Lankan tea industry concerned over Pakistani move

COLOMBO, Jan 2: The Sri Lankan tea industry is apprehensive about Pakistan's decision to establish an International Tea Auction Terminal (ITAT) in that country as it could pose a major challenge to other tea auction centres in the region including one here.

However, market analysts say that such a centre in Pakistan would be very helpful to the regional tea exporters, specially those in Sri Lanka and India who export the brew to the CIS (Commonwealth of Independent States) countries and the Middle East, two areas where tea consumption is rapidly rising.

Pakistan has recently planted its first experimental plot of tea and become the 12th country in Asia to take to tea cultivation. Asian countries account for about 80 per cent of the world's tea production and South Asian nations for 55 per cent. Once the tea project in Pakistan gets under way, this share could increase further.

The Pakistan government has already approved setting up of the ITAT which, according to tea consultant to the Summerville Tea Ltd here, Maxwell Fernando, could prove to be a success. "Karachi, the (commercial) capital of Pakistan, is strategically placed and possesses all the infrastructure for setting up a trading centre." Fernando said.

"Karachi is well placed in the international tea routes serving the vast Middle East sector. It could also serve as an important land link to most CIS countries and a trading centre for SAARC countries," he added. "Exporters in the region can have their products shipped out from Karachi to the vast areas in the Middle East or have them transported by the land route to the immense CIS markets."

Forbes tea consultant Tilak Alawattegama said that Sri Lanka should try to find out the reasons why a project similar to the Pakistani one hasn't still got off the ground despite years of careful planning. "Colombo can boast of being the largest auction centre in the world.

Last year Sri Lanka tea fetched the highest price in international markets," Alawattegama said. Sri Lanka's tea production has been rising steadily and is predicted to reach 300 million at the turn of the century. According to Alawattegama, the matter for concern was whether the present marketing system could sustain this rate of production in a world of competitive marketing.

"Time is fast running out on Sri Lanka, and if we fail to take remedial measures immediately, we will revert back to be just a producer of a primary commodity, and leave the manipulation and value addition to others," Ceylon Tea Board chairman Clifford Ratwatte said.

A spokesman for the Sri Lanka Chambers of Commerce and Industry quoted a former president of the Karachi Chamber of Commerce and Industry as saying that Pakistan would soon become a terminal market for Southeast Asia and CIS countries and that he expects big brokers in tea-producing countries to participate in the ITAT.

Pakistan, a $60 million tea market, is the third largest importer of tea in the world, consuming about 150 million kilograms of tea annually. However, the Pakistanis are now under pressure to limit tea consumption due to foreign exchange difficulties.

According to Alawattegama, value added exports of Sri Lanka tea have dropped after Russia reduced tea purchases. "All indications are that Sri Lanka could forfeit up to 20 per cent of the Russian tea market over and above the 25 per cent drop anticipated for 1998. Since Russia is a supporter of the value added segment, this loss would mean that we are fast becoming a bulk exporter," Alawattegama said.

Ratwatte stressed that Sri Lanka should adopt a more dynamic approach to marketing and be more responsive to consumer needs. "Our aim should be to move away from an inward oriented marketing strategy to one that is more amenable to demands. It should be vigorous and flexible," Ratwatte said.

He urged the government to permit free import of tea so that exports could be increased. "We are told that very cheap tea is now inundating the Russian market and Sri Lanka is unable to offer any kind of competition as we don't have such tea."

- India Abroad News Service