United Nations Conference on Trade and Development Challenges and Opportunities Arising from Private Standards on Food Safety and Environment for Exporters of Fresh Fruit and Vegetables in Asia: Experiences of Malaysia, Thailand and Viet Nam United Nations New York and Geneva, 2007 Note Symbols of the United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. This publication has been edited by Ulrich Hoffmann, UNCTAD secretariat, and René Vossenaar, consultant, formerly with UNCTAD. 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UNCTAD/DITC/TED/2007/6 UNITED NATIONS PUBLICATION Copyright © United Nations, 2007 All rights reserved iii Foreword The production of fresh fruit and vegetables (FFV) for domestic and international markets provides a living to a large proportion of rural households in South-East Asia, and a basis for export diversification and agro-industrial development. Governments and the private sector in countries of this region have been working to promote the use of good agricultural practices (GAP) in the production of FFV. The wider use of GAP has helped to increase efficiency in FFV production, offer safer and healthier produce to domestic consumers and improve the safety and quality of exported FFV. Most countries have adopted gradual approaches to GAP development and implementation, with an initial focus on (consumer and worker’s) safety followed by the gradual incorporation of additional requirements. These are important achievements. Yet, as this monograph indicates, many challenges still need to be addressed. This includes the need for credible certification, improved quality-assurance infrastructure and related institutions, as well as appropriate involvement of the private sector. One major issue is how to take account of the differing needs and capacities relating to GAP implementation and certification of a large number of diverse producers and other actors in the supply chain that target markets with very different characteristics. From an exporter’s perspective, demonstrating GAP compliance to importers or customers in external markets is often essential. European importers and retailers, for example, increasingly demand certification to EurepGAP (recently renamed GlobalGAP) or an equivalent standard. Producers supplying supermarket chains in the domestic market or in other South-East Asian markets may also need to respond to a growing demand for higher level certification. However, for growers who are producing for the domestic market or for less demanding export markets, higher level certification is expensive and a luxury they can ill afford. For these producers, a gradual upgrading of national GAP schemes remains the preferable, if not the only, option. Reconciling these differing needs is a daunting challenge. In Thailand, the Thai Chamber of Commerce and the Thai Fruit and Vegetable Producers Association, among others, have started a two-year project aimed at developing ThaiGAP, a GAP standard that aims to respond to domestic needs and which could later be benchmarked to GlobalGAP. It is envisaged that ThaiGAP will assist small-scale Thai producers to achieve group certification against the benchmarked standard. In 2005, Thailand shipped almost 14 per cent of its FFV exports (excluding nuts and cassava) to the EU-27, an increase from only around 9 per cent in 2000 (in value terms). These exports were worth over $66 million, but accounted for less than 1 per cent of all EU imports of FFV from third countries, or just over 2 per cent if imports of processed fruit and vegetables are also taken into account. There is a clear potential for further increasing exports to the EU market provided that public and private-sector requirements can be met. This increasingly includes meeting the requirements of the GlobalGAP Standard for Fruit and Vegetables. Demonstrating capacity to meet higher level third-party GAP certification, however, is also becoming increasingly important to successfully export to other markets. For example, Thailand has recently gained greater access to the United States market for a number of fruit that previously had been subject to phytosanitary restrictions, based on the country of origin. This implies, however, that Thai fruit exporters that are interested in taking advantage of improved market access conditions need to assess the implications of private-sector standards that play a role in the United States market. As this UNCTAD report points out, whereas meeting the requirements of government regulations may currently be a greater challenge than private-sector GAP standards for exporting to Japan and to the markets of developing countries in the South-East Asian region, there are good reasons to believe that private-sector GAP standards will play an increasingly significant role in coming years. In August 2007, a Japanese GAP standard (JGAP), which was developed by producers, retailers and distributors in that country, was approved for GlobalGAP benchmarking. Will there be a trend for large retailers to require compliance with GlobalGAP or JGAP for domestic and imported FFV? Thai FFV exports iv to China have increased manifold in recent years. Will the growth of hypermarkets and the expansion of international retail corporations in China result in increasing demand for quality assurance and centralized supply management systems for imports? And will that mean that FFV exports to China will increasingly need to show compliance with higher level GAP standards, including GlobalGAP? GAP standards, including GlobalGAP, may also become more important in the context of intra- ASEAN trade. For example, the Department of Agriculture of Malaysia is initiating a formal process aimed at GlobalGAP benchmarking of SALM, its farm accreditation scheme. Malaysia is a net importer of FFV, importing some $50 million of FFV from Thailand every year. Will GlobalGAP benchmarking in Malaysia have implications, not only for Malaysian exports but also for imports into that country? By September 2007, only around 25 Thai FFV producers/exporters had achieved GlobalGAP certification individually. For small-scale producers, GlobalGAP certification is very costly and almost impossible to achieve on their own. However, groups of small-scale growers may join together in efforts to achieve GlobalGAP certification through “option 2”. Even this is not an easy process, in particular because it requires producer groups to be well organized and capable of managing an internal control system. In this context, the German development agency, GtZ, has done useful work in Thailand and other developing countries in crafting a quality management manual and working with produce marketing organizations (PMOs). Some PMOs have already achieved GlobalGAP certification. However, more may need to be done to reach out to the very large number of small-scale growers in Thailand. One of the objectives of ThaiGAP is to promote group certification to a local GlobalGAP-benchmarked GAP standard in Thailand (option 4). The development and implementation of national GAP standards in South-East Asia offers an opportunity to take local regulatory, agronomic, social and other conditions into account. However, a number of questions remain to be addressed. How can the benefits of a locally developed GAP standard be combined with wider buyer recognition in international markets? What are the pros and cons of benchmarking vis-à-vis other (not mutually exclusive) options for GlobalGAP certification? What factors would have to be reflected in a national standard to enable it to be benchmarked? How can GlobalGAP benchmarking, where considered useful, be reconciled with the gradual approach to the development and implementation of national GAP standards? Can a GlobalGAP-benchmarked national standard be integrated into a GAP framework that also benefits producers for the domestic market and/or export markets where GlobalGAP certification is not required? Do modular approaches on GAP respond to the need for coherence and harmonization, and will they serve to avoid confusion among producers and consumers, ease access to domestic markets and reduce certification costs and the need for multiple audits? This monograph analyses these questions and other relevant issues based on case studies of national experiences in Malaysia, Thailand and Viet Nam that were