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Published by: noorirocks on May 14, 2009
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Pakistan imported about 8178.88 metric tonnes (MT) of black tea worth$16.1 million during March 2009, as compared with 9096.48 metric tonnes inMarch 2008 worth $18.5 million. According to these numbers provided byPTA, imports witnessed a decline of 10 percent. The apparent reason for thedecreasing value of decline was a hike in the prices of commodities andpetrol prices in general; it is significant to mention over here that theinternational tea prices also witnessed their peak in the past few months.Probably that is the reason why the existing importers in the country couldnot import the expected quantity of tea. This decline did not really affect the consumption pattern of the populationas people consumed tea like they did in the past; the change in consumptionpattern did not show a descending trend because of the existence of smuggled tea.Pakistan’s per capita consumption of tea is 1 kg per annum, but the countryrelies almost completely on imported tea. Its import volume is third highestbehind Russia and the United Kingdom. Pakistan imports tea from 21countries and the major portion is imported from Kenya. During March, 58.81percent of the total quantity of imported tea was bought from Kenya ascompared with 49.63 percent imported in the corresponding period last year.According to an interview given to Daily Times by the President of Pakistan Tea Association (PTA) Hanif Janoo, legal importers of the commodity arefacing a critical situation because of increase in smuggling over the past fewyears. The country’s annual consumption of tea stood at 170-175 million kg,the third highest in the world. Mr. Hanif Janoo also stated that only 100million kg of tea is brought into the country through legal process while therest is smuggled under the garb of Afghan Transit Trade.
It is to be noted that the government is annually losing Rs 5 billion to Rs 5.5billion revenue due to smuggling. This loss could easily be neutralized bymaking the legal trade regime easy and by placing minimum duties onregular imports as is the practice in almost all the tea-importing countries. The set of solutions suggested by Mr. Janoo included the reduction of importduty from 10 percent to zero, placing the black tea in negative list or puttinga quantity quota like India-Nepal agreement. Other than the suggestionsmentioned above regarding the steps that could be taken by thegovernment, it is imperative to mention that in-house production andcultivation of tea leaves would also help us add more money to our localexchequer. If we spend approximately Rs. 20 million just for the cause of importing tea every month, we can easily calculate the amount we wouldsave by initiating the local production in the coming few years. The importquantity would hence only increase with the increasing population.
 The external macro environment in which a firm operates can be expressedin terms of the following factorsPoliticalEconomicSocial TechnologicalPEST analysis is used to describe a framework for the analysis of thesemacro environment factors.
 These factors and government interventions can make or break the industry. The political factors have played a very benign role for the tea industy. Thepolitical arena has a huge influence upon the regulations of the businesses,and spending power of consumers and other businesses. The politicalenvironment of Pakistan is relatively unstable in the current situation. The
investors are not willing to invest in Pakistan. However, WTO and tradepolicies encourage the import of raw materials for Tea industry.
Tea Import Quota
It is an important consideration. Each year there is a certain quota on teaimport in total imports of Pakistan. Each player is given quota to import andmanufacture so one can say that it is a very regulated industry.
Diplomatic Relations
 The relations with the tea producing nations and Pakistan play a vital role aslarge part of imports comes from Kenya, but now Pakistan is also importingtea from India.
Unstable Geographic Conditions
Pakistan is situated at a very critical and geographically strategic location.Due to the uncertainty new investors are not ready to invest in Pakistan.
Economic conditions of an environment have a direct impact on thedevelopment of any industry. The recent economic recession in the world hashad an impact on Pakistan’s economy as well.Pakistan's economy mainly encompasses textiles, chemicals, foodprocessing, agriculture and other industries. In 2005, it was the third fastestgrowing economy in Asia. Since the beginning of 2008, Pakistan's economicoutlook has taken a dramatic downturn. Security concerns stemming fromthe nation's role in the War on Terror have created great instability and led toa decline in FDI from a height of approximately $8 bn to $3.5bn for thecurrent fiscal year. Concurrently, the insurgency has forced massive capitalflight from Pakistan to the Gulf. Combined with high global commodity prices,the dual impact has shocked Pakistan's economy, with gaping trade deficits,high inflation and a crash in the value of the Rupee, which has fallen from60-1 USD to over 80-1 USD in a few months. For the first time in years, itmay have to seek external funding as Balance of Payments support.

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