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Pakistan's tea import performance

The second largest tea importer countryin the world.

By Dr. Hajan Khan Jamali 
&
 Noor Muhammad Jamali.

Oct 01 - 07, 2001

Tea is the cheapest and most popular beverage that is served at both professional and social gatherings all over the world. In Pakistan it is counted as a staple food item of common man and is an integral part of our culture and heritage. Due to these causes Pakistan consumes an substantial quantity of tea and our country enjoys the distinction of being the world's second largest non-producing tea importer. Its consumption is increasing at a much faster rate because of population growth, food habits, and comparatively cheaper means of entertainment. The amount of tea required for consumption not only increased the foreign exchange burden but also encouraged the smuggling of tea. Approximately more than 20 percent of yearly consumption is being received by smuggling, counted as a major cause of losses in government revenue. Various policy measures have been introduced to encourage cultivation of tea for eliminating foreign exchange burden and to curb smuggling by further reduction in taxes and import duties. Unfortunately all these measures always appeared ineffective due to bureaucratic apathy and lack of will by the political leadership. To get rid of these economic disasters, there is a need to take rigorous and severe measures. Keeping these economic calamities in mind, the present study examines the critical situation by reviewing our import performance of tea during 1988-99. It also proposes some important suggestions for eliminating foreign exchange burden and smuggling. The analysis is supported by the secondary data collected from the Economic Survey of Pakistan 1999-2000. Only growth rates in volume and value of imported tea are derived from the given data, with the help of the following formula:

Growth Rate = (Present value- Past value) X 100
Past value

Analysis:

The world market is dominated by four leading exporters of tea, namely India, Sri Lanka, China and Kenya and by four leading importers of tea, namely, United Kingdom, United States of America, Pakistan, and Egypt. The major tea suppliers to Pakistan are, Kenya, Sri Lanka, India, and Bangladesh. To analyse the performance of imported tea into Pakistan during 1988-99, the compiled data in terms of volume and value are documented in the following table:

Year 000 Kgs Volume Absolute Change 000 Kg Growth Rate % Unit Value Rs. Kg Million Rs. Gross Value Absolute Change Rs. million Growth Rate %

1988-89

104,505

+14501

16.11

28.51

2975

+729

+32.46

1989-90

107,622

+3117

02.98

36.01

3876

+901

+30.28

1990-91

104.056

-3566

-03.31

35.92

3729

-147

-03.79

1991-92

110,235

+6179

+05.94

39.06

4306

+577

+15.47

1992-93

125,651

+15416

+13.98

42.87

5386

+1080

+25.08

1993-94

116,140

-9511

-07.57

48.39

5619

+233

+04.33

1994-95

116,629

+0489

+00.42

49.68

5794

+175

+03.11

1995-96

114,760

-1869

-01.60

49.73

5707

-087

-01.50

1996-97

85,426

-29334

-25.56

61.09

5218

-489

-08.57

1997-98

98,649

+13223

+15.48

99.52

9818

+4600

+88.16

1998-99

119,695

+21046

+21.33

93.15

11150

+1332

+13.57

Source: Economic Survey of Pakistan 1999-2000.

(The compiled data given in the table reveal the pattern growth by volume and value of imported tea into Pakistan. It indicates that the volume of imported tea increased by 14501 thousand kgs in 1988-89, 3117 thousand kgs in 1989-90, 6179 thousand kgs in 1991-92, 15416 thousand kgs in 1992-93, 489 thousand kgs in 1994-95, 13223 thousand kgs in 1997-98, and 21046 kgs in 1998-99. Thus showing a rise of 16.11 percent in 1988-89, 2.98 percent in 1989-90, 5.94 percent in 1991-92, 13.98 percent in 1992-93, 0.42 percent in 1994-95, 15.48 percent in 1997-98, and 21.33 percent in 1998-99 against their respective preceding years. On the other side, the table also illustrates that the volume of imported tea decreased by 3566 thousand kgs in 1990-9l, 9511 thousand kgs in 1993-94, 1869 thousand kgs in 1995-96 and 29334 thousand kgs in 1996-97. Thus reflecting a decline of 3.31 percent in 1990-91, 7.57 percent in 1993-1994, 1.6 percent in 1995-96 and 25.56 percent in 1996-97 as compared to their respective preceding years.

Analysis of data shows that during the whole period of the study (1988-99) the average volume of imported tea approached to 109347 thousand kgs. Per annum. In the first 5 Years (1988-93) it reached to 110,414 thousand kgs, while in the last 6 years it came down to 108,550 thousand kgs. Hence the average growth rate of the whole period (l998-99) sustained at 3.47 percent per annum. In the first 5 years (1988-93) it was 7.14 percent, while in the last 6 years (1993-99) it declined to 0.42 percent per annum. The main reason was that in the last 6 years the fall in the volume of imported tea appeared as 7.57 percent in 1993-94, 1.6 percent in 1995-96, and 25.56 percent in 1996-97 as compared to their respective preceding years.

The table also reflects that the value of imported tea increased by Rs. 729 million in 1988-89, Rs.901 million in 1989-90, Rs. 577 million in 1991-92, Rs. 1080 million in 1992-93, Rs. 233 million in 1993-94, Rs. 175 million in 1994-95, Rs. 4600 million in 1997-98, and Rs. 1332 million in 1998-99. Thus indicating a rise of 32.46 percent in 1988-89, 30.28 percent in 1989-90, 15.47 percent in 1991-92, 25.08 percent in 1992-93, 4.33 percent in 1993-94, 3.11 percent in 1994-95, 88.16 percent in 1997-98, and 13.57 percent in 1998-99 against their respective preceding years.

On the other side, the table shows that the value of imported tea decreased by Rs. 147 million in 1990-91, Rs.87 million in 1995-96, and Rs. 489 million in 1996-97. Thus, expressing a fall of 3.79 percent in 1990-91, 7.57 percent in l993-94, 1.50 percent in 1995-96 and 8.57 percent in 1996-97 against their respective preceding years.

A vigilant search also clears that during the whole period of the study, the value of imported tea approached to Rs. 5780 million per annum. In the first 5 years (1988-93) it was counted as Rs. 4054 million, whereas, in the last 6 years (1993-99) it climbed to Rs. 7218 million per annum. Hence the average growth rate of the whole period sustained at 18.05 percent. In the first 5 years it was 19.09 percent, while in the last 6 years it reduced to 16.52 percent per annum. The main reason was that in the last 6 years there was a sharp rise in the unit value of imported tea such as it increased to Rs.99.52 per kg in 1997-98 and Rs.93.15 per kg in 1998-99 as compared to Rs.48.39 per kg in 1993-94 . A vigilant look for unit value illustrates that within the 11 years of the study, the unit value of imported tea increased by more than twice, i.e. it increased to Rs. 93.15 per kg in 1998-99 from Rs. 28.55 per kg in 1988-89. This shows that the unit value of tea increased by 25.69 percent per annum in the first 5 years 1989-93 it increased by 12.07 percent while in the last 6 years 1994-99 it climbed to 17.96 percent per annum.

Remedy Measures:

After separation of East Pakistan in 1971, Pakistan started importing tea. Simultaneously steps were taken to encourage tea cultivation in the suitable areas of the country. In 1973-74 a special crops cell was introduced in Ministry of Food and Agriculture. A project titled as "Research and Introduction of Tea in Pakistan" was also initiated in the same year. In 1982 Chinese experts were invited for advice. In 1986 National Tea Research Station was established at Mansehra. It introduced five Chinese varieties suited to Hazara and Swat hills and established different tea plantations.

The Establishment of National Tea Board under Ministry of Commerce and setting up of tea development society with the participation of local partners are under decision process.

The national tea companies (Tapal and Isphahani) also offered for setting up tea gardens. In this context, the foreign tea companies Lever Brothers promoters of Liptons, Brooke Bond brands of tea are also waiting for approval.

Conclusion:

The present study examined the different behavior patterns of imported tea into Pakistan during 1988-99. By evaluating and analyzing the trends of volume and value of imported tea during the period under focus, following are the observations:

•The compiled data revealed the rising trend in both the volume and value of imported tea but with a decreasing moving average rate of growth.
•The rising trend in the import of tea was attributed to the indigenous increase in the consumption of tea
•The reasons for increase in the indigeneous consumption were connected with the population growth, food habits, and comparatively cheaper means of entertainment.
•The continuous rise in indigeneous consumption also boosted up the unit value of tea.
•The high amount of consumption and higher unit value of tea not only increased the foreign exchange burden but also encouraged the smuggling of tea.
•The rise in import bill by more than twice within the whole period of the study was mainly attributed to the rise in consumption and unit value of tea within a given period.
•In 1996-97, the fall in the volume of imported tea by 25.56 percent was due to a sharp rise in the unit value of tea from Rs. 49.73 per kg in 1995-96 to Rs. 61.09 per kg in 1996-97.
•In 1997-98, the unit value of tea amounted to Rs. 99.52 per kg from Rs.61.09 per kg in 1996-97 causing the rise of 88.16 percent in import bill.

This study also recommended some important suggestions to curtail foreign exchange burden and to curb smuggling of tea. These include:

•To encourage endigeneous cultivation of tea to save valuable foreign exchange earnings.
•To facilitate local farmers for the cultivation of tea.
•To encourage a few national companies for setting up tea gardens in Pakistan, in areas befitting for the cultivation of tea.
•To avoid foreign companies (Lipton and Brooke Bond) for setting up tea gardens in the county in the overall national interest.
•National brands should be preferred for consumption.
•To establish dairy farms, because the neglection of these farms also increased the consumption of tea.
•To reduce consumption through de-marketing of tea.
•There is need for further reduction in impost duty, because, it still provides incentives for smuggling of tea into the country.
•To impose a development cess of Re.1 per kg for the investment on the tea project consisted with the development of tea gardens.