depending on the products and SPS requirements,these products may undergo treatment and even-tually be admitted into the EU markets, redirectedto other markets, or sold at a discount.

Table A4-2 Hazards Identified from CIS Consignments (continued)


Azerbaijan • aflatoxin in hazelnuts; 5• unauthorized sorbic acid in fruit juices; 1

Uzbekistan • ochratoxin A in raisins; 15• aflatoxin in walnuts; 1 • cyanide in apricot kernel; 3

Georgia • molds on hazelnut kernels; 2• abnormal smell of hazelnut kernels; 1

Moldova • high content of sulphites in wine; 2• cadmium and lead in frozen strawberries; 1• sorbic acid in dried prunes; 3• unsuitable organoleptic characteristics of shelled walnuts; 1

85

The following tables summarize a number ofWorld Bank studies and lending activities involv-ing the CIS countries.

Appendix 5. World Bank Activities

in CIS

Table A5-1 World Bank SPS-Related Studies, 1996 to the Present

Plant and Food Country Project name animal health safety Labs Competitiveness

CIS The Agrarian Economies of CEE and CIS, 2005 x

The Russian Handbook of Trade Policy and WTO Accession, 2005 xFederation Russian Economic Report, 2006 x

Ukraine Improving Agricultural Fiscal Policy, 2006 (Working Paper) x x x

Kazakhstan Livestock Sector: Supporting its Revival, 2004 x x xThe Impact of Kazakhstan Accession to the WTO, 2007 x

Belarus Window of Opportunity to Enhance Competitiveness and Sustain Economic Growth, 2005 x

Moldova Opportunities for Accelerated Growth, 2005 xEconomic Growth and Poverty Reduction Strategy Paper Annual Report, 2006 x

Armenia Armenia’s Rural Economy from Transition to Development, 2005 x x

Georgia Joint IDA-IMF Staff Advisory Note, Poverty Reduction Strategy Paper, second progress report, 2006 x

Azerbaijan Building Competitiveness, 2003 xAgricultural Markets Study, 2006 x x

Kyrgyzstan Agricultural Policy Update, 2004 xEconomic Memorandum, 2005 x

Note: X denotes topic included.


Table A5-2 World Bank SPS-Related Lending, 1996 to the present, US$ million

Plant and Food Project name animal health GPAI safety Labs Competitiveness

CISThe Russian FederationUkraineKazakhstan Agricultural Competitiveness Project, 2004 N/A

Agricultural Competitiveness Project, 2005 N/AAgricultural Competitiveness Project, 2006 (PAD) 6Innovation and Competitiveness Development Project, 2006 N/A

BelarusMoldova Competitiveness Enhancement, 2005 4.9

AIHP Project, 2006 8 0.5***Poverty Reduction Support Credit, 2006 N/A

Armenia Rural Enterprise and Small-Scale Commercial Agriculture Development Project, 2005 (PAD) N/A**Foreign Investment and Export Facilitation, 2006 1AIHP Project, 2006 6.25 0.5***

Georgia Rural Development Project, 2004 2.29Rural Development Project, 2005 (PAD) 10AIHP Project, 2006 7 N/A 0.5*

Azerbaijan Agricultural Development and Credit, 2006 N/A N/ASecond Agricultural Development and Credit Project, 2006 (PAD) 10* N/AAgricultural Development and Credit, 2006 N/AAIHP Project, 2006 5.1 N/A

UzbekistanTajikistan Community Agriculture and Watershed

Management Project, 2004 (PAD) 2.1AIHP Project, 2006 5 N/A

Kyrgyzstan Agricultural Support Services Project, 1998 (PAD) 1*Sheep and Wool Improvement Project, 2003 4*Agribusiness and Marketing Project, 2004 8.1AIHP Project, 2006 4 N/A N/AReducing Technical Barriers for Entrepreneurship and Trade, 2006 1.2* 1.2*

Turkmenistan Crop Protection and Veterinary Services, 1999 N/ANon-CIS CountriesSerbiaCroatia Farmer Support Services Project, 2003 4.52

Agricultural Acquis Cohesion Project, 2005 (EA, PAD) 19.55

Bosnia and Herzegovina Enterprise Export Facility, 2005 10

Notes: GPAI figures represent approved operations; AIHP stands for Avian Influenza Control and Human Pandemic Preparedness and ResponseProject; EA represents Environmental Assessment; PAD stands for Project Appraisal Document; N/A indicates no specific information or break-downs are available.

* Estimated amounts.* * Animal health is one of the government objectives but not part of the project.*** A part of the GPAI component.

Appendix 5. World Bank Activities in CIS 87

Table A5-3 World Bank SPS-Related Lending, in Preparation, US$ million

Plant and Food Project name animal health GPAI safety Labs Competitiveness

CISThe Russian FederationUkraine Agricultural Competitiveness and Food

Safety Project, 2006 50*AIHP Project N/A

Kazakhstan Technology and Competitiveness Project, 2007 N/A N/A

BelarusMoldovaArmenia Poverty Reduction Support Credit III, 2007 N/AGeorgiaAzerbaijanUzbekistan AIHP Project N/ATajikistanKyrgyzstan Agricultural Investments and Services Projects,

2007 N/A N/ATurkmenistanNon-CIS CountriesSerbia Transitional Agriculture Reform, 2006 N/ACroatiaBosnia and AIHP, 2006 2.77 N/A N/AHerzegovina Agriculture and Rural Development Project,

2007 N/A N/A N/A N/AMacedonia Agriculture Strengthening and Accession Project

Notes: AIHP stands for Avian Influenza Control and Human Pandemic Preparedness and Response Project; N/A indicates no specific informa-tion or breakdowns are available.

* Estimated amounts.

89

ESTIMATION OF COSTS OFCOMPLIANCE WITH VARIOUSSTANDARDS REGIMES FORMOLDOVA Table A6-2 demonstrates how a CIS country’s costsof compliance might vary depending on the stan-dards regime it adopts. Assumptions are made onthe levels of investment and costs of operations (ormaintenance costs) as percentages of export flows.In this exercise, Moldova is used as an example,and table A6-1 provides Moldova’s 1998–2004 totaland average annual food and beverage export val-ues to key markets. The following assumptions aremade on the rates of investment and annual main-tenance costs.

• No additional investment and minor mainte-nance costs are needed to comply with theCIS-GOST regime.

• GOST-R regulations are changing at a moder-ate pace and should require modest invest-ment and maintenance expense.

• WTO SPS and related OIE, Codex, and IPPCstandards still require major adjustments todevelop and apply regulations.

• Third-country certification as a supplier ofhigher-risk products to the EU requires pro-found changes in regulation, enforcement, andservice provision of an entire sector, for exam-ple, livestock and livestock products, and theseinvestment costs are likely to be very high.

• Based on recent accession experience, com-plete harmonization with the EU is assumedto require an order of magnitude leap ininvestment.

• Convergence toward U.S. processed food stan-dards is less costly than convergence towardEU requirements because individual compa-nies may qualify their processes and productswith U.S. regulators even when moderate defi-ciencies exist in the source country’s publicfood safety and agricultural health institutions.

These assumptions are the bases for the rates incolumns 2 and 4 of table A6-2. These rates were thenapplied to the 1998–2004 total and mean export flows

Appendix 6. Estimating Costs and

Benefits of SPSManagement

Table A6-1 Moldova Agro-food Exports

1998–2004 (US$ 000) Market Share (%) Mean (US$ 000)

Total food and agricultural exports 2,795,104 399,301CIS countries 2,083,843 75 297,692EU15 232,434 8 33,205CEEC* 333,136 12 47,591

Source: WITS UN COMTRADE, accessed May 2006; World Bank 2007b.

* CEEC (Central and Eastern European countries) here includes new EU members from the region—Czech Republic, Estonia, Hungary,Lithuania, Latvia, Poland, Slovakia, Slovenia, Bulgaria, and Romania.

in table A6-1 to provide a rough estimate of the total(public and private sector) costs of compliance(columns 3 and 5) with a range of regional (CIS),Russian Federation (GOST-R), and internationalstandards regimes. Columns 6 and 7 break downtotal investment into public and private components.

It is clear that Moldova’s public sector complianceinvestment needs for the Acquis Communautairewould be much greater than the estimated US$1.018million (for EU third-country certification) esti-mated in table A6-2. That estimate is based on gen-eral ranges found in World Bank research forcountries with market economy food safety andagricultural health systems. These estimates clearlydon’t hold for transition economies, especially whencompared to the US$9.7 million (over nine times ofthe amount in table A6-2) estimated for public sectorcosts in the Moldova Action Plan for adopting inter-national standards and the consistent acceptance bythe EU of both low- and high-risk products.

COSTS FOR CAPACITY BUILDINGFOR SPS MANAGEMENTThe World Bank assisted in the preparation ofstrategies to build capacities for SPS managementfor Armenia, Lao PDR, Moldova, and Vietnam.

Costs were estimated for the recommended actions(see table A6-3 and table A6-4).

AN EXERCISE ON COSTS AND BENEFITSCost and benefit computations were done basedon the SPS Action Plans for Armenia, Lao PDR,and Moldova. Costs are estimated outlays of therecommended actions (see table A6-3). Economicbenefits are assumed to be the result of improvedmarket access (with possible increases in valuethat can stem from increased volume and price);reduced risks of rejections and bans in foreignmarkets (avoided losses); lower losses from pestdamage and diseases in agricultural production;lower losses of productive days for workers dueto food-borne health problems; and lower medicalcosts through better disease and food safety sur-veillance, control, and prevention. Benefits arealso assumed from general efficiency improve-ments in inspection and prevention systems dueto abolition of unnecessary or low effective in-spections, vaccinations, certifications, and quar-antine requirements. Benefits may also result fromreplacement of inefficient systems with more cost-effective ones.


Table A6-2 Estimation of Costs (US$000) with Various Standards Regimes for Moldova

Investment Annual maintenance Investment(1) (2) (3) (4) (5) (6) (7)

Standards Assumed Assumed Public Private Regime rates (%) US$ ‘000 rates (%) US$ ‘000 (6%)e (94%)e

CIS-GOST 0.00 0a 0.5 1,518c 0 0GOST-R 0.10 2,084a 1.0 2,977c 125 1,959WTO SPS Standards 1.00 5,656b 1.5 1,212d 339 5,316EU acceptability (low to moderate- risk products) 1.50 8,484b 1.5 1,212d 509 7,975

EU third-Country certification (high-risk products) 3.00 16,967b 2.0 1,616d 1,018 15,949

EU harmonization(Acquis Communautaire) 30.00 169,671b 3.0 2,424d 10,180 159,491U.S. standards forprocessed products 1.00 5,656b 0.5 404d 339 5,316

Source: The authors’ calculations, based on general ranges provided by the World Bank (2005c).

Notes: a. Assumed rates applied to CIS 1998–2004 export flows. b. Assumed rates applied to EU15 and CEEC 1998–2004 export flows.c. Assumed rates applied to CIS mean export flows. d. Assumed rates applied on EU15 and CEEC mean export flows.e. Percentage applied on computed investment.

Appendix 6. Estimating Costs and Benefits of SPS Management 91

Table A6-6, table A6-7 and table A6-8 presentsimplified cost-benefit assessments on SPS capacitybuilding. The aggregate benefits of improved plantand animal health are assumed to be approximatedby growth in the value-added for agriculture:crops, for example, for plant health (assumed in-crease in value-added ranges from 0.2 percent to0.3 percent) and livestock for animal health (as-sumed growth from 0.75 percent to 1 percent).Benefits accruing from improved food safety come

from savings caused by reduced incidence ofhuman illnesses, using the DALY indicator and es-timated annual wages in chapter 3 (see table 12).For Lao PDR, the 2002 DALY is 176,000,43 and theestimated annual wage used was US$300.44 The ex-ercise assumes a proportionately equal reductionin DALYs of 20 percent for all three countries. Thismeans a reduction in Armenia of 800 DALYs, inMoldova of 400 DALYs, and in Lao PDR a reduc-tion as high as 35,200 DALYs. Even at proportion-

Table A6-3 Estimated Costs for the Public Sector (US$ 000)

Technical Training and Equipment Recommended actions assistance workshops and supplies Total

ArmeniaCoordination team 970 — 50 1,020Market opportunities 61 2 — 63Institutional realignment and legislative framework 690 299 350 1,339Inspection, monitoring, and surveillance 384 30 15 429Pesticide management 63 — — 63Diagnostic capacity 673 400 1,450 2,523Border procedures 348 130 200 678Risk assessment and economic analysis 332 260 460 1,052Emergency response 66 10 — 76Information and education 127 4 350 481Total 3,714 1,135 2,875 7,724

Lao PDRCoordination team 1,040 100 1,140Studies on markets and SPS requirements 189 3 192Legislative and regulatory issues 1,032 44 1,076Institutional issues 442 7.2 7 456Surveillance; databases 527 4.8 200 731.8Diagnostic capacity 796 2 1,000 1,798Building human skills 77 927.2 100 1,104Regional cooperation; bilateral consultations 647 150 797Public information and education 113 202 100 415Total 4,863 1,296.2 1,551 7,710

Moldova Establish coordination 920 — 100 1,020Institutional restructuring 140 5 3 148Economic analysis and risk assessment 189 154 6 349Harmonization of the regulatory system 316 200 200 716Certification 130 7 3 140Accreditation 33 130 163Laboratory system 295 195 1,200 1,690Inspection, monitoring, and surveillance 313 302 900 1,515Border control 454 360 1,350 2,164Stamping out and emergency response 72 10 350 432Reorganization of veterinary services 86 2 88Pesticide management 130 52 100 282Public information and awareness 191 8 800 999Total 3,269 1,425 5,012 9,706

ately much lower improvements in food safety, theabsolute impact in Lao PDR would be much higherthan in the other two countries.

Cash flow

The following assumptions are made about thecash flow of investments and operational expenses.Investment costs are spread over the first six yearsof implementation, and an additional annual oper-ating cost for materials and depreciation of US$1million is assumed. The full level of benefits is as-sumed to occur by the fifth year of implementation;25 percent of full benefits is assumed for the thirdyear, and 50 percent for the fourth year. The netpresent values were computed for 5, 10, and 15 per-cent discount rates.

Scenarios

Deviations in net benefits were examined usingboth optimistic and pessimistic assumptions of re-sults. The optimistic case assumes negative net ben-efits were lower by 5 percent and positive netbenefits higher by 5 percent. Operating costs mayhave been lower or causal effects more positive.The pessimistic view is the opposite: higher nega-tive net benefits and lower positive net benefits.The results show some sensitivity but basically ap-proach the base case scenario.

Results

The results are presented in table A6-5. The rates ofreturn for Armenia and Moldova range from 11percent to 18 percent. Given the modest assump-

tions for agricultural health, SPS investments canbe profitable. For Armenia, the assumed returns toSPS is a flat one-time 0.3 percent (plant health) and1 percent (animal health) increase in value-addedonly, a very small fraction of overall growth gainsindeed considering that agriculture has been grow-ing at sustained high rates of about 7 percent for thelast seven years, which means a 100 percent in-crease of agricultural GDP in 10 years.

Lao PDR has the same modest assumptions onbenefits to agriculture but has higher rates of returnof 64–70 percent, due to the huge savings from pub-lic health benefits, specifically the 35,200 reductionin DALYs for an annual savings of US$10.6 million.The assumed uniform rate of reduction (20 percent)would result in a significant discrepancy in resultsamong the three countries because of differences intheir current condition. Lao PDR has a poorer foodsafety situation but also lower capacities than dothe two CIS countries, but the model shows thateven at much lower proportional improvements inits food safety situation, Lao PDR’s IRR is likely tobe much higher.

The resulting numbers are not meant to be takenper se; rather, the exercise demonstrates that al-though SPS capacity entails major costs, benefits ac-crue over time in all three areas of food safety, animalhealth, and plant health and in both domestic mar-kets and the export sector. These benefits, if carefullyaccounted for, will help determine if the costs ofbuilding capacity (often substantial) can be justified.

Finally, although the exercise focuses on agri-cultural and food products, countries that increase


Table A6-4 Proposed Budget for Vietnam Action Plan (million US$)

Food Plant Terrestrial Aquatic safety health animal health animal health

WTO accession (MARD) 1Risk analysis, including data base 2 1.4 1.2 0.1Training and capacity building 1.6 1 1 0.5Diagnostic capacity 6 2 2 8Surveillance and inspection systems (including pesticide monitoring) 6 4 5 1

Quarantine systems 1 1Disease and pest eradicationand control systems 1 7Total 15.6 10.4 17.2 9.6

Source: World Bank 2006b.


capacity to the point of achieving WTO accessionand greater participation in global trade, will findspillover benefits extend to all industries in theirthe economies.

METHODOLOGICAL ISSUES INTHE ESTIMATION OF COSTS AND BENEFITSCost-benefit analysis is a useful tool for gaugingproposed projects and has been incorporated intomany World Bank studies. The use of cost-benefitanalysis to look at SPS capacity building, however,is a new approach. The exercise above is meant toprovide general transparency about the returnsneeded to make SPS capacity building (in a narrowsense) a good investment. They allow specialists toassess how returns would change under differentassumptions. Yet, the wide-ranging scope of activ-ities included in an SPS system and the positivespillovers from the measures add complexities tothe estimation process. A number of issues shouldbe taken into consideration.

Appropriate measurements

Measuring costs and benefits in food safety and agri-cultural health is difficult, given the wide-rangingimpacts of illnesses and diseases on livelihood, pro-duction, productivity, and expenditures (public andprivate), which may also include social and envi-ronmental consequences. The WHO’s DALY(Disability-Adjusted Life Year; see chapter 3), an in-dicator of the consequent costs of diseases, may beused to estimate economic costs by using appropri-ate wage estimates, although it covers only the most

important diseases and excludes treatment costs. Indetermining the costs of food safety, attributing theconsequent losses of morbidity and mortality forcertain diseases—whether food-borne, water-borne,or from plant and animal sources—can also be diffi-cult (see chapter 3). Another complicated issue con-cerns zoonotic diseases that affect both humans andanimals. Evaluation of the costs should account forimpacts on both populations (see appendix 3).

It is also very difficult to disaggregate and prop-erly attribute cost savings among different causes,for example, investments made by the public andprivate sectors in improved water supply and san-itation; reform of regulatory and enforcement sys-tems; changes in agricultural and value-chainstructures and management practices; changes inknowledge, attitudes, and practices at the house-hold level; and cycles and trends in the natural en-vironment that shape the year-to-year populationdynamics, evolution, and the geographical spreadof pests and disease. This complexity leads nationaland international institutions to simplify theiranalyses by focusing on the domestic food safetysituation; on the domestic agricultural health situ-ation on a sector-by-sector, pest, or disease basis; oron system performance as it affects trade at importand export market borders.

Levels of aggregation

The various levels of aggregation at which SPS in-terventions occur may lead to problems of scopeand the appropriate attribution of costs and bene-fits. Three levels should be considered: (i) the firmand group level, (ii) the subsector level, and (iii) thelevel of encompassing the entire agriculture andfood system.

Table A6-5 Results of Cost-Benefit Exercises

Lao PDR Armenia MoldovaNPV ($) NPV ($) NPV ($)

5% 10% 15% IRR (%) 5% 10% 15% IRR (%) 5% 10% 15% IRR (%)

I. Base case96.89 62.12 41.11 67 9.62 4.04 0.84 17 6.31 1.40 (1.35) 12

II. Optimistic case102.19 65.67 43.60 70 10.81 4.91 1.51 18 7.47 2.27 (0.67) 14

III. Pessimistic case91.59 58.57 38.62 64 8.43 3.18 0.17 15 5.14 0.54 (2.03) 11

Improving market access for a firm or for a groupof related producers can begin with a list of SPS con-straints in the public and private domains and thenproceed to a search for solutions and calculations ofthe costs and benefits of possible interventions.This looks relatively simple from an SPS perspec-tive, but from a commercial and counterfactual per-spective it becomes much more complex. Forprivate investors, the complexity lies in their needto consider simultaneously scaling up productionto cover fixed costs, improving overall qualitymanagement, and adjusting their commercial strat-egy to product-market combinations more de-manding than those to which their firms arealready familiar with. These adaptations are basi-cally private sector responsibilities, and differentcompanies may make different choices, given theirresources and their assessments of potential prof-itability. The public sector can broaden the choicesavailable to investors and facilitate ongoing effortsby providing necessary services, reducing transac-tion costs, and co-funding investments having apublic goods aspect. For costs and benefits at thefirm and group level, many costs and benefits mustbe taken into account, and attribution of parts of netpresent values to SPS and commercial investmentsis highly arbitrary. Generally, the additional cost ofSPS may be a small part of overall additional in-vestment, making attribution of all benefits to SPSanomalous in many cases.

In mitigating SPS constraints for a subsector, forexample, vegetable exports in a country with arange of players having quite different resources,product-market combinations, and commercialstrategies, attribution ex ante and ex post of the netimpact of SPS investments will be difficult, giventhat a range of the commercial investment deci-sions made on that basis might have been made

anyway to address other concerns. Experimentaldesign for assessing differential outcomes can beperceived as a theoretical solution, but it will notwork in real situations. In projects for boostingagricultural production and income, cost-benefitcalculations are usually made on the basis of as-sumed standardized additional inputs and outputsfor a homogeneous sector. This approach is moredifficult to follow and to calibrate in an export en-vironment with a range of profiles and product-market combinations. In addition, benefits fromSPS improvements in agricultural subsectors canprovide important spillover benefits to domesticsectors as well.

Considering the agriculture and food sector as awhole will reveal several subsectors for which theadditional costs and benefits induced by SPS effortswill be extremely difficult to isolate from the effectsof private commercial decisions. Moreover, con-trols for imported and domestic food safety andplant and animal health are intrinsically important,and significant common use of generic capacitieswill naturally occur. The cost of laws and regula-tions, the cost of their enforcement and of the ruleof law in general, and the cost of human and insti-tutional capital cannot simply be allocated to con-sumer health, agricultural health, or services togroups and subsectors. These services representvarious degrees of public good. In other words, iso-lating SPS benefits and attributing them to sector-specific investments is exceedingly difficultbecause SPS investments are only a small part oftotal investment in the agro-food sector. Lastly,subsectors tend to compete for resources and thusto have an interest in downplaying their costs andexaggerating their benefits, further complicatingcost-benefit assessments for subsectors within theoverall framework.



Tabl

e A

6-6

Cos

t-B

enefi

t A

sses

smen

t fo

r La

o PD

R

Ass

umpt

ions

:1.

Agr

icul

ture

val

ue a

dded

(VA

) for

200

5 is

US$

1.1B

(WB

SIM

A).

2. D

ata

from

Ban

k of

Lao

PD

R a

nnua

l rep

orts

: liv

esto

ck (3

5% o

f agr

icul

ture

val

ue a

dded

), cr

ops

(59%

).

3. P

ublic

hea

lth: A

ssum

ing

impr

oved

food

saf

ety

mea

sure

s w

ill r

educ

e D

ALY

s by

20%

, or

35,2

00 (D

ALY

in 2

002

was

176

,000

); at

an

estim

ated

ann

ual w

age

of

US$

300,

the

annu

al b

enefi

t is

US$

10.6

mill

ion.

4. C

ompu

tatio

n of

est

imat

ed b

enefi

ts: E

stim

ated

ben

efits

are

ass

umed

to b

e so

me

perc

enta

ge (s

econ

d co

lum

n) o

f est

imat

ed v

alue

add

ed (e

st. V

A).

Estim

ated

VA

Es

timat

ed

cont

ribu

ted

($M

)R

ate

appl

ied

bene

fits

($M

)

Ani

mal

hea

lth38

50.

008

3.08

Plan

t hea

lth64

90.

0025

1.62

25Pu

blic

hea

lth

10.6

5. T

otal

cos

ts, $

M�

7.7

Yea

r 0

12

34

56

78

910

1112

1314

15

I. B

ase

case

Cos

ts (

US$

M)

Inve

stm

ent c

ost

�1.

386

�1.

386

�1.

386

�1.

386

�1.

386

�0.

77O

pera

ting

cost

s�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1B

enefi

ts (

US$

M)

Ani

mal

hea

lth0.

771.

543.

083.

083.

083.

083.

083.

083.

083.

083.

083.

083.

08Pl

ant h

ealth

0.41

0.81

1.62

1.62

1.62

1.62

1.62

1.62

1.62

1.62

1.62

1.62

1.62

Publ

ic h

ealth

2.65

5.30

10.6

010

.60

10.6

010

.60

10.6

010

.60

10.6

010

.60

10.6

010

.60

10.6

0N

et b

enefi

ts�

1.38

6�

2.38

6�

2.38

61.

445.

2713

.53

14.3

014

.30

14.3

014

.30

14.3

014

.30

14.3

014

.30

14.3

014

.30

Dis

coun

t rat

e5%

10%

15%

NPV

$96.

89$6

2.12

$4

1.11

IRR

67%

II. O

ptim

isti

c ca

seN

et b

enefi

ts�

1.32

�2.

27�

2.27

1.37

5.53

14.2

115

.02

15.0

215

.02

15.0

215

.02

15.0

215

.02

15.0

215

.02

15.0

2D

isco

unt r

ate

5%10

%15

%N

PV$1

02.1

9 $6

5.67

$4

3.60

IR

R70

%II

. Pes

sim

isti

c ca

seN

et b

enefi

ts�

1.46

�2.

51�

2.51

1.51

5.00

12.8

613

.59

13.5

913

.59

13.5

913

.59

13.5

913

.59

13.5

913

.59

13.5

9D

isco

unt r

ate

5%10

%15

%N

PV$9

1.59

$5

8.57

$3

8.62

IRR

64%

Not

e:Th

is c

ost-

bene

fit ta

ble

diffe

rs fr

om th

e co

st-b

enefi

t tab

le in

the

Lao

PDR

Act

ion

Plan

bec

ause

of d

iffer

ent a

ssum

ptio

ns u

sed.


Tabl

e A

6-7

Cos

t-B

enefi

t A

sses

smen

t fo

r A

rmen

ia

Ass

umpt

ions

:1.

Agr

icul

ture

val

ue a

dded

(VA

) for

200

4 is

US$

546M

(WB

SIM

A).

2. D

ata

from

the

2005

Sta

tistic

al Y

earb

ook

of A

rmen

ia: p

lant

gro

win

g (5

6% o

f agr

icul

tura

l pro

duct

ion)

, ani

mal

hus

band

ry (4

4%).

3. P

ublic

hea

lth: A

ssum

ing

impr

oved

food

saf

ety

mea

sure

s w

ill r

educ

e D

ALY

s by

20%

, or

800

(DA

LY o

f 400

0; s

ee T

able

12)

; at a

n es

timat

ed a

nnua

l wag

e of

US$

360,

th

e an

nual

ben

efit i

s U

S$0.

288

mill

ion.

4. C

ompu

tatio

n of

est

imat

ed b

enefi

ts: E

stim

ated

ben

efits

are

ass

umed

to b

e so

me

perc

enta

ge (s

econ

d co

lum

n) o

f est

imat

ed v

alue

add

ed (e

st. V

A).

Estim

ated

VA

Es

timat

ed

cont

ribu

ted

($M

)R

ate

appl

ied

bene

fits

($M

)

Ani

mal

hea

lth24

00.

012.

4Pl

ant h

ealth

306

0.00

30.

918

Publ

ic h

ealth

0.

288

5. C

osts

, $M

�7.

7

Yea

r 0

12

34

56

78

910

1112

1314

15

I. B

ase

case

Cos

ts (

US$

M)

Inve

stm

ent c

ost

�1.

386

�1.

386

�1.

386

�1.

386

�1.

386

�0.

77O

pera

ting

cost

s�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1�

1B

enefi

ts (

US$

M)

Ani

mal

hea

lth0.

61.

22.

42.

42.

42.

42.

42.

42.

42.

42.

42.

42.

4Pl

ant h

ealth

0.23

0.46

0.92

0.92

0.92

0.92

0.92

0.92

0.92

0.92

0.92

0.92

0.92

Publ

ic h

ealth

0.07

0.14

0.29

0.29

0.29

0.29

0.29

0.29

0.29

0.29

0.29

0.29

0.29

Net

ben

efits

�1.

386

�2.

386

�2.

386

�1.

48�

0.58

1.84

2.61

2.61

2.61

2.61

2.61

2.61

2.61

2.61

2.61

2.61

Dis

coun

t rat

e5%

10%

15%

NPV

9.62

4.04

0.84

IRR

17%

II. O

ptim

isti

c ca

seN

et b

enefi

ts�

1.32

�2.

27�

2.27

�1.

41�

0.61

1.93

2.74

2.74

2.74

2.74

2.74

2.74

2.74

2.74

2.74

2.74

Dis

coun

t rat

e5%

10%

15%

NPV

10.8

14.

911.

51IR

R18

%II

. Pes

sim

isti

c ca

seN

et b

enefi

ts�

1.46

�2.

51�

2.51

�1.

56�

0.55

1.74

2.48

2.48

2.48

2.48

2.48

2.48

2.48

2.48

2.48

2.48

Dis

coun

t rat

e5%

10%

15%

NPV

8.43

3.18

0.17

IRR

15%


Tabl

e A

6-8

Cos

t-B

enefi

t A

sses

smen

t fo

r M

oldo

va

Ass

umpt

ions

:1.

Agr

icul

ture

val

ue a

dded

(VA

) for

200

4 is

US$

473M

; ind

ustr

y va

lue

adde

d is

US$

531M

(WB

SIM

A).

2. D

ata

from

the

Nat

iona

l Bur

eau

of S

tatis

tics

of M

oldo

va: P

lant

pro

duct

ion

(71%

of a

gric

ultu

ral p

rodu

ctio

n), l

ives

tock

pro

duct

ion

(27%

), se

rvic

es (2

%).

3. O

f the

tota

l vol

ume

of in

dust

ry p

rodu

ctio

n, 1

0.4%

is fr

om p

roce

ssin

g m

eat a

nd d

airy

pro

duct

s, p

rese

rved

frui

ts a

nd v

eget

able

s, a

nd p

repa

red

anim

al fe

eds.

4. P

ublic

hea

lth: A

ssum

ing

impr

oved

food

saf

ety

mea

sure

s w

ill r

educ

e D

ALY

s by

20%

, or

400

(DA

LY o

f 200

0; s

ee T

able

12)

; at a

n es

timat

ed a

nnua

l wag

e of

US$

300,

th

e an

nual

ben

efit i

s U

S$0.

12 m

illio

n.

5. C

ompu

tatio

n of

est

imat

ed b

enefi

ts: E

stim

ated

ben

efits

are

ass

umed

to b

e so

me

perc

enta

ge (s

econ

d co

lum

n) o

f est

imat

ed v

alue

add

ed (e

st. V

A).

Estim

ated

VA

Es

timat

ed

cont

ribu

ted

($M

)R

ate

appl

ied

bene

fits

($M

)

Ani

mal

hea

lth12

80.

0075

0.96

Plan

t hea

lth33

60.

002

0.67

2Pu

blic

hea

lth

0.12

Proc

esse

d fo

od55

0.03

01.

656.

Cos

ts, $

M�

9.7

Yea

r 0

12

34

56

78

910

1112

1314

15

I. B

ase

case

Cos

ts (U

S$M

)In

vest

men

t cos

t�

1.74

6�

1.74

6�

1.74

6�

1.74

6�

1.74

6�

0.97

Ope

ratin

g co

sts

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

�1

Ben

efits

(U

S$M

) A

nim

al h

ealth

0.24

0.48

0.96

0.96

0.96

0.96

0.96

0.96

0.96

0.96

0.96

0.96

0.96

Plan

t hea

lth0.

170.

340.

670.

670.

670.

670.

670.

670.

670.

670.

670.

670.

67Pu

blic

hea

lth0.

030.

060.

120.

120.

120.

120.

120.

120.

120.

120.

120.

120.

12Pr

oces

sed

food

0.41

0.83

1.65

1.65

1.65

1.65

1.65

1.65

1.65

1.65

1.65

1.65

1.65

Net

ben

efits

�1.

75�

2.75

�2.

75�

1.90

�1.

051.

432.

402.

402.

402.

402.

402.

402.

402.

402.

402.

40D

isco

unt r

ate

5%10

%15

%N

PV$6

.31

$1.4

0 ($

1.35

)IR

R12

%II

. Opt

imis

tic

case

Net

ben

efits

�1.

66�

2.61

�2.

61�

1.80

�1.

101.

502.

522.

522.

522.

522.

522.

522.

522.

522.

522.

52D

isco

unt r

ate

5%10

%15

%N

PV$7

.47

$2.2

7 ($

0.67

) IR

R14

%II

. Pes

sim

isti

c ca

seN

et b

enefi

ts�

1.83

�2.

88�

2.88

�1.

99�

0.99

1.36

2.28

2.28

2.28

2.28

2.28

2.28

2.28

2.28

2.28

2.28

Dis

coun

t rat

e5%

10%

15%

NPV

$5.1

4 $0

.54

($2.

03)

IRR

11%

99

Table A7-1 presents the derivation of costs estimates on animal identification and registration discussed inbox 20 in chapter 4.

Appendix 7. Cost Estimates for Animal

Identification andRegistration

Table A7-1 Derivation of Cost Estimates

Costs/hd ($)Tags RFID Low end High end

Farm costsTags 1-2/hd @ $1 1/hd @ $3-$5 1 4Weight loss up to 1% up to 1% 2 2Mortality increase 0.10% 0.10% 2 2Tagging equipment $20/100 $50-$500/500 0.2 0.5Fuel and electricity $0.1-0.4/hd $0.1-0.4/hd 0.1 0.5Farmers’ time

Tagging 10 min/hd @$12 2 2Monitoring 10 min/hd @$12 2 2Recordkeeping 5 min/hd @$24 4 4Farm facilities Amort $5000 1 10Subtotal 14.3 27

Monitoring: Inspector $50-$200/visit 5 10

Central database: Equipment $1M/1M hd At taxpayer costs 0.5 1Staffing 1-2 fte/1M hd At taxpayer costs 0.8 1.5Subtotal 1.3 2.5

Transport and processing cost:Improvements to transport Amort> US$1M 0.5 1Separation of milk processing no data 1 5Modification of abattoirs Amort > US$5M 5 10Extra holding time up to 1% up to 1% 2 5Record keeping 0.25 1Subtotal 8.75 22Total 29.35 61.5

Cost allocation to end product:Pigs: Slaughter wt/hd estimated average of 75 kg $0.196 $0.410Dairy: Milk yield estimated average of 8,000 liters $0.004 $0.008Beef/veal: Slaughter wt/hd estimated average for beef and veal of 200 kg $0.147 $0.308

Notes:

1. The costs for farmers’ time vary considerably between confined and grazing animals, including replacement of lost tags; for large farms, thiscategory may include computer costs.2. FTE, or full-time equivalent, translates as one staff person working a full-time schedule for one year.3. Transport requires tracing individual animals.4. Processing may require tracing batches.5. Extra holding is required when records are inconsistent.6. Pig costs are divided by two to account for the herd approach.7. Dairy costs are per liter of milk.

101

Appendix 8.Spending on SPS under EU Accession Programs

SAPARD Expenditure 2000–2006

Total SAPARD investment in agro-processing and marketingEU contri- Total

bution public of which Private Total Total Annual Total Total Total to Total expen- EU con- contri- (7 yrs) Annual (7 yrs) avg per SAPARD SAPARD

SAPARD SAPARD costs diture tribution bution as % avg as per farm farm as % per farm(million (million (million (million (million (million of ag % of ag labor labor of ag labor

Country euro) euro) euro) euro) euro) euro) GDP GDP (euro) (euro) GDP (euro)

Czech Republic 324 154 105 52 39 52 12.2% 1.7% 491 70 37.9% 1518Estonia 243 86 42 21 16 21 27.2% 3.9% 1107 158 159.1% 6466Hungary 703 266 182 73 55 109 9.7% 1.4% 822 117 37.5% 3177Latvia 387 153 106 53 40 53 48.7% 7.0% 755 108 178.1% 2763Lithuania 542 212 129 58 44 71 31.8% 4.5% 503 72 132.9% 2108Poland 2659 1201 1196 598 448 598 25.6% 3.7% 465 66 57.0% 1035Slovak Republic 294 128 90 45 34 45 26.0% 3.7% 700 100 85.4% 2298Slovenia 156 45 76 27 18 49 17.7% 2.5% 1004 143 36.5% 2069Bulgaria 808 121 230 115 86 115 14.1% 2.0% 789 113 49.5% 2777Romania 2083 1073 468 234 176 234 11.1% 1.6% 137 20 49.4% 611Total 8200 3439 2622 1275 954 1347 17.7% 2.5% 357 51 55.4% 1117

Source: Country SAPARD programs; Eurostat; World Bank Development Data Platform Time Series.

Note: The SAPARD program is used mainly to prepare the agricultural sector and rural areas in candidate countries for EU membership. It runsfrom 2000 to 2006. The national SPARD programs vary from country to country, but typically funds are allocated to the following priorities:• Investment in agricultural holdings;• Improving agro-processing and marketing;• Diversifying economic activities in rural areas;• Rural infrastructure, agri-environment, and so on.


PHARE Expenditure on Agriculture in Lithuania and Poland, 2000–2006

EU contribution

Total Funds for SPS Total to PHARE PHARE of which Total funds PHARE agriculture

funds for EU for of which funds for funds per EU Funds for SPSagriculture contribution SPS-related EU agriculture farm labor as % of per farm

Country (million euro) (million euro) projects contribution as % of ag GDP (euro) ag GDP labor (euro)

Lithuania 53 40 24 13.0% 206 5.9% 93Poland 306 179 204 115 6.6% 119 2.5% 45

Source: PHARE project lists were provided by the Poland and Lithuania Ministry of Agriculture; Eurostat; World Bank Development DataPlatform Time Series.

Note: The PHARE program is mainly for public sector institution building. Funds for SPS under PHARE include projects on veterinary and phy-tosanitary control, veterinary and phytosanitary border control, enforcement of the EU food control system, development of animal tracing andepidemiological surveillance systems, strengthening food control laboratories, and others.

103

The European Union is one of the three major exportmarkets for Armenia’s fisheries products; Japan andthe United States are the other two (World Bank2007a). Armenian exporters occupy a niche in the EUfor live crayfish that allows them to compete in amarket dominated by low-priced (cooked andfrozen) crayfish from China. In 2001, Armenia didnot yet have an agreement with the EU with respectto fisheries products. It was listed as a List II countrywith clearance for imports given on a firm-by-firmbasis. The Ministry of Foreign Affairs started to ne-gotiate an agreement in 2000. Although severalArmenian shipments of crayfish had entered the EUin 1998 and 1999, two sample shipments of live cray-fish were refused entry.45 Armenian exporters re-ceived assistance through a project supported by theUnited States and resumed exporting to Europe, trig-gering an inspection visit by the EC.

The European Commission’s Food and VeterinaryOffice mission to Armenia in 2003 resulted in the des-

ignation of an Armenian Competent Authority—theState Hygienic and Epidemiological Inspection—tocertify that only live, wild-capture crayfish would beexported and to regulate approved establishments ac-cording to Council Directive 91/493/30.46 Also, twoestablishments were de-listed and denied export cer-tificates. The Ministry of Health received donor assis-tance to upgrade its regulations and certificationprocesses. Individual crayfish firms received assis-tance from other donor projects to upgrade their fa-cilities and practices. By August 2004, four firms wereapproved for export of live crayfish to the EU underEC List II procedures.

The figure below shows the rapid progression oflive crayfish exports from Armenia to EU destina-tions following the EC authorization of export pro-cedures. While Russia and other CIS destinationsrepresent the historic center of these exports, theirimportance is dwarfed by the rapid expansion ofexport to Western Europe.

Appendix 9. Armenia’s Live Crayfish

Exports to the EU

Figure A9-1 Live Crayfish Exports from Armenia

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1997 1998 1999 2000 2001 2002 2003

$000

Belgium-Luxembourg Spain France Germany Russian Federation

Source: Armenia National Statistical Service.

105

accreditation, laboratoryalso accreditation bodies Formal recognition that a

laboratory is competent to perform specifiedtests or measurements. An accreditation bodyis an organization that performs the accredita-tion service. (UNIDO)

Acquis Communautaire (EU) The entire body oflaws, policies, and practices that have evolvedup to the present in the European Union. Thisincludes all treaties, regulations, and directivespassed by the European Union and affiliate in-stitutions. The expression made its first officialappearance in the 1992 Maastricht Treaty,under which it became an explicit objective ofthe Union “to maintain the acquis communau-taire and build on it.”

agricultural health Animal and plant health; see an-imal health and plant health.

animal health Issues pertaining to diseases of fish,bees, and livestock and the prevention thereof.

border post A port, airport, railway station, or roadcheckpoint open to international trade of com-modities at which veterinary or plant inspec-tions may be performed (OIE).

conformity assessment A comprehensive processthat includes testing, calibration, inspection,and certification to determine whether prod-ucts, processes, systems, and people meet spec-ified requirements (UNIDO).

equivalence Condition in which the sanitary andphytosanitary measures of one country,though not identical to those of another coun-try, have the same effect or achieve the samelevel of sanitary or phytosanitary protection(WTO).

GAP, Good Agricultural Practice GAP refers to theapplication of recommendations and availableknowledge to address environmental, eco-nomic, and social sustainability for on-farmproduction and post-production processes re-

sulting in safe and healthy food and non-foodagricultural products (FAO).

GOST [gosudarstvennyy standart] The system oftechnical standards maintained by the Euro-Asian Council for Standardization, Metrology,and Certification (EASC), a regional standardsorganization operating under the auspices ofthe Commonwealth of Independent States(CIS).

HACCP, hazard analysis and critical control pointA widely accepted food safety managementsystem that favors monitoring critical points infood chains to prevent food safety problems byidentifying specific hazards and measures fortheir mitigation (FAO Food Quality and SafetySystems Manual, 1998).

harmonization (of standards) The establishment,recognition, and application by different coun-tries of sanitary and phytosanitary measuresbased on common or uniform standards.

international standards Standards developed byinternational organizations. For sanitary andphytosanitary measures, the relevant organi-zations are the joint FAO/WHO CodexAlimentarius Commission (Codex) for foodsafety; the World Organization for AnimalHealth (OIE) for animal health; and theInternational Plant Protection Convention(IPPC) for plant health.

ISO, International Organization for Standardiza-tion ISO is a nongovernmental organizationconsisting of a network of national standardsinstitutes from different countries that seek toachieve a consensus among these countries onspecifications and criteria to be applied consis-tently in the classification of materials, in themanufacture and supply of products, in testingand analysis, in terminology, and in the provi-sion of services. ISO 9000 provides a frame-work for quality management throughout the

Glossary

processes of producing and delivering prod-ucts and services. In June 1997, Codex recom-mended that laboratories responsible forcontrol of export and import foods complywith ISO/IEC Standard 17025 “GeneralRequirements for the Competence ofCalibration and Testing Laboratories.” (ISO)

maximum residue level (MRL) The maximum con-centration of a pesticide, veterinary drug, orother chemical substance residue (expressed asmg/kg) recommended by the CodexAlimentarius Commission to be legally per-mitted in or on food commodities and animalfeed. Foods derived from commodities thatcomply with the applicable MRLs are intendedto be toxicologically acceptable and safe forhuman consumption. (FAO)

Food regulators can use MRLs other thanthose recommended by Codex Alimentarius orcan choose their own MRLs for substances andfood products for which no CodexAlimentarius advice has been formulated.

monitoring Continuous investigation of an in-fected population or subpopulation and its en-vironment to detect changes in the prevalenceor incidence of a disease, often to chartprogress of a disease-control program to assessits effectiveness (OIE, FAO EMPRES).

See surveillance.morbidity rate Incidence or prevalence of disease

(FAO EMPRES).mortality rate Proportion of death in a population

(FAO EMPRES).mutual recognition arrangements Mechanisms by

which a user or acceptance authority in onecountry can have sufficient confidence in thevalidity of test reports and calibration certifi-cates from laboratories in foreign countrieswithout needing to make individual evalua-tions of the competence of those laboratories(UNIDO).

nondiscrimination in trade Circumstance in whicha country treats its trading partners equally(giving them equally most-favored-nation orMFN status). Some exceptions are free-tradeareas in which special arrangements apply togoods traded among countries within the free-trade area. Also, imported and locally pro-duced goods are treated equally, at least afterthe foreign goods have entered the market.This treatment of foreign and domestic goods,services, trademarks, copyrights, and patents

is known as national treatment, that is, the prac-tice of according foreign producers the sametreatment as is given to national producers.(WTO)

notifiable disease A disease listed by law that mustbe brought to the attention of veterinary au-thorities as soon as it is detected or suspected(OIE).

OIE listed diseases Transmissible diseases as es-tablished by the OIE International Committee(chapter 2.1.1 of the Terrestrial Animal HealthCode 2005). In May 2004, OIE member coun-tries approved the creation of a single list ofdiseases notifiable to the OIE. A new list wasapproved in May 2005 by the InternationalCommittee and became effective in 2006. Notethat before 2006 diseases notifiable to the OIE wereclassified in two lists, List A and List B. (OIE)

outbreak Occurrence of disease in an identifiablegroup of animals (for example, animals in a penor animals within a village) at a level greaterthan that normally expected (FAO EMPRES).

pest biotic agent capable of causing injury to plantsor animals or to plant and animal products.

pesticide residue Any specified substance in food,agricultural commodities, the environment, oranimal feed resulting from the use of a pesti-cide. The term includes any derivatives of apesticide considered to be of toxicological sig-nificance. (FAO)

phytosanitary Pertaining to plant quarantine(FAO).

phytosanitary certificatealso phytosanitary certification A phytosanitary

certificate is an official document attesting tothe phytosanitary status of any consignmentaffected by phytosanitary regulations (FAO).

phytosanitary legislation Basic laws granting legalauthority to the relevant ministry or agenciesto draft phytosanitary regulations (FAO).

phytosanitary measure Any legislation, regulation,or official procedure intended to prevent theintroduction and/or spread of quarantinepests (FAO).

plant health Issues pertaining to pests and diseasesaffecting plants and the control or preventionthereof.

plant quarantine All activities designed to preventthe introduction and/or spread of quarantinepests or to ensure their official control (FAO).

quarantine For plants, official confinement ofplants or plant products subject to phytosani-


Glossary 107

tary regulations for observation and researchor for further inspection, testing, and/or treat-ment (FAO).

For animals, isolating a group of animals insuch a way that it precludes contact with otheranimals and prevents spread of disease.During quarantine an animal may undergo ob-servation for a specified length of time and, ifappropriate, testing and treatment. (OIE)

quarantine pest A pest of potential economic im-portance to the area endangered thereby andnot yet present there or present but not widelydistributed and being officially controlled(FAO).

risk Likelihood in an importing country of the oc-currence and likely magnitude of an event ad-verse to human, plant, or animal healthresulting from a hazard (OIE).

risk analysis Process composed of hazard identifi-cation, risk assessment, risk management, andrisk communication (FAO).

Risk assessment is the evaluation of thelikelihood and the biological and economicconsequences of entry, establishment, orspread of a pathogenic agent within the terri-tory of an importing country. Risk manage-ment is the process of weighing policyalternatives in light of the results of the risk as-sessment and, if required, selecting and imple-menting appropriate control options,including regulatory measures. Risk commu-nication is the interactive exchange of infor-mation on risk among risk assessors, riskmanagers, and other interested parties.

In plant health, a pest risk analysis (PRA)combines pest risk assessment and pest riskmanagement. Pest risk assessment is the deter-mination of whether a pest is a quarantine pestand evaluation of the potential effects of its in-troduction. Pest risk management is thedecision-making process aimed at reducing therisk of introduction of a quarantine pest. (FAO)

sanitary and phytosanitary (SPS) measures Anymeasure applied to protect human, animal,and plant health or life from risk arising fromthe entry, establishment, or spread of a hazard(OIE).

SPS management includes capacities toenact a proper regulatory framework for con-trol of pests, diseases, and harmful substancesin food and agricultural products; enforce-ment; prevention; detection; monitoring; sur-

veillance; inspection; control of outbreaks;sharing of information with trading partners;and risk assessment.

science-based Based on scientific justification or asa consequence of consistent risk decisionsbased on an appropriate risk assessment(WTO).

stamping out Method of eradicating disease bykilling all animals in a herd or defined regioninfected with and/or exposed to pathogens(OIE).

surveillance also active surveillance, passive surveillance

Observation and investigation of a susceptible(uninfected) population or subpopulationaimed at the early detection of cases of a par-ticular disease so control actions can be quicklyinstituted (OIE, FAO EMPRES).

Surveillance is often subdivided into twocategories, passive and active. Passive surveil-lance is the secondary use of routinely collecteddata generated for another purpose, such as adiagnostic service. Active surveillance is the rou-tine collection of data the primary purpose ofwhich is surveillance. (FAO EMPRES)

See monitoring.traceability Ability to follow the movement of a

food through specified stage(s) of its produc-tion, processing, and distribution chain (CodexAlimentarius Commission).

transition economies Former state-planned econo-mies that have opted to develop marketeconomies and are in the process of changingtheir laws, institutions, trade regimes, and enter-prise ownership to those of a market economy.In new EU member states this process is largelycomplete, and these countries are no longer con-sidered transition economies. Current transitioneconomies include the CIS countries, Mongolia,and several countries in the Balkans, but severalcountries in Asia and Africa share some of thesecharacteristics as well.

transboundary animal disease Diseases of signifi-cant economic, trade, and/or food security im-portance for a considerable number ofcountries that can easily spread to other coun-tries and reach epidemic proportions and thecontrol and/or management of which includesexclusion and requires cooperation among sev-eral countries (FAO EMPRES).

transparency The principle of making available, atthe international level, information on sanitary

and phytosanitary measures and their ratio-nale (OIE, FAO).

zoonosis Disease or infection naturally transmissi-ble from animals to humans (OIE).

Sources:

EU European Commission, Justice and HomeAffairs. Glossary. http://ec.europa.eu/justice_home/glossary/glossary_a_en.htm.

FAO Glossary of phytosanitary items. http://www.fao.org/docrep/W3587E/w3587e01.htm.

FAO EMPRES Emergency Prevention System (EM-PRES) for Transboundary Animals and PlantPests and Diseases. http://www.fao.org/livestock/AGAH/EMPRES/GEMP/resources/resources.html.

IPPC International Plant Protection Convention.OIE Terrestrial Animal Health Code (2005).

General definitions. http://www.oie.int/eng/normes/mcode/en_chapitre_1.1.1.htm.

UNIDO Working Paper No. 2, Trade CapacityBuilding Series, “Laboratory Accreditation inDeveloping Economies.” 2003.

WB “Food Safety and Agricultural HealthStandards: Challenges and Opportunities forDeveloping Country Exports.” Report No.31207. World Bank. 2005.

WTO http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm.


109

EXECUTIVE SUMMARY1 The agreements referred to are the 1994 WTO Agreement on

the Application of Sanitary and Phytosanitary (SPS)Measures and the 1994 WTO Agreement on TechnicalBarriers to Trade (TBT).

CHAPTER 12 The transition economies in Central and Eastern Europe

(CEE) that have joined the EU have all become members ofthe WTO: Czech Republic (1995), Hungary (1995), Poland(1995), Slovak Republic (1995), Slovenia (1995), Romania(1995), Bulgaria (1996), Estonia (1999), Latvia (1999), andLithuania (2001).

CHAPTER 23 World Bank Development Data Platform Time Series. 4 During the Soviet period, government policies directed pro-

duction decisions, including levels of production, types ofcommodities, and others.

5 Fiber crops (cotton and flax) are not covered by this report6 Modern retail channels in CEE and CIS countries include hy-

permarket, supermarket, “cash and carry,” discount, andconvenience stores. For simplicity, the word supermarket issometimes used to refer to all of these channels.

7 Problems persist in recording trade statistics for CIS coun-tries. Some countries have weak border controls. and cor-ruption in border agencies may also affect the quality of tradedata. For a few countries, central governments may lack con-trol over secessionist territories (Frienkman, Polyakov, andRavenco 2004).

8 The value of Moldova’s agro-food exports (table 4) is biggerthan its agriculture value added (table 2). This is becausewine and spirit making are not included in agriculture value-added, whereas wine and spirits form a major part of agro-exports.

9 The former Soviet Union used to import coarse grain in largequantities for animal feed to sustain the high level of live-stock production and consumption. Following the economictransition (with its price and trade liberalization), Russia andsome other CIS countries now export grains and import live-stock products, suggesting a comparative advantage forgrain rather than for livestock production; see Liefert andSwinnen (2002).

10 For example, 80 to 90 percent of Moldova and Georgia’s wineexports went to the Russian market. Moldova’s monthlywine sales to Russia stood at US$20 million before the ban.After the ban, Moldova significantly increased wine exports

to Belarus, Romania, Ukraine, the Baltic countries, Poland,and other countries. Georgia’s wine exports dropped fromUS$21.5 million in the first quarter of 2006 to US$5.6 millionin the second quarter. From April to June, Georgia primarilyexported wine to Belarus, Kazakhstan (US$1.3 million), andUkraine (US$3 million).

CHAPTER 311 This is not to say that no research was done on standards in

the former Soviet Union. A significant amount of researchwas done, but it resulted in a detailed, rigid system of stan-dards suited to the planned economy.

12 WHO 2003; World Bank 2007a; World Bank 2007b. 13 No universally accepted measure for food safety exists at the

international level. Substantial difficulties and high costs arisein efforts to separate food-borne causes of morbidity and mor-tality (infectious disease, environmental toxins and allergens,and chemical additives) from water-borne, animal-to-human,and plant-to-human causes of disease and mortality.

14 This measure results from the WHO Global Burden ofDisease studies published in 1993 and since codified for usein projecting and measuring global and national human dis-ease and mortality burdens. DALYs for a disease or healthcondition are calculated as the sum of the years of life lost dueto premature mortality in the population and the years lostdue to disability for incident cases of the health condition. Itis a measure of the health gap between existing conditionsand an ideal state in which every person born in a countrylives without disease to the age indicated by his or her life ex-pectancy.

15 WHO DALYs don’t provide comprehensive coverage ofzoonotic diseases.

16 It should be noted that the use of the proxy measure under-states the costs to these economies of food- and water-bornediseases because it excludes many food- and water-borne dis-eases occurring in the country; noninfectious diseases, suchas cancers, caused in part by food- or water-borne diseases;and treatment costs. Use of DALYs for policy purposes in acountry context requires correcting for significant diseasesnot covered in WHO figures, attributing reported DALYs inother categories to the specific disease or class of diseases ofconcern, and accurately assessing costs of methods for dis-ease reduction to evaluate their cost-effectiveness. It shouldbe noted that DALYs cover death as well as workers’ loss ofproductive time and inactive persons’ loss of time due to ill-ness; the use of lost wages is a rough proxy that does notcover costs of treatment and indirect loss of productive timein the household, nor is it, of course, a justifiable valuation ofloss of human life.

17 Similar introductions occurred in Kenya.

Notes

18 UN TRAINS (Trade Analysis and Information Systems) data,accessed January 2007.

19 This program gives the Least Developed Countries exportduty-free access to all products except weapons.

20 http://forum.europa.eu.int/irc/sanco/vets/info/data/listes/list_all.html, accessed December 2006.

21 This refers to joint efforts by the European Bank forReconstruction and Development (EBRD) and the WorldBank Business Environment and Enterprise PerformanceSurvey (BEEPS).

CHAPTER 422 FAO 2003 and FAO 2006b.23 In Canada, food control and phytosanitary controls are under

one authority, whereas in Lithuania only food and veterinaryinspections were consolidated.

24 The first study (GAO 1999) covered four countries and thesecond (GAO 2005) covered seven countries.

25 SAPARD stands for “Special Accession Program forAgriculture and Rural Development.” PHARE is theacronym for “Poland and Hungary: Assistance forRestructuring Their Economies,” initially established forPoland and Hungary in 1989. ISPA is the acronym for“Instrument for Structural Policies for Pre-Accession,” andCARDS is the acronym for “Community Assistance forReconstruction, Development, and Stabilization.”

Sources: http://ec.europa.eu/enlargement/financial_assistance/index_en.htm

26 This information derives from interviews with Lithuanianfood safety and agricultural health authorities.

27 The projects were cofinanced with the national budget ofLithuania. The amounts listed here are those from EU fund-ing only.

28 Regulation on Food Hygiene (EC 852/2004), Regulation onSpecific Hygiene Rules for Food of Animal Origin (EC853/2004), Regulation on Official Controls on Foods ofAnimal Origin (EC 854/2004), Regulation on Animal Health(Council Directive 2002/00), and Council Directive 2004/41,which repealed certain directives on food hygiene. Other per-tinent regulations amend, implement, and provide for thetransition of the basic laws.

29 Regulation (EC) No. 178/2002.30 For most imported products, the importer need only indicate

the exporter from whom the product was obtained.31 Hazard analysis and the identification, validation, and veri-

fication by the producer or third-party auditor at critical con-trol points in food or feed production eliminate, in principle,all or most of the need for end-product testing to ensureproducts conform to food safety requirements.

32 Codex is preparing a translation in Russian of all its stan-dards, to be finished in 2007. The OIE has also made availableRussian translations of some of its main reference documentsand standards.

33 http://www.wto.org/english/tratop_e/sps_e/sps_e.htm,accessed December 18, 2006.

34 WHO 2003, from http://www.euro.who.int/foodsafety/Surveillance/20020903_3.

35 Except in Poland, government officials responsible for foodsafety often looked lost during interviews when asked aboutcivil society organizations.

36 In Hungary, 8,382 corporate farms (0.87 percent of total hold-ings) cultivate 40 percent of the agricultural area, whilenearly one million private holdings with an average size of 4hectares cultivate the remaining 60 percent of the land. In theSlovak Republic, cooperatives and commercial companiescultivate 76 percent of total agricultural land.

37 World Bank 2002.38 The Standards and Trade Development Facility (STDF), a co-

operative partnership of FAO, OIE, WHO, WTO and theWorld Bank for SPS capacity building, is making joint ana-lytical efforts to analyze and recommend ways for improvingsustainability. http://www.standardsfacility.org/

CHAPTER 539 Available data from field work indicate that Lithuania re-

ceived EC support for SPS of 5.9 percent of agricultural GDP,or €93 per person employed in agriculture, and Poland 2.5percent, or €45 per person (see appendix 8).

APPENDIX 240 Crop rotation is the basic control tool used in the United

States.

APPENDIX 441 http://ec.europa.eu/food/food/rapidalert/index_en.htm.42 Eurostat; accessed May 2007.

APPENDIX 643 http://www.who.int/healthinfo/statistics/bodgbddeath

dalyestimates.xls. 44 Minimum monthly wage for labors: US$ 25/month (Kip

250,000) http://www.business-in-asia.com/laos_economic_review.html.

APPENDIX 945 Rackowe 2001. 46 DG SANCO 2003.


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RELATED WEBSITESCodex Alimentarius, FAO/WHO

http://www.codexalimentarius.netEU, European Neighbourhood Policy

http://ec.europa.eu/world/enp/welcome_en.htmEU, Financial Assistance

http://ec.europa.eu/enlargement/financial_assistance/index_en.htm

EU, Third-Country Establishments Listshttp://forum.europa.eu.int/irc/sanco/vets/info/data/listes/list_all.html

FAO, Regional Office for Europe and Central Asiahttp://www.fao.org/world/regional/REU/field_programme/field_default_en.html

FAOSTAT [FAO statistics]http://faostat.fao.org/

IPPC (International Plant Protection Convention)http://www.ippc.int/IPP/En/default.jsp

IWGO (International Working Group of Ostrinia and OtherMaize Pests)http://www.iwgo.org

LABORSTA (ILO labor statistics)http://laborsta.ilo.org

TACIS, EU and Eastern Europe and Central Asiahttp://ec.europa.eu/comm/external_relations/ceeca/tacis/index.htm

Ukraine, State Statistics Committeehttp://www.dssu.gov.ua/control/en/index

UN Comtrade (United Nations Commodity Trade StatisticsDatabase)http://comtrade.un.org/

WHO, Burden of Disease Statisticshttp://www.who.int/healthinfo/bod/en/index.html

WHO, Surveillance Program for Control of Food-borneInfections and Intoxications in Europehttp://www.euro.who.int/foodsafety/Surveillance/20020903_3

World Integrated Trade Solution (WITS)http://wits.worldbank.org/witsweb/

World Organization for Animal Healthhttp://www.oie.int

WTOhttp://www.wto.org

WTO, Documentshttp://docsonline.wto.org

WTO, Sanitary and Phytosanitary Measureshttp://www.wto.org/english/tratop_e/sps_e/sps_e.htm.

PEOPLE INTERVIEWED DURINGFIELD VISITS TO LITHUANIA ANDPOLAND

LithuaniaMr. Albertas BarzdaDirector, National Nutrition CentreMs. Edita Bishop, Member, National Consumer Rights

Protection Board

Ms. Irena Endriuskiene, Chief Specialist, Department ofEconomics and Finance, Trade Policy Division

Ms. Zivile Kazakeviciene, Head, Division of Foodstuff andRecreational Services

Dr. Almantas Kranauskas, Deputy Director, NationalNutrition Centre

Ms. Angele Liubeckiene, Head, Quality Division, Food Safetyand Quality Department

Mr. Edmundas Morkevicius, Head, State Plant ProtectionService

Mr. Vidmantas Paulaskas, Deputy Director, State Food andVeterinary Service, National Veterinary Laboratory (NVL)

Mr. Feliksas Petrauskas, Chairman, National Consumer RightsProtection Board

Ms. Irma Pilipiene, Administrative Director, Lithuanian DairyAssociation

Mr. Darius Remeika, First Deputy Director, State Food andVeterinary Service

Ms. Rima Zivatkauskaite, International Affairs DepartmentMr. Mindaugas Zobiele, Head, International Relations and

Legal Division

PolandMs. Maria Boratyn-Laudanska, Director, Food Safety and

Veterinary Department Ms. Anna Galica , Director, General Veterinary Inspectorate Mr. Antoni Gibowicz, Board Member, Quality and Assurance

Department, “Sokołów” (a private meat company) Ms. Daniela Gressani, Country Director, World BankMr. Adam Jarecki, Head of Unit, Food Safety and Veterinary

DepartmentMs. Monika Jarzębska, Specialist, Department of Food,

Nutrition and Consumer’s Objects Hygiene, Chief SanitaryInspectorate, Ministry of Health

Ms. Marta Jasińska-Kiełek, Specialist, Department of PlantBreeding and Protection

Ms. Katarzyna Laskowska, Chief, Information and PromotionDepartment, Ministry of Agriculture

Ms. Grazyna Morkis, Institute of Agriculture and FoodEconomy

Ms. Malgorzara Niepkulczycka, President, Polish ConsumerFederation

Ms. Bożena Nowicka, Director, Department of Plant Breedingand Protection

Mr. Andrzej Pawelczak, Director PR, ANIMEX (a private meatcompany)

Ms. Katarzyna Poskocz, Specialist, Department of Food,Nutrition and Consumer’s Objects Hygiene, Chief SanitaryInspectorate, Ministry of Health

Mr. Jaroslaw Ptak, “Polsus”, the Polish Swine BreederAssociation

Ms. Elzbieta Sieliwanowicz, Technical specialist (food), PolishConsumer Federation

Mr. Paweł Szabelak Chief, Monitoring and Evaluation,Programs Department, Ministry of Agriculture

Mr. Krzysztof Szponder, Director, Food Safety and Quality,REAL (retailer chain, part of the METRO company)

Prof. Jerzy Wilkin, Department of Economics, University ofWarsaw

Ms. Iwona Zawinowska, General Veterinary Inspectorate


Food Safety and Agricultural Health Management in CIS Countries: Completing the Transition

THE WORLD BANK

REPORT NO. 40069-RU

Agriculture & Rural Development DepartmentWorld Bank1818 H Street, N.W.Washington, D.C. 20433http://www.worldbank.org/rural