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Last Updated:  Wednesday, 19 February, 2003, 12:52 GMT
Sri Lanka moves to protect tea industry
The government in Sri Lanka is acting to protect the country's $700m tea industry in the event of war in Iraq.

Sri Lanka is the world's biggest tea exporter - last year it exported 291 million kilograms with more than half of it going to the Middle East and North Africa.

The prospect of a war in Iraq is causing panic among small-scale Sri Lankan tea growers, who are asking the government to bail them out.

The last two auctions in Colombo have seen tea prices drop, and there are fears about shipping lines to the Middle East becoming disrupted.

Nobody wants their tea to get caught in transit if war breaks out - a risk reflected in increasing insurance surcharges.

Small growers worst hit

If there is a Middle East war, the worst hit Sri Lankan producers will be not the big tea plantations but the small holders - farmers who have a hectare or two of land for subsistence growing.

These small holders account for 69% of Sri Lanka's tea production.

Rohan Fernando of the National Chamber of Exporters says orders from Dubai have already dried up because of the fear of war.

Dubai acts as an important transit point for tea, some of which is then smuggled into Iran and Iraq to avoid duties and import restrictions.

Iraq, for example, buys up to 15% of Sri Lanka's tea - but a third of this would come illegally on small boats from Dubai.

Government help sought

Bill Gorman of the British Tea Council told the BBC's World Business Report that "the ingenuity of traders to get product to market is remarkable."

Sri Lankan exporters have called for the government to help them with concessionary bank loans arguing that they suffer from high interest rates as well as the highest production costs in the world.

And some tea factory owners are calling for a moratorium on electricity bill payments - something that would be difficult at a time of high oil prices.

Diplomatic manoeuvres

Plantations Minister Lakshman Kiriella said tea promoters would receive diplomatic postings in Sri Lankan missions abroad to give an extra push to the island's "green gold".

He has also set aside $15m to promote Sri Lankan brands on international markets, and offered to hold exporters' stocks for up to a month free of warehousing charges.

But sceptics say there is unnecessary panic.

They argue that international prices for Ceylon tea have been excellent for the last three years, and that the industry should be resilient enough to survive a short lived crisis.

Bill Gorman, Tea Council
"The ingenuity of traders to get product to market is remarkable."

War threatens South Asian tea
06 Feb 03 |  Business
Sri Lanka tops tea sales
01 Feb 02 |  Business

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