RICE EXPORTS VS TEA IMPORTS
By Syed M. Aslam
Dec 13 - 19, 1999
Pakistan-Kenya bilateral trade basically comprises two commodities tea and rice. Pakistan is the second top importer of Kenyan tea after the UK. It also exports a substantial quantity of Irri variety of rice to Kenya.
Thus far cordial trade relation between the two countries, however, are heading towards a simmering trade dispute with the imposition of non-preferential tariff imposed by Kenya on Pakistani rice.
Pakistan imported around 115 million kilogram of tea from all the sources last year of which about 70 per cent or 80 million kilogram came from Kenya at an estimated value of $ 140 million. It also exported as much as 80,000 tonnes of irri rice to Kenya the FOB value of which totalled $ 16 million. The bilateral trade has been favourable to Kenya whose export proceeds totalled Rs 5.6 billion compared to an imports of Rs 3.6 billion in 1997-98. Kenya has always enjoyed a trade surplus for trading with Pakistan.
According to Hanif Janoo, the chairman of Pakistan Tea Association and a rice exporter, an exportable surplus of irri rice of 1.2 million tonnes this year and the imposition of a high import duty on Pakistani rice has brought the rice shipments to Kenya to stand still. In addition, a bumper crop in all the major rice producing countries has made it difficult for Pakistan to dispose of the rice surplus in the international markets.
The recent crisis arose after Kenya allowed the preferential rates of duty to other members of Common Market for East and Southern Africa (COMESA). As Pakistan is not a member of COMESA its exports are liable to a non-preferential tariff which adds up to discouraging 60 per cent.
Pakistan has asked the Kenyan government to cut the import tariff on Pakistani rice to continue export to Kenya. It has also said that failure to reduce the import tariff on the part of Kenya would force it to find alternative tea sources elsewhere.
Hanif Janoo fully backed the demand of the Pakistani government and agreed that Kenya should be made to reduce the import tariff on rice to allow Pakistani irri rice an easy access into the Kenyan market. He said that as is the slump in the international prices of rice has made it difficult for Pakistan to dispose of an exportable surplus of 1.2 million tonnes.
The slump in the international prices has also taken a toll on the prices of irri rice locally which has fallen to Rs 180 per 40 kilogram at present compared to an average price of Rs 230-240 per 40 kilogram during the same period last year. It is also obvious from the export statistics only 72,000 tonnes of irri has been exported thus far this season compared to over 350,000 tonnes till December 15 last year.
Just how bad is the situation this year is clear from the fact that growers are forced to sell their irri rice below the officially fixed price of Rs 185 per 40 kilogram.
Talking to PAGE, the Tea Manager at Lever Brothers Pakistan, Asghar Ali said that 80 per cent of all the total tea imports into Pakistan comes from various countries of Africa, the bulk of which comes from Kenya. Tanzania, Rwanda, Malawi are the other major African tea exporters. He said that though the quality of tea, many of these African countries is as good as that of the Kenyan variety they would not be able to substitute the huge quantity imported from Kenya.
Hanif Janoo fully endorsed the stand taken by the Pakistani government to link the issue of Kenyan tea imports to the export of Pakistani irri rice to Kenya. He said that if Egypt which imports a much smaller quantity of tea from Kenya in comparison to Pakistan was able to force Kenya to lower the import duty on its rice what stops Pakistan to use the same strategy successfully.
Putting the demand of tea at 135 million kilogram a year in Pakistan he said that besides the import of 115 million kilogram of tea from all sources the rest of the demand of 20 million kilogram is met through smuggling.
Observers say that being the top second tea importer allows Pakistan to make Kenya lower its non-preferential import tariff on Pakistani rice. As is, Egypt has already blocked a $ 20 million shipment of Kenyan tea at Port Said to force Kenya to allow rice and tyre exports from Egypt at preferential rates of three per cent.
While Pakistan can resort to similar tactics to dispose of its irri rice in Kenya the relevant question which arises here is would the tea guzzling Pakistanis would be able to adapt their tastes to teas from other sources.
Prior to the separation of East Pakistan, the tea demand was totally met through local production from the breakaway wing. Over two deacdes later today, some 80 per cent of tea imports into Pakistan comes from African countries, the bulk of which comes from Kenya. Of the total 115 million kilogram imports annually, 15 million kilogram comes from Indonesia, some 6-7 million kilogram from Bangladesh and about 5 million kilogram from Sri Lanka which also used to be a major source of tea two decades ago.
Would Kenya, which has much more to lose than Pakistan if the later make good on its threat to find alternative tea sources, reduce non-preferential tariff imposed on Pakistani rice? We have to wait and see.