Vol. XXII, No. 110 [ BusinessWorld Online ]
Tuesday, January 6, 2009 | MANILA, PHILIPPINES
SAN MIGUEL Corp. and the Kuok Group will launch the first phase of their $1-billion farm venture this quarter, which may help the government achieve its food security goal.
San Miguel, Asia’s biggest food conglomerate and Kuok, the world’s largest listed palm oil trader, will plant rice, corn and cassava in 18,518 hectares of land in Davao del Norte, one of the plantation areas identified by the government.
"The joint project should start in the first quarter because we need it up and running by the end of March, during the harvest season," Marriz B. Agbon, president of the Philippine Agricultural Development and Commercial Corp. (PADCC), said in a phone interview yesterday.
The investments are expected to help the Philippines, the world’s biggest rice importer, meet its rice and corn self-sufficiency goal by 2013 and 2010, respectively.
The government wants to increase rice output to 21.59 million metric tons by 2013, from a projected 16.89 million tons last year. It also seeks to hike corn output to 8.53 million metric tons from 6.95 metric tons last year.
The 18,518 hectares of land covers the municipalities of Kapalong with 3,246 hectares, San Isidro with 5,860 hectares, Talaingod with 7,860 hectares and New Corella with 1,552 hectares.
In a statement, the Agriculture department said the areas have been logged and classified as barren land ideal for upland planting. But Mr. Agbon said rice and corn post-harvest facilities would be needed in the second quarter, and cassava post-harvest facilities by the end of the year to prevent yield losses.
San Miguel and the Kuok Group signed a deal in July to invest up to $1,000 on every hectare of farmland devoted to rice, corn, cassava, sugar, coconut and palm oil. It is eyeing a total of one million hectares.
The two will split a 30% equity infusion in the project, while the remaining 70% will be raised through long-term debt. The joint venture will borrow here and abroad, depending on market conditions, to fund certain phases of the project.
Under the agreement, San Miguel and Kuok will finance and manage crop production, as well as provide irrigation, access roads and post-harvest investments.
The partners will buy the crops from farmers, giving the sellers a market while assuring the buyers of adequate supply.
The PADCC, the agribusiness arm of the Agriculture department, has identified one million hectares of prospective land in the provinces of Isabela, Mindoro Oriental, Mindoro Occidental, Negros Oriental, Bukidnon, Davao Oriental, Sultan Kudarat and Surigao del Sur.
The areas were still being evaluated by the joint venture, Mr. Agbon told BusinessWorld.
In August, the government corporation recommended 100,000 hectares of so-called priority 1 areas in Luzon and Mindanao, and 220,000 hectares of priority 3 lands in Davao del Norte, Davao del Sur, South and North Cotabato, and Agusan del Norte.
Priority 1 areas are those whose residents are below the poverty threshold, while a place is classified as priority 2 if it is within the poverty threshold. Priority 3 areas are those that are relatively developed.
Mr. Agbon told BusinessWorld he would meet with San Miguel and Kuok officials this week to discuss the evaluation process and requirements of joint venture. — Neil Jerome C. Morales