The Department of Agriculture (DA) is looking for other sources of funds for a feasibility study for the country’s first tire factory, after the proposed budget for it was thumbed down by the Department of Budget and Management (DBM).
Philippine Rubber Research Institute (PhilRubber) Executive Director Rodolfo L. Galang said P100 million was allocated for the feasibility study for the construction of the Pilipinas Agila Tyre Factory (PATF) in the DA’s 2018 budget proposal.
“There are no funds for the feasibility study at the moment. So we have to identify other sources for it,” Galang told reporters in an interview on Wednesday.
Galang said the money could be sourced from the budget of the Office of the Secretary or from official development assistance.
The PhilRubber official added the figure was computed based on the recommendation of the DA’s Project Development Service that the budget for the feasibility study should be 1 percent or 2 percent of PATF’s total construction cost. PATF, which will be built in Mindanao, is estimated to cost $200 million.
“That’s why there is a special order [creating a committee for the conduct of the feasibility study]. And one of the functions of the committee is identify and source out funding for the conduct of the feasibility study,” Galang said.
Following the decision of the DBM to reject the initial budget for the feasibility study, he said the cost has been slashed to P50 million.
Despite this, Galang noted the government is optimistic that construction for the first Philippine tire factory remains on schedule and will start in 2019.
“Based on the estimate of Black Donuts Engineering Inc. [Black Donuts], the construction could take about two years,” he said. “I’m hopeful and I want to be positive that we’re on track.”
Black Donuts is currently preparing the project proposal for the factory, according to Galang.
He added PhilRubber had proposed a budget of P650 million for 2018, the bulk of which would be used to expand rubber plantations. However, the DBM had allocated only P32 million for the attached agency of the DA.
In May Agriculture Secretary Emmanuel F. Piñol announced that the DA will sign a memorandum of agreement with Finnish tire-manufacturing company Black Donuts by September. This will formalize the conduct of the feasibility study for the construction of the PATF.
The DA chief said the establishment of the PATF would help stabilize the price of local raw rubber by giving farmers an assured market for their produce.
“We expect the tire factory to stabilize the price because when rubber is dependent on world market prices, then we will really be affected whenever the price drops,” Piñol said.
Phoenix Petroleum Philippines Inc. is the main investor for the PATF, a 50-hectare rubber-manufacturing plant that is capable of producing at least 4 million tires a year, according to Galang.
He said the tires are suitable for regular cars, pickup trucks and other small-type trucks.
Galang added 40 percent of the tire to be produced will be made of natural rubber. Each tire requires around 10 kilograms of natural rubber.
The goal of producing 4 million tires per year would need at least 16 million kilograms of rubber or 16,000 metric tons (MT) annually.
Galang noted that the Philippines produces around 110,000 MT of rubber a year, but domestic consumption is pegged at only 30,000 MT. According to government data, Mindanao accounts for 99 percent of the country’s rubber production.