Culling Compensation and Beyond

1
Culling Compensation and Beyond

• Moving from Bird Flu Compensation to
  Institutionalized and Sustainable Funding of
  Epizootics Prevention and Control
• G. Schreiber, ECSSD, World Bank
• 8 May 2008

2
Key Issues (1)

• HPAI Projects currently envisage only
  compensation for poultry culled due to HPAI
  outbreaks
• Undisbursed HPAI project funds for compensation
  are likely to be be canceled at project closing
• Funding at present is exclusively from government
  budgets and external donors/projects
• What institutional and funding arrangements will
  be in place after project closing?

3
Key Issues (2)

• Culling and compensation are equally important
  for various other animal diseases, and not only
  for poultry
• Culling and compensation is only one element in
  an effective animal disease prevention and
  control strategy
• Culling and compensation is more costly than
  effective prevention
• Backyard poultry represents potentially much
  genetic value which culling may eliminate

4
Objectives

• Institutionalizing a sustainable financing
  facility for epizootics prevention and control,
  including for culling compensation
• Preparing for an expansion of coverage to other
  diseases and animals
• Involving animal owners in a public-private
  partnership in its funding and administration

5
Four Key Questions

• Should the facility finance only compensation for
  culled animals (and possibly for animals
  demonstrably killed by specified epizootic
  diseases) or should it also finance preventive
  and control activities?
• Should the funding be provided exclusively from
  the Government budget or should it also come
  from mandatory contributions from animal owners?
• Should the facility by managed by the Ministry of
  Agriculture or should it be operated by a
  special institution established for this purpose?
• Should this facility cover only HPAI and poultry
  or should it also cover other zoonoses and
  other animals?

6
Proven Arrangement

• Autonomous Animal Disease Control Caisse (or
  Epizootics Control Fund)
• Legally and operationally autonomous body of
  public law
• Managed in private-public partnership, with
  definitive involvement of animal owners in
  decision-making
• Mandatory membership of all owners of specified
  domestic animals
• Compulsory cost-sharing by animal owners
• Governmental contribution during start-up phase
  and in the event of inadequate financial reserves

7
Second-Best Alternative

• Government-run Epizootics Control Fund
• Administered by a governmental agency
• Funded partially by budgetary allocations and
  partly by compulsory fees from animal owners
• Funds are kept outside Government budget
• Mandatory coverage
• Main drawback
• No involvement of livestock owners in
  decision-making on fees, on compensation levels

8
Other Approaches?

• Compensation provided through ad-hoc allocation
  of government budget funds or from earmarked
  emergency funds
• Main drawbacks
• Arrangements usually not in place in advance to
  respond rapidly
• Risk of large unforeseen claims on budget
  resources
• Risk of lengthy delays in appropriation and
  disbursement
• Risk of not compensating at all or only a limited
  number of animal owners

9
Private Sector Solutions?

• Commercial Insurance
• Rarely attracts any but the large commercial
  producers
• Unattractive to insurers due to high risk and
  unpredictability of large-scale outbreaks
• Mutual Insurance
• High unpredictability of timing and scope of
  outbreaks
• High premium cost to subscribers
• Key weakness
• No element of compulsion to ensure compliance
  with essential public-good requirements of
  registration, reporting and culling
• Could be addressed through legal requirement to
  obtain insurance, but very difficult to enforce

10
Legal Basis (1)

• Veterinary Law must establish basic parameters
  regarding epizootics control measures, including
  the right to compensation
• Legal basis for establishment and operation of an
  autonomous Epizootics Control Caisse or Fund can
  be provided within the Veterinary Law or through
  a specific legal instrument
• types of animals
• types of diseases
• types and range of financial support for
  different epizootic prevention and control
  measures (e.g., diagnostic testing, culling
  compensation, vaccination, carcass disposal,
  stall disinfection, etc.)

11
Legal Basis (2)

• Administrative and operational details are
  addressed in the Charter/Statutes and an
  Operational Manual
• (A sample decree/law to establish a Caisse and a
  sample Charter are available on request)

12
Governance Structure (1)

• Supervisory Board
• a majority of livestock owners plus
  representatives of the public and private
  veterinary services and other relevant public
  institutions
• Key responsibilities
• approval/amendment of Charter
• approval of annual budget and business plan
• determination of fees and compensation levels
  (within parameters established by law)
• oversight over investment of capital reserves

13
Governance Structure (2)

• Management Staff,
• a small unit to manage
• registry of animal owners and animals
• database of fees due/fees paid, payments
  authorized/made
• financial investments of accumulated funds
• claims and payments
• preparation of budget and business plan, periodic
  operational and financial reports, etc.

14
Governance Structure (3)

• Oversight Ministry typically Ministry of
  Agriculture
• approval of Charter/Statutes and any amendments
• appointment of public sector representatives on
  Supervisory Board
• ensures that Agency operates in accordance to
  laws and charter
• right to require changes in operational decisions
  if essential for effective control of epizootics
  and/or safeguarding public health

15
Membership Registry

• Mandatory for all owners of animals specified by
  law
• Including smallholders and backyard poultry
  owners they must be registered even if no fee
  payment is required from some of them
• Registration once per year, with number and type
  of animals
• Commercial poultry operators register average
  monthly number of birds
• Smallholders backyard owners register only as
  units
• Local administrations can facilitate registration

16
Proceed Gradually

• Begin with simple structure and arrangements for
  poultry and HPAI (Board mandate for HPAI
  operations currently extends only to HPAI)
• Keep initial schedule of fees and compensation
  rates simple
• Introduce refinements once system is well
  established, experience has been acquired, and
  poultry owners have gained confidence
• Expand to additional animals and epizootics
  later, focusing on country-specific priorities

17
Fees

• Fees are set annually by type of animal and may
  be adjusted to maintain reserves and/or to avoid
  accumulating excess funds
• Fees should be established in close consultation
  with animal owner representatives to ensure
  acceptability (for poultry about 0.5 of market
  value would be appropriate)
• Fees for smallholders may be a fixed annual
  minimum or may be waived entirely, to minimize
  administrative cost and burden
• Fees collected are used only to fund eligible
  activities for the same type of animal no
  cross-financing from cattle to poultry, etc.

18
Purposes of Compensation

• Encourage early reporting of disease outbreaks
  and compliance with reporting and culling
  requirements
• Reimbursement for legitimate private property
  destroyed by the State for the public good
• Cannot replace separate measures for equity,
  asset transfers to poor

19
Indicators of Success

• Disease control is improved
• Those entitled are compensated adequately and
  rapidly
• Disease spread is reduced
• Measures and requirements are known and
  understood by all
• Full compliance with reporting and culling
• Livelihoods distress is reduced

20
Indicators of Lack of Success

• Low compliance with reporting and culling
• Disease spreads out of control
• Some entitled owners are not paid
• Compensation arrangements add to inequality
• Procedures, rights and requirements are poorly
  understood
• Inconsistency in application across zones and/or
  farm types and sizes

21
Effective Schemes

• Compensate the appropriate beneficiaries an
  appropriate amount
• Shortest possible intervals between reporting,
  culling and payment
• Effective communication and high public awareness
• Adequate financial, institutional and human
  resources

22
Preparedness is Key

• Much harder to set up after disease outbreaks
• Legislation, Contingency Plans, Operating
  Guidelines must be in place and clear to all
• Culling and compensation must be part of a
  broader disease control strategy
• Prior agreement among stakeholders on whom, when,
  how and how much to compensate
• Full transparency
• Resources for implementation that are immediately
  available for response
• Effective communication and training are essential

23
Beneficiaries

• Owners of culled animals are compensated
• Other losers from the disease outbreak are
  typically not compensated
• Complications
• Contract farmers are not compensated for labor or
  other inputs to flock culled
• Ensuring actual decision-makers/poultry owners
  are involved (i.e., farm women)
• Lack of information on smallholder flocks

24
Losses to Compensate

• Only direct losses are compensated, in whole or
  in part
• Animals destroyed
• Animals demonstrably killed by the epizootic in
  question may also be eligible
• Some follow-up control and prevention measures
  are covered to prevent recurrence
• Stall disinfection
• Carcass disposal
• Infected materials disposal (e.g., bedding, dung,
  waste, feed)

25
Losses Not Compensated

• Consequential losses on farm are typically not
  compensated downtime, impact of movement
  controls, price declines very difficult to
  estimate and to implement, and very costly
• Indirect losses off farm are never compensated,
  since they are not relevant for compliance
• If ownership records differ from culling records,
  compensation is paid for the lower of the two
  numbers

26
Culling

• Culling should be limited to the immediate
  outbreak area and its surroundings
• Owners, community representatives and veterinary
  officials must be present
• Record keeping must be on-the-spot, accurate and
  public
• Compensation must be directly and visibly linked
  to culling
• Prevent influx of healthy birds for culling from
  outside and selling off of diseased birds
  important to control movement

27
Compensation Rates

• Should be set for all relevant animal categories
  in advance, as simple as possible e.g. broiler,
  layer, chick, duck, native chicken
• High-value special cases (e.g., breeding bulls
  and rams, race and show horses) are an issue
  best dealt with through additional private
  insurance
• Compensation rates should be between 75 and 100
  of farmgate value (established once per year, or
  linked to representative market price 2-3 months
  before outbreak)
• For very young animals (especially poultry in
  commercial hatcheries) a replacement value
  could be used, e.g. one-day chicks

28
Record Keeping and Transparency

• Accurate record keeping (animal ownership,
  culling, payment claims, payments made) is
  crucial to avoid abuse and to maintain public
  trust
• Owners or their designated representatives must
  be present at culling and sign records
• Multiple copies of farm- and village-level
  culling records and separate submission channels
  to allow verification and prevent falsification
• Community involvement in supervising culling and
  compensation

29
Organizing Payment

• Pre-existing data base of eligible livestock
  owners is key to rapid response and proper
  governance
• Everyone affected by a culling order must be
  compensated selective compensation promotes
  non-compliance
• Large scale commercial operators have bank
  accounts that simplify administration of payments
• Payment in cash of smallholders as soon as
  possible after culling (or even at the time of
  culling)

30
Governance

• Major concern for most governments and their
  partners, can delay response
• Transparency - community participation
• Problem is worst where advance preparation is
  least
• Where outbreaks occur in an unprepared
  institutional environment, ex post audits
  substitute for ex ante institutions and
  procedures, but not fully

31
Capital RequirementsAn Example (1)

• Facility should be able and prepared to
  compensate for the culling of up to 5 of the
  national poultry flock
• In Moldova, this would amount to roughly 650,000
  birds
• Compensation at 75 of farmgate value would
  require about US3 million
• Funding a facility of this size will take some
  time, even with a substantial initial
  capitalization provided by the Government and
  with Project funds provided for this purpose,
  because annual fees for poultry owners must not
  be set at prohibitively high levels

32
Capital RequirementsAn Example (2)
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Capital RequirementsAn Example (3)
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Capital RequirementsAn Example (4)
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• www.worldbank.org/avianflu
• Gerardo Bravo Garcia
• Avian Flu Series, 2006
• Oil Gold Leaf on Canvas
• Courtesy of the World Bank Art Program