Indonesia to Levy Tea Import Duty

Eva Fitriani | October 01, 2012

The Indonesian government is planning to curb tea imports by imposing an import duty in an attempt to boost the fortunes of local tea producers amid efforts to improve the nation’s overall trade balance.

The Trade Ministry estimates Indonesia will consume 85,000 to 90,000 metric tons of tea this year, up 21 percent to 29 percent from last year’s consumption of 60,000 tons. The country produces 140,000 to 150,000 tons of the aromatic beverage, but more than half of the harvest is sold overseas. The exported teas are mostly premium quality and enjoy higher prices on the international market.

“Indonesia is known as one of the [world’s] best tea producers,” Bayu Krisnamurthi, the deputy trade minister told reporters on Friday. “Still, in recent years, the amount of tea imports kept increasing.”

Indonesian consumers’ demand for high quality tea has grown in recent years, Bayu noted. Tea imports are set to reach 25 percent of total consumption this year, up from 5 percent in 2006, he said.

He added the government was formulating a set of policies to limit imports of the commodity, but did not provide further details. Currently, tea imports are duty-free.

Indonesia posted a record $6.9 billion current account deficit in the second quarter of the year, equal to 3.2 percent of the country’s gross domestic product. The current account balance is the difference between a country’s total exports of goods and services and its imports of them. 

Data from the Central Statistics Agency (BPS) showed that the country’s trade deficit narrowed to $176.6 million in August from $1.32 billion in July, prompting some economists to suggest that the current account would return to surplus by the end of this year. 

Finance Minister Agus Martowardojo said on Thursday that Indonesia’s current account deficit would reach 2.5 percent of the country’s GDP this year. The International Monetary Fund projected that over the medium term, the deficit would remain around 2 percent because of high levels of capital goods imports financed by foreign direct investment.