Tea trade divided over liberalising imports

The move is fiercely opposed by significant sections of the industry, particularly smallholders who now produce the bulk of the Ceylon tea crop, and Sri Lankan entrepreneurs who have successfully challenged the dominance of multinationals with their own brands in the global tea market.

It is supported with equal vehemence by prominent figures in the tea export trade.

The issue will be taken up at the forthcoming workshop on de-regulation arranged by the Industrial Development Ministry at which all stakeholders are expected to participate.

Advocates of liberalisation say free imports of orthodox teas from other origins are necessary if Sri Lanka is to play a bigger role in the world tea trade and become an international trading hub.

Opponents fear the move could lead to Ceylon tea, perhaps Sri Lanka's best-known brand, losing its image. Prices at the Colombo auctions could also fall if unrestricted imports are allowed.

Malik Fernando, director of MJF Holdings which exports Dilmah, arguably the most successful of the small crop of Sri Lankan-owned brands, dismisses the proposal.

"This is not really an issue. It is not worth even looking at," he said. "It is a proposal that is totally inconsiderate of the main stakeholders in the industry."

He warns that free imports of teas from other origins could spell "the death-knell" for the Ceylon tea industry.

"We need to give local plantation companies more time to become more productive - to recover from 20 years of high operating costs, low yields, and poor labour productivity," Fernando said. "Some companies were privatised only in the late 1990s and have not had time to become competitive."

Michael de Zoysa, managing director of Gordon Frazer and Company, the new tea export arm of the John Keells conglomerate, argues that the Ceylon tea trade is over-regulated. Free imports of teas from other origins are required for the industry to capture a bigger share of the world market for the beverage, he said.

The tea industry is covered by over 2,000 regulations which prevent the operation of free market mechanisms, he told a news conference last week.

"Sri Lanka exports only 300 million kg and has 20 percent of the world tea market," he said. "Our market share has not grown. The world tea market is around 3,000 million kg of tea a year which everyone else is using but ourselves."

Blended teas

De Zoysa, the former managing director of Unilever Ceylon's Tea Division, said Unilever's closure of its plant for tea bags and packet teas in Mabole was a big loss.

Unilever brands such as Lipton Yellow Label and Brooke Bond Red Label account for almost 25 percent of the international market for branded teas, according to Hasitha de Alwis, director, Tea Promotion Bureau.

The multinational has been downgrading their operations in Sri Lanka since 1997 when it unsuccessfully lobbied the government to allow imports of orthodox teas for blending.

De Alwis said that if Unilever had made Colombo a blending centre, it would have catered to the entire South Asian market and part of the Middle Eastern market as well.

Anil Cooke, senior vice president of tea brokers Asia Siyaka Commodities, said he believed that Sri Lanka is already a value addition centre and effectively a hub, as far as tea bags are concerned.

"We have allowed unlimited imports of CTC teas with multi-origin blends being packed here for national and international brands. So it is important to study how effective this has been so far," he said.

The industry should closely study the implications of liberalising imports of orthodox teas, especially whether it would hurt prices at the Colombo tea auctions, and what safeguards would be required to protect the Ceylon tea industry. "Nobody has set out the environment, the checks and balances required, to see if it can be done and how any threat to Ceylon tea could be minimised," he said.

"Tea is a global commodity and prices in Colombo are influenced by prices of international teas," he pointed out.

Fernando of MJF said the import and re-export of cheap, low quality foreign teas could tarnish the image of Ceylon tea and damage efforts by Sri Lankan entrepreneurs to develop Sri Lankan brands containing pure Ceylon tea. Successful local brands include Mlesna from Euro-Scan and those of Akbar Brothers and Stassen. Talk of making Colombo a tea hub is only an excuse for a small number of players, mainly exporters, who are looking at reducing costs, Fernando said.

Add value?

However, speciality teas should be allowed to be imported, as they are now, to support high profile branded teas. The government should give incentives to encourage Sri Lankan brands of Ceylon tea who have a long-term allegiance to the Ceylon tea industry. "The tea world is controlled by two or three multinationals," Fernando said. "A few Sri Lankan brands have managed to establish themselves and can compete because of the superior taste of Ceylon tea. If we try to compete with other teas and brands on price, we will lose. We would be forced to lower our prices. We have to target them using guerrilla marketing tactics, emphasising that we have a far superior product." 

Cooke of Asia Siyaka said that imports of orthodox teas could help to cater to different segments of the market. "Some consumers demand certain prices," he said. "It is possible to convince consumers that there is better value in buying Ceylon tea and we should consistently target that segment and make it grow. But the reality is that there is a much larger global market which we can't reach with our current level of production."

Safeguards

"If there is no limit, foreign brands will only benefit from the promotional value of Ceylon tea and the 'packed in Sri Lanka' identity," he said.

Regulations were required to ensure packs carry the legend that they contain tea imported from different origins and are only packed in Sri Lanka, he said. De Zoysa said the Sri Lankan tea industry would have to undergo "a great deal of liberalisation" if the country is to achieve its ambition of becoming an international hub for tea.

The Colombo Tea Traders' Association (CTTA), which represents exporters, while pressing for liberalised imports, was not advocating imports of secondary grades and dust - cheaper filler teas of matching quality from other origins - so as not to affect the poorest and cheapest Ceylon teas at the Colombo auctions, he said. The CTTA also wanted to initially restrict tea imports to only five percent of the total crop. "There's a lot of marketing to be done first," he said. "We need to find markets, grow the markets, joint ventures have to be formed - before the hub concept can become a reality."

Dialog GSM announces GPRS - first in the region

GPRS technically stands for "Global Packet Radio Switching" which supports high speed packet based mobile data services. This pioneering step into the arena of high speed Mobile Internet places Sri Lanka among the first 40 countries in the world to launch the technology which hitherto has been limited to developed countries in Europe and South East Asia. 

Chief Executive Officer, Dr. Hans Wijayasuriya said with this development, consumers would begin to experience convergent technology that is truly mobile and global. 

GPRS, acclaimed as a major step towards 3G (3rd Generation) technologies is expected to revolutionise mobile communications technology by virtue of higher data speeds, packet based data communications and end to end IP (Internet Protocol) based connectivity. GPRS will initially deliver mobile data speeds of up to 32 kbps and will be enhanced to 115 kbps by the end of 2002. Enhanced data speeds are expected to provide an all new dimension to the Mobile Internet. Coupled with the advent of Colour Mobile Phones, GSM/GPRS enabled Personal Data Assistants (PDAs) and other mobile computing devices, end users would now enjoy a host of multi-media applications while on the move. GPRS extends the Mobile Internet capabilities of GSM networks to provide a range of entertainment, information and multimedia content to their customers. GPRS is a key convergent technology, which brings together the spheres of Information Technology, the Internet and Telecommunications on a single device.

Dialog GSM's state-of-the-art GPRS network is based on infrastructure from Ericsson Telecommunications - a world leader in GSM and the evolution of Mobile Internet Services towards 3rd Generation Technologies.

"We are proud that our customers would be the first in South Asia to sample GPRS Services", stated Dr. Hans Wijayasuriya, CEO of Dialog GSM. "In line with our brand promise of the 'Future Today' we have been successful through the untiring efforts of our Engineering Teams, Product Developers and Researchers, to launch GPRS in Sri Lanka ahead of our counterparts in the region. This is just the beginning of a long journey in to the ever-expanding vistas of the Mobile Internet. At the launch, our customers would be able to sample a variety of multimedia applications through mobile phones, PDAs and other mobile computing devices. The mobile phone is fast becoming an all-purpose multimedia communication device, and what we see in Sri Lanka today is the very latest in convergent technology in the palm of your hand. I am extremely appreciative of the progressive policies adopted by the TRC, and the invaluable encouragement received from our customers which have together, made it possible for Sri Lanka to be placed amongst developed nations in the sphere of mobile communications".

Packet Based services bring with it the unique concept of Volume Based charging as opposed to Time Based Charging. GPRS, for the first time in Sri Lanka would enable customers to be billed according to the volume of data exchanged rather than the time spent connected on an Internet Session. The latter feature allows users of GPRS services to be "always connected" - i.e., to maintain continuous connectivity to the Internet via their mobile computing device whilst paying only for "downloads" or "information queries" on a per kilo-byte basis.

The packet data service would also enable the customer to accept or make a voice call while on an Internet Session, transforming today's mobile phone in to an all purpose communicator.

Connectivity via GPRS would resemble LAN connectivity from an end-user point of view by virtue of the "always connected" feature of the technology. The advent of Packet Based Services signifies a major break through in Sri Lanka's data communications infrastructure. In fact GPRS would be the first retail packet based data communication service to be offered by a fixed or mobile operator in the country.

The higher bandwidths supported (by virtue of high-speed data access) is no doubt the most exciting feature of the GPRS technology. Whereas today's wireless applications tend to be text oriented, the high bandwidth offered by GPRS will finally make multimedia content, including graphics, voice streaming and video on mobile devices a working reality. For example downloading movie clips and radio clips onto your mobile phone and other devices are all in store for Sri Lankan consumers joining a select few across the world to sample GPRS services. The Internet would now be a "button click" away from a host of mobile devices - the user will no longer need to "dial up" an ISP - a feature made possible through end-end IP (Internet Protocol) based connectivity.

"We are happy to provide customers with an opportunity to sample the service completely Free of Charge for approximately 1 month", explained Nushad Perera, GM, Marketing and Sales at Dialog GSM. "This pre-commercial period is aimed at collecting customer feedback on this brand new service which will be unparalleled in Sri Lanka or the region. GPRS capable handsets are now entering the local market and are also available in most South East Asian and European Markets. Because GPRS supports standard networking protocols, configuring computing devices to work with GPRS will be very straightforward. In the case of IP communications, one can use existing TCP/IP protocol stacks, such as the stack that comes with Windows 95 or Windows 98, Windows CE and Windows NT. TCP/IP stacks are readily available for most other platforms as well".