Government urged to cut export tax on tea

Wahyoe Boediwardhana, The Jakarta Post, Nusa Dua

State-owned plantation firm PT Perkebunan Nusantara (PTPN) VIII is urging the government to cut the 30 percent export tax on tea, claiming it harms the country's competitiveness in the global market.

Abdul Halik, the president director of PTPN VIII, which controls about 90 percent of the nation's tea plantations, said that other tea producing countries such as Sri Lanka, Kenya and India had a maximum export tax of 5 percent.

"Their prices are better than ours in the (international) market," Halik said on the sidelines of the opening of the five- day Second International Tea Business Conference in Nusa Dua, Bali, on Monday.

Producers can only sell their tea for between 90 US cents and $1.10 per kilogram before taxes, said Halik. "Ideally it should be between $1.30 and $1.40 per kilogram."

However, PT Unilever Indonesia, a major tea buyer in the country, attributed the low prices to the low quality of Indonesian tea.

The company's general manager, Visvajit De Alwis, said the quality of Indonesian tea was below that of Kenya, Sri Lanka, India and China, due to the country's geography and climate and a lack of investment in the industry.

Indonesia needs to reduce production and concentrate on developing the quality, said Visvajit.

"The world is oversupplied with tea. Those (countries) that have the best quality will see high prices, while the prices of the lower quality tea will definitely fall," he said.

Halik said it would be impossible to lower production amounts because that would mean less revenue for the already struggling industry.

Indonesia is the fifth biggest tea exporter in the world, supplying 8 percent of the world's demand.

The country's tea exports dropped by 12 percent to 88,176 tons in 2004 from 100,185 tons the previous year due to lower tea consumption in several destination countries, including the United Kingdom and the Netherlands, and to tougher competition.

Indonesian tea is only used by packers worldwide as a filler -- a small amount in each package to balance prices -- and not as the main element in the blend, and thus the country's tea is very easy to replace.