Fonterra seeks to ease tension in Sri Lanka

Activists demonstrating outside the Sri Lankan headquarters of New Zealand dairy giant Fonterra. Photo / AFP

New Zealand has pushed Fonterra's case in meetings with the Sri Lankan government following a tumultuous month which saw the dairy giant temporarily shut down its Sri Lankan operations.

Foreign Minister Murray McCully and Fonterra chairman John Wilson made a one-day visit to Colombo to discuss progress in resolving the recent tensions, as well as future cooperation in the dairy sector.

Fonterra temporarily shut down its operations in Sri Lanka amid protests over a court order which barred it from selling its products there. The order was overturned just over a week ago.

But tensions remain as Sri Lanka looks to decrease its reliance on foreign dairy imports and increase its domestic milk supply.

Mr McCully urged Sri Lanka to give Fonterra greater certainty, when he and Mr Wilson met Sri Lankan Economic Development Minister Basil Rajapaksa.

The two governments also agreed to work toward a dairy sector cooperation agreement.

Mr McCully said Sri Lanka was keen to substantially build its domestic dairy production, and Mr Rajapaksa clearly understood the world-class expertise and experience which Fonterra could bring to that.

"He was very interested in hearing how Fonterra might be able to assist. We took the opportunity to underline the greater certainty that Fonterra will need in the Sri Lankan market."

Mr McCully said he hoped the dairy sector cooperation agreement would be signed later this year.

"This will set out the ways both governments can support the growth of Sri Lanka's dairy sector, and thereby assist in creating a more certain environment in which Fonterra can make a broader contribution to the sector's development."

Mr McCully said there was still considerable work to do to create greater certainty for New Zealand's dairy trade in Sri Lanka.

"I believe we have established with the Sri Lankan Government a more positive basis for taking the relationship forward."

Mr McCully also met Sri Lankan President Mahinda Rajapaksa and the country's health and external relations ministers.

New Zealand officials are also continuing their work on an international market recovery plan in the wake of the Fonterra botulism scare.

Primary Industries Minister Nathan Guy told TVNZ's Q+A programme the Government was looking at which markets needed visits from officials and ministers first.

China was high on the agenda, with Ministry for Primary Industries acting director-general Scott Gallacher likely to make a visit later this week.

Mr Guy said the world was demanding more of New Zealand as a food producer.

"They are demanding more in terms of scientific tests, and we are going to respond accordingly. Food safety is hugely important for New Zealanders, as it is for our international trading partners."

Mr Guy denied New Zealand had slipped behind in its testing regime.

"What I would say is the markets are demanding more of us. That's whey we've got a ministerial inquiry which is going to look at all of our food safety systems - our tracing, testing, all of those things."

Mr Guy refused to be drawn on Crown-owned AgResearch's role in the botulism scare, saying it was not known what AgResearch was asked to do when it carried out its tests.

Asked whether AgResearch had got its science wrong, Mr Guy said that would be up to the Government's inquiry.