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| Sunday, 29 May 2005 |
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Lanka can regain Pakistan's tea market by Gamini Warushamana Sri Lanka can regain the tea market it enjoyed in Pakistan 25 years ago, said the chairman of the Pakistan Tea Traders Association Mauhammed Altaf. A trade delegation led by Altaf is now in Sri Lanka for discussions with Sri Lanka Tea Board (SLTB) officials and their counterparts on the potential tea trade after the Pakistan - Sri Lanka Free Trade Agreement (FTA) comes into effect from June 12. "A quarter of a century has gone and it is a long time. Our consumer taste has shifted to East African tea, mainly to Kenyan tea. More Sri Lankan interaction is needed to re-gain the lost market in Pakistan" Altaf told the Sunday Observer. Pakistan's tea trade is very competitive. But advertising is a waste of money. The taste and price are the important factors to be considered, he said. In 1970s Sri Lanka held 63% share in the Pakistan tea market and the annual exports were around 30 million Kgs. In 1980s Sri Lanka's tea industry was affected by drought and other factors and production dropped and prices went up. As a result Sri Lanka's market share in Pakistan has fallen to 3%. According to the FTA Sri Lanka can export 10 million Kgs of tea to Pakistan with zero duty. It is expected that Sri Lankan market share in Pakistan will be increased to 5% in the short run, said SLTB chairman Niraj the Mel. The price is the major factor that affects our competitiveness in the Pakistan market. Today the FOB price of Sri Lankan tea is US$ 2.18/Kg while from Kenya it is US$ 1.78. Even with zero duty, Sri Lankan tea is expensive in the Pakistan market, he said. Pakistan is among the world's three largest tea importers. Pakistan officially imports 125 million Kgs of tea annually and nearly 40 million Kgs are smuggled across the Iran and Afghanistan borders and therefore Pakistan's total annual tea consumption is around 165 million Kgs, Altaf said. Pointing out the rapid increase in Bangladesh tea exports to Pakistan, Altaf said that the FTA is a big advantage for Sri Lanka. There is no trade agreement between Pakistan and Bangladesh. However, Pakistan offered zero duty for Bangladesh and Nepal tea as a measure of goodwill to least developed countries in the SAARC region. Thereafter Bangladesh tea exports to Pakistan increased from 3.7 million Kgs in 2002 to 9.4 million Kgs in 2004, he said. According to De Mel the major challenge Sri Lanka faces is the gap between our production and Pakistan demand. We are mainly producing orthodox tea but Pakistan mainly imports CTC tea. Attempts made to increase CTC tea production to 15% failed and today we are producing only 6% CTC tea. However Altaf feels that production will be adjusted with the opening of
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