INTRODUCTION

Livestock breeding is an important sector of the global agriculture. In many countries, this sector is more advanced compared to crop production. One-third of cropland is occupied by forage crops for the purposes of animal husbandry.

In the modern conditions, livestock breeding largely determines food security of the countries. Livestock products provide a full range of nutritional value. Namely, they are the sources of energy, bio-digestible minerals and vitamins, and high-quality animal protein containing all essential amino acids. Each person should consume above 20 grams of animal protein per day for a healthy diet. This can be achieved by annual consumption of 33 kg of meat, or 45 kg of fish, or 60 kg of eggs, or 230 kg of milk, respectively. Both production and consumption of animal products grow rapidly throughout the world. According to the forecast of the Food and Agriculture Organization of the United Nations [FAO] (2015), world meat production is expected to double by 2050, mainly owing to developing and emerging countries. The growth rate of meat production could exceed the growth rate of the world population. The possibility of advancing growth of meat sector in the developing and emerging countries was revealed. Such countries will be able to satisfy their domestic demand at the expense of their own production (FAO, 2015).

However, the growing scale of livestock is accompanied by a wide range of problems. One of the main problems is an environmental impact in the forms of degradation of pastures, irreversible changes of the local genetic resources of animals and plants, increasing water consumption, soil and water pollution with animal waste, as well as drugs used in animals breeding. Thus, ensuring animal health is one of the most important challenges of combating negative environmental impact. This is supported by ever-growing attention of scientists and experts, who consider the development of veterinary service in terms of its contribution to the sustainable development of the society and ensurance of food security (Davis, 2008; Gerber, Mottet, Opio, Falcucci, & Teillard, 2015; Ipema, Bleumer, & Lokhorst, 2011). Over the years, veterinary professionals have played significant roles not only in animal health, but also in human health and welfare, food quality, food safety, and food security (Caceres, 2012). Modern veterinary practice includes a series of activities that lead to environmental pollution, soil degradation, and contamination. The inevitable consequences of the veterinary interventions are a collection, recycling, and disposal of biological waste. The problem of biological waste disposal and destruction is relevant for a number of countries, especially emerging ones (McLean, Watson, & Muswema, 2007; Traverse & Aceto, 2015; Osipova, 2008; Popkova, Dubova, Yakovleva, Azarova, & Titova, 2014). In addition, negative impact on the environment may be caused by the veterinary treatment of cattle, disinfection, disinfestation, and deratization. This also contributes to soil degradation as a result of the chemical effect of disinfectants.

Many publications are devoted to the research of the possibilities and ways to reduce antibiotic treatments in veterinary (Trevisi et al., 2014; Mohring et al., 2009; Caruso et al., 2013). In the developed countries, much attention is paid to the issues of ensuring animal welfare as an aspect of decisions about whether animal-usage systems are sustainable (Velarde, Fàbrega, Blanco-Penedo, & Dalmau, 2015; Broom, 2010; Da Silva & Naas, 2012).

Based on the vision of “one medicine”, scientists consider the role of veterinary medicine in protecting food security and safety (Pappaioanou, 2004; Sargeant, 2008; Steele, 2008). Dividing the concepts of food security and food safety, in this chapter, the authors address the food security in relation to the veterinary service understanding that the activities of veterinary services have a significant impact on food security which is relatively homogeneous over the four components: availability, accessibility, utilization, and sustainability. According to Zinsstag, Schelling, Waltner Toews, and Tanner (2011), the concept of “one medicine” should be transformed into the concept of “one health”, and even “ecosystem health”. Considering the intensifying processes of globalization, it should assume a global scale.

At the same time, the above-mentioned problems related to veterinary service remain relevant for the majority of the emerging countries because they have not yet found any optimal solutions of economic issues of veterinary care. In many countries, demand for veterinary services is quite low because of the low income of farmers and lack of qualified veterinarians, insufficient technical, financial, and administrative support of their work. This situation adversely affects the stability of livestock breeding, environment, and rural development.

The solution to this problem is largely connected to the reform of the national veterinary services (Ahuja, Umali-Deininger, & de Haan, 2003; Rutabanzibwa, 2011). Experts note that a flexible combination of state support to the veterinary services and active stimulation of the commercial sector of the veterinary medicine is required (Leonard, 1987; Ekboir, 1999; Turkson, Slenning, & Brownie, 1999; Rubyogo, Murithii, Agumbah, & Obhai, 2005; Bhandari & Wollen, 2008; Amankwah et al., 2014). In emerging countries, institutional reforms run at different speeds and with different efficiency. A success can be achieved through analysis of international experience, as well as regular monitoring of anticipated and unanticipated effects of privatization and decentralization to enable policy adjustment.

The main idea of the research presented in this chapter is to investigate the experience of reforming of the veterinary services in one of the emerging countries. The authors studied the case of Russia and surveyed the heads of the regional departments of the veterinary service in one of the Russian regions.

Research tasks included:

• • Identification of the strengths and weaknesses of the reform, evaluation of its impact on different divisions;
  
• • Expert survey to study the opinion of the veterinarians on the features and results of the further development of market relations in veterinary medicine, government impact on the improvement of the veterinary service, opportunities of stimulating demand for veterinary services, the role of veterinary medicine in ecosystem health improvement;
  
• • Generalization and ranking of the survey results, theoretical justification of the level of government intervention;
  
• • Development of solutions and recommendations for improving the work of the veterinary services departments based on the identified problems.

BACKGROUND

Russian animal breeding is one of the largest in the world. Russia takes the 5th place in the world in meat production, 6th place in milk production, 9th place in wool clipping (Khokhlov, 2014). However, during the 1990s, Russian livestock breeding was damaged by the market reforms and transition processes happened after the collapse of the Soviet Union in all post-soviet countries. The main damaging factor was the fall in purchasing power, which affected the most income-elastic meat and dairy products. In addition, the efficiency of livestock production and yield per unit of forage in Russia during the 1970-1980s were much lower compared to the developed countries. Therefore, import of meat and dairy products to the country rose sharply and created a competitive position to the Russian producers giving them no time for fundamental modernization of the industry.

Along with the sharp decline in output, significant structural changes occurred. Before the 1990s, the basic commodity production was concentrated in the large public agricultural enterprises. As of 2015, 54.7% of cattle and 53.4% of sheep and goats are produced by small-scale production units: farms and private subsidiary farms.

Such transformation required substantial changes to the system of veterinary care. Both before the market transformation and now, only a few veterinarians are responsible for the health condition of livestock at large agricultural enterprises. However, in small-scale farms, animal management required the establishment of a special service. In Russia, this service was established on the basis of public institutions – district centers for animal disease control that existed in each administrative area. Such centers became the major veterinary units engaged in rendering services to the owners of small animal farms within the territory of an administrative district, as well as in the coordination of the work of veterinarians at large enterprises and private veterinarians engaged in entrepreneurial activity.

The economic basis for the veterinary services has also undergone significant changes. In the planned economy, the cost of keeping and organizing the veterinary service was financed by the government. The liberalization of economic relations in the sphere of animal husbandry and veterinary medicine started in the 1990s along with the national market reforms. In 1991, public veterinary institutions financed by the state were allowed to render commercial veterinary services. However, for over 20 years, state veterinary authorities had no right to administer their earnings. Money obtained from the rendered commercial services was transferred to the regional budgets and then distributed centrally between all district centers for animal disease control located in the area. A number of budget allocations were calculated based on the performance achieved by the district centers for animal disease control centers during previous years. Thus, the degree of state economic regulation of the veterinary service remained high.

The situation changed in 2013 when the new model of market activities of district centers for animal disease control was introduced. The amount of budget money transferred to the accounts of the veterinary centers is determined based on the performance of the governmental plan on rendering veterinary services to small private farms, not the operational plan of the center itself. A governmental plan is developed based on livestock number on farms and smallholdings within the territory of an administrative district and is aimed at the prevention of quarantine and dangerous diseases. It includes scheduled preventive vaccinations and treatments of animals, scheduled diagnostic tests, a sampling of biological material for diagnostic studies on quarantine and especially dangerous animal diseases, as well as registration and issuing certificates of compliance of foodstuffs with the requirements of the veterinary standards of the food market.

The fact that such types of veterinary services are financed and controlled by the state is justified. Thus, both Lin et al. (2003) and Trevisi et al. (2014) emphasize the priority of preventive measures for the formation of the so-called “sustainable medicine” (SM) as one of the important components of a wide range of possible sustainable approaches to peaceful co-existence.

On the other hand, the involvement of a government in the facilitation of preventive measures for small private farms has been remaining top-priority in emerging countries for a long time (Leonard, 1987; Ekboir, 1999; Amankwah et al., 2014). The reasons for that have been low-income of farmers and lack of experience and industrial practices which both have led to underestimation of preventive measures and consequences of dangerous animal diseases to the society and environment.

The second feature of the new model of the market functioning of district centers for animal disease control is associated with the use of funds from commercial services. Previously, money earned by the veterinary centers was transferred to the regional budget. Currently, the money remains on the centers’ accounts and is spent according to the centers’ needs. Thus, the transition to the new finance system promoted the commercial component of veterinary centers’ activities, strengthening their autonomy and financial independence.

To assess the results of the implementation of the new finance system of public veterinary institutions the authors conducted an expert survey on the case of Stavropol region of Russia. The region was selected as a case-study because of its well-developed animal husbandry industry. The share of animal production in total agricultural output in Stavropol region is 31%. Stavropol region ranks the second in Russia by a number of sheep and output of wool, the ninth by poultry stock, and the tenth by a number of cows and output of milk. At the same time, 69% of cattle and 82% of sheep are kept on small farms (Territorial Authority of the Federal State Statistics Service of the Russian Federation in Stavropol Region, 2014). Veterinary care of this livestock is carried out by the experts from the district centers for animal disease control. Each year, they complete over 640 million actions (vaccination, research, and animal decontamination), over 10 million laboratory and diagnostic studies, and 120 million of veterinary and sanitary examinations.

31 heads of district centers for animal disease control took part in the survey. 73.3% of them have more than 15 years of experience in veterinary medicine. The questionnaire forms were forwarded to them via e-mails and then completed forms were returned to the authors by post.

MAIN FOCUS OF THE CHAPTER

The transition to the new model of district centers of animal disease control pursued economic aims related to saving budget funds, strengthening financial independence of disease control centers, and stimulating demand for veterinary services. The most obvious consequence of this transition was a reduction of staff. Before the reform, the average number of staff per a disease control center was 70 people, now it is about 53 people.

One of the main hypothesis of the current study is that the results of transition are not similar for the veterinary centers in different districts. In order to prove it, the authors grouped the questionnaires by the size of animal population served by the district centers. Grouping the survey results allowed the authors to distinguish four groups of disease control centers. The first group includes large district veterinary networks that manage a large number of livestock (over 40 thousand livestock units). Over 70% of livestock is managed by small private farms. There is 21% of such administrative districts in the region. During the staff optimization, the number of employees per center was reduced by 14 persons in average, but the average total number of staff remained high – 61 persons. Veterinary centers are characterized by the high rate of government task performance (100% and more) and high level of income earned from commercial services.

The second group comprises veterinary centers where the livestock number amounts to 20-40 thousand units. Its considerable part (40-70%) is managed by small private farms. The share of such disease control centers is 24%. The staff was cut by 11 persons, and now the average number totals 52 persons. The majority of disease control centers in this group do not perform the government task in full volume.

The third group of the veterinary centers (42%) includes districts where livestock number is below 20 thousand units, but 70% of which is managed by small private farms. The average staff number of such centers is 47 persons. The reforms mainly affected this type of veterinary centers as 16 persons on average were fired. Underdevelopment of livestock in such administrative districts has an adverse effect on the volume of commercial services. The government task in not performed unevenly, the main targeted indicators are not met.

The fourth group of veterinary units includes city veterinary centers (about 13% of the total number). They do not treat livestock, but control processes of livestock products processing and sale. Their main function is to provide safety control.

The opinions of the heads of Stavropol district centers for animal disease control on the reform are very diverse. 40% of the respondents from first group mention did not find any disadvantages in the new system, whereas 25% of the respondents from the third group did not see any advantages. The analysis of the survey results shows that the main controversial issue is the most obvious result of the reform – staff optimization with an account of the livestock managed. Almost 47% of the respondents mentioned it as the main advantage, while 43% recognized it as the main drawback of the new system. Some experts explain that both the threat of dangerous disease spread and growth of livestock number result to the need of improving response activity, timely diagnostics, and veterinary care. This is the reason why the reduction of the staff number may endanger veterinary security.

The reduction of staff number also increased the load on the remained employees. On the other hand, it created conditions for the increase of salaries and incentives for specialists. The analysis shows that the largest number of staff optimization supporters is in the first group (60%) and the third group (54%). For the respondents from the third group, the main factor is saving limited means of such type of disease control centers. 87.5% of the respondents from the second group assess the staff layoff as the main drawback of the new system.

The lack of interest of disease control centers in environmental protection was considered as a disadvantage only by 7% of respondents. This highlights inadequate attention of experts to the issues related to sustainable development of rural areas. Strengthening of the financial independence of the centers as a positive result of the reform was mentioned by 43.3% of the respondents. It was particularly noted by the respondents in the second group (70%). Herewith, 51.7% of the respondents from the second group think that the new financing system enables a complete coverage of livestock with preventive measures and reveals new opportunities for the development of physical infrastructure.

Calculation of volume of state subsidies based on livestock number led to the change of the amount of state funding. In general, every fifth respondent mentioned the significant increase of budget funding after the transition to the new system. Herewith, there is a trend to decrease in state funding in 40 districts. 20% of the respondents from the first group mentioned the significant increase in state funding, 40% said it had slightly increased. That means that the new system improved financial situation in 60% of large district centers for animal disease control. Even bigger share of the respondents from the second group (71.4%) noted an increase in funding, while the situation in the third group was different. The reduced state financing was observed in 54% of veterinary centers. Every third respondent mentioned significant decrease of subsidy rates.

The volume of such preventive measures as vaccination, sample selection, and allergic response study is related to the current livestock number and the total level of livestock development in an administrative area. Herewith, over a half of the respondents mentioned the underperformance of the government task implementation. Only 13% of the centers succeeded to meet the targets. The authors believe that the main reason for that is an evasion of compulsory preventive veterinary and sanitary measures. This is connected to the underestimation of the importance of preventive measures for livestock health and environment as well as to reluctance of farmers to show the real livestock number. As a result, the governmental plan does not always correspond with the situation in the particular center. As a rule, the unaccounted livestock does not participate either in compulsory (free) or in commercial sanitary and veterinary treatment.

The threat of dangerous disease outbreaks remains relevant. It is difficult for the veterinarians to manage such diseases in the conditions of low awareness of their origin and course. Consequently, this situation can be regarded as a constraint for ensurance of food safety and food security in the area. The situation is complicated by organizational challenges. The current system of material and technical supply of the centers for animal disease control allows cases of untimely supply of vaccines and diagnostic materials. More than 53% of the respondents consider the problems of veterinary service supply with veterinary preparations as one of the most urgent ones.

The second important source of financing of the district centers for animal disease control is commercial services. Commercial services include all types of veterinary activities not included in the governmental plan. Commercial services are priced by each disease control center individually according to the guidelines developed by the regional state agency – Veterinary Authority. There is a unified mechanism of pricing, however, the guidelines do not provide any price limits or any other regulatory tools. As a result, the price of the same type of service varies from one district to another. This leads to the dissatisfaction between the owners of the farms located in neighboring areas, causes social conflicts, and reduces demand for veterinary services.

The problems related to pricing affect the amount of money received from rendering commercial services. Its volume reduced in 50% of the veterinary centers, while increased in 40% of those veterinary centers included to the first and the second groups. That means that the large veterinary centers have succeeded to strengthen their commercial component and increase their financial independence under new conditions.

The respondents note that the full list of commercial services is implemented only by a half of the veterinary centers. In most cases, this relates to the special features of veterinary network performance in a certain district. Thus, for example, not all the districts have veterinary laboratories. Another issue is a lack of legally formalized markets as it limits the opportunities for veterinary and sanitary examination of food products sold on the market. As the result, 42% of veterinary centers cannot cover their economic needs with money received from rendering commercial services. The main share of this money is spent for salaries and bonuses for employees. The other significant item is utility payments.

The same sort of situation is observed in the case of fixed assets purchase. Only 22.3% of the respondents considered equipment procurement as the main item for spending money received from rendering commercial services. According to the survey results, 13% of the veterinary centers do not spend their earnings on new equipment. As a result, in the districts with underdeveloped livestock breeding veterinary service is backward. There is a lack of own means for veterinarian vocational training.

Respondents were asked about the possible ways of solving existing problems. The majority of respondents believe that in order to improve veterinary service it is necessary to develop the system of financial incentives and bonuses in the case when a center systematically overperforms the governmental plan. Additional financial rewards of veterinarians are considered to be fair by 80% of the respondents from the first group, 71.4% of the respondents from the second group, and 38.5% of the respondents from the third group.

About 67% of the respondents mention the acute need for improving price policy of commercial services. This measure seems to be urgent for 80% of the respondents from the first and the second groups. These results are confirmed by the data obtained by Tregubov et al. (2012) carried out during the survey of Stavropol veterinarians on the procedural and institutional issues of veterinary service operation. In 2012, 74.1% of the respondents mentioned the problem of the inadequate price level.

Providing centers with modern equipment and vehicles is also considered as a significant issue. The importance of measures for equipment renovation was mentioned by 85.7% of the respondents from the second group and 61.5% of the respondents from the third group.

Many of the above-mentioned problems are typical for other Russian regions (Ilyinykh, 2013; Nikitin, Akmullin, & Trofimova, 2012), so the measures proposed based on the survey results are relevant for the improvement of the veterinary service.

Summarizing the survey results, the authors conclude that the reform of the veterinary service has undeniable positive organizational and economic results. The most significant of them are strengthening the commercial base of the veterinary service, staff optimization, financial incentives for the employees, more opportunities for earning financial resources, and use of new technologies. Undoubtedly, all those factors will contribute to the development of rural areas and environmental health. On the other hand, an extension of market relations caused further stratification of the network of district centers for animal disease control by financial and economic condition, opportunities for sustainable development, and ensurance of food security.

Generally, there is no opportunity to render commercial services in sufficient volume in the areas with a few livestock due to the low demand a lack of veterinary laboratories and laboratories of veterinary and sanitary examination. In such centers for animal disease control, possibilities of adequate salary rates are limited and technical backwardness and employees’ dissatisfaction with the working conditions are observed. Those problems may be further complicated by a lack of transport in rural veterinary services, untimely provision of drugs, etc. As the result, preventive measures may be adversely affected, and the volume of medicines used in a case of animal disease outbreaks increases.

The lack of measures aimed at the adjustment of the working conditions of those centers can lead to the spiral development of adverse consequences, worsening conditions for veterinary security, and, as a result, further reductions in the number of livestock that taken together negatively affect food security in the area. Therefore, it is advisable to limit the differentiating features of the market, which can eventually become the signifying one. That is unacceptable in terms of the social, ecological, and economic importance of the veterinary service.

In the emerging economies, the need for state regulation of organizational and economic aspects of the veterinary service is caused by its affinity to infrastructure sectors. The issue of the market mechanism development and increasing its effectiveness is important and is still an unsolved problem in production infrastructure within the system of market economy in Russia. One of the main reasons is that many of the branches of production can be regarded as natural monopolies. Consequently, the rate of liberalization and its borders in various industries, as well as the resulting effect, are different.

According to Sulakshin et al. (2007), natural monopoly as an object of state regulation is the sphere of economic activity where competition is limited due to the specifics of the production process or contradicts the public interest. In order to identify the sectors that could be attributed to natural monopolies, the authors propose to allocate four types of market boundaries: economic, technological, social, and strategic.

Under such approach, it can be assumed that the veterinary infrastructure also has certain features of a natural monopoly. The leading element is the social boundaries of the market, according to which the social importance of the veterinary security relates to the issues of ensurance of food security. In this context, the economic boundaries of the market are also relevant, as competition in the field of quarantine and dangerous animal diseases prevention under conditions of market imperfection, which is usually observed in the emerging countries, could have negative economic consequences for agricultural production. Thus, competition in quarantine and dangerous animal diseases prevention is possible but requires public or government regulation in terms of creating conditions for ensurance of food security. It should be noted that in the developed countries the government always played an important role in the development and regulation of the veterinary service (Enticott, 2014; Kellar, 2012).

The degree of danger of animal diseases, which have to be eliminated by the veterinary service, can be regarded as social and technology boundaries of the market, beyond which the competition is rather effective. However, it should be noted that the concept of technological boundaries of the market is closely linked to the territorial limitation. In the field of veterinary medicine, this factor is quite important due to the territorial dispersal of a livestock. Therefore, in order to avoid local monopolies, a certain degree of state intervention and public control should be presented in the area of veterinary practice, which is not associated with dangerous animal diseases. This intervention should apply to regulation of tariffs on services, development of veterinary network entities, adjustment of differentiating and sanitizing functions of the market, i.e. those aspects that were mentioned by the respondents during the survey.

Based on the survey results, the authors formed a diagram of causes and effects in improving the efficiency of the veterinary services that reflects the importance of various factors (Figure 1).

Figure 1. Causes and effects in improving efficiency of the veterinary services
Source: Authors’ development

The description of elements presented in Figure 1 and links between them is given in Table 1.

Table 1. Description of causes and effects in improving efficiency of veterinary services

Element	Description
	Resulting factors of the second level
	Resulting factors of the third level mentioned by more than 60% of the respondents
	Resulting factors of the third level mentioned by 20-60% of the respondents
	Resulting factors of the third level mentioned by less than 20% of the respondents
1.1	Targeted subsidizing of the veterinarians in rural areas
1.2	Staff management improvement
1.21	Bonuses for the veterinarians for better performance
1.22	Optimization of staff structure of the veterinarian service
1.23	Improved availability of the qualified professionals
1.3	Advanced training of the veterinary service employees
1.31	Entrepreneurship training for the veterinarians
1.32	Exchange of experience with the veterinarians from other regions and countries, vocational training
2.1	Modern equipment for the veterinary entities
2.11	Availability of modern equipment
2.12	Availability of transport
2.13	Reconstruction of buildings belonging to the veterinary services
2.2	Availability of veterinary preparations
2.21	Well-timed provision of veterinary preparations to the district centers for animal disease control
2.22	Improvement of medication dosing techniques
2.3	Introduction of new technologies to medical treatment of animals
2.31	Cooperation with scientific and research centers, universities
3.1	Regulatory framework for veterinary service operation
3.11	Control of prices of services
3.12	Improvement of development and control of the governmental plan
3.2	Effective arrangements with clients
3.21	Explanatory work on the necessity of preventive measures
3.22	Improvement of legislation aimed at reduction of unaccounted livestock number
3.23	Official formalization of unregulated markets
3.3	Support of the veterinary centers in the areas with small livestock number
3.31	Creation of money reserves to the support of the veterinary entities
3.32	Differentiated approach to the calculation of subsidies for the governmental plan

Source: Authors’ development

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