Wasted tea economy and indispensable recipe of employment

§ino arvelaDZe

Tea market in Georgia annually consumes 50 million USD worth of tea. Out of it, 99% falls on the imported commodity, which, in spite of good packing, is of much lower quality than Georgian tea.

Sceptics believe that the time of tea production in Georgia has passed, that the quality of our tea is not up to the mark. It is a scurrilous lie. In Kenya, which now is the fourth largest tea supplier, they started to grow tea-plants in 1970s, and now the country already has the leading positions. Secondly, of course, tannin contained in Georgian tea is not of Ceylon level, but it is not inferior to other analogues in flavor and other properties, and sometimes on the contrary. Thirdly, only blended tea is used in the world now and in this case Georgian tea is indispensable, and finally – we have a unique previously created property in the form of tea plantations, which enraptures foreign specialists even now, and if were necessary to grow them now, even 4 billion worth of investments would not be enough. Besides, it is impossible to grow anything on the lands where tea is cultivated, these lands will remain unutilized and will shall lose a considerable sector of the export potential in conditions of unemployment and the low living standard. Where is the head of this dragon and why are wasting this treasure?
s you can see, on June 30 of the current
year the Georgian parliament passed a
decision on implementation of measures for rehabilitation of tea-growing, which sparked hope in the hearts of tea sector’s representatives, they point out with bitterness that the so-called Russian blockade first started with banning of Georgian tea, but no attention was paid to this either then or after banning of other products. Of course, tea sector’s producers ask for the state support, but even here they are notable for their modesty and agree to a verbal support of the state.
During the soviet period tea production in Georgia reached its peak, it made up nearly 10% of the country’s GDP, and this fact was often to be found in songs’ words. After disintegration of the empire, the tea industry, like other branches of the industry, found itself in crisis and now is looking for the way out of this situation. As a result of degradation, only 10-15% of the tea industry’s capacity is being used. Over the past 10 years the picking of tea leaf has decreased by 9.6 times, and production of the finished commodity – by 8.2 times. If in 1970-80s the country produced for export 100-1200 000 tons of tea, by 2004 tea production made 6.7 thousand tons. The time has come to remember the past with regret and take real steps aimed at the revival of the tea sector. Even a dilettante will see that the export of Georgian tea can make a considerable contribution to Georgia’s GDP, but, for the time being, it is necessary to render assistance to it and create an acceptable investment environment.
We have spoken to the Executive Director of the Georgian Association of Tea Producers – Mr. Tengiz Svanidze concerning the existing problems.
– Mr. Tengiz, if it is possible, please tell us how do you assess the potential of tea culture in Georgia from the viewpoint of both the soil and cadastre, as well as from the viewpoint of tea leaf quality, its yield and the place of our product on the international market?
– If we take a realistic view, it will become clear the country is in economic distress, there is certain progress but it is still a very log way to success, that is why, in my opinion, much attention is attached to priority branches of agriculture. I consider the tea branch as one of them, and I shall explain what gives me a possibility to speak so. In the recent past tea was one of the branches, which was one of a most successful branch from the viewpoint of economic, social issues as well as employment and export potential. Its share in the national income made up almost 10%. However, this took place during the soviet period and the huge empire depended on Georgian tea only, 95% of tea supplies to its republics fell on Georgian tea. I want to point out that market was not a problem. During that time tea production in Georgia was growing year by year, since the demand was growing as well, 97% of output was exported, mainly to the soviet republics, and 3% was left for domestic consumption. If we express all this in figures, we shall see that 600 000 tons of tea leaf was picked during the peak period, i.e. if we convert these figures to output, we shall get the amount of 120-125 000 tons. Over the past 3-4 years 20-24 000 tons of tea leaf is picked, which is equal to 5-6 000 tons of the product.
– What can be said of the quality of this product?
– It is clear that the quality was not high, but there was demand for the product of this quality on the market, correspondingly, the supplies were carried out as well. In other words, during the soviet period the tea sector and its whole infrastructure was working in a well organized way. It is true that there was no market economy then, but there existed a permanent and guaranteed market in the form of the Soviet Union, there were production possibilities. 120-125 000 tons of tea was a huge amount and it brought large incomes. Broadly speaking, the whole of western Georgia, where tea is grown, was founded on this culture, tea-growers’ regions were the richest ones. These are – Kvemo Imereti, Guria, Samegrelo, Kvemo Ajara, Abkhazia.
– In your opinion, what is the reason for the collapse of tea production business?
– During this period there were about 65 000 hectares of tea plantations, up to 160 factories for primary processing of tea with their own infrastructure, then packing of tea took place in Georgia, there were enterprises that catered for these factories and mobile machinery that picked tea. It was a highly developed industrial sector. Of course, the market’s disorganization was followed by its losing, economic ties were disrupted and it became impossible to supply Georgian tea. In 1990-1991 the market was completely lost and tea was not considered as the sphere of the state or large business any more. Losing of the market, in its turn, entailed cessation of enterprises, the latter – fines to the tax authorities, nonpayment of property taxes. All this fell on factories, which found themselves on the brink of ruining. Then, during the civil war, there took place plundering of the remains of tea, stealing, devastation of the factories, cutting for scrap metal, etc. During this period almost all enterprises were destroyed, but it particularly concerned tea, since his branch found itself in the epicenter of the war.
– From your point of view, what is the way out and how long it will take to restore the tea production business?
– Since 1997 the wave of the civil war gradually abated. The state began to take care of this sector as far as it was possible and finance it with small amounts of money, which, to a certain extent, has retained this branch and the signs that it was possible to save it appeared. Then an investor appeared, who did an imported business. The matter concerns Mr. Martin Bauer, his large investment partially fixed up the branch and carried out its rehabilitation. Taking into account all the peripeteias, it turns out, according to our estimates, that the branch has 37-40 000 hectares of tea plantations, except for Abkhazia. The rest of them withered in view of lack of tendance or were substituted for other cultures. Currently there are 15-20% of these plantations are in operation, the other part of the plantations has run wild or become outgrown and requires tendance. Somehow or other, 17-20 000 hectares are in operation and it can be seen that they are tended. The same can be said of the tea factories. In the second half of 1990s privatization of the branch took place, but, from my point of view, it was carried out very badly. It is true that the enterprises acquired proprietors and some of them were turned into joint-stock-companies, but some were sold at zero auctions, some for vouchers, that is why the tea factories were appropriated by the people who spent almost nothing on purchasing of these factories, and cheaply acquired property can be easily wasted. At the same time, the new proprietors had neither means nor experience for the resumption of these factories’ work, this also concerns the search for the market and marketing work. After privatization the tea factories remained in the hands of their proprietors only. There was the single enterprise that worked with 10-15% load.
– Is Georgian tea competitive on the market from the viewpoint of quality, and what is the possible volume of export now?
– Georgian tea had its market even with the output of that quality, and it always had its consumers. However, we should not be under the impression that the whole amount of tea was of low quality, nevertheless, the bulk was not high quality tea, since quantity was the priority then. For instance, according to the rules, maximum 2.5-3 tons of leaf per plantation hectare should be picked when three or four times picking is carried out during the year, while 12-15 tons were picked in peak periods. It is clear that the obtained product could not have been of high-quality under this kind of circumstances. However, it want to point out that it had its consumers and there is still nostalgia for in the places where Georgian tea failed to restore its market. By the way, the Russian blockade first of all concerned Georgia tea, but no attention was paid either in the press nor in businessmen’s speeches. Probably, the current low export potential of tea can also be considered as the reason for that, but there was a talk of citruses, greens and wine and no one mentioned tea. After import of Georgian tea had been banned in Russia, the demand for it appeared in different regions of Russia. Another example – we mainly supplied black and green tea to the republics of Central Asia. During the years when this market was closed and Georgian tea was not exported there any more, Central Asia was left without Georgian tea and this niche was taken by China. Chinese tea is of higher quality than our green tea. The inhabitants of Central Asia drink 40-50 cups of tea daily, but there is much more tannin in Chinese tea in comparison with the Georgian one, that is why Georgian tea is lighter. Drinking of Chinese tea in large quantities has a negative effect on health, that is why there is a great demand for Georgian tea in Central Asia as well. Later on, starting from 2000, this market was gradually revived, Chinese tea is cheaper and of higher quality even now, but consumers prefer the Georgian one. I also want to point out that Georgian green tea is better than the Chinese one according to gustatory properties. By this I confirm that it will not be difficult for the Georgian market to become established on the markets of the former Soviet Union. Georgian tea is exported to Turkmenistan, Uzbekistan, the Republics of Central Asia and Ukraine.
– What would you say about the European market?
– Georgian tea is sold in Poland, by the way it is of low quality, the US has a special representative, who is a Dutchman, and he orders the so-called fine tea, it is also called sifted tea, out of which the tea for one-time tea bags is produced. However, the quantity of the product required by the customer is not produced since the relations between the customer and the producer are not adjusted. At the same time, in connection with rising in price of energy carriers, the prime cost of tea increased as well, that is why the interest is not great either. 2000-3000 of the product is approximately equal to 12000 tons of leaf, which will employ people, that is our tea has its niche in America as well.
– What would you tell us about the tea-processing industry and the technopark, what is the situation from this point of view?
– The situation is just the same as it is in the agriculture and plantations. Even now the work at the factories is done by means of machines and equipment created in 1950-60s. These installations are power-consuming, that is why they require more expenses and, in the long run, it has an effect of the prime cost of tea. In civilized classically tea countries a drying oven for drying of 1 ton of the products consumes 300g of fuel, let us say black oil, and in our country the same machine for drying of the same amount of the product consumes 1 kg of black oil, i.e. three times as much black oil is used. The same concerns electric power, the bigger the machine is the more energy it consumes. Let us take a look – the branches of agriculture which introduced the new technologies were revived in Georgia and now they produce high quality products, for instance – beer, coca-cola, ice-cream, etc. The state annually allocates 2-3 million GEL to the tea industry. Of course, this sum has played its role and the branch did not disappear, but it reminds of the situation when a person is in agony and switched to artificial respiration, he cannot recover and does not die. The situation is complicated by the fact that the purpose of the allocated sums was changing annually with changing of the leader, at one moment much attention was paid to plantation, at another – to export promotion and search for a new market. All methods were good but the allocated sum was small, and there was a constant lack of money in the budget, that is why attention was first of all paid to the priorities, which did not include our tea. The allocated sum used to reach the beneficiary with delay, it was not timely and sufficient, though, in spite of its scantiness, it was possible to redistribute it more effectively. I believe that, with the purpose of good investment climate and retention of transparence, the sum allocated by the state should be used for turning of the existing enterprises into civilized ones, i.e. new technologies should be inculcated. I emphasize that this should happen by co-financing, the state allocates a certain sum and gives it to a businessman so that he would create an enterprise which would be a modern tea-processing line, where production of high-quality products with low energy consumption will possible. In this case, the prime cost of the product will de reduced. The allocated sum can used for putting in order of the building and it should look like a food production unit, i.e. the state should allocate a certain sum but the businessman should add his share as well. Without co-financing, in case of taking the state’s aid, the business will be either not done or will be done indifferently. If the businessman invests his own money, the business will be finalized and he will always try to complete it successfully. That is why, in case of allocation of money by the state, all tenders should be implemented on the basis of co-financing.
– What is the approximate sum that is necessary for the revival of tea industry and is it possible to allocate it at a time?
– It is a large sum, but I would say that there is no necessity in its allocation at a time at this stage, since simultaneous revival of the whole branch is impossible. At the same time, in this case it is possible to pick 120 000 tons of tea leaf, which makes up 30 000 tons of good product, but we have no market for it now. In my opinion, the state should annually allocate a sum that will be purposefully spent. It is good to rehabilitate a plantation for this sum, but it is not the best choice. Re-equipment of the technopark should be carried out by means of this sum. Salvation is in stage-by-stage aid. Today there is a trend in the world when tea production falls behind consumption, especially in the countries that are considered as classical ones, like India and Turkey, here production does not grow the way it is the case with consumption, that is why the export potential of these countries is being reduced at the expense of domestic consumption. This state of affairs is favorable for a country like ours, i.e. tea deficit may appear in the world and the issue of search for the tea market and its selling falls away by itself. I want to say by the example of classical countries that there is no country where the state does not render assistance to tea production. Being in one of Central Asia’s countries I saw Argentinean and Iranian teas that are competing with the Georgian one, while their quality is identical to the quality of our tea, though no other tea can be compared to ours, which is much better than the Turkish, Iranian and Argentinean ones. Our country has better processing technology and traditions and, of course, peculiarities of soil and air play a big part. To present day there is tea planted by our specialists in Vietnam. In spite of this fact, this country’s product made its way to the market and this happened at the expense of the state, which gives subsidies or finances the external market. The cost of Argentinean tea on the market was 40 cents, which is only the transportation price, in fact it is financed by the state, entering the market and its taking takes place, then the prices will be raised. Each state, including Turkey and Iran, has its principles of making its way to the market, our state should have this kind of principles as well. We often hear the phrase – “until when the branch constantly supported by the state should exist?” However, our branch needs assistance during the first years, otherwise, it will not rise to its feet and I unambiguously declare it. Our infrastructure and business are not developed to the extent that the branch could take care of itself. Ruining of the branch will entail deplorable results. However, in case of the state assistance to the tea industry, the tea culture will have a high export potential. At the current stage this branch is not only economy. Its revival will entail employment of the population. This is the reason why other states are financing this branch.
– What consequences will the branch’s liquidation entail?
– Presently tea plantations in Georgia occupy 40 000 hectares of land fit for agricultural use. Let us say that, in case of its liquidation, a decision on uprooting of these plantations will be taken, but this will require two or three times larger sums than the state aid. These plantations are mainly located on red soils, on which other cultures practically do not grow, and for this nuts were considered as an alternative. In Turkey they started to cultivate nuts as well, but there they again return to tea plantations, since nuts do not grow very well on those soils. In other words, in case of liquidation of tea plantations, the main part of land remains useless. Along with all this, tea has ecological function as well – it prevents erosion and landslides. Last year Ajarians uprooted a tea plantation at one of the farms and used the land for household purposes. However, after the rains the landslide destroyed everything. One cannot take thoughtless decisions without scientific research. In case of nontendance of the plantations and letting everything take its course, they will turn into impassable forest. However, they are mainly located in populated areas, which will make discomfort for the population and will turn their wealth into misfortune. After my speech in the parliament Zurab Zhvania said that today tea is “misfortune” for Georgia in a good sense of the word, but, in case of not taking care of it, it will turn into a bigger “misfortune”, and if we look after it, it will turn into the source of kindness, incomes and employment for people. Here we confront a real choice. I think that the state will chose the right way, the President’s words give me the hope for it. He said that even in case of subsidies, if the branch is able to employ a large number of people and bring export incomes, the state will still help and revive it. This was followed by the parliament’s decision dated June 30, which had been prepared by the efforts of the Head of the Parliament’s Committee for Agrarian Issues – Mr. Edvard Surmanidze. The issues, which I have touched upon, are just a small part of the problems. One of the important problems is protection of the domestic market. In supermarkets we often see various tea products, but no one knows what they contain. There was a time when even Poland switched to tea falsification. Products of unknown origin are imported to Georgia. It is clear that banning of tea import is ruled out. We even reduce taxes on import, but this does not mean that one can import anything to the country, this mainly concern one-time tea, containing dye stuff, which is harmful to the health. This time I am speaking on behalf of Tea Association of Georgia. We tried several times to produce tea for the domestic market, Martin Bauer and Kazbegi produced a very good tea, Tkibuli used to produce good tea as well, but they did not have the appropriate advertisement and, in view of the Georgian mentality implying that Georgian tea is not good, these products were not sold. Everything has its prime cost, a well-packed one-time tea costs about 12-14 GEL and, according to the statistical data, a kilo of imported tea costs 12 cents. It is clear that is was contraband, which was reduced, but the problem of falsification emerged again. Our natural tea does not sustain competition with them since it is expensive. That is why the domestic market is practically lost for Georgian producers, and, unfortunately, I do not see the way out as yet. The only thing that we can do is to check falsified products in its importing and block it as harmful to the health. The capacity of our domestic market is 2500-3000 tons, and if Georgian tea takes it, it will be a big profit for Georgian production. If re-equipment of the enterprises takes place, the things in the branch will go right since there is a sufficient number of plantations. Let us revive this branch so that Georgian people would not go to Turkey to pick tea, where they have to suffer humiliation and insults. There is such a huge branch, but there is neither state nor private body that could take care of it. A single person can found in the Ministry of Agriculture that would pay attention to the tea branch.
– What can we consider as the reason for this kind of indifference?
– I have no answer to this question. I have hope after the parliament’s decision, the President’s words also had an effect, so let us see what kind of strategy the government will work out. However, my speech is not just aimed at getting support from the state and we do not want to hope for it only. One can render effective assistance even by words. The coordination and management link should be worked out, where they will give an answer to the interested entrepreneurs.
– How much time has passed since tea was left without any attention?
– In 1997 there existed the state commercial association “Sakchaisubtropik”. After its liquidation, the main work was assumed by the investor, Martin Bauer, who contributed a great deal to retaining of this branch. This time, everybody showed interest and we set up our association. After the parliament’s decision we have the hope that the situation will improve, Georgian tea will be exported and make a serious contribution to Georgia’s GDP.