2294 part 1 final report.pdf - Agra CEAS Consulting

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Prevention and control of animal diseases worldwide Part I: Economic analysis: prevention versus outbreak costs 5.4.4. Comparison of prevention versus outbreak costs In the case of Romania, no cost-benefit analysis as such of Romania’s prevention and control strategies appears to exist currently in the reviewed literature. Nonetheless, important conclusions can be drawn in this direction from a comparison of prevention to outbreak costs. The animal health component of the WB Integrated plan for HPAI control for 2006-9 comes to a total US$ 14.3 million over a 3 year period (Table 20). Of this total, some US$ 1.6 million is earmarked for control (culling and compensation activities) in the event of an outbreak. Excluding this provision, total prevention and control activities as such (during ‘normal times’) come down to US$ 12.6 million. The largest component of this plan is strengthening disease surveillance, diagnostic capacity and research which accounts for US$ 10.9 million over the 3 year period. Strengthening the institutional framework attracts some US$ 1.5 million, and finally biosecurity US$ 0.3 million. Against these figures, the analysis of existing data suggests that direct costs of the 2004-05 HPAI outbreaks (including culling and control costs, excluding consequential on-farm losses) amounted to Euro 56.3 million during the 6 month period between October 2005 and May 2006, or roughly US$ 67.6 million 135 (Table 21). Official conservative estimates have put the total economic losses (direct and indirect) due to HPAI since the beginning of the outbreaks at an amount of EUR 192 million (or US$ 230.4 million). These losses the various indirect effects described above, such as ripple effects in terms of fall in demand/prices and loss of export (official estimates put this at Euro 70 million, or US$ 84 million), and the spill-over effects on tourism (estimated by the tourism industry at Euro 50 million, or US$ 60 million). Our own estimates of a potential HPAI outbreak occurring in future suggest that, under the scenarios and assumptions presented in section 6, Romania could face total direct costs and losses (including consequential on-farm losses) of US$ 65.3 million a year. The comparison of the relative scale of the WB prevention plan against the actual and potential outbreak costs involved is depicted in Figure 15. It is noted that the WB control and eradication plan’s figures are totals over a 3 year period, while the outbreak costs are quoted as amounts during the outbreak time (i.e. covering a six-month period) or, in our projections, annual estimates. The comparison clearly points to the fact that the potential benefits that can accrue from improving prevention and control are worth several times the investment. It is noted, however, that this relies on the assumption that a certain investment would result in gains in productivity and export earnings. The extent to which this will occur will depend on the effective design and implementation of the investment, to ensure the effective control of the disease. A risk factor will be the re-appearance of the disease, as is often the case in practice. The above calculations do not take into account the incremental operational costs involved, which can be a significant part of the cost of strengthening VS. 135 Euro to US$ average exchange rate during October to May 2006 Civic Consulting • Agra CEAS Consulting 136
Prevention and control of animal diseases worldwide Part I: Economic analysis: prevention versus outbreak costs On the other hand, the investment in strengthening the control of a particular disease, e.g. HPAI, can have important spill-over benefits on the entire VS. Figure 15 Romania: comparison of prevention versus outbreak costs scenario outbreak: total direct costs per year (d) 2005-06 outbreak: effects on tourism (a) 2005-06 outbreak: ripple effects (a) (c) 2005-06 outbreak: total direct costs (a) (b) WB AH (2006-9): institutional framework WB AH (2006-9): disease surveillance, diagnostics WB AH (2006-9): total excl. outbreal control WB AH (2006-9): total incl. outbreal control 0 10 20 30 40 50 60 70 80 90 US$ million (a) during the six month period of the outbreaks (b) excluding consequential on-farm losses (c) includes price/demand changes and impact on exports (b) annual; including consequential on-farm losses (source: Agra CEAS projection, Annex 5) Notes: WB AH plan’s figures are totals over a 3 year period; Total direct costs (scenario outbreak) are quoted as annual amounts; Incremental operational costs (a significant part of the total costs of strengthening VS) are excluded from these calculations, due to lack of data. Source: Agra CEAS Consulting, based on literature and own analysis Civic Consulting • Agra CEAS Consulting 137
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