New Zealand and Sri Lanka have agreed to develop the Asian country’s dairy sector in an attempt to build bridges after a safety row involving Fonterra milk powder.

Sri Lankan regulators hit Fonterra with a two-week ban on selling and advertising its products last month, after the country’s food safety authority claimed it had detected the agricultural chemical DCD in milk powder. Fonterra disputed the results and insisted the products were free from DCD. However, the backlash against the company in the market – including protests staged outside Fonterra sites – prompted the dairy giant to temporarily suspend activities in Sri Lanka.

While Fonterra resumed operations in Sri Lanka last week, reports have suggested the ban on Fonterra advertising products as “100% perfect” has been extended to 20 September.

In a bid to resolve the dispute, Fonterra chairman John Wilson and New Zealand Foreign Affairs Minister Murray McCully met with Sri Lankan Economic Development Minister Basil Rajapaksa in Colombo today (2 September).

“Sri Lanka is keen to substantially build its domestic capacity in the dairy sector. Mr Rajapaksa clearly understands the world-class expertise and experience that Fonterra can 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,” McCully revealed.

“The Minister and I agreed that our governments will work toward a Dairy Sector Cooperation Agreement, which we hope to see signed a little 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.”

McCully also held talks with Sri Lankan External Relations Minister G L Peiris and met Sri Lankan President Mahinda Rajapaksa, the New Zealand government revealed.

“There is still considerable work to do to create greater certainty for our dairy trade in Sri Lanka. I believe we have established with the Sri Lankan Government a more positive basis for taking the relationship forward,” McCully said.