With the rising youth population in Pakistan, there is an increase in coffee consumption driven by the younger generation in colleges and universities, reflecting changing tastes influenced by the increasing youth population.
Pakistan, as an emerging market for coffee, needs to be explored further by rationalizing the duty structure. The overall duty on finished coffee products, including customs duty, additional customs duty, and regulatory duty, currently stands at 53 percent, while bulk imports face a duty of 28 percent. The duty on tea is only 13 percent.
For Adil Aslam, an undergraduate student studying in Lahore this is absurd. “I know there’s an impression that tea is the drink of the masses but more and more people in our generation prefer coffee over tea. Considering that around 60% of the population is under 30, coffee is slowly but surely catching up to tea. Affordability for this age group is a huge factor”.
Coffee can become more affordable with tariff rationalization. The high duty not only hampers the growth of the coffee market but also creates challenges for formal businesses to invest in this sector. Consequently, higher duties have led to the emergence of a parallel illicit trade market. Smuggled international coffee brands are being sold in retail shops at prices that legitimate coffee-making companies cannot compete with, due to duties and taxes.
This situation also violates SRO 237 issued in 2019, which sets requirements for imported products, such as a minimum 66 percent shelf life, ingredient labeling in both English and Urdu, and Halal certification from accredited authorities, along with specific logo and labeling guidelines. Ensuring compliance with these regulations is the responsibility of the federal government at the import stage and provincial governments at the retail stage.
Pakistan’s growth in coffee consumption is an opportunity to localize, assemble, manufacture, and brand coffee in Pakistan, with a potential for export. Notably, one of the world’s leading multinational coffee producers is already operating in Pakistan and may be ready to seize this opportunity. The government plays a crucial role in creating an enabling environment for such endeavors.
Furthermore, coffee cultivation is viable in Pakistan, particularly in the Pothohar region, where the climate is suitable. This could add a new dimension to the Pakistani agriculture value chain. To facilitate this, it is essential to rationalize the duty structure for bulk coffee, which would contribute to the development of value chains, attract foreign investment, and foster innovation in the coffee market. Pakistan has the potential to replicate successful examples from Brazil, Peru and Africa of value chain development.
By addressing the duty structure, encouraging localization, and supporting coffee cultivation, Pakistan can tap into the potential of the coffee industry, creating value chains, attracting investment, and contributing to the nation’s economic growth and development.
This article is written by Muhammad Salman Khan. He is an expert in economic development and international trade policies.
The post Pakistan is Ready for Coffee: Time for Tariff Rationalization appeared first on ProPakistani.
