Exporters’ Willingness to Adopt the Tea Hub Concept in Sri Lanka

Abstract

As one of the leading tea growing and exporting countries, Sri Lanka needs to take new strategic decisions to strengthen the sector, to compete with the global tea market. Consequently, the concept of tea hub has been introduced by the industry experts and some parties as a strategy, in which liberalization of tea imports for blending, value addition and re-exports could be steered. Nevertheless, this concept of tea hub has been a controversial topic in the industry, with the argument to make the whole country a tea hub or to establish a tea hub in a separate free zone within the country. The exporters are the major proponents of this tea hub concept, and also the major party who will privilege from it. With this background, this study has focused on the factors affecting exporters’ willingness to adopt the tea hub concept in Sri Lanka, and has attepmted to identify the most preferred hub model among exporters. The sample consists of 56 tea exporting firms in Sri Lanka, which were selected according to the stratified sampling method. The primary data were collected using a structured questionnaire. Nine factors were used to measure the general objective. According to the results of probit regression, market experience and current status of importation of tea were significant at 95% significance level, and bulk tea export volume, tariffs and non-tariffs barriers, and influence of competitors were significant at 90% significance level. The current status of importation of tea, tariffs and non-tariff barriers, and influence of competitors have a positive relationship with the exporters’ willingness to adopt the tea hub concept, while others have a negative relationship. This study concluded that majority of the exporters are willing to adopt the tea hub concept and prefer to have an exclusive free zone (46.15%) as a tea hub in Sri Lanka.