Putting the chai into Dubai: Rise of the world’s tea re-export capital

18-Mar-2014 - Last updated on 18-Mar-2014 at 15:48 GMT

Dubai Creek was where it all started

The order given by Dubai’s ruling sheikh in 1959 to dredge the Creek, the water channel that flows into the heart of what was at the time a sleepy fishing village, is commonly seen as the move that would transform the Gulf state into an economic powerhouse.

Up until that point, the Creek was too shallow to accommodate the Dhows that plied the seas between the southern shore of the Gulf and Iran and South Asia. By deepening it, Sheikh Rashid bin Saeed Al Maktoum immediately unlocked the potential of the emirate as an import and re-export hub.

Today, Dubai’s foreign trade in the food sector alone in the nine months from January last year amounted to Dh46bn (US$12.5bn), according to Dubai Customs—a growth of 7% over the same period in 2012. Of this trade, the lion’s share went to imports to Dubai and the wider Gulf, while Dh7bn (US$1.9bn) went to re-exports, a rise of Dh1bn (US$270m) over the previous year.

Sugar, tea, rice, milk, cocoa products and nuts are among the major foodstuffs that are traded through Dubai. Iran is the major partner for Dubai with a share of 25%, followed by Oman (12%) and Saudi Arabia (7%).

Selling on tea

The UAE continues to be the world’s biggest tea re-exporter—a position it has held since 2004. Over the past five years, the country has broken the 60% market share level, valued at at least around $50m.

The UAE, through the Dubai Tea Trading Centre (DTTC), which was established in 2005, provides global tea producers and importers with a wide range of facilities that include a large tea storage compound that is also equipped with the means to mix and package the commodity. It is also home to a number of tea companies’ offices, including many of the world’s biggest growers, like McLeod Russel.

DTTC also has a tasting unit, which categorises tea arriving at the UAE from 35 Asian and African countries, and is considered to be one of the world’s most important tea re-export industry hubs.

"We are in the middle of all major trade routes across the world, so if you look at the trade routes of the tea-producing countries versus the tea-consuming countries, there is clearly Dubai at the centre," said Sanjeev Dutta, the director of the centre.

Tax breaks

Traditionally, producing countries would ship their tea directly to consuming countries. But in recent years, multi-origin teas have become more popular as they better suit some palates and are generally cheaper.

Dubai has carved out its niche due to regulations in many countries which prohibit multi-origin blends because they affect the industry in the tea producing destinations. Many of these require the payment of a significant duty on multi-origin teas, wheres that is not the case in the UAE.

As a result, DTTC has been growing at a rate of around 20% per year as Dubai continues to cement its place as the world’s tea re-export capital.