Tea Stimulus For Pakistan's Economy

Pakistanis' great hospitality to strangers and strong addiction to tea has given birth to many proverbs. The best known of these is the one about the "three cups of tea" which goes like this: On the first cup, you're a stranger, and on the second, a guest. By the third cup, you're family.

Pakistan is the world’s third-largest importer of tea with nearly 175 million kg of annual consumption, costing an estimated $500 million, and increasing at about 4% a year. It imports tea from 21 countries, with the lion's share of black tea imports coming from Kenya, Bangladesh and Sri Lanka. The country's green tea requirements are met by imports from five countries led by Indonesia and Vietnam. Only a small fraction of Pakistan's tea imports come from neighboring India.

Tea prices, which hit record highs in 2009 due to droughts in India, Sri Lanka and Kenya, should stabilize in 2010 as weather has returned to normal in the main producing regions in Asia and Africa, the Food and Agriculture Organization (FAO) said. It is estimated that global tea production has been cut by as much as 20% this year.

The UN food agency said its Tea Composite price, the indicative world price for black tea, hit a high of $3.18 a kg in September, driven by the droughts and higher demand, up from an average price of $2.38 per kg in 2008. At 34 percent annual increase, tea prices have significantly outpaced overall food price inflation, which has also been running in double digits in recent years in Pakistan.

China, India, Sri Lanka, Kenya, Turkey, Indonesia, Vietnam, Japan, Argentina and Bangladesh are the top 10 tea producing countries in the world.

Pakistan is not a tea producing country but it is the third largest importer of tea in the world, behind Russia and the UK. Because of its high tea consumption, and the fact that it has no production of its own, it is a market which is keenly pursued by main tea exporting nations. Tea affects the taste buds; therefore, it is difficult to replace a particular variety with a substitute. This explains why certain types are favored by certain countries : for example, the Russians and former Soviet republics favor Indian and Sri Lankan teas. UK and Pakistan prefer Kenyan teas.

To cut spending on tea imports, trials have been conducted for growing tea in Pakistan, particularly Mansehra, Battagram, Swat and Azad Kashmir. These trials have shown good results in Northern Pakistan, but the necessary commercial investment needed to develop a viable industry has not yet materialized.

With the rising tea consumption and growing import bill, it is important for Pakistan to give incentives for investments for tea cultivation. Such a policy can help create jobs in the northern regions where they are most needed, while at the same time providing economic opportunity to young people to take a step toward creating the much-needed peace and political stability for the entire nation.

Related Links:

Food, Clothing and Shelter in India and Pakistan

Tea Growing Regions in Pakistan

How Much Tea Does Pakistan Drink?

Tea in Pakistan

FAO Data and Statistics

Solving Pakistan's Sugar Crisis

Pakistan's Water Scarcity

Food Inflation in India and Pakistan

Comments

Riaz Haq said…
Here's an Economic Times report on increasing Indian tea imports in Pakistan:

Pakistan's dependence on Indian tea is gradually increasing. This year, Pakistan has imported 20 million kg of CTC teas from India, which is one of the highest in recent years. A drop in Kenyan production has also helped India to strengthen its position in the Pakistani market.

A trade delegation from Pakistan Tea Association will be visiting India in April during which long-term business deals are expected to be clinched. With Iran stopping its purchases from India due to a payment problem, Indian tea producers are banking on Pakistan as one of the emerging export markets in the coming years.

Pakistan is largely a market for the CTC variety and said to be the second largest importer after Russia. The country's total official tea import volume is around 120 million kg. But tea industry sources say that a high import duty results in additional tea making its way into the country through grey channels. Almost 65%-70% of its total official tea import comes from Kenya, while India accounts for 15%. But with Kenyan production down by almost 9% to 259.77 million kg, India has an edge this year.

"Pakistan has been a good buyer so far from south India and is even buying from north India as well. The strengthening of the dollar against the rupee has also made Indian tea competitive in the Pakistani market," said Azam Monem, whole-time director, McLeod Russel India.

"Kenyan prices are higher compared with India and its production has been down. This could be an advantage for us," Monem added.

"Per capita consumption of tea has reached 1kg per annum and this is expected to go up further," said CS Bedi, chairman of Indian Tea Association. "We had been trying to develop business relationship with Pakistan over quite sometime now. Political tensions between the two countries have not marred our effort and over the years exports has been increasing to Pakistan," Bedi said.

He added that a delegation is coming from Pakistan Tea Association to explore business opportunities with India. "We hope to enter into long-term business deals with Pakistani tea traders," said Monem.

India is now offering Pakistan a wide array of tea blends at different price points. "Earlier, Pakistani tea trade used to complain about high prices of Indian tea. But now they understand that India offers quality teas which are at par with thee Kenyan tea or even sometimes even better," said Bedi.
Riaz Haq said…
Here's Kenya's Business Daily's report on tea exports to Pakistan:

Kenya’s dependence on Pakistan for tea exports is gradually being eroded by the Asian country’s improved ties with India.

Pakistan, which buys more than 17 per cent of Kenya’s black tea, last year imported a 21.8 million kilogrammes of tea worth $27.2 million (Sh2.3 billion) from India, compared to 8.3 million kilogrammes worth $15.5 million in 2010.

“One would expect that with the improved trade relationship with Pakistan more and more tea will be bought from the neighbouring country,” said East African Tea Trade Association marketing manager Brian Ngwiri.

As India’s share of the Pakistani market grew, Kenya’s slice dropped from 60 per cent in 2010 to 55 per cent in the last financial year, according to latest data from the Pakistan Tea Association (PTA).

East African Tea Trade Association showed that Kenya exported 58 million kilogrammes worth $175 million (Sh14 billion) to Pakistan in 2010 compared to 70 million kilogram worth $204 million (Sh16.9 billion) in 2011.

“Kenya’s share of total tea imports by Pakistan has reduced by five per cent,” PTA said in a press briefing last week.

Total Pakistan tea import increased by a third in the last fiscal year to 127 million kilogrammes worth $301 million from 95 million kilogrammes worth $252 million imported in 2010.

However, industry insiders said more Kenya tea could be finding its way to Pakistan through smuggling via Afghanistan.

Tea Board of Kenya data indicates Afghanistan increased its imports from Kenya by the highest margin — 48 per cent to 49 million kilogrammes — among the 48 destinations supplied with Kenya tea last year.

“The ratio between tea imports through legal and illegal channels is almost equal,” said PTA Chairman Mohsin Saifi adding that Pakistan loses between $50 million and $80 million annually in revenue due to tea smuggling through Afghanistan.

The Pakistan government charges a 10 per cent import duty, a 15 per cent sales tax, a 10 per cent value added tax and another two per cent income tax on imported tea, laying the ground for a black market to flourish.

Afghan imports Kenyan tea that is blended and sold to Pakistan at an extra charge of 15 per cent making it competitive
Pakistan meets its green tea requirement from five countries including Indonesia, Vietnam, Bangladesh, China and Sri Lanka. Vietnam has a major share of 64.38 per cent in this group. Indonesia, Bangladesh and China shares in Pakistan’s green tea market are 2.33 per cent, 3.58 per cent, and 29.76 per cent respectively.


http://www.businessdailyafrica.com/India+rivals+Kenya+with+Sh2+3bn+tea+exports+to+Pakistan+/-/539546/1299784/-/1098a9kz/-/
Riaz Haq said…
Turkey’s Ministry of Food, Agriculture and Livestock has sent a latest automatic tea-processing plant to Pakistan as a gift in recognition of the country’s tea-growing efforts.

https://www.dawn.com/news/1353946

Talking to journalists on Friday, National Tea and High Value Crops Research Institute Director Dr Farrukh Siyar Hamid said the plant has arrived in Karachi and currently paperwork is being done for its release.

The plant, which has a capacity to process 400 to 500kg of tea per day, would be made operational in April next year.

The plant will be set up at the tea project site located in Shinkiari, near Mansehra. Spread over 50 acres, this is Pakistan’s first tea garden where black and green tea is produced.

The existing plant at the institute was imported from China and has the capacity of producing one tonne of black tea per day and about 100kg green tea per day.

Dr Hamid said that after a series of soil surveys carried out by the institute, 158,147 acres of land suitable for tea plantation has been identified in districts of Mansehra, Battagram and Swat. The productive and cultivable land is presently not being utilised, he said.

The institute had also carried out soil surveys in Azad Jammu and Kashmir (AJK) where prospects emerged for the cultivation of tea. However, the forest department of AJK refused to allocate land for the project, he added.

Tea crop cultivation has been experimented on farmers’ fields in different agro-ecological zones in the three districts, he said.

The efforts to promote tea cultivation received a setback when the tea garden, spread over 186 acres, and a plant were completely destroyed in Swat during the military operation against terrorists.

The tea research institute has completed testing of 14 exotic tea germplasm and identified 13 tea clones.

In addition, the institute has developed clusters at Siran, Konsh and Kunhar valleys where sixty farmers were trained to grow tea.

Responding to a question, Dr Hamid said the tea being produced in Pakistan is much liked by the Chinese and the products have the prospects to thrive along the China-Pakistan Economic Corridor.

The tea institute’s data shows that Pakistan imported 93,500 tonnes of black tea during the first six months of 2017 at a cost of Rs22 billion. The import of 450 tonnes of green tea during Jan-June 2017 period cost Rs106 million to Pakistan. The data further shows that import of tea increased by over 325 per cent in 20 years.
Riaz Haq said…

India ranks 43rd in the global ranking in average per capita tea consumption with 0.73 kg compared with 7.54 kgs in Turkey, 4.34 kgs in Morocco, 2.74 kgs in United Kingdom and 1.01 kgs in Pakistan.

https://www.business-standard.com/article/markets/tea-board-on-promotional-drive-to-increase-per-capita-tea-consumption-116073000191_1.html

Per capita consumption of tea
Country Quantity (Per KG)
Turkey 7.54
Morocco 4.34
Ireland 3.22
United Kingdom 2.74
UAE 1.89
Kuwait 1.61
Russia 1.21
Iran 1.07
Pakistan 1.01
India 0.73
Source: Industry, Wikipedia
Riaz Haq said…
China has a big role to play in promoting Pakistan’s tea industry, as potential suitable sites and land for tea cultivation is located alongside the China-Pakistan Economic Corridor (CPEC), says a report published by Gwadar Pro, quoting experts.

https://www.thenews.com.pk/print/778492-china-can-help-promote-tea-industry-along-cpec-route


Pakistan has identified 64,000 hectares of area as suitable for tea cultivation along the CPEC’s route, according to Dr. Abdul Waheed, Director of the National Tea and High Value Crops Research Institute (NTHRI).

However, tea is currently cultivated on around 200 acres of land only. The area of Shinkiari in Manshra alone produces seven to eight tons of tea annually.“If we grow tea on 64,000 hectares of land, Pakistan will not only be self-sufficient in tea but will also export tea products to other countries,” said Dr. Abdul Waheed.

Riaz Haq said…
Tea Imports by Country
by Daniel Workman

https://www.worldstopexports.com/tea-imports-by-country/

Global purchases of imported tea totaled US$6.7 billion in 2020.

The overall value of tea imported by all buyer countries shrank by an average -2.1% since 2016 when tea purchases cost $6.8 billion. From 2019 to 2020, the total dollar amount for imported tea slipped by -5.5% from 2019 to 2020.

The 5 most valuable import markets for tea (Pakistan, United States, Russia, United Kingdom, Saudi Arabia) accounted for almost a third (31.1%) of the worldwide sales of imported tea in 2020.

From a continental perspective, Asian countries bought the most imported tea during 2020 with purchases costing $2.9 billion or 43.7% of the worldwide total. In second place were European countries at 29.3% while 14.4% of all tea imports were delivered to customers in Africa.

Smaller percentages went to North America (9.1%), Oceania (2%) led by Australia and New Zealand, and Latin America (1.5%) excluding Mexico.

For research purposes, the 4-digit Harmonized Tariff System code prefix for tea is 0902.
Tea Imports by Country

Below are the 15 countries that imported the highest dollar value worth of tea during 2020.
Pakistan: US$589.8 million (8.9% of total imported tea)
United States: $473.8 million (7.1%)
Russia: $412.2 million (6.2%)
United Kingdom: $348.7 million (5.2%)
Saudi Arabia: $243.6 million (3.7%)
Iran: $236.3 million (3.5%)
Hong Kong: $221.8 million (3.3%)
Morocco: $202.3 million (3%)
Egypt: $197.2 million (3%)
Germany: $195 million (2.9%)
China: $180 million (2.7%)
France: $168.1 million (2.5%)
United Arab Emirates: $164.9 million (2.5%)
Japan: $156.6 million (2.4%)
Iraq: $134.7 million (2%)
Among the above countries, 4 markets for tea imports grew since 2019 namely: Hong Kong (up 19%), Pakistan (up 18.7%), Saudi Arabia (up 2.9%) and France (up 0.7%).

Those countries that posted declines in their imported tea purchases were led by: Iran (down -39.9%), Egypt (down -28.7%), Iraq (down -23%) and United Arab Emirates (down -21.7%).

By value, the listed 15 countries purchased 58.9% of all tea imported in 2020.
Riaz Haq said…
Palm Oil Imports by Country
by Daniel Workman

https://www.worldstopexports.com/palm-oil-imports-by-country/

International purchases of imported palm oil cost an estimated total US$33.8 billion in 2020.

Overall, the value of palm oil imports increased by 19% for all importing countries since 2016 when international purchases of palm oil cost $28.4 billion. From 2019 to 2020, globally imported palm oil appreciated 12%.

An edible vegetable oil, palm oil is derived from the reddish pulp of oil palm plant fruit. Palm oil is a highly saturated vegetable fat used for lower-cost cooking, blending into mayonnaise and as a butter substitute. Palm oil is also an ingredient for biodiesel fuels.

The 5 biggest importers of palm oil (India, China, Pakistan, Netherlands, Spain) bought 43.2% of total palm oil purchased via international markets in 2020.

From a continental perspective, Asian countries imported the highest dollar worth of palm oil during 2020 with purchases valued at $17.7 billion or over half (52.3%) of the global total. In second place were European importers at 24.8% while a fast-growing 15.7% of palm oil imported worldwide was delivered to Africa.

Smaller percentages went to customers in North America (4.3%), Latin America (2.5%) excluding Mexico but including the Caribbean, and Oceania (0.3%) led by Australia and New Zealand.

For research purposes, the 4-digit Harmonized Tariff System code prefix is 1515 for palm oil and its refractions, whether or not refined.

India: US$5.1 billion (15.1% of total imported palm oil)
China: $4.1 billion (12.2%)
Pakistan: $2.1 billion (6.2%)
Netherlands: $1.9 billion (5.5%)
Spain: $1.4 billion (4.1%)
Italy: $1.2 billion (3.7%)
United States: $1.1 billion (3.2%)
Bangladesh: $896.9 million (2.7%)
Kenya: $829.6 million (2.5%)
Russia: $793.2 million (2.3%)
Egypt: $732.5 million (2.2%)
Vietnam: $694.7 million (2.1%)
Malaysia: $657.1 million (1.9%)
Myanmar: $645.3 million (1.9%)
Germany: $599.1 million (1.8%)
Among the above countries, the fastest-growing markets for palm oil since 2019 were: Myanmar (up 660.4%), Kenya (up 59.2%), Vietnam (up 30.8%) and Italy (up 20.2%).

Only one top country posted a decline in its imported palm oil purchases namely India thanks to its -5.4% drop.

By value, the listed 15 countries purchased 67.4% of all palm oil imported in 2020.
Riaz Haq said…
Pakistan to pursue tea plantation on commercial scale
Plans to cultivate tea an area of about 25,000 acres over next five years


https://tribune.com.pk/story/2314494/pakistan-to-pursue-tea-plantation-on-commercial-scale

While pursuing tea plantations on a commercial scale, the government of Pakistan has decided to cultivate tea on an area of about 25,000 acres over the next five years.

“This year we are going to approve a project where we are growing tea on an area of 25,000 acres; we are creating history; we plan to complete the proposed tea plantations over the next five years,” said Special Assistant to Prime Minister on Food Security Jamshed Iqbal Cheema during his visit to the National Tea and High-Value Crops Research Institute (NTHRI) at Shinkiari, Mansehra.

On the recommendation of Chinese tea experts, the National Tea Research Institute (NTRI), later renamed as NTHRI, was set up on 50 acres of land in Shinkiari in 1986. NTHRI is playing a crucial role in promoting tea cultivation in the country.

Out of the proposed 25,000 acres of land, 10,000 are government-owned forests; 12,000 acres are private land where the Forest Department has planted forests while 3,000 acres of land have been identified in Azad Kashmir. During the next phase, the tea plantation would be extended to all tea-cultivable land of the country, as per the government plan.

Read Over 3m saplings to be planted in Pindi

Pakistan has great potential for growing tea, according to Cheema, as the country has 178,000 acres of tea cultivable land. “Pakistan can grow its own tea,” he said, adding that the country imported 30 million tonnes of tea each year from 15 different tea-producing countries.

Cheema said Pakistan spent Rs90 billion annually on importing tea. The import value of black tea is Rs89 billion while Rs1 billion goes to green tea’s import.

While inviting private tea companies to invest in the tea sector, Cheema said, “We are ready to facilitate and solve any problems of the private companies regarding their investment.” The government is providing an opportunity to the private companies to invest and to promote the tea trade, which would also create thousands of jobs for the locals. The Ministry of Food Security has allocated Rs8.5 billion budget for high-value crops and cluster development.

According to experts, China from the beginning has played a crucial role in tea promotion in Pakistan. As potential suitable sites and land for tea cultivation are located alongside the China-Pakistan Economic Corridor (CPEC), China has a big role to play in promoting tea on a commercial scale through joint ventures and technical and financial support.

Riaz Haq said…
Why is Pakistan’s government asking people to drink less tea?
The country is grappling with a debt crisis

https://www.economist.com/the-economist-explains/2022/06/21/why-is-pakistans-government-asking-people-to-drink-less-tea


On june 14th Ahsan Iqbal, Pakistan’s minister for planning and development, appealed to people “to cut down the consumption of tea by one to two cups” a day to help preserve the country’s dwindling foreign exchange reserves. Cries of “austeri-tea” soon made their way across social media. The average Pakistani sips at least three cups a day. So why is the Pakistan’s government asking them to drink less tea?

Pakistan imports some $600m of tea each year. But the government coffers hold less than $9bn in foreign reserves. That is a drop of more than 50% since August and barely enough to cover 45 days of imports of all goods. It owes some $129bn to foreign lenders. On June 21st representatives from the United Nations Development Programme met officials in Islamabad, Pakistan’s capital, to discuss the country’s economic crisis.

Food and fuel prices are rising across the world. In Pakistan annual inflation hit 13.8% in May, the highest in two-and-a-half years. But decades of economic mismanagement have triggered a string of balance-of-payment crises. The country has spent 22 of the past 30 years in some kind of International Monetary Fund (imf) programme. The pandemic and war in Ukraine have further battered the ailing economy. On June 21st the rupee hit a record low against the dollar. And the budget deficit is 8.6% of gdp, well above the government’s previous target of 7.1%. Recent political instability has not helped matters. Imran Khan, the former prime minister, was ousted in April and replaced by Shehbaz Sharif. Mr Khan has sought to destabilise the new government ever since.

Still, there are signs that Mr Sharif’s new government is restoring some order to the economy. On June 10th Miftah Ismail, the finance minister, presented a budget full of cost-saving measures. He increased the taxes on the banking sector by three percentage points and reduced the target for the budget deficit to 4.9% of gdp. He also promised to revoke fuel subsidies that cost the government $600m each month. On June 17th, the government increased fuel prices by 29%—the third increase in a month. Such moves will be painful but are aimed at coaxing the imf into disbursing the remaining half of a $6bn rescue package, without which Pakistan may default on its debt obligations.

But the imf is fed up with Pakistan’s long history of empty promises. Between 1996 and 1997 the government fiddled with the budget-deficit figures to reduce it by $2bn in order to secure a bailout from the fund. Citigroup, an American bank, predicts that the new budget announcements will not be enough to sway the fund.

The tea-based austerity is not the first time that the government has used a spoon to dig itself out of a hole. In 2018 officials were asked to replace meals with biscuits during meetings to cut costs. But difficult structural reforms, rather than cutting down on tea, will be necessary to save Pakistan’s economy from plunging deeper into crisis.

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