Trade Development Briefing Note Issue 4, July 2010 59985 Operating costs of trade-related sanitary and phyto- sanitary surveillance activities in the Lao PDR Key messages based, by monitoring and controlling pests, diseases and harmful A growing trend faced by exporters trying to access international agro- chemicals along the entire food supply chain. food markets is the requirement for information about the pest, disease and food safety situation in the exporting country. This information is Surveillance and monitoring activities are important: derived from sanitary and phytosanitary (SPS) surveillance and monitor- to detect and, thereby, help to control hazards; and ing activities. Yet, implementation of these activities needs more than to provide information on pests, diseases and food hazards the initial capital investments and training provided by external sources. - to guide policy makers on adopting appropriate measures, priority Sustainability requires public funding of substantial recurrent costs. setting and resource allocation; However, decision makers in Government have little knowledge about - to provide input for risk analysis; and the tasks to be performed and the costs involved. - to comply with requirements of trading partners for information on the pests and disease situation and food hazards within the export- A new study by the World Bank1 provides recommendations for expand- ing country. ing surveillance, testing and diagnostic activities in the Lao PDR for the next five to seven years, and assesses minimum levels of additional Such activities are especially important for countries with long porous public funding needed. In the short to medium run, cost-efficient meth- borders, such as Lao PDR, where border controls may not be the most ods to expand surveillance can be applied such as the use of rapid test effective or cost-efficient method to manage agricultural and food haz- kits and subcontracting of confirmation testing to laboratories abroad. ards. Surveillance and monitoring activities rely heavily on capable and The report also makes recommendations on ways to improve efficiency efficient diagnostic laboratory support (at home or abroad) that should through the clearer delineation of responsibilities among existing SPS have capacities to perform physical, microbiological and chemical analy- laboratories. ses. Methodology Lao PDR SPS institutions The assessment makes use of information from three sources: The primary SPS institutions in the Lao PDR are the Ministries of Health (MOH), and Agriculture and Forestry (MAF). The Department of Agricul- Technical staff of relevant government agencies identified pertinent ture (DOA) and the Department of Livestock and Fisheries (DOLF) of cost items for the various activities they are carrying out. MAF are responsible for plant and animal health, respectively. Food Cost information, especially laboratory test fees, from Thailand and safety, however, is a shared responsibility among various offices of both Vietnam provided benchmark information on cost levels in well- MOH and MAF. The Food and Drug Department (FDD) under the MOH established laboratories in the region as well as costs of purchasing is responsible for processed or semi-processed food products. FDD diagnostic services as an alternative to conducting tests by Lao PDR shares the responsibility for the management of food-borne diseases laboratories. with the Hygiene and Prevention Department (HPD) of MOH. The International laboratory specialists provided information and stylized proper use and safe levels of pesticides in food products, safe formula- estimates for the costs of use of expensive laboratory equipment. tions of fertilizers and pesticides and the presence of heavy metals and other pollutants in soils and fertilizers are shared concerns of the FDD The work focuses on surveillance and diagnostic activities that include with the DOA. Likewise, safe use and levels of veterinary drug residues, the collection of samples, diagnostics of pests and diseases, and testing proper formulation of veterinary drugs and animal feed, and safety of of safety of agricultural and food products and agricultural inputs. An animal and fish products are food safety concerns shared with the important assumption is that facilities, such as laboratories, and certain DOLF. equipment are already or will soon be available and operational. More- over, general expenditure items that are part of the regular public The relevant agencies that provide support to surveillance and monitor- budget for laboratories such as utilities and salaries of staff are not in- ing activities are the following: cluded in the estimation. For laboratory tests, assessments assume a the Food and Drug Quality Control Center (FDQCC) under FDD; minimum workload of 500 tests in a year needed to maintain proficiency the National Central Laboratory for Epidemiology (NCLE) under the of staff and to make efficient use of advanced equipment and facilities. HPD; Estimated operational costs consist of, among others: the Plant Protection Center (PPC) under the DOA; and transportation and purchasing costs for sample collection; the National Animal Health Center (NAHC) under the DOLF. costs of chemical reagents and solvents; Recommendations costs of outsourcing of tests; On investments: build-up of laboratory capacity should take into calibration and maintenance of laboratory equipment; consideration demand and available cost-effective alternatives to several lumpy investments. maintenance of information systems; participation in proficiency testing schemes and training; and Testing and diagnostic facilities and equipment require significant in- cost of accreditation services for testing activities. vestment. Also, there are requirements to the efficient and sustainable use of advanced testing equipment such as (1) sufficient volume of tests Surveillance and monitoring activities (at least 500 per year), (2) availability of chemicals, (3) continuous sup- Sanitary and phytosanitary measures aim to protect human, animal and ply of power and air conditioning, (4) regular maintenance and calibra- plant health against the introduction and spread of pests, diseases and tion, and (5) participation in a proficiency testing scheme. However, in harmful chemicals via the entry of imported agricultural and food prod- some areas there is not yet enough demand to justify investment in ucts from abroad. Similarly, SPS measures benefit and promote domes- expensive testing equipment. A short- and medium-term alternative is to tic production, and in turn the production networks on which exports are make use of rapid test kits for initial diagnosis and to subcontract to laboratories abroad for confirmation testing. 1 World Bank (2010) Lao People's Democratic Republic: Operating costs of trade-related SPS activities, Poverty Reduction and Economic Management Sector Department, East Asia and Pacific Region, Washington, D.C. On institutions: a consolidated national SPS laboratory would pro- 3. Equipment and facilities vide economies of scale and is--at least from a technical point of In the medium and longer term, the purchase of equipment, facilities view--the preferable solution for building laboratory capacity in Lao and structural adjustments may be needed to broaden the range of PDR. testing parameters. If it is not feasible to consolidate laboratories, the next-best alterna- 4. Human resources tive is to design a clear delineation of functions with assignation of In all areas there is a dearth of trained specialists, inspectors and labo- lead roles and specializations for each of the institutions. ratory technicians to conduct surveillance, collect samples, and to carry out diagnosis and tests. The following division of responsibilities is recommended: FDQCC leads on food microbiology and food chemistry, including 5. Information management pesticide residues, and mycotoxins; Information management should be performed by setting up a database PPC leads on heavy metals, and composition and quality of pesti- in each of the three areas and employing a staff solely working in data cides; and, management and analysis. Without ensuring proper use of the informa- tion, the benefits from surveillance, testing and diagnostics will be mea- NAHC leads on composition and quality of veterinary drugs and vac- ger. cines, residues of veterinary drugs in food, zoonoses in and microbi- ological safety of unprocessed animal products. Lao PDR is too small to justify parallel capacities in most areas of food safety testing. The three institutions in place--FDQCC, NAHC and Table 1: Summary of estimated operational costs (US$) PPC--have common interest in various areas of surveillance and testing, such as pesticides, veterinary drugs, mycotoxins and heavy metals. The FDQCC (Food safety) 170,200 proposed division of responsibilities would allow for the use of each other's expertise and capacities. The above institutional arrangements Surveillance 23,200 also call for coordination on responsibilities, procedures, and sharing of Microbiology 27,000 information. There should be clear procedures, especially among agen- cies from different Ministries, on submission of samples, provision of Pesticides residues, Variant 2 72,000 certificates, and cost recovery mechanisms. Mycotoxins, Variant 2 14,500 On funding: the amount of additional public operational funding needed to conduct the recommended volume of activities is about Heavy metals 17,000 US$ 800,000 each year. Food-borne diseases 15,000 Table 1 presents the breakdown of the estimated operational cost for Data management 1,500 recommended activities for the next five years. The total operational budget needed to carry out recommended expanded activities amounts PPC (Plant health and food safety) 156,600 to about US$1 million a year (about 8.5 billion Kip). More than half (68 percent) is for animal health (and related food safety and human health Pest surveillance 57,000 protection), primarily for animal health surveillance and diagnostics, half of which is for Highly Pathogenic Avian Influenza (HPAI). Purchased pest identification 5,000 Post-entry quarantine 3,000 The present operational budgets allocated from Government sources are estimated to be in the range of US$50,000 annually. In some cases tem- Pesticide residues 22,600 porary small budgets are available from foreign funded projects; the main exception is the sizable external funding for HPAI, which is currently Pesticide formulations 52,500 about $237,000 for surveillance and testing. If the HPAI external funding will continue in the medium term, additional public funds of about Heavy metals (soil and fertilizer) 15,000 US$800,000 each year would be needed to achieve the recommended Data management 1,500 volume of activities. One option to reach this target might be to increase public funding incrementally by US$ 160,000 per year for five years. NAHC (Animal health and food safety) 706,000 Priority activities that may be expanded first in the near future are the use Surveillance 164,000 of rapid test kits and plant pest and disease surveillance. Subsequently, other active and passive surveillance activities can be gradually stepped Diagnostic testing 310,000 up. A rolling annual plan will be needed to guide priority in allocations. Veterinary drug residues 25,000 Key requisites to recommendations Drug and vaccine quality 35,000 Several requirements are critical to successfully expand operational budgets: Animal and fish products 10,000 (microbiology and zoonoses) 1. Institutional and legislative framework Expanding capacity in surveillance, testing and diagnostics assumes that Safety of animal feed 60,000 proper institutional and legislative frameworks are or being put in place already with support from the Trade Development Facility and other pro- Readiness, variant 2: vaccines 100,000 jects. Data management 2,000 2. Volume of work Total SPS 1,032,800 The volume of sample collection should be sufficient for the building and maintaining of proficiencies of staff and utilization of laboratory capacity. The current volume of samples does not justify further addition of equip- ment, staff and accreditation. For further information, please contact: World Bank Office, Vientiane Produced with resources from the Trade Development Facility Poverty Reduction and Economic Management Multi Donor Trust Fund, financed by the European Commis- Patou Xay, Nehru Road sion and the Government of Australia, and administered by the Vientiane, Lao PDR World Bank. Information contained in this briefing note reflects the t: +856 21 414209 views of the authors, and not necessarily those of the f: +856 21 414210 Visit us at http://www.worldbank.org/lao/trade World Bank Group. e: laoinfo@worldbank.org