An investment-friendly land ownership framework

The proposed amendments to the economic provisions of the New Federal Constitution are most critical to our aim of attracting more inflows of foreign capital to the Philippines. One of the most controversial and hotly debated issues is the long-standing matter of land ownership.
The draft Federal Constitution of the Consultative Committee stipulates that all lands of the public domain, waters, minerals, coals, petroleum and other mineral oils, all forces of energy, fisheries, forests or timber, wildlife, flora and fauna and other natural resources are owned by the state and shall not be alienated except lands of public domain provided as alienable. Moreover, agricultural and reclaimed lands may be further classified by law according to the uses which they may be devoted to such as residential, commercial or industrial. It goes on by saying that “Save in cases as provided by Federal law or in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations or associations qualified to acquire or hold lands of the public domain.”
Except for a few rewordings here and there, it is still clear that land ownership even under the proposed new Constitution is only open to Filipino citizens or Filipino corporations and associations that comply with the nationality requirements. Jurisprudential reasoning for this is that available alienable public lands are slowly decreasing because of huge population growth, not to mention the problems of equitable diffusion of land ownership. If big corporations or families own most of our lands, then societal instability becomes a real risk.
In the midst of a Foreign Investment Act’s Negative List (FINL) which enumerates ownership of private lands to be limited to 40% foreign equity, we are slowly realizing the painful reality of this legal prohibition in our fundamental law of the land. This frustrates the growth of foreign direct investment to the Philippines. Amongst the ASEAN economies, we are even behind Laos, Vietnam and Cambodia. And while other countries in the region may have some form of restrictions, the negative impacts are cushioned by a fair, consistent and transparent regulatory and enforcement framework — one that is wanting in our country.

INTERNATIONAL TREND AND CLAMOR
The Joint Foreign Chamber of the Philippines appreciated the 11^th FINL but it also said that the changes have not been substantial enough to really excite foreign investors. In its statement, it urged the government, particularly the Congress, to pass laws that shall relax restrictions on foreign ownership in the Philippine Constitution. Citing the Organization for Economic Cooperation and Development (OECD), the Joint Foreign Chambers said that with the current state of play, the Philippines shall continue to be regarded as one of the most restrictive nations in terms of foreign direct investments.
Moreover, the World Bank and United Nations Conference on Trade and Development considered our ban on foreign ownership of natural resources such as land to be a very big constraint to the full development of our economy. Without huge foreign investments, our ability to compete in a “commercial world without borders” is impaired. Economic analysts see this phenomenon as misplaced nationalism that denies our nation, one brimming with educated, skilled, young, good natured and positive population, many opportunities to enrich themselves culturally, socially and financially. Imagine tracts of land devoted to a mix of sustainable agriculture, factories, industrial and commercial estates, export processing plants, ports and wharves or even eco-tourism sites. These possibilities can become a reality by partnering with credible, reputable and financially stable international corporations, organizations or entities.
WAY FORWARD
Yes, there may be threats of exploitation or abuse, but these can be curbed by a proper governmental and enforcement infrastructure that is fully resourced and empowered because of more funds precisely raised through foreign capital to build up such infrastructure.
The key to all of this is striking a good, healthy balance between local and international interests. The positives clearly outweigh the negatives in this space. The Constitution, as a living document, should adjust to the imperatives of the times. It must recognize that an isolationist economic policy is extremely ineffective in an open, borderless and interdependent community of nations. To put it simply — It’s a small world. after all.
 
Ariel F. Nepomuceno is a management consultant on strategy and investment.