Features
Some suicidal strategies in marketing Ceylon Tea
Lackadaisical approach of Tea Board Secretariat and lack of innovation
(Excerpted from the autobiography of Merrill J. Fernando)
(continued from last week)
The remit of this committee covered, not only the formulation of proposals in respect of the Middle East market, but also included a complete re-evaluation of the existing promotional strategy and the submission of recommendations for the development of a comprehensive promotional plan covering all the important overseas markets. In fact, its scope was wider than that of the Advisory Committee appointed by Minister Jayawickrema in 1980.
The intention was to develop a broad promotional plan, valid for three years initially, to be extended for five years after a review at the end of three years, with amendments introduced, subject to market developments which may have occurred in the interim.
This committee, which met in late 1983, proposed a series of wide-ranging reforms, commencing with the organizational structure of the Promotional Division in the SLTB Head Office and the demarcation of specific priority overseas markets for development. It advocated a system for trade liaison between principal exporters and the promotional division, locations, and functions of overseas bureaus, the restructuring of the overseas tea centres, as well as promotional strategies in respect of each marketing region, based on marketing history and informed projections of future trends. The recommendations were based on a comprehensive analysis of both historical data and current performance.
The committee also evaluated the rules and regulations applicable to tea exports, first set out during the colonial era, and proposed reforms to meet new developments and requirements in marketing tea internationally. One of the key issues was the need for differentiation between bulk exports and value-added, private label exports, especially those destined for sophisticated markets, where Ceylon Tea was waging a difficult battle with already-established multinational brands. What was recommended was undiminished regulatory control, combined with adaptation and innovation where necessary, to market environment dynamics.
However, the absolutely lackadaisical approach of the Secretariat, with its instinctive rejection of innovation, ensured that the proposal submitted by the sub-committee to the Board in April 1984 was not implemented. Finally, it proved to be a futile exercise.
Knowledge is strength
When Egypt, Iraq, Syria, and Libya were free markets, the buying in Colombo, on behalf of these countries, was carried out by several parties in each case. This system generated a healthy competition, resulting in good quality tea, especially the low-grown varieties, fetching attractive prices with benefits to the grower as well. Eventually, in most of these countries the tea buying was assigned to central, government corporations, each representing 20 to 30 importers.
Egypt and Iraq established their own buying offices in Colombo, whilst others sent out sourcing delegations from time to time. Tea was frequently purchased through tender procedures. The general result was an unhealthy competition in the country, with local exporters vying with each other to secure the business by lowering prices. The system of large forward contracts, which then came into being, resulted in significant volumes being offered at below prevailing prices, with no consideration for potential price movement dynamics, thus guaranteeing an auction price depression for several months in to the future.
Had we established a common marketing initiative for Ceylon Tea, at the time that the Gulf Corporation Council came in to being, many of the adverse impacts on our tea prices, as described
above, would have been countered by the influence of a combined front, representing Ceylon Tea in the Gulf region.
Consumption patterns vary from region to region, subject to historical preferences, lifestyle, and economic power and, in recent decades, the overpowering influence of multinational traders with persuasive brand promotion strategies. Variations in the latter factors stimulate changes in consumption habits, and an intimate, up-to-date knowledge of such market dynamics is essential, in order for any exporter to stay in the competition. Unfortunately, neither the SLTPB nor the SLTB possessed either awareness or capability, in-house, for them to be able to advise the local exporter on effective overseas marketing strategy.
Given that of all the major tea growing nations, Sri Lanka exports the maximum proportion of its production an average of over 90% annually overseas marketing expertise had to be both a primary focus and a major strength, of our State tea trade regulatory bodies. However, what should have been our greatest strengths were, in reality, our most glaring weaknesses.
The inability to identify and prioritize promotional opportunities and to exploit them at the correct time were among the main shortcomings of both our private tea sector entities and the State bodies responsible for overseeing and regulating the tea industry. This absence of enterprise also reflected our ignorance of market realities. The lack of both foresight and initiative demonstrated in the case of the Middle East market, when it was ripe for development, and later in the case of the Russian market, are very good examples of a submissive, overcautious, and uninformed mindset.
The Tea Board in particular was, for years, quite comfortable in frittering away paltry sums on a multitude of insignificant projects, but balked at allocating even a reasonable budget for a single large project with potential.
Suicidal strategies
Most of our larger exporters were local agents or representatives of multinational or foreign-owned brands, which were then moving from loose-leaf packaging to tea bags, in order to meet a consumer demand created by the multinational giants themselves. As the CTC (Crush, Tear and Curl) type tea, with its strength, uniformity of particle size, and general homogeneity, lent itself easily to tea bag packaging, there was a proposal by members of the CTTA (Ceylon Tea Traders Association) to convert a sizeable proportion of our national production, from Orthodox to CTC.
The stated intent was to eventually convert, over a five-year period, a volume equivalent to about 25% of the national production, drawn from the Low and Mid-Country regions, to CTC. The proponents based their reasoning on the uncritical emulation of the Kenyan model but, actually, were driven by the need to promote the interests of the foreign labels being serviced in the country.
At a meeting of the Sri Lnka Tea Bord (SLTB) at which this matter was first discussed, the then Minister of Plantations, Dr. Colvin R de Silva, and his Secretary. Doric de Souza, were also present. At that point of time I had had no previous acquaintance with either of them. The dominant opinion at the meeting, underwritten and driven by multinational interests, was that we should go with the conversion to CTC manufacture.
Surprisingly, the Minister turned to me and asked me for my opinion. I explained to him in detail the reasons for my opposition to the proposal, but suggested that we could perhaps convert 10% of our
production to CTC, to test the market, and thereafter assess the impact it would have on both prices and selling patterns, of our Orthodox tea.
The Minister immediately requested the Ceylon Tea Propaganda Board to talk to the agency houses and, through them, offer the plantation companies an incentive to manufacture a limited proportion of CTC tea. In fact, the Tea Board provided handsome subsidies for the purchase of machinery.
Had we succumbed to the blandishments of the local servants of the multinational tea bag retailers then, and gone ahead with a large-scale conversion to CTC tea, our wide range of Orthodox tea, which continues to fetch premium prices even today, would have been obliterated by the boring sameness of the CTC product. Prices too would have declined proportionately and, in any event, eventually, we would have lost out to the Kenyan and Indonesian producers, who manufacture and bring the same type of tea to the market at a much lower cost than ours.
It is the artisanal aspect of a large proportion of our manufacture, that is responsible for the variations of style and appearance, which separates Pure Ceylon Tea from the herd. An unregulated conversion of a large proportion of our production to CTC, would have eliminated those features of attractiveness altogether from the Ceylon Tea portfolio.
In this issue as well, the hasty decision making was the result of a combination of flawed logic, ignorance of market realities, and either a lack of understanding of, or a lack of consideration, for the long term impact on our tea industry arising from a sudden, large-scale conversion of our national production to CTC style.
The proposal to convert marginal Mid- and Low-Country plantations to CTC made no sense as, in any event, having failed to produce decent Orthodox tea, the CTC product from such factories would have fared very poorly against the already-established high-elevation competition from North India. Kenya, and some of the other smaller African producers.
Ideally and logically, our CTC production should have been confined to select High-Grown plantations, if it were to offer meaningful competition to then current international market leaders of that type of tea. Since that meeting, in several instances, Doric de Souza sought my opinion on a number of tea industry issues. One such matter was the restriction on auction quantities, which then was limited to 3-3.5 million kilos per auction, leading to accumulation of stocks on plantations, especially during high cropping periods.
The Minister called a meeting of the major exporters to discuss this issue and though I was not in that category then, I attended the meeting at the request of Kenneth Ratwatte, then Chairman of the CTTA. He insisted that I attend at least for a short period, even though at that time I was confined to my home due to ill-health, as he wanted me to explain to the Minister the issues involved.
The Brook Bond and Lipton representatives were totally opposed to an increase of auction quantities, insisting on the continuity of the prevailing limitation of three million kg per auction. Major buyers were also completely supportive of the CTTA position to volume limitation. Finally, the Association relented and, with my total support, the motion to increase volumes to at least 4.5 million kg initially, and to five million kg during cropping months, finally carried the day.
There was no oversupply situation as a result and, subsequently, even larger volumes were disposed of without serious problem. To me, this was another example of the hidebound thinking of the multinationals and their associates, who resisted any kind of change, especially if the change carried even an implied threat to their dominance.
The sad reality is that there has never been a nationally-articulated marketing plan for Ceylon Tea, to place its image before the world, using the unique selling points of singularity of origin, wide grade spectrum, traditional orthodoxy, purity, and quality. Had there been a sustained promotional programme commencing from the 1960s, when Ceylonese-owned firms started to emerge from the daunting shadow of the multinationals, many locally-owned brands would today be out in the international marketplace, competing successfully with the biggest multinationals.
My disillusionment with the Tea Propaganda Board and subsequently with the Tea Board is relevant to their activities of the 1970s and ’80s and is confined to a handful of the bureaucrats in service then. The appointed members of successive boards were, by and large, men of integrity, competence, and vision. In the years following the events described in this narrative, the SLTB, as a body, has been far more proactive and, overall, demonstrated sound judgment in respect of all major issues.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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