Gov't earmarks P1-B Estrada bonds for cassava project

The government is set to approve a P1-billion allocation from the proceeds of the so-called Erap bonds, specifically for a cassava project packaged by the Land Bank of the Philippines with San Miguel Corp. as the primary market.

Trade and Industry Secretary Manuel Roxas II told reporters that the National Development Co. (NDC) which administers the P5-billion proceeds of the Erap bonds, is now evaluating the Landbank proposal for documentation and approval.

Roxas said this would involve a massive nationwide cassava planting program, with Landbank as the conduit for relending the P1 billion to come from the Erap bond proceeds.

Roxas said the cassava would be used mainly as input for the manufacture of animal feeds and San Miguel would be the primary buyer specifically for its feeds business. Cassava is also being promoted as a substitute for sugarcane.

"We (the NDC) would be passing the fund on to Landbank at nearly cost," Roxas said. "Our priority in this case is not to make profit but to make sure that the government will get paid back."

However, government still has not settled the renegotiation of the terms of the Erap bonds after realizing the mismatch between the instrument and the projects it was intended to finance.

Government is reviewing the terms of the Erap (Economic Recovery through Agriculture Production) bonds with the view of harmonizing it with the projects it is intended to finance.

According to Roxas, there was a basic mismatch between the four-year maturity period of the bonds and most of the projects being applied for financing.

"This fund is intended primarily for agricultural projects with long gestation periods," he said. "But government has to start making repayments for these bonds in three years, where is the money going to come from?"

Roxas said the government has to renegotiate the exit mechanism for the bonds since the rollover of funds from the projects financed by the instrument would not be possible for at another seven to 10 years, the average gestation period for most agricultural projects.

According to Roxas, there is also a problem of quality where the projects being applied for funding are concerned. "I've seen some of these applications and most of them are people offering their lands as equity and asking the government to finance whatever project they had in mind. This won't do," he said.

Roxas also explained that although the proceeds from the Erap bonds were intended for big-ticket agro-industrial projects, government did not want a single company to corner the funds. So far, the biggest project applied for financing, aside from the cassava project, was a P3-billion project packaged by Dole Philippines.

After almost one year, however, the government has not approved a single project under the P50-billion fund and its initial P5-billion tranche is still unutilized even as government continues to make interest payments on the bonds.

NDC said there are 86 projects pending for government financing for agriculture, industry and services. These projects have an estimated total cost of P56.6 billion, of which 66 projects worth P35 billion were under the Erap bonds.