MANILA — San Miguel, Southeast Asia's biggest food and beverage group, will spend up to $1 billion in a venture with the Kuok group to develop Philippine farmland and use the produce to support its food businesses.
Eduardo Cojuangco, the San Miguel chairman, said the project entailed the development of 1 million hectares, or 2.47 million acres, of land under an arrangement with the Philippine government, with the two companies willing to spend up to $1,000 a hectare.
The investment may help the Philippines, the world's biggest rice importer, meet a goal of rice sufficiency by 2010. President Gloria Arroyo Macapagal wants to increase output of rice to 19.7 million metric tons in 2010, from a projected 17.3 million tons this year, Agriculture Secretary Arthur Yap said in May.
San Miguel and Robert Kuok, the chairman of the Kuok Group, would split a 30 percent equity infusion in the project while the remaining 70 percent would be raised through long-term debt issues, the San Miguel president, Ramon Ang, said.
"Our priority is always rice, corn, sugar, coconut, and maybe later on other crops like palm," Ang told reporters, adding that San Miguel will convert most of the produce into animal feed.
"We have feed mills so we can use it," he said.
Rice would be used for beer fermentation, Ang said.
San Miguel, partly owned by Japan's Kirin Holdings, has a near monopoly of the local market for beer. It also has interests in livestock feed, poultry and hogs.
San Miguel and Kuok Group will offer financial assistance, technical expertise and a guarantee to buy all agricultural produce from the land.
The joint venture will issue debt locally and offshore, depending on market conditions, to fund certain phases of the project.
"We can go to the market and issue 25-year bonds," Ang said.
"We are ready to help our government in any way possible, whether it is providing seed money to help farmers pay for shallow wells, basic agricultural inputs such as hybrid seeds and fertilizer, and extending technical expertise," Ang said in a statement.
San Miguel is looking to break ground at its first farm cultivation project next month.