International institutions forecast a
significant increase in animal production in developing countries
in the next two decades. Such growth will have major consequences,
including an increase in demand for animal health services
from livestock keepers, as well as a pressing need for improved
veterinary public health and food safety systems to safeguard
Animal health services have proved notoriously slow in responding
to changing demands, both in developing and developed countries.
In the 1970-80s, privatization of public services, hence of
animal health services, in developing countries was seen as
the solution to overcome the scarcity of state financial resources.
However, two decades later, there is ample evidence that the
expected results have not been achieved. In developed countries,
political, economic and institutional factors have played
a strong role in delaying the adaptation of animal health
services to changing consumer demands.
Factors affecting efficiency and effectiveness of animal
healthcare systems include structural and organizational issues
(e.g. the decentralization process taking place in most developing
countries) as well as geographical circumstances (e.g. high
transaction costs associated with service delivery in remote
and rural areas). Furthermore, it has often been argued that
the scarcity of funding is a major factor undermining the
system’s ability to adapt to new situations.
Systematic assessment of possible funding sources for national
(human) health systems started in the late 1960s, and several
funding options were debated with a view to the criteria of
macro and micro efficiency, equity, feasibility and political
acceptability. These were/can be adapted to animal healthcare
systems and include:
(i) taxation (general or earmarked, national or local);
(ii) national livestock or animal health insurance contributions;
(iii) private livestock insurance; and
(iv) user charges or out-of-pocket payments.
Most animal health services rely on a mix of approaches,
and the way in which they are combined carries different consequences
in terms of equity and efficiency. For example, systems relying
heavily on indirect taxation tend to be more regressive, i.e.
affect poorer people more than wealthier ones, compared to
systems based on direct taxation. However, other factors,
such as the goods taxed, decentralization and devolution of
power to districts and redistribution, may compensate for
A review of the funding preferences for animal health and/or
livestock insurance reveals certain differences between regions.
In OECD countries, and especially within the EU, policies
for animal healthcare funding tend to focus on livestock insurance
mechanisms. Several types of national livestock insurance
systems exist, most of them focusing on direct losses due
to epidemic diseases and/or on the associated consequential
losses. For example, the UK compensates farmers for direct
losses from the EU compensation scheme and the UK national
budget, whereas Spanish and Italian farmers only receive the
minimum compensation stipulated by the EU statutes*.
Consequential losses, arising from trade bans for example,
might be compensated through private insurance schemes (e.g.
The Netherlands, Germany, UK), free public insurance schemes
(e.g. Finland, France) or public-private partnerships (e.g.
Denmark, Finland, Spain). There is a growing tendency to rely
on private insurance markets for livestock insurance so as
to divert financial risks away from state funds. National
schemes focusing exclusively on improving animal health exist,
for example Australia’s ‘Animal Health Australia’,
or Greece’s ‘Agricultural Insurance Organization’
(ELGA). These schemes are based on a combination of funding
mechanisms and in part draw on taxation (direct or indirect)
earmarked for animal health.
Most African countries rely on general taxation for animal
healthcare funding, with the ministry of finance allocating
funds to the livestock sub-sector on an annual basis. Decentralization
is taking place in some of these countries. In districts where
livestock constitutes an important income-generating source,
devolving the management of taxes collected to local authorities
and earmarking these for animal health services may be a viable
alternative. The process would enable local authorities to
obtain a more stable and predictable budget for animal health
services, which could then be more adapted to local needs.
This alternative could make budget allocation a more transparent
and thus more accepted by the local population.
In Asia, some countries (e.g. India, Indonesia, Malaysia,
Nepal, the Philippines, Sri Lanka, Thailand) have a relatively
consolidated culture of National Livestock Insurance schemes
that emerged in the 1970-80s to address risks subsistence
smallholders are confronted with when engaging in livestock
production. These schemes however tend to target dairy production.
Given the developments in international animal health standards,
the use of such funding schemes appears a useful tool when
considering livestock production from a commodity chain perspective.
Recommendations: A Pro-poor Focus to Funding Mechanisms
When focusing on pro-poor policies for the livestock sector,
the equity criterion will play a central role. Several authors
have recently debated the role of the state in promoting agricultural
and consequently livestock development, arguing that structural
adjustment programmes may have left vulnerable groups worse
off than before. State intervention appears justified in areas
where there is market failure, which is the case for most
remote locations, and on social or environmental grounds.
For pro-poor development, revenues collected for the livestock
sector through the aforementioned mechanisms should be channelled
to benefit the less-favoured farmer populations. Planning
of animal healthcare funding should consider the following:
- In the case of general taxation at the national level,
a redistributive tax system would allow the central government
to allocate resources to poorer districts/provinces, with
priority given to poor farmers. However, as a precondition,
livestock service needs of various producer groups have
to be carefully assessed.
- Within taxation systems for the livestock sector, indirect
taxation should be carefully assessed (i.e. types of goods
or services and who the consumers are) so as not to increase
the tax burden of the worse-off farmer population.
- When designing insurance schemes, incentives should be
provided for poor livestock keepers (including those with
livestock other than dairy cattle) to access the scheme.
This might be possible by increasing risk pooling and risk
sharing between livestock insurance funds (progressive membership
fee calculation or premium setting, risk-based payment or
contribution, exemptions, etc.).
Footnote to above:
* Compensation of direct losses
in the EU is partly based on EU directives for list-A diseases.
Compensation includes 50% of the value of animals subject
to compulsory and pre-emptive slaughter, 70% of the value
of those slaughtered for welfare reasons and 50% of the costs
of organisation (i.e. administrative costs).