Examination of Witnesses (Questions 140-159)
24 MARCH 2004
MR JAROSLAV
CAMPL-«K
AND MR
MIROSLAV KOBERNA
Q140 Chairman: Our final group of witnesses,
and we are most grateful, gentlemen, for sparing time to come
and talk to the Committee, are from the Federation of the Food
and Drink Industries of the Czech Republic. We have with us Mr
Jaroslav Campl-«k, who is their President. You are most welcome,
Mr President. It is not often we have the chance to say "Hello,
Mr President" but we might as well enjoy this. And Mr Miroslav
Koberna, the Director of the organisation. You have been patiently
listening to the lines of inquiry, as we have probed those involved
in food and farming in the United Kingdom and our own Food and
Drink Federation, about how they see the challenges, the threats,
the opportunities which arise from enlargement. If I look at the
Czech Republic, could you give us just a flavour as to how well
you think your food and drink industries are prepared for full
membership in the European Union?
Mr Campl-«k: First of all,
thank you for giving us a chance to be here with you. It is a
big honour for us. Very briefly, I think the food sector in the
Czech Republic is one of the strongest sectors in our country.
There is no need to repeat all the figures we gave you in our
written material[7],
so I will concentrate mostly on how we are prepared for the accession.
Our industry has done all possible to be ready and I think we
are ready. We have spent a lot of money on investment, especially
to fulfil all the requirements, all the hygiene and veterinary
standards of the EU. That has been finished and the absolute majority
of the food industry has fulfilled what has been required and
is ready for the accession. We believe that there are big opportunities
for us to be in the EU market. I will try to tell you very briefly
what we appreciate and what the opportunities are. There are a
number of closed enterprises and plants are asking for a transition
period does not represent, from the capacity point of view, any
importance. So it is really the companies which have been closed
were mostly very small companies with a very low number of employees.
For example, from 500 units closed the total number of employees
was 2,000, so you can have a brief picture of how big these companies
were. Problems can arise in the case of the marketing because
we think this is not a very strong point of our industry because
if you look at what the other companies in the EU spend on marketing,
it is nearly 100 per cent more than what is usual in our country.
So this is not a very strong point of ours. Problems occur from
time to time in the preparation of the State administration for
the role which they should fulfil in the new conditions. We have
been criticised several times, our State organisations, but the
last time it has also improved and we hope also that the payment
agency will be ready in time to be able to get money from the
EU, especially for our industry, because I do not know if you
know the Czech Republic was the only country from the Candidate
Countries which has used all the money from the support programme,
which was money destined to improve especially the hygiene conditions
and standards. We are ready to prepare new projects to use the
money from the structure funds. So we hope that the administration
will be ready. Foodstuffs and food products from the Czech Republic
do not represent any risk for you, for the existing EU countries,
we can assure you. If you look at our country in the past there
were no crises in foodstuffs like dioxin or others. The only problems
which we had was the BSE, but in a very limited number of cases.
What we appreciate and what we see what has been done, we appreciate
the assistance of the European Food Organisation, especially the
CIAA, where we are only five years associated members in Brussels.
We also appreciate the assistance of the Food Federations of the
EU countries, which were our partners. They helped us a lot in
the preparation for the entrance and also the BS people who run
the business support programme which helped us especially, for
example, to introduce codes of good hygiene and production practices
which have been introduced and a lot of seminars and practical
training in our country how to implement these things in the food
industry. Naturally the assistance of foreign mission officials
and non-government organisations from the EU Member States in
the networking of the Czech businessman and organisation within
the accession period. What we, as the Czech Republic, also appreciate
very much is the approach of two existing EU countries, it is
England and Ireland, that there are no limits for our people to
go and to find jobs in your countries. This is appreciated very
much because the other countries were not so kind as you were.
So we think it is possible and we fully understand the restriction
on the social advantages they could use. They are in certain limits.
We fully understand this. So the Food Federation of the Czech
Republic believes that there is a space for strengthening of co-operation,
trade exchange and investment activities in the food agri sector
in the interests of both countries.
Q141 Chairman: Thank you very much for
your opening statement. I am sure the representatives of our own
Food and Drink Federation, who have kindly stayed with us, will
have noted what you have had to say. You said a moment ago, Mr
Campl-«k, that the majority of the sectors were now working
to the European Union standards, but are there any areas, either
by sector or particular types of food plant, which are currently
able to be exempt, not have to comply with, the European safety
standards, certainly as far as export foods are concerned, perhaps
on a temporary basis? Are there any that we should be aware of?
Mr Campl-«k: As I mentioned,
all these companies which did not fulfil up to the end of last
year have been closed. There are only about 20 companies which
have asked for a transition period and the others are designated
and they will supply only the local markets. So from this point
of view I do not think there is any reason for some doubt about
how it has been done.
Q142 Chairman: Did you have a national
plan with clear timetables for achieving the European Union standards
that were agreed by all of the food producers in the Czech Republic?
Mr Koberna: I think it was about
some two years ago and in this document where some time limits
for the increasing of the hygiene and veterinary situation in
companies. Now we are in the final steps.
Q143 Mr Lepper: So you are convinced
that your ability to meet required standards of food production
are all adequate, within the limits that you have told us about.
Thank you. Are there any risks that we should be aware of in this
country?
Mr Campl-«k: I am sure there
are no risks. I do not know how far you are informed, but the
majority of the industry has also been privatised by the multi-nationals.
So we have all the companies which you know, starting from Nestle«,
Unilever, Danone and many others. They have introduced all these
standards and also you can imagine they have other suppliers which
have to fulfil their standards. They do not buy raw materials
from companies which do not fulfil, so it means it is not the
first day we are doing this. These companies came 10 years ago
and they are already supplying all the other markets also, but
they mostly concentrate on the new Candidate Countries, especially
Hungary, Poland and Slovakia Republic.
Mr Koberna: I think that the best
evidence of the preparedness of the Czech food industry is in
that we have not any problems so-called food crisis in the Czech
Republic the last 30 or 40 years. It means that our control system
was in the past only very effective and now we only change the
situation from our local registration to European, which was a
bit different.
Q144 Mr Lepper: Do you feel there is
potential for your food producers to exploit the markets of the
rest of the EU once you have joined?
Mr Campl-«k: To be quite
honest, we think our core business will stay within the existing
Candidate Countries mostly. There will be products like the Czech
beer, which is famous, but it certainly will find market also
in existing EU countries. You can see also all the multi-nationals
are mostly concentrating on the Candidate Countries, the four
which I mentioned, plus the Russian market. So we have some chances,
but we do not expect any explosion to exist here.
Q145 Mr Lepper: Not even of the beer?
Mr Campl-«k: Too big a chance.
Q146 Mr Lepper: One final question; you
have heard representatives of our own Food and Drink Industry
Federation talking about the question of the borders, the security
of borders and the huge increase and the extent of the border
which needs to be kept secure now. Do you have any views about
whether there is a serious threat of illegal imports coming, I
am not suggesting from the Czech Republic, into the EU across
those new borders, including your own?
Mr Koberna: We have not any outside
border in Czech now.
Mr Campl-«k: Our advantage
is after the accession we shall have no borders with these other
countries because we are just in the middle.
Q147 Mr Lepper: Thank you for correcting
my geography.
Mr Campl-«k: We cannot give
you information about Poland and Slovakia, how they will handle
this issue, but the problems certainly could come especially from
the Ukrainian market and these parts of the world. There is a
certain potential danger could be, but we hope they have got enough
money to really close the border and to make strict control.
Mr Koberna: We have similar problems
which have been mentioned in our procedure. It means, for example,
I think two weeks ago our customs services found some pork which
has been stated as vegetable in some containers from China.
Mr Campl-«k: So from time
to time somebody tries, but I think our control bodies are very
well equipped and they can control it.
Q148 Chairman: As a Committee we visited,
as you may have gathered, Hungary and Poland to get a flavour
of some of the issues and it is quite clear that not all Member
States' food industry and their various factories are going to
be as well prepared as clearly yours are. Should those countries
face any kind of punishment, do you think, as far as the Commission
is concerned, for not having played by the rules of the acquis
in being fully prepared by the date of accession? You have made
all the efforts, others will still be able to trade because they
have been given dispensations. Is that fair? Do you think those
countries should be punished in any way?
Mr Campl-«k: It is more a
question for the European Commission than for us, but I have been
with Jonathan at the Alimentaria two weeks ago and heard Madam
Testori. She said that she thinks that all the Candidate Countries
are now ready and there is no serious potential to be afraid.
I heard her six months ago give a very strong criticism of the
Candidate Countries because she really was pushing us to really
fulfil all what has been required. I think the pressure brought
results and I have heard her and she was not afraid, so I do not
think there is any reason to be really afraid.
Q149 Chairman: Is that your view, Mr
Koberna?
Mr Koberna: We know, of course,
the situation in most of the European countries and I think that
our companies are not worse in comparison. Therefore it is not
a question of preparedness or of technical advice. So from my
point of view it is only a question of political attitude to that
question.
Q150 Ms Atherton: The Chairman just mentioned
that we were in Poland and Hungary and we were struck by the lack
of supply chains, the fragmentation of the whole food industry
and the lack of credit opportunities that the food industry had.
All these were, we felt, great limitations. In your experience—and
if you can speak about the 10 new Member States, I would be grateful—do
you agree that this is a challenge and how do you see membership
enabling you to change that?
Mr Campl-«k: From this point
of view, I think in the food chain in our country the weaker point
in the past was the first step which was all the feeding and now
I think also in this part we have created order. There is a legislation,
they are implementing the codes of good practice. So I think to
this end we more and more talk about the food chain and I can
assure you again the Czech Republic is one of the exceptions.
You can find nearly all the retail chains in the Czech Republic,
starting from your Tesco up to the Ahold and all the Germans,
everybody there and you know the requirements of these people.
Also, they are ready and they already ask for confirmation. They
are visiting our factories. So I do not think the problem is in
the food chain and I think they have absolutely the same requirements
on us as an industry they have in your countries. They do not
make any difference.
Q151 Ms Atherton: That is very reassuring
to hear, I am sure, but we can all do better and I am sure you
would agree there. Can you tell us then to what extent you have
used the pre-accession funds? You mentioned you had used it in
the field of hygiene, presumably in food manufacture. What other
areas have you used this money?
Mr Campl-«k: The possibilities
were in two fields. First of all, the money has been destined
to introduce and implement systems—HACCP and ISO in the
factories. The second was not only the hygiene standards and improving
all the conditions, not only on the veterinary industry which
is dealing with animal products but also buying new technology.
It means improving the quality of the product and so these were
two fields for which the money has been destined.
The Committee suspended from 16.16 pm to
16.40 pm for a division in the House
Q152 Chairman: Can I turn to the question
of privatisation and, indeed, foreign investment in your food
industry? Just for the record, is privatisation of your food industry
now complete?
Mr Campl-«k: I think the
food sector is fully private. Budweiser is still in State hands
and it is not privatised, but I think the Government needs money.
They will sell it, but I think the main concern is that they would
not like that our Czech Budweiser would finish in the American
hands of Budweiser. This is the main concern. If this concern
did not exist, they would sell it already.
Q153 Chairman: Because with our privatisations,
where there was a business of strategic importance in the United
Kingdom, the Government kept what they called a "Golden Share"
so that final ownership could not be passed to somebody else until
the Government saw fit to sell its holding. So maybe that is a
possibility. But that is the main area which is still in Government
hands? The rest . . .
Mr Campl-«k: Yes, the rest
is . . .
Q154 Chairman: Has the fact that it has
been privatised brought new external investment into your food
industry and, if so, where?
Mr Campl-«k: The investment
went to all main sectors but still I think there are possibilities
because especially in the meat and milk industry there is still
a space, also, for some canned vegetables and foods. There is,
also, a space for investors, but I think the most important players
they are already in the Czech Republic.
Q155 Chairman: Was it Czech investors
who bought the companies or was it foreign investors who bought
into the companies? Could you just explain a little bit more about
how the privatisation was achieved?
Mr Campl-«k: It was different.
In the beginning it was the Government who started to sell the
companies. I do not know how far you are informed about the coupon
privatisation which has been distributed within the population
and so on, but later on there were also Czech bodies buying the
companies and they later on sold it to the foreign investment.
So part has been done by the Government and part by the private
sector.
Q156 Chairman: Has this brought new money
into the Czech food industry?
Mr Campl-«k: Yes.
Q157 Chairman: Has that also helped in
the process that you talked about earlier, where you said that
all sectors and, in fact, all companies had achieved the necessary
European Union hygiene and other standards? Has that process been
helped by the privatisation?
Mr Campl-«k: I give you one
example. I have been the Managing Director of the chocolate and
biscuit group of 14 factories. It has been privatised by Nestle«
and Danone and the deal has been done in that time by the Government.
They have had an obligation, for example, that they will in the
next five years invest such an amount of money into the sector.
So it was certainly bringing in money and not only the money,
all the know-how which has been brought on the hygiene standard,
marketing, IT, technology. So I think the privatisation was a
very good input and it helped really the industry to adapt to
these conditions. So really the process of the accession came,
I would say a lot of companies have already been ready because
the multi-nationals they did not make any difference if they are
already in or not. So they introduced their standards, their control
systems, everything, the control of the raw materials, their standards.
They had the same behaviour as in the EU countries.
Q158 Chairman: Has employment been maintained
in your food industry because if the new more modern techniques
to which you referred have come in one would assume that, whilst
productivity would have risen, numbers employed would have gone
down?
Mr Koberna: I think that in the
bigger companies the employment is decreasing, certainly in terms
of higher effectivity and labour productivity, but we have, I
think, big space for the establishing of new small companies.
It means up to 50 employees. Because biggest companies change
their market policy. It means they remit every year the number
of products, they increase the volume of production, but thanks
to it they create new space for the local small companies which
fulfil that empty space on the market with some regional specialities
and others. It means that the most of people which went out of
the bigger companies went to smaller, or some part of them established
their own business.
Mr Campl-«k: You have to
imagine that before the revolution in 89, there were no private
small businesses in the Czech Republic, all was only State companies
and mostly the biggest ones. So the reduction in these big factories,
privatised by multi-nationals, which certainly brought the productivity
and reduced, as Miroslav mentioned, the number of production.
So it has created, on the other hand, a space for the small, small
businesses. But it is a question how after now the accession if
everybody will survive. We have now already seen some of the small
ones, especially which were not able to fulfil the criteria of
the special veterinary standards, they have to close down. So
there were about more than a thousand companies closed down, not
companies, we call it units. Some of them we are sure will not
be able to face the competition and they will close, not because
of the hygiene standard, but because of the competition.
Chairman: From what I gather from your
last answer, that is likely to be a trend that will continue.
There will be more rationalisation, as we would say, in the food
and drink industry.
Q159 Mr Drew: You were at the back when
I asked the Food and Drink Federation about this potential problem
of speculative stockpiling, where people will try to manipulate
the price by actually building up a stockpile of products. The
response was it did not seem to be a general problem, but could
be a problem in some market sectors like sugar. I just wonder
what your views are on this and if you see potentially some people
trying to play this as a way of making some money?
Mr Campl-«k: I think in our
country we can talk mostly on sugar. On the other things I do
not think we have such a potential that you could create some
stocks. All these stocks of other things like wheat and rape seed,
it is not an issue which could be interesting. But sugar we are
a country which is a big producer of sugar. On the other hand,
we do not think in our country, specially what we think is a little
bit unfair, is the evidence of the stock of the finished product
because we do not think that the sugar of finished products could
really damage the EU market because you have to admit that each
product has a certain shelf life and the speculation to have sugar
in finished products and everybody when you are supplying the
retailers with product which already has two months, expires the
shelf life, they immediately ask for a reduction. So this is certainly
not the way. What can happen, there could be companies, but certainly
not producers, some companies which used to do and still are doing
business with sugar, we cannot say that everybody is so fair that
they did not speculate to buy some quantity of sugar. But again,
if you look at the production in our country and the local consumption,
the difference which could be on speculation is not—we are
not a size like Poland or other countries, so I think that is—and
certainly I really can assure you the food industry, nobody of
the companies is speculating in this way. Certainly not.
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