11 October 2019 (closed)
USD/IDR (14,140) +14.00 +0.10%
EUR/IDR (15,591) +14.03 +0.09%
Jakarta Composite Index (6,105.80) +82.16 +1.36%
Among the beautiful natural scenery that attracts numerous tourists in Indonesia are the tea plantations. The region around the Puncak pass in West Java is particularly known for its tea plantations. However, Indonesia's domestic tea production and exports are on the decline, while tea imports into Indonesia have been skyrocketing. Not only in terms of quantity there is concern about Indonesian tea, but also in terms of quality. Lets take a closer look at the world’s seventh-biggest tea producer.
Dody Edward, Director General of Foreign Trade within Indonesia's Ministry of Trade, stated that export realization of Indonesia's national tea in full-year 2015 was recorded at 62.700 metric tons (worth USD $128.4 million), extending the declining trend that started in the late 2000s.
Also in the January-September 2016 period this decline continued. Indonesia's tea export fell to a value of USD $86.3 million compared to USD $104.3 million in the same period one year earlier. According to Dody Edward this decline is partly caused by the global trade performance being at its weakest point in the 2016-2017 period.
Tea production in Indonesia over the past year has been plagued by volatile weather conditions (El Nino and La Nina). However, there exists a bigger problem that threatens the existing tea plantations: climate change. Temperatures around some tea plantations rose by 5-7 degrees Celsius. Also pollution brought about by traffic takes its toll on tea production.
Besides weather, local farmers also prefer other cash crops with simpler maintenance requirements (for example vegetables), especially now the global tea price is low amid the oversupply. Therefore, the total size of tea plantations in Indonesia fell from 150,000 hectares to 120,000 hectares in recent years.
Despite being the world's seventh-largest tea producer, Indonesia still needs to import tea from abroad. In fact, tea imports into Indonesia have risen sharply from 500 metric tons in 1999 to 25,000 metric tons in 2015. This situation is caused by two factors: declining domestic tea production and rising domestic tea demand.
Indonesia's domestic tea market is not that big considering national per capita tea consumption stood at an average of 0.32 kilogram of tea per person per year only in 2014. This is considerably below the world average (at 0.57 kilogram). However, given Indonesia has a huge population (with more than 255 million people) and premium tea consumption is rising due to the country's expanding middle class segment, it has led to a shortage of high quality tea on the domestic market. Additionally, Indonesia's demand for high quality imported Chinese tea leaves (that re served in premium stores, hotels and restaurants) also contributes to rising tea imports.
Tea Production & Export Indonesia:
(in metric tons)
(in metric tons)
Source: Food and Agriculture Organization of the United Nations
The absence of import duties on tea products also led to rising tea imports in Indonesia. Indonesia used to apply a five percent import duty on tea. However, after the implementation of the ASEAN free trade agreement, regional peers can now export tea to Indonesia rather easily. Therefore, Rachmat Badruddin, Chairman of the Indonesia Tea Board (DTI), said Indonesian authorities should impose non-tariff barriers to curtail imports. He added Indonesia should not import any tea types that are already being produced domestically.
Meanwhile, Indonesia applies a 20 percent import duty on imported tea from non-ASEAN countries. Most of imported tea in Indonesia originates from Argentina, Kenya, India, Iran and Vietnam.
Read more: Overview of Indonesia's Tea Industry
Another problem is that Indonesia's domestic tea processing industry is rather underdeveloped, implying that the majority of raw tea is exported abroad and the processed (higher value) product is then imported into Indonesia. Only roughly 40 percent of the total 130,000 tons of tea produced in Indonesia in 2015 was processed domestically. Part of this domestically produced tea - about 40 percent - goes to the domestic market. This is the "not so good" quality tea, while the remaining 60 percent is shipped overseas. Only 6 percent of the 62,700 metric tons of exported tea in 2015 comprised processed tea.
In Indonesia (raw) tea is either produced by the big state-owned enterprises (SOE) and large private tea estates (usually involving high-grade or premium tea that is exported) or smallholder farmers who are more oriented toward the domestic market (their output is usually low quality tea, hence cheaper, due to the use of older technology and poor farming methods).