Compensation and rehabilitation in HPAI control programmes: issues and options

(discussion with WB and UNSIC, 13-14 July 2006)

Anni McLeod and Ana Riviere CinnamondFAO Emergency Centre for Transboundary

Animal Diseases (ECTAD)

Overview

• The context• A framework for thinking about compensation and

rehabilitation• Issues and options that have emerged so far• Next steps

Increasing regulations raises market barriers for small commercial producers……. (Vietnam)

Breeding centres (large quantities)

Trader (small quantities)

Semi-commercial farmers

Large companies producing feed & day old chicks

Wholesale market(slaughter)

Trader (small quantities) Retail

markets (slaughter)

Supermarkets

Local market(slaughter)

Assembler

Small private entities incubating and selling day old chicks

Big trader – might rep 2 or 3 companies

Consumers(slaughter)

Farm-gate sales to Neighbours

Slaughterhouse

activities/linkages still operating no longer operating

The framework for thinking about compensation and rehabilitation

Framework around 5 questions....

• Why?• Who?• How much?• How?• From where?

General principles.....

• Keep it practical• Work off a simple framework• Design locally, draw lessons globally• Think beyond the emergency• Changing the rules of the game takes time

Issues that have emerged so far

Why?

Issue1 unless you are clear about what compensation is and why it is being done, it is difficult to build a coherent plan

Reasons why countries consider compensation for HPAI....

• Belief that compensation will encourage reporting and discourage panic selling (not proved). Many countries.

• Wish to prevent a public health threat. Cote D’Ivoire : high density of people, live bird markets. Vietnam: a matter of principle, human cases

• Pressure from neighbours or international organisations WBGS : pressure from neighbour

• Moral notion or stakeholder pressure that payment should be made by the government for private property destroyed in the public good. Held to some extent in many countries....... Iraq laughed

Reasons why countries consider compensation for HPAI....

• Existence of an insurance fund, private or public-private, to which people have contributed. e.g. Australia. Few if any developing countries.

• Support on social, humanitarian or political grounds, to restore livelihoods or to rehabilitate the poultry industry (depending on stakeholder “voice”). Nigeria : pressure from stakeholders with high level of “voice” . Thailand: pressure from stakeholders, ??social conscience.

Cambodia: has firmly declared cannot afford compensation

We find it useful to distinguish between....

1.Compensation by government: Payment for private property destroyed (birds culled) in the public good

2.Indemnity from private sources: Payment made to people who have contributed to an insurance fund

3.Rehabilitation: Support from public funds, on social, humanitarian or political grounds, to restore livelihoods or rehabilitate the poultry industry (e.g. reimbursement for birds that died of disease, payment for downtime, assistance to restart poultry enterprise or move to other enterprises) even when damage results from externalities created by risky behaviour of private individuals.

Who is supported?

Issue2 what to do about people who have suffered from HPAI outbreaks or control processes but will not be eligible for compensation because their birds were not culled?

1.Compensation by government:.... compensate everyone whose birds are culled• In Vietnam, payments made for birds “volunteered” for

culling.• A problem, Backyard producers sometimes left out of

compulsory culling

2. Indemnity from private sources: .... compensate people in the scheme• limited examples in developing countries

3.Rehabilitation: .... the jury is still out.... payment for birds that died before the culling team got

there? (were sold? were eaten?) ... payment for downtime? .... help to restart local poultry in a more biosecure way?.... help to start a different livelihoods enterprise?

Strong interest in rehabilitation in• Cote D’Ivoire and Nigeria: strong poultry sector• WBGS: income source for many people, ?80% protein from

poultry – possible rehabilitation through microfinanceAt risk countries are paying less attention to this aspect, it

only becomes important when they have had an outbreak....... table top simulations to stimulate interest

How much?

Issue3 it is difficult to establish (and implement) a consistent strategy about compensation rates, or other forms of support, in a decentralised financing system

Levels of support.....1.Compensation by government: • Same rate for same bird everywhere in the country

advisable (otherwise people move birds). More difficult with decentralised decision making and finance or very variable local prices. Vietnam....... Across international borders......

• Different prices by species and category (age, broiler or layer, traditional or commercial, breeding flocks). Not too many categories or it is hard to administer. Premium value on traditional birds? The opposite in Cote D’Ivoire.... discouraging to farmers.

• Based on % of market price or, for commercial poultry, production costs rather than market price. Decide in advance how to determine market price – average for month or week? the price on the day of culling?

Market prices as basis for establishing rates in Mauritania, Vietnam, Cote D’Ivoire, Egypt??, Nigeria, Thailand

Production costs as basis for commercial birds in WBGS, Senegal, Benin,

Establishing market price: in several countries, average price for the month before the outbreak. In EU, general principle is price on the day of culling (incentive to report quickly).

Percentage of market price: we recommend <=100%. Thailand, 70-100%. Vietnam 30-50% in practice. Cote D’Ivoire 75% suggested after stakeholder negotiation. Iran, ?? compensated at 3x market price for 3 weeks only (to encourage rapid reporting)

Levels of support....

2. Indemnity from private sources: • payment level standardized or agreed in advance

Levels of support.....3.Rehabilitation:• unlike compensation payments, process usually decided

after an outbreak, not in advance• agreed restocking packages? some interest in

Afgahnistan.... very tricky in Vietnam... • poultry development project with credit / microfinance?

associated with training / quality management Crimea, UNDP

• should consider including rehabilitation planning and some operational work in emergency projects

Compensation may need to be entirely centrally funded, rehabilitation funded from local sources

How?

Issue4 may need very different financing and operational processes for compensation vs rehabilitationfor situations where there is an existing food emergency vs those where there is notIssue5 more evidence is needed on the best form of payment, and the best balance of compensation vs rehabilitation, for poor and vulnerable peopleIssue6 rehabilitation schemes may be highly beneficial but they take time and expertise to establish – in the meantime, the future of smallholder poultry development schemes are uncertain

Identifying farmers and poultry

1.Compensation by government:2.Indemnity from private sources:.... only pay for birds that are culled and registered

or part of an indemnity scheme• Registration forms, carbon copies, supervision of

culling and registration by veterinary services, local authorities, poultry owner (+ other?)....

does not entirely prevent scams needs to work fast or people will cull their own.Gender issues? Who gets registered?

Where / by whom are payments made?• Cheques:

• Issued by the National bank, cashed upon presentation of ID. Francophone Africa many smallholders have bank accounts.

• Cash: • Smallholders thought to like cash, but not everywhere.

Gender issues? Need a simple system that makes use of existing institutions. In some countries cash payments not possible through the government. Authorities, NGOs, mosques. UN agencies (refugee camps or relief areas).

Cheques or cash can be paid swiftly• In-kind:

• Food? only in cases of severe food insecurity• Seeds? relief mechanism may exist for disbursement

Identifying farmers and poultry

3. Rehabilitation:.... ideally, need advance registration but, Smallholders (even in UK, until recently) not

usually registered anywhere. Good records may be available for contract farmers.

Where / by whom are payments made?• Poultry Mauritania suggested compensate with

birds, Vietnam has restocking scheme (problematic) (i) risky in epidemiological terms, (ii) direct restocking by government is difficult, (iii) farmers might prefer to invest in other areas. Requires investment in a restocking/poultry development programme.

• Other things e.g. help to get into non-poultry enterprises Vietnam restructuring plan could send 2 million smallholders out of poultry. Examples??.

Who funds it?

Issue7 “where there is no money” – a widespread outbreak may result in a hefty compensation bill for a poor country – and decisions to do things differently next time – under what circumstances is international financing appropriate?

Sources of finance..

1.Compensation by government:• Taxes.... general or earmarked? General taxes used by

many countries that have a compensation scheme... but fund may not be quickly accessible. FAO reports estimate available tax

• With a well organised private sector, can set up a fund for livestock emergencies, to which government and private sector contribute. Encourages reporting, helps insure against losses, shares the financial risk so that all take steps to reduce disease risk. e,g, Australia.

• Top up from regional economic group (e.g. EU)• International sources... will require careful review of

auditing process

Sources of finance..

2. Indemnity from private sources:• Commercial farmers who take out private insurance will

probably be asked to join a quality management scheme

3.Rehabilitation:• A variety of sources for rural development

Thank you

Next steps

Immediate plans.....

• Support to more countries on request to include compensation and rehabilitation in HPAI control plans

• “Lessons learned” – e-consultation – August• Prepare workshop• Refine generic guidelines• Put compensation into table-top simulations• Issues and options publication • Collaboration..... World Bank, USDA....