Indonesia tea exporters face tough year
Leony Aurora, The Jakarta Post, Jakarta
It is ironic that Indonesia, despite being the world's fifth largest tea exporter, consumes only 280 grams of tea per person per year -- one-third of that sipped by Indians and a paltry one- fifth of what the British drink annually.
However, with exports declining the country may soon find itself as low down on the list of tea exporters as it is on the list of tea consumption.
Tea exports dropped by 12 percent in 2004 to 88,176 tons from 100,185 tons the previous year. The Indonesian Tea Association attributed the decline to lower tea consumption in several destination countries, such as the United Kingdom and the Netherlands, and to tougher competition.
"Tea production all over the world is increasing," said Alex Supit, president of PT Sari Wangi, producer of local tea brand Sariwangi, at a recent press briefing.
Kenya, for example, boosted its tea production by 16.9 percent to 326,992 tons, rising to third place on the list of the world's tea exporters.
Still, decreased output from India, the world's largest tea exporter, and a rise in tea consumption in the U.S. pushed up global tea prices -- which increased Indonesia's tea prices in the process.
In the first nine months of 2004, the average price of tea here climbed to US$1.02 per kilogram, or 6.68 percent higher than the same period the previous year, said association chairman Insyaf Malik.
"This year, the price is expected to increase slightly to between $1.03 and $1.05 per kilogram," he said, acknowledging that compared to countries, tea prices were still relatively low.
The average tea price at the Colombo Tea Auction, for example, stands at $1.64 per kilogram, while in Kenya the price is $1.63, Insyaf said.
One reason Indonesia cannot raise its prices is that its tea is often used by packers abroad only as filler -- a small amount in each package to balance prices -- and not as the main element in the blend.
"It is very easy to replace," said Insyaf.
Insyaf said the ideal price for tea was above $1.30 per kilogram. At the current prices, tea producers are losing money.
Last year, Indonesian tea producers are estimated to have lost a total of more than Rp 150 billion ($16.12 million), he said.
Given the low prices, producers have begun to replace labor- intensive tea crops with more lucrative commodities.
"State plantation company PTPN IV, for example, has converted 4,000 hectares of tea crops to palm oil plantation," said the Ministry of Agriculture's director of plantation development, UK Anggoro.
State and private plantations account for some 49 percent and 26 percent of tea production, respectively, in Indonesia, with community farms accounting for the remainder.
In order to boost exports and prices, Indonesian players need to package the nation's tea as the main blend and introduce it to the international market, with a helping hand from the government, especially on taxation issues, Supit said.
At present, "we have to pay 10 percent value added tax if we buy tea to pack", said Supit. Cartons and other necessities in the packaging process are also subject to taxes.
Although packers can ask for a tax refund once they export the tea, the refund usually takes at least a year to arrive and never in full.