NAIROBI, Sept 29: Kenya’s tea industry says the government should negotiate a free trade agreement (FTA) with its top market Pakistan or risk losing its market share to India, a top tea industry official said on Monday.

India, the world’s largest tea producer, aims at sharply increasing its exports to Pakistan, hoping to take advantage of a fragile peace process between the two neighbours. Pakistan, the world’s second largest tea importer, buys 60 per cent of its tea from Kenya.

Kenya Tea Development Agency (KTDA) managing director Eric Kimani told Reuters that although Kenya has established very strong ties with Pakistani traders, the east African country should not rest on its laurels.

“Kenya should not just sit back and just watch,” Mr Kimani said in an interview. “I think the industry should take the step of approaching the governments of Kenya and Pakistan to enter into a free trade agreement because Kenya has everything to gain from it.”

Pakistan traders have been pushing Kenya to sign an FTA hoping to increase rice exports to Kenya and address a trade imbalance that is largely skewed in favour of Kenya.

But the Kenyan government, fearing a backlash from peasant rice farmers, has been slow to respond. Mr Kimani said Kenya had no alternative but to listen to Pakistan.

“We may lose a little in rice but if a country like Pakistan is buying 26 per cent of our entire production, you cannot ignore it, its better to trade off one for the other,” Mr Kimani said.

Pakistan levies a 20-per cent import duty on tea, including a withholding tax and sales tax, taking the effective rate to around 50 per cent. Officials say an agreement to remove the duties would help increase Kenya’s tea exports.

Mr Kimani said KTDA, which accounts for 63 per cent of Kenya’s total tea output planted by nearly 400,000 small holder farmers, was eyeing the specialty tea market to boost farmers’ income.

He said the current global tea price slump was expected to remain due to oversupply in the world market.

“I don’t think we will see a lot of change in the prices...they might just stay there unless something dramatic happens in the three major producing countries,” he said, referring to India, Sri Lanka and Kenya.—Reuters