March 2014 INVESTMENT CLIMATE Food Safety Toolkit Case Introduction and Quick Start Guide Studies: Armenia, Canada, Croatia, Lithuania, Moldova, Mongolia, Ukraine Investment Climate l World Bank Group ©2014 The World Bank Group Table of Contents 1818 H Street N.W., Washington D.C., 20433 All rights reserved. March 2014 Available online at www.wbginvestmentclimate.org This work is a product of the staff of the World Bank Group with external contributions. The information included in this work, while based on sources that the World Bank Group considers to be reliable, is not guaranteed as to accuracy and does not purport to be complete. The World Bank Group accepts no responsibility for any consequences of the use of such data. The information in this work is not intended to serve as legal advice. Armenia 5 The findings and views published are those of the authors and should not be attributed to IFC, the World Bank, the Multilateral Canada 7 Investment Guarantee Agency (MIGA), or any other affiliated organizations. Nor do any of the conclusions represent official policy of the World Bank or of its Executive Directors or the countries they represent. Croatia 12 The denominations and geographic names in this publication are used solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of IFC, the World Bank, MIGA or other affiliates concerning the legal status of any Lithuania 17 country, territory, city, area, or its authorities, or concerning the delimitation of its boundaries or national affiliation. Moldova 19 Rights and Permissions The material in this work is subject to copyright. Because the World Bank Group encourages dissemination of its knowledge, this work Mongolia 23 may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution of this work is given. Ukraine 27 Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, the World Bank, 1818 H Street NW, Washington, DC 20433, USA; telephone: 202-522-2422; email: pubrights@worldbank.org. Acronyms 30 About the Investment Climate Department of the World Bank Group The Investment Climate Department of the World Bank Group helps governments implement reforms to improve their business environments and encourage and retain investment, thus fostering competitive markets, growth, and job creation. Funding is provided by the World Bank Group (IFC, the World Bank, and MIGA) and over 15 donor partners working through the multidonor FIAS platform. Armenia not be competent, and some of these new staff may have come from the SES. Relevant functions from the Metrology inspections were also transferred (when Challenges and limits of the ‘single they related to food products), again without transfer of staff. agency’ approach On this basis, the government largely considered that In December 2010, several services dealing with food the food safety issue was solved, or at least its institu- safety were merged into a new State Food Safety Ser- tional aspect. The food safety law itself was amended vice (SFSS) by a Presidential Decree. The Veterinary In- in 2006, and the set-up of a new “single agency” was spection and Phytosanitary Inspection from the Minis- intended to complete the reform. try of Agriculture were directly merged into the new service, and the functions pertaining to supervision of In fact, the “single agency” creation has shown that safety of food products were removed from the Sani- is was no such “silver bullet.” A number of issues re- tary and Epidemiological Service (SES) of the Ministry of main unsolved, possibly because too much was ex- Health and given to the new SFSS. pected from the merger itself, rather than seeing it as a first step in a long set of actions. Even though the While staff from the veterinary and phytosanitary in- SFSS is working hard at improvement and has potential spectorate was transferred to the new service, there to contribute positively to further changes, it is worth was no systematic staff transfer from the SES. Instead, considering why it has so far been unable to fulfil ex- the SFSS hired some new staff to cover areas where pectations. existing veterinary and phytosanitary specialists may Module 8: Case Studies 5 Canada GDP by sector: Agriculture: 2.2 percent, Industry: 26.3 percent, Services: 71.5 percent (2010 est.)2 Regulatory reform following Listeria A large proportion of Canada’s pork, beef, and live ani- mal exports are to the United States, which is Canada’s outbreak in 2008 largest export market for farm products. Most grain and oilseed exports, which are dominated by wheat Lessons learned • Coordination. There is a risk that SFSS sees itself as a “sin- Background and context and canola are sent to other markets. In recent years, gle food agency”. However, for success it will need to co- Japan, EU, Mexico, and China have become major ex- • Insufficient preparation and issues with structures, com- ordinate closely with others (for examples, the health care Canada is among the world’s largest countries, and its port markets for Canada.3 petences and staffing. Even though the Armenian govern- system, SES etc.) At the same time the some stakeholders territory is second only to Russia. The Gross Domestic ment clearly foresaw that much work would be needed within the Government tend to think that the issue has Product per capita in Canada was last reported at During the summer of 2008, Canada experienced one to support the SFSS once set up, it did not fully envision been solved with the SFSS being set up. $25, 588 US dollars in 2010, according to a report pub- of the worst outbreaks of Listeriosis. What initially be- how considerable the work would be to transform it into a lished by the World Bank.1 The GDP per capita in Cana- gan as an increased number of Listeriosis cases was modern food safety service. The “merger” work was also In conclusion, there has been mixed success in Armenia da is equivalent to 207 percent of the world’s average. soon to become a major public health concern. The done without fully considering the competences previously with the single agency approach. The SFSS is still a young Agriculture accounts for 3 percent of the nation’s GDP source of the outbreak was traced back to cooked vested into the SES of the Ministry of Health, and trans- organization, and its management is showing signs of un- and 3 percent of its workforce. meats that had been contaminated with a pathogenic ferring relevant staff (contrary to, for instance, what was derstanding the need for further change. The government is organism, L. monocytogenes. The cooked meats had done in Lithuania or Latvia). As a result, there are some skill strongly supporting reform and ready to make the necessary been produced at Maple Leaf Foods in Ontario. gaps, the relations with the SES are unclear, and it seems commitments. On the other hand, however, it can be used that in practice the SES is still checking some hygiene is- as a strong reminder that setting up a “single agency” will, 1 Retrieved on 4/07/12 from http://www.tradingeconomics.com/ canada/gdp-per-capita sues that, in FBOs, should in fact be checked by the SFSS if in and of itself, not solve any issue. It can be a useful tool 2 Source: http://www.indexmundi.com/canada/gdp_composition_ it were to really be a “single food safety agency.” if all the relevant steps are being taken. It can also in some by_sector.html 3 Source: http://www.thecanadianencyclopedia.com/articles/ circumstances act as a distraction, when it is thought that this agriculture-and-food • IT and planning. In order to really fulfil its functions, the merger will solve all issues and thus attention is being taken SFSS needs to conduct risk-based planning of control ac- away from the real problems that need to be solved. tivities (inspections etc.). It is currently not able to do it because of the lack of appropriate database and software. IFC has helped develop a methodology for risk-based in- spections planning, but implementation is a problem not only because of IT issues, but also because of staff in the SFSS being slow to take up new approaches. • Staff vision and problem analysis. The SFSS was not fully on board for a new approach to food safety regulation that would put more focus on the role of the private sector, and seek to minimize administrative burden while preserv- ing and even strengthening effectiveness. Crucially, even though the SFSS has a strategy document for food safety reform, it is based on a somewhat generic goal of “getting closer” to EU regulations. What was needed was a proper stock taking of issues, gaps and problems to reach specific EU regulations. At the same time there was no clear under- standing or agreement that the current system is both bur- densome and of limited effectiveness. The interim result was a bifurcated scenario with a desire for improved safety but a reality where some stakeholders sought to introduce fees, fines and a heavier oversight process. 6 Investment Climate Food Safety Toolkit Module 8: Case Studies 7 Financial implications and cost areas Maple Leaf Foods initially predicted that the financial burden would cost the company around $20 million. The outbreak eventually cost in excess of $37 million. The cost included collecting and destroying the recalled product of $17.6 mil- lion, and losses incurred on product dispositions directly re- lated to the recall of $2.2 million. Closing down the site and implementing a full clean and sanitisation program cost $6.7 The outbreak resulted in 57 confirmed cases and 23 deaths million; incremental media of $4.2 million; the cost of setting that were spread across seven provinces. The contaminated up a customer response call center of $1.2 million; and other meat was primarily sent to hospitals and long-term care related cost $5.6 million (Maple Leaf, 2008). homes in catering sized packs. The majority of cases involved the elderly, who are known to be at greater risk of contract- Sales of sliced cooked meats fell by 50 percent from the previ- ing Listeriosis. ous years’ sales. The company’s meat product adjusted earn- ings had declined from $94.1 million prior to the outbreak to Following the outbreak an independent investigation was set $29.5 million throughout the duration of the outbreak and up by the Canadian federal government and presided over by ensuing investigation estimated to be 9 months. The total Sheila Wetherill who was directly appointed by the Canadian group meat product sales had declined by 4.5 percent to $3.3 prime minister. billion compared to $3.5 billion. The outbreak is estimated to have cost the economy $132 million, due to loss of earnings, Box 8.16 Food Safety in Canada achieving food safety federal government canadian food industry inspection agency (cfia) • Established and conduct food safety program in • Enforce all federal laws and regulations accordance with regulatory rewuirements and dealing with food industry practices • Ensures industry compliance with food • Verifies effectiveness of food safety systems and safety regulations through inspection/ ensures safe production and distribution of food compliance verification of food producers • Investigates food responsible for foodborne illness outbreaks with food safety partners consumer • Initiates food recalls (with industry) • Clean, Washes hands with soap • Handles, prepares and cooks food safety health canada (HC) • Consumes foods with caution • Sets food safety standard/policies • Makes health risk assesment decisions re food on market • Communicates to public on food safety issues local public health / regional public health public health agency authorities of canada (phac) • Inspect food establishment • Acts as first point of contras for federal • Educate regarding food safety practices government for human health impact of foodborne outbreaks • Report confirmed cases of foodborne illnesses to province/territory • Conduct public health surveillance • Investigate foodborne illness outbreaks; collest provincial / territorial • Lead epidemiological investigations when food samples; send samples to labs governments investigation is in morethan one province • Conduct analyses of findings • Regulate food processing within their jurisdiction • Implement food safety program • Lead outbreak investigations within their jurisdiction • Communicate food safety messages to public Module 8: Case Studies 9 medical costs, travel expenses, and increased surveillance and Lessons learned and changes to legislation testing in dealing with the outbreak. The Weatherill Report made 57 recommendations. A void in Class action lawsuits were filed against Maple Leaf foods at leadership, a raft of systemic flaws, and a shortage of inspec- a cost of $27 million. tors were just some of the criticisms levelled at Canada’s food safety regulatory system.6 There was a clear focus that both After the recommendations made by the Wetherill report, regulators and business should place safeguarding consumers Conclusion the Canadian Food Inspection Agency (CFIA) demonstrated at the center of their consciousness and collective actions.7 commitment by increasing the budget to improve the food The regulatory reform initiatives that came about following inspection service. $75 million was announced in September The investigation identified four broad categories where im- the Maple Leaf outbreak were based on an understanding of 2009 and the budget was to increase by $100 million over provements need to be made. There must be: shared responsibility for food safety. It would have been easy five years.4 The report of the independent investigator is esti- for the government to place the entire burden of responsibil- mated to have cost $2.7 million. • more focus on food safety among senior officials in both ity on the food business itself but it clearly recognized institu- the public and private sectors; tional failings in its own systems for assuring food safety. Key Food safety regulatory responsibility and legislation • better preparedness for dealing with a serious foodborne features of this regulatory reform are: illness with more advance planning for an emergency Within government, three agencies have the responsibility response; • better communication systems in the event of an for the Canadian food safety system – the Canadian Food • a greater sense of urgency if another foodborne outbreak; Inspection Agency (CFIA), Health Canada, and The Public emergency occurs; and Health Agency of Canada. See Box 8.1 for details. • clearer communications with the Canadian public about • improved food safety education for consumers Listeriosis and other foodborne illnesses, especially at-risk particularly those in high-risk groups; At the time of the outbreak, Maple Leaf Foods would have populations and health professionals. been regulated under the Meat Inspection Act. The Act re- • improved understanding of the potential demographic quires companies to be federally registered and licensed. The CFIA announced that they would be implementing the of at-risk groups based on an evaluation of available Companies must establish safety measures and controls at full 57 recommendations made from the report with a full scientific data; every step of the food production process to comply with the review of all policy and legislation concerning food safety. regulation (Weatherill, 2009). During the outbreak the 2004 • a new regulatory requirement for FBOs to communicate Canadian Policy on  L. monocytogenes  in ready-to-eat foods The 2004 Listeria policy has undergone a full review, taking trends in product and environmental contamination data; was a published. Maple Leaf Foods was found to already be into account the roles and responsibilities of industry, govern- following this policy. ment, and consumers. It is based on Codex standards and • improved training for inspectors to ensure that they had provides guidance on definitions of ready-to-eat foods that product- and process- specific expertise – identification of Prior to the outbreak a new system called the “Compliance may support the growth of Listeria. a “scope” for inspectors; and Verification System” was being piloted (CVS). The system was designed by the CFIA, to consolidate all the inspection In 2012, the new  Safe Food for Canadians Act was intro- • better division of responsibility among federal agencies requirements that previously existed in different meat inspec- duced and will consolidate a lot of the specific acts, including clarifying their role in the event of an outbreak. tion programs. In April 2008, the CVS was introduced and the Meat Inspection Act. This followed from one of the rec- CFIA inspectors are now required to conduct specific inspec- ommendations made by the Weatherill report to “modernize tion activities at the registered federal meat plants. and simplify federal legislation and regulations that signifi- cantly affect food safety.’’ The Act will impose tougher penal- ties for activities that put health and safety at risk, provide better control over imports, institute a more consistent in- spection regime across all food commodities, and strengthen food traceability (CFIA, 2012). 5 CFIA, 2011 6 Weatherill, S.(2009) Recommendations to Strengthen the Food safety System’ P.15 • Wetherill Report into the maple Leaf outbreak in 2008. 7 Harrington, 2009 The full report can be viewed at http://www.cpha.ca/uploads/history/ 8 Weatherill, 2009 achievements/09-lirs-rpt_e.pdf 10 Investment Climate Food Safety Toolkit Module 8: Case Studies 11 Croatia Financial and technical support were provided through various donor projects, in the form of trainings, estab- lishment of the animal identification system, prevention Reform of the food safety system and eradication of animal and plant diseases, and also support of all related services (customs, laboratories, Croatia is a transitional South East European country research institutes) and the private sector (training of and candidate to access the EU in 2013. Coming out farmers in GAP, producers in GHP, GMP, HACCP). from the centrally controlled economy in 1990’s and Balkan wars from 1991-95, it underwent the period of The state reorganized the inspection service, made one early market economy and managed to conduct neces- common State Inspectorate (composed of different sary reforms and harmonize legislation and practices inspectorates such as tax, fire, construction, mining, with the EU. The driving force for reforms were WTO work safety, equipment under pressure) but control membership and EU perspective. of food was left in the competence of the Ministry of Agriculture and partially of the Ministry of Health, ac- Croatia joined the WTO in 2000, and until 2012, has cording to the EU model. Control of food is performed reorganized completely the food safety area and built by specialist inspectors split into veterinary and border capacities of the competent authority - the Ministry of veterinary, phytosanitary, agricultural, livestock, water Agriculture. The capacities of regulators to perform management fishery and wine inspections. harmonization and risk management were increased, along with the setup of functional Codex Alimentarius, OIE, IPPC, RASFF, WTO-SPS contact points. Module 8: Case Studies 13 The number of state veterinary inspectors is below optimal, Benefits of the CEFTA agreement for the food safety sector Lessons learned: • Clear division of responsibilities between inspections but the veterinary practitioners were trained to perform food include: controlling food. Although they belong to different safety controls and for that service they are paid from the • Early identification of a main goal of the food safety ministries, their collaboration and cooperation is state budget. Risk-based control was introduced in all sec- • identification of main regional export commodities and reform process. In Croatia’s case it was harmonization functional and on a constant basis (monthly meetings, tors, and guidelines, checklists, trainings for inspectors have potential non-tariff trade barriers associated with them; with EU requirements in order to export to the EU and exchange of information, joint actions). been organized. Laboratories were specialized for testing of become a member state. certain types of commodities, accredited according to the ISO • harmonization of legislation and practices in line with EU • Monitoring and eradication plans developed and 17025 (by Croatia’s accreditation body, which is a full mem- practice for main export commodities in order to facilitate • Setting up strong contact points with international enforced in line with OIE, IPPC, and relevant EU bodies ber of the ILAC) and they are organized in such a manner that trade; standard-setting organizations, information sharing, (FVO) recommendations. the whole territory is easily serviced. RASFF system in place and functioning. • sharing information about new laws and measures- • Where there is a regional trade agreement, having one GAP, GHP and GMP are mandatory, according to Reg EC transparency, through the CEFTA coordination body • Fulfilment of all necessary requirements of the WTO-SPS country that is more advanced in terms of international 852/2004 and Reg EC 853/2004, which were transposed into (CEFTA Secretariat); helped reorganize and strengthen the food safety area. food safety requirements can become a strong driving national legislation. HACCP became mandatory in 2006. It force for other countries to reform their systems and was first introduced into export facilities, then in production • training in different food safety areas organized for whole • Access to EU funding for potential member countries was practices. of food of animal origin, and by 2015, there is a plan to have region; essential for financing extensive reforms. all facilities in line with HACCP requirements. • bilateral collaboration (countries share their experiences Harmonization of legislation and practices is well advanced through harmonization, and control bodies collaborate in the food and veterinary area, but implementation of mea- in setting up common practices in inland and border sures is still behind schedule in the phytosanitary area. inspections); Multiannual control plans were developed with technical as- • bilateral collaboration in laboratory testing (for example: sistance from the EU, which has a policy of supporting imple- Montenegro uses capacities of Serbian laboratories for mentation of Reg EC 882/2004 in EU candidate countries. official certification of geographical denomination for their certain vine types); and Electronic databases exist in different inspectorates and need to be interconnected. • common projects in food safety area facilitated by the CEFTA Secretariat. Regional trade (among eight countries of the CEFTA- Central European Free Trade Agreement zone: Albania, Bosnia and Herzegovina, Croatia, FRY Macedonia, Kosovo, Montene- gro, Moldova, Serbia) represents a very important segment of trade in agricultural commodities. All countries decided to harmonize legislation and practices according to the EU model and are working actively on supporting a transparent manner of preparing new legislation and measures, with the CEFTA Secretariat as an active mediator and facilitator. 14 Investment Climate Food Safety Toolkit Module 8: Case Studies 15 Lithuania from the end of the 1990s was it able to eventually join along with others to form the (then) EU-25. Food safety reforms to join the Prior to reforms, Lithuania’s food safety system was largely built on the former Soviet Union’s foundations. European Union, and improve the This meant a strong reliance on ex ante controls and business environment certification of product types, many permits and ap- provals, and split responsibilities between veterinary, Of the three Baltic states, Lithuania is the largest, and sanitary and trade inspections, with many overlaps and the one where agriculture contributes most to the na- duplications. tional economy. Agriculture accounts for more than 12 percent of the country’s GDP, which is relatively high for In 2000, the State Veterinary Service with its subordi- an EU member state. Lithuania has a long agricultural nate institutions, the State Hygiene Inspection under tradition with strengths in dairy, cereals, fodder, and the Ministry of Health and the State Quality Inspection animal production for meat, in particular. A significant were (for the most part) merged into a new institu- share of its production is exported to other EU mem- tion – the State Food and Veterinary Service. The SFVS bers and to Russia. is in charge of food safety control in the whole chain in line with the EU concept “from stable to table” and Given the importance of agriculture and agribusiness “from field to fork.” Another institution established as for the country, improving its food safety system was a a result of reform was the State Non Food Products In- particularly salient as part of its EU accession process. spectorate under the Ministry of Economy, which took In the second half of the 1990s, as candidate countries over controls on safety of non-food products. in Eastern Europe were regularly assessed, Lithuania was for a long time one of the “laggards.” It was long The SFVS is responsible for risk analysis and for inspec- thought that it would not be able to join along with tions and enforcement. For the most part, regulatory the batch of new entrants scheduled to join in 2004. powers are clearly divided between ministries (Econo- Only through a considerable acceleration of reforms my for labelling, Agriculture for rules concerning pri- Module 8: Case Studies 17 Moldova One of the reasons for the decline of Moldova’s agri- cultural sector is that it suffers from an outdated food safety infrastructure and from other policy and regula- Leveraging competitive advantage tory constraints distorting the agricultural inputs mar- kets and hampering the efficiency of transport, logis- through agribusiness related tics, and export procedures. investment climate reforms Given this situation, the Government of Moldova mary production, and Health for residue levels, hygiene, and The reform was financed from the state budget. However, Moldova benefits from a favorable climate, soil, and sought to: (i) address regulatory constraints hampering all other issues pertaining to human health). The SFVS is itself since this was the pre-accession to the EU period for Lithu- topography. This combined with relatively low wages the development of a competitive agribusiness indus- the regulatory institution for animal health and welfare. This ania, at the time and later on after accession to the EU, the and its proximity to major consumer markets (the EU, try, and (ii) attract investors in the high value agriculture was decided because the competence in this field is concen- country received additional substantial financial assistance Russia) to give it a potentially important comparative subsector. Within this, building a credible, EU-compat- trated in this institution following the reform. from the EU for build up control infrastructure. advantage in agro-based exports, particularly high-val- ible food safety system was identified as a key priority, ue agricultural products. In addition, Moldova enjoys as this is a binding constraint for high value exports The goals of the reform, beyond the immediate purpose of As a result of the reform: preferential export quotas for most agricultural prod- development. EU accession, were: ucts under the EU-Moldova Autonomous Trade Prefer- • a single institution is responsible for safety in the whole ence Agreement of 2008. • to decrease the administrative burden for business food chain; operators by decreasing the amount of mandatory • a uniform control system was established; In spite of these advantages, agriculture has lagged be- approvals and certificates, and the burden of control for • the administrative burden decreased; and hind throughout the last decade: its share of real GDP low-risk operators; • clearer conditions and requirements were set for food value added halved between 2000 and 2008, and Mol- • to implement in Lithuania the EU market surveillance business operators. dova is unable to fulfil its EU preferential export quotas principles and give priority to ensuring food safety by for most agricultural products. means of official controls; Lithuanian producers gained access to the EU market, and • to shift responsibility for food safety to producers/ retained or increased their access to third markets (such as operators; Russia). The safety situation in the country also improved. • to establish uniform food control according to the The reform promoted consolidation of producers, in order concept “from stable to table” and “from field to fork”; to be able to cope with the investments needed to comply • to form more favorable conditions for free movement with the new requirements. While this generally can be held within EU member states in parallel ensuring effective to have had positive economic effects in the long run, there controls of imported products of animal origin; and were nonetheless some downsides in the short term with • to ensure further improvement of animal welfare and decreases in primary production employment as the industry protection against contagious animal diseases. modernized. The intergovernmental working group was established by decree of the prime minister in February 2000 to prepare the reform. The resolution that created the new institutions was adopted by the government in May 2000. They started func- tioning in July 2000. In other words, the initial step of the reform was implemented in record time. Full implementation of the reform, to get institutions working and improving their practices, took several years. To some extent, it is still going on, as the government has been implementing (since 2010) a comprehensive inspections reform program that covers food safety as well as all other issues. The aim is to make inspec- tions more transparent, more risk based, and to help busi- nesses comply through better information efforts. 18 Investment Climate Food Safety Toolkit Module 8: Case Studies 19 As a result, the government of Moldova adopted an in- In spite of overall consolidation of functions in the tegrated package of reforms for the agribusiness sector NFSA, a certain number of areas of competence are re- in the fall of 2011, including the following: served for the Ministry of Health. Given the law’s word- ing, it is likely that some areas of friction or duplication • Abolishing the list of food products subject to of control may arise over the control of food on the mandatory certification, a key step in removal of market (where MoH has competence over certain types non-tariff barriers to trade (mandatory certification of foods, and certain aspects, whereas the NFSA has being not only in contradiction of WTO SPS, but general competence), or to its production (where MoH also widely seen as ineffective to guarantee the supervises the health and knowledge of workers, and safety of food) and important contribution to free the NFSA again has general competence). trade negotiations with the EU. Major efforts will be needed to implement the new law. • Adoption of the National Food Safety Strategy They will need to set up the NFSA, prepare and adopt a for 2011-2015 in line with EU approximation considerable amount of secondary legislation, and de- requirements, including the establishment of a velop new guidelines and processes. However, in only single food safety agency. about two years, the country has managed to move from sever challenges in the food safety arena to a real- • Piloting the adoption of the EU Common Catalogue ity where outdated regulations (such as mandatory cer- for Seeds and Seedlings by allowing the import of tification) have been abolished, and a new, coherent, all EU-registered varieties for a selected number of EU-compatible food safety law has been adopted. crops that are under-represented in the national catalogue. • Transposition of several EU Directives on product safety and quality standards (95/16/CE, 2009/142/ CE, 97/23/CE, 88/378/CEE, 2000/9/CE, 94/25/CE, 2009/105/CE) into national legislation, thus fast tracking the harmonization process with EU and internationally recognized standards of a significant number of manufacturing product categories, including agricultural equipment, thus making imports of modern machinery easier. The high point of reforms so far has been the recent adoption of a new Law on Food Safety (voted by Par- liament on May 18, 2012). This law continues the approximation process by setting forth rules on food safety that are directly taken from EU legislation. It also foresees the creation of a national food safety agency, with both regulatory, and inspections and enforcement powers. As such, it can be seen to constitute both a final step (to the series of legal changes on the food safety side) – and a starting point (for implementation work to make this new food safety approach a reality). Module 8: Case Studies 21 Mongolia export potential, currently considerably hindered by low food safety reliability), the project logically focused an important part of its activities on the Inspectorate’s Challenges of developing food safety work in relation to food. This included: legislation • developing a methodology for risk-based planning of food business operators (FBOs); Mongolia presents an interesting case of the many challenges and contradictory pressures and demands • designing checklists for inspections of FBOs; and that can arise when attempting to support the devel- opment of new food safety legislation. Since 2009, an • consolidating internal structure of the Inspectorate IFC project has been working with the Government to to have more coherence in supervision of improve at improving business inspections in Mongo- FBOs (single “food safety” department being lia through legal reform and changes in structure and considered), as well as retraining of staff. practices of the “State Inspectorate” (formerly called General Agency for Specialized Inspections, now be- All these activities showed, however, that proper imple- ing renamed Public Safety Agency) in charge of most mentation of new tools and practices required sound, inspections outside of tax, customs, and fire safety (its modern, and comprehensive food safety legislation to mandate is now being slightly narrowed down, but re- be in place. This was not the case, with some aspects mains very broad, covering most safety issues). regulated in an outdated way, some left uncovered, and overall an incoherent set of legal acts. As understand- As one of the Inspectorate’s major functions is to en- ing grew in the country of the loss of competitiveness force regulations in food production, processing, and and market access for food exports due to the poor trade, and given the importance of food safety for the food safety framework, the project was approached by Mongolian economy (with its significant meat and dairy requests from members of parliament and the presi- Module 8: Case Studies 23 dential secretariat to assist with drafting a new food safety As a result of these discussions, the final version of the law The experience from Mongolia also gives an idea of the time- months, after which implementation was the next issue to law. went for generally “good practice” or even “best practice” frame involved. Preliminary work with the inspectorate lasted worry about. This process took already a fair amount of time solutions (where applicable), but always staying realistic. over a year and half (from early 2010 to mid 2011) before it in Mongolia, a country where decision making is actually very This proved to be a challenging undertaking for a variety of Producers’ liability was introduced, as well as traceability, re- became clear, and agreed upon, that a new law was needed. fast, the parliament functions well, and all political parties are reasons, many of which may be applicable to other countries quirements allowing for product recalls, and requirements to Then actual drafting took close to a year, with intense com- overall in favour of reform. Timescales may be far longer in and settings: ensure safety of the products at all stages. The law estab- munication around it. Support to adoption then took over six other countries. lishes a National Reference Laboratory, clarifies supervision • A comprehensive food safety law needs to regulate a powers and responsibilities, and mandates risk assessment variety of issues, some of which may not exist in any and management. It does not, however, make HACCP man- other legislation in the country (such as recall of unsafe datory, and foresees that clear and simple guidelines have to foods, recognition of third-party certifiers, and liability of be issued to make implementation of new requirements easy producers). This may end up being problematic if other for SMEs. Thus, it aims at supporting Mongolian businesses legislation (for example, on certification, producers’ to improve. liability) is missing, which forces the food safety law to become increasingly detailed and complex, or to leave On top of all this, the project had to deal with competing leg- out key issues. islation, as the Ministry of Agriculture had in its action plan to prepare a new “Food Law” for 2012, and proceeded with it. • Attempting to refine the contents so as to have a The contents of this new draft law were mostly rather vague, “technically perfect” piece of legislation may run contrary and dealing with many issues not linked to food safety as to political agendas (which require things to happen such (mostly food supply and storage), but some sections of quickly) and fail once the draft law becomes debated in it clearly dealt with safety, creating a kind of “collision” with parliamentary proceedings, where all kinds of changes the concurrent draft food safety law. The team had to devote may take place). a lot of energy to support reconciliation of these two drafts and possible merger into one. • Debates on the proper level of regulation vs. risk of undue burdens on the private sector, or on the adequacy In the end, the new food safety law was adopted after some of “imported” standards vs. real capacity in country, may delay, due to parliamentary elections. The new coalition that be intense and cause significant delays. In Mongolia, came in power was even more strongly in favor of the reform this was the case regarding all regulations for slaughter and the food safety law entered into force in January 2013. (knowing that most meat sold in Mongolia is slaughtered This was the result of a very important part of the work that “informally” and that this is because most consumers focused on building understanding of food safety issues and trust “informal” meat more, how likely was it that support for reform among policymakers, politicians, and the regulations would be successful or which incentives to media. This was done thanks to a series of meetings, semi- build in the legislation?) and regarding HACCP. Given that nars, conferences etc., with participation of foreign experts, it was clear that mandating HACCP for all FBOs would in particular from governments and regulatory agencies hav- be completely unrealistic and create massive burden and/ ing already successfully conducted similar reforms (such as or corruption opportunities, what incentives for HACCP new member states of the EU). adoption or “graded introduction” were possible? 24 Investment Climate Food Safety Toolkit Module 8: Case Studies 25 Ukraine The regulations provide inadequate guarantees of food safety, thus limiting foreign market access for local pro- ducers and processors, and also limiting their ability to Food safety reform as a key to differentiate their products on the local market, in par- ticular for subsectors such as dairy. Even though there unlocking agribusiness potential and are significant dairy exports from Ukraine (mostly to the foreign markets access CIS and developing countries), they are in large part confined to the lower end of the value chain. Access to Ukraine is not only the largest country in Europe after higher-value markets such as the EU is still closed.11 Russia, but also one with exceptional natural conditions for agriculture. Lands are particularly fertile (mostly so Reform in Ukraine has often been made very difficult the chernozem, or “black earth” belt), the climate is by political upheavals, gridlock, and vested interests. relatively moderate, and rainfall is sufficiently abun- Not only have agribusiness and food safety not been dant. Geographical location combines easy sea access an exception in this perspective, but they have been for bulk exports and proximity to the EU and Russia, its marked by particularly problematic reform. Even WTO two major markets. Agriculture employs 16 percent of accession in early 2008 failed to bring about the chang- the labor force, and agricultural production plus pro- es in food safety regulations that were agreed as part cessing make up close to 16 percent of gross domestic of the accession package (they were voted but not im- product (GDP). Production is important both in cereals plemented). The perspective of free trade with the EU and staples, and meat and dairy. Overall, Ukraine has a provided important incentives, but changes remained particularly high agricultural and food export potential, slow. In this context, the IFC IC intervention tried to but it has yet to realize its full potential. The country is bring about much-needed change by building on previ- mostly concentrated on relatively low-value-added seg- ous achievements. ments, such as bulk cereals or vegetable oils. See IFC Reforming Food Safety Regulation in Ukraine: Proposals for Policymakers - A Background Policy Paper, 2009 - http://www1.ifc.org/ 1 wps/wcm/connect/fc9b75804b5f7acd9ec6bf6eac26e1c2/Food_safety_report_ENG.pdf?MOD=AJPERES&CACHEID=fc9b75804b5f7acd9ec 6bf6eac26e1c2 Module 8: Case Studies 27 Starting in the early 2000s, and with growing emphasis and unsafe products enter the market. Private food businesses Thus, by leveraging WTO accession requirements, EU free The experience of this work showed the benefits that can be resources from 2005, work had focused on promoting re- bear little responsibility for food safety, and the capacity of trade perspective, the projects were able to support key steps reaped from focusing advisory services efforts on a specific form of permits and business inspections. It has had some supply chain systems to ensure food safety is not leveraged, that had long been mooted, but never pushed through. In sector. It also taught lessons on the need to plan carefully the important successes, such as the adoption of a Permits Law contrary to what is the case in the EU. The focus is purely on particular, the cancellation of mandatory certification re- responsibilities and actions when two projects are involved, in 2005 and an Inspections Law in 2007, but also with some meeting formal requirements (permits, certificates) and not moves a very important source of administrative burden, and to have full agreement on the goals and steps before disappointments in the implementation of these reforms. really on ensuring that only safe products are on the market. which also has acted for a long time as a brake on innovation starting work, as coordination is never easy. Finally, it showed Given the apparent need to concentrate resources and at- in the food sector in Ukraine. The merger of the veterinary the relevance of an approach that strongly emphasizes pri- tention on a specific sector, priority was given to agribusiness Results of the first phase of work (up to 2012) were signifi- and phytosanitary agencies is more a foundation stone for vate sector involvement, as the private sector ultimately has and specifically food processing, The initial emphasis was on cant, even though they only constitute a first step. The main further work, to help this agency become really a modern to implement reformed regulations, and is the main driver of the dairy sector, which was one area where Ukraine was par- changes were the cancellation of mandatory certification for food safety body, risk-focused and intent on promoting com- food safety in practice. Working with large retailers, in par- ticularly far from reaching its potential, and where the EU had food products (in line with WTO SPS and EU practice), which pliance. The draft law development is also a crucial founda- ticular, proved to be particularly important. quite critically appraised the regulatory regime). was adopted in December 2009 (even though full implemen- tion for further work. tation of this decision took some time) and the merger of Ukraine’s food safety regulatory regime pre-reform was (and the Veterinary and Phytosanitary Agencies in May 2011. This still is to a large extent) characterized by: merged service in theory has primary responsibility for food safety inspections, but in practice the Sanitary and Epidemio- • Burdensome administrative procedures limiting business logical Service still conducts a vast number of food-related set up, growth, and product innovation, – with many inspections. mandatory prior approvals and permits, and mandatory standards and certificates (applying even to product This reform work also resulted in the preparation of a draft recipes). new law on food safety, which was approved by the gov- ernment and sent to Parliament, but saw its consideration • Duplication and overlaps in control activities, with six delayed by the 2012 elections. This new law, when adopted, agencies covering food safety from various perspectives, should form the basis for a new food safety system in line with little or no coordination. with international (and in particular European) best practice. It proposes traceability, HACCP, recall procedures, reinforce- Many aspects of the food safety system are (or were) a relic of ment of FBO liability, and also elimination of permits, approv- the planned economy, in particular mandatory standards reg- als, and controls that are not strictly necessary. ulating the exact way in which products should be prepared, rather than focusing on safety parameters, and placing over- sight of the food chain on several regulatory agencies with overlapping mandates. The existence of several uncoordinat- ed technical agencies results in repetitive checks, themselves conducted against outdated requirements, at great cost to businesses. State agencies are not held accountable when 28 Investment Climate Food Safety Toolkit Module 8: Case Studies 29 Acronyms APLAC Asia Pacific Accreditation cooperation GRMS Global Red Meat Standard BAP Best Aquaculture Practice HACCP Hazard Analysis Critical Control Point System BRC British Retail Consortium ILAC International Laboratory Accreditation Cooperation CAC Codex Alimentarius Commission LIMS Laboratory Integrated Management System CAS Country Assistance Strategy NGOs Nongovernmental organizations CFIA Canadian Food Inspection Agency ILAC International Laboratory Accreditation Cooperation CPS Country Partnership Strategy IPPC International Plant Protection Convention EAL European Cooperation for Accreditation of OECD Organisation for Economic Co-operation and Laboratories Development EC European Commission OIE World Organization for Animal Health EAC East African Community PCB Pest Control Products Board EFSA European Food Safety Authority PRPs Prerequisite Programs EU European Union RFID Radio frequency identifier FAO Food and Agricultural Organization SBA Sustainable Business Advisory FBO Food business operators SPS Sanitary and Phytosanitary GDP Goss Domestic Product SQF Safe Quality Food GAP Good agricultural practices USAID U.S. Agency for International Development GFSI Global Food Safety Initiative USDA U.S. Department of Agriculture GHP Good hygiene practices WHO World Health Organization GMO Genetically modified organisms WTO World Trade Organization GMP Good management practices Credits Photography: BigStockPhoto - Arev Hambardzumyan (page 4), Szilagyi Palko Pal (page 5), Elena Elisseeva (page 8), (page 11), Zvonimir Atletic (page 12), (page 13), Viktor Pravdica (page 15), Deborah Benbrook (page 16, 21), Tatiana Konstantinova (page 17), Piotr Pawinski (page 19), Vaida Petreikiene (page 22), (page 23), Serghei Starus (page 25), Liubomir (page 26), Yuanyuan Xie (page 28), Shirley Hu Xiao Fang (page 29), Ray Woo (page 31), Joseph Gough (page 32), Gautier Willaume (page 33), Jirapong Boonpongha (page 36), Anatolij Tsekhmister (page 37), Andrey Volokhatiuk (page 38), Yuriy Brykaylo (page 39) in partnership with: