Current regulation of the meat market has high corruption risks and can not solve its problems

19-02-2019

Over the past five years, Ukraine has experienced a declining trend in livestock production: the number of cattle has decreased by 19% and the number of pigs – by 21%. At the same time, the decrease rates are significantly lower in agricultural enterprises than in farming households. The animal disease prevalence, the ineffective market control, the capital intensity of production and active migration processes in rural locations are among the causes. At the same time, Ukraine has much lower meat consumption rates per capita compared to developed countries. For example, while a Ukrainian consumes an average of 7.3 kg of beef and 19 kg of pork per year, a German – 14 and 56 kg, respectively.

The government, business and public representatives discussed the he ways of solving the market problems during the Roundtable “Meat Market Regulation: the balance between consumer safety and business development” in Kyiv on February 19. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of #PRODialogue.

“The market is very promising, but the current legislation does not provide effective mechanisms to solve its problems. A quarter of rules are irrelevant, and one third of regulatory tools provoke high corruption risks. With a high prevalence rate of animal diseases, it leads to a significant reduction in the number of livestock and financial losses to the business as well as does not protect consumers from poor quality products,” the Agriculture Sector Head at BRDO Andriy Zablotskyi said.

BRDO experts conducted a systematic analysis of the market regulatory framework and found out that almost a quarter (22%) of 68 regulatory acts in the market were irrelevant and should be revised to eliminate barriers to business. Moreover, one third of 30 regulatory instruments have high corruption risks, and even more of them (40%) do not have approved procedures or procedures for their implementation.

In Ukraine, the bulk of cattle stock is traditionally concentrated in farming households – 67% compared to 33% in agricultural enterprises. At the same time, the number of meat breeds is only 1.3% of the total number, and the beef production is derived from dairy cattle breeding. In pig breeding, 54% of pig stock are provided by enterprises, and 46% – by the population.

One of the main market problems is a complicated and non-transparent procedure to identify and register animals, in particular a lack of transparent calculation of the cost of services, which leads to the reluctance of farms to undergo this procedure. As a result, there is a large number of unidentified/unregistered animals in the market, a lack of traceability along with ineffective control over the safety and quality of meat products.

Hence another significant problem related to the uncontrolled spread of African swine fever (ASF). Thus, the number of ASF cases has increased more than 10 times (from 16 to 163) in 2014-2017. Regulatory tools that could solve the problem, such as prevention, compartment, insurance and state support, do not work properly. The most negative impact of ASF is on farming households that do not have the technical capability to meet necessary safety requirements. And attempts to independently prevent diseases with antibiotics and uncontrolled use of veterinary drugs lead to the development of animals’ resistance to antibiotics and poisonings with dangerous meat products. Consequently, the market is gradually reformatted into industrial production using modern technologies and biosafety products that are more attractive for investments.

For the first time since 1995, there have been positive trends in the market. Thus, the level of industrial cattle production profitability became positive for the first time in 2017, having showed an increase of +3.4%. The breeding of market pigs also increased by 3.5%, although this figure was negative in 2016. In addition, the export rate of cattle has increased by 85% over 5 years. Mainly, due to the export of live cattle to the Middle East.

According to BRDO experts, the necessary steps for further market development are:

* improving sectoral legislation;

* developing cooperation;

* increasing state support;

* developing local agrarian markets.

The event was attended by the Deputy Minister of Agrarian Policy and Food Olena Kovaleva, the Head of the State Regulatory Service of Ukraine Ksenia Lyapina, the Head of the State Food Safety and Consumer Protection Service Volodymyr Lapa, the Director General of the Food Safety and Quality Directorate at the Ministry of Agrarian Policy Mykola Moroz, the Head of the Ukrainian Stock Breeders Association Iryna Palamar, the Head of the Association of Production and Processing of Meat Industry “Meat of Ukraine” Natalia Dremblyuha, the Director of the State Enterprise “Agency for animal identification and registration” Ihor Klymenyuk, the Head of the “Meat Industry” Association Vitaliy Pavlivskyi, the Vice-President of the Association of Pig Producers of Ukraine Oksana Yurchenko, the First Deputy Chairman of the Board of the National Association of Meat and Meat Product Makers of Ukraine “Ukrmyaso” Ivan Hrod, the EU Delegation to Ukraine, business and expert community representatives.

More information is available at www.regulation.gov.ua.

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