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Kenya: Bureaucracy Deals Blow to Tea Exports
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Business Daily (Nairobi)
OPINION
19 May 2008
Posted to the web 19 May 2008
Peter Kimanga
An article appearing in Business Daily (May 12) titled Kenya Tea Loses Flavour in Pakistan must have alarmed local tea producers.
Indeed, a loss of any major market like Pakistan, the third largest importer of tea in the world, should be a concern to every producer, not Kenya alone. However, the figures quoted in the paper were misleading. Pakistan has never imported such huge percentages from Kenya.
Indeed, in 2006 and 2007, she imported 84,498 and 79,818 tonnes respectively, and this is slightly below 50 per cent of their domestic imports of 170,000 tonnes. Kenya's total production in 2006 and 2007 was 310,578 and 369,606 tonnes respectively.
In Pakistan's religion-based culture, tea has no competitor in beer, wine, or liquor as they are outlawed, making it the drink of choice. Together with Sri-Lanka, Bangladesh, Bhutan, India, Maldives and Nepal, Pakistan forms the South Asian Association for Regional Co-operation (SAARC).
This region produces, and consumes, about a third of all the tea grown in the world. SAARC is the acknowledged regional entity with the most potential impact on tea trade today.
While India consumes most of her tea, Sri-Lanka markets most of her best teas value-added, mainly to the European and Asian markets. Until the late 70s, Sri-Lanka was a major exporter of tea to Pakistan.
It is the vacuum left by these European and Asian exports that Kenya tea has been filling up.
Members of SAARC signed a bilateral trade agreement on tea, where Bangladesh, Indonesia and Sri-Lanka would supply a certain weight of tea at zero import duty to Pakistan.
The thawing of relations between India and Pakistan has also seen improved exports to the latter. Currently, the import duty on Kenyan tea into Pakistan is 10 per cent, having come down from a high of 30 per cent.
Pakistan, without much success, has been lobbying for a reciprocal duty reduction on rice imported into Kenya, currently at 35 per cent, and likely to go up to 75 per cent next year, when Kenya harmonises the tariff in tune with the East Africa Community's Common External Tariff (CET), after the expiry of a three year grace period.
Unfortunately, like SAARC, Kenya also belongs to the Common Markets for East and Southern Association (Comesa). As such; Kenya lacks the locus standi to singularly negotiate external tariffs outside the EAC protocols. However, protectionist policies on rice have little effect as there is a huge shortage in the world and if even there wasn't, one can sleep without a cup of tea but not food, it's the tea producers who have a problem of oversupply.
Fortify market
Recently, Sri-Lanka managed to negotiate a bilateral trade arrangement with Egypt, a member of Comesa, and had her duty on tea slashed, to make it compete with that of other Comesa member countries. Perhaps it's such an arrangement that Kenya should negotiate to fortify the Pakistan market, without diluting the existing protocols with either Comesa or EAC.
Another bilateral agreement that should worry Kenya tea is Asia Pacific Trade Agreement (APTA), expected to boost Sri-Lanka tea exports to China. The Chinese tea drinking culture is changing from green to black, and with her strengthening economy, her people have more disposable incomes.
The need for a better cup of tea becomes apparent. While Sri Lanka exports to China have grown from 172 tonnes to 880 tonnes in fours years, Kenya exports have leapt by over 160 per cent in just one year, from 479 tonnes in 2006 to 1,258 tonnes in 2007. Sri Lanka is now making a grand entry in China.
Regrettably, Kenya has been given, and lost many opportunities, mainly due to bureaucratic policies. Many Kenyan envoys have been frustrated trying to organise tea trade fairs overseas, citing lack of support either in information dissemination or lack of attendance by local tea merchants.
It is mainly on funding reasons. There is need to create a special fund for this research and promotion. Our scientists from the Tea Research Foundation should be sent to China and Japan and study the new high value extracts from tea like catechins, tea oils and flavours.
They will then disseminate such information to producers back home. If the industry has to prosper, the catch word in this new world is doing things Just In Time (JIT), period.
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Kimanga is an expert on tea.
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