Josiah Lance B.

Bautista
WFV

January 5, 2015
Position Paper
Missing the Point

As a human is a collection of organs, so can a nation be thought of as a collection of working

parts. We have brain that coordinates these organs, a heart that pumps blood and nutrients, as a nation has
a government that directs it, an economy that satisfies its citizens needs. We have emotions and things
we want to become, as nation has its patriots and national goals. And as no human is complete without a
soul, so is no nation complete without a Constitution. The Constitution is the soul of a nation. Making
changes to the Constitution is therefore a precarious move that can only be done after enough research
and consultation between the brain (the government), and the body (the people).
Late August 2014 the plenary debates began in the House of Representatives, deliberating on the
Resolution of Both Houses No. 1 (RBH1). RBH1 is a proposal to append the phrase unless otherwise
provided by law to several sections in Articles XII, XIV, and XVI of the Constitution. If it is added, it
will allow the legislative branch to make contracts with foreign investors, allowing them to own pieces of
Philippine land for developing their businesses. The proponents, headed by House Speaker Feliciano
Belmonte, Jr. believe that lifting our bans on foreign involvement in the economy will attract more
investors to the country; subsequently, the stronger inflow of Foreign Direct Investments (FDI) will cause
a boost in our GDP towards economic growth.
Of course, the proposal has drawn opposition particularly from Congressman Walden Bello,
who claimed that it was unnecessary. He pointed out that the government should focus on other matters
first. Much controversy has been generated will editing the nationalistic provisions barring the 100%
ownership of Philippine land by foreign entities really lead to economic growth? After all, improving the
Philippine standard of living has been part of a long-time effort by government officials and amending
our Constitutions strict bans on foreign ownership of lands has long been asserted as the only way to do
it. Certainly, this isnt the first time such arguments have been put forth.
To answer this question, we must tackle the proposal itself. Why change the Constitution does
the problem really lie there, as Belmonte and co. claim? We must examine their reasoning behind it will
removing the restrictions and opening up our lands really attract more investors? And if it does, will
having more investors actually lead to an increase in FDI? To take matters further, will the Philippines as
it is now, actually benefit from an increase in FDI?
It is important to keep in mind, however, that the addition of unless otherwise provided by law
to the affected sections does not grant immediate ownership of land to foreigners rather, it grants

Congress the flexibility to respond to the times in the crafting of economic policies, as Congresswoman
Mylene Garcia Albano put it during the plenary sessions. So should the resolution be approved by the
Senate, foreigners would still have to rely on the special bills to be enacted by Congress in order to
legitimately own any land in the Philippines.

To begin: is it really necessary to edit our Constitution? Despite what some of those in Congress
may think, it is not. A quick review of history would indicate that the poor economic performance of the
Philippines today has roots in its inability to industrialize after the war. After that the country was made
poorer by the Marcos regime, and in the succeeding decades we only managed to recover minimally.
Nowadays the rampant corruption and red tape only serves to worsen the long-existing problems of poor
infrastructure, lack of proper agrarian reform, low education, tech, and skill levels, and unemployment.
Poverty has even had such a large effect on our modern culture that nowadays most poor Filipinos have
defeatist attitudes towards school and work.
Caught in the complex net of flaws in the internal economic structure of the country woven in the
past decades, it is therefore highly doubtful whether the addition of a few words into the Constitution will
do much in the push for better living standards for Filipinos. Our restrictive Constitution isnt the root of
the countrys poor economy our weakened and neglected economic structure itself is so I think there
is little reason to bother changing it. Perhaps only when the economy has recovered can the issue of land
ownership have as much of a significance as the other issues plaguing the country right now. As Cong.
Walden Bello says in his Inquirer article dated August 30, 2014, rather than distracting the country with
the illusion of a magic bullet for development, the proponents of charter change should be pushing
measures to radically reduce inequality and poverty
Others argue, however, that the main cause of the countrys poverty is actually its ruling class
the oligarchs who own large companies like the Lopezes, the Marcos cronies, Ayalas, Lucio Tan, and
Henry Sy who, through corruption, tax evasion, and political influence, have landed the less fortunate at
a state even lower than they were before. Those against changing the Constitution have even been
accused of protecting these oligarchs. They speculate that the oligarchs will do anything to stop the
proposal, as foreigners being allowed own land here will serve as strong competition, putting their own
companies at risk.
In their defense, I would like to point out that while it is true that the oligarchs will be the most
inconvenienced by developments toward foreign land ownership, the companies they run still constitute a

large part of our economy, and that they have done so much for the country, especially in in building
hospitals, schools and malls. In the first place, I think having a ruling class comprised of Filipinos is in
line with the goal of having a Filipino-controlled economy, much better than having to rely on foreigners.
In this light, I dont see them as the root of the countrys poor economy either.
Moving on, another reason why we do not need to edit the Constitution draws from comparison
with the policies of other countries. Of course, how restrictive a country is on foreign land ownership will
vary depending on factors such as the amount of land available, public opinion, nationalistic sentiments,
and how developed it is, but by comparing our current policies to that of other countries and how theirs
worked out for them, we may find insight on how to change our own.
For example, Saudi Arabia does not allow foreign ownership of land, but, or precisely because it
makes money from its rich oil reserves. Meanwhile, the Philippines has its own abundant resources too;
unfortunately, unlike Saudi Arabia, we lack the technology available to extract and harness them without
the help of foreign capital. China, Indonesia, and Vietnam as countries whose FDI has increased
abundantly in the past years despite not allowing foreigners to own land as well (Bello). China in
particular is an interesting case, as while you cannot own land directly, you may be allowed to lease it for
a period of 70 years. Interestingly, in the Philippines, land can also be leased, for a period of 25 years,
extendable for 25 more years.
Countries like Korea, Singapore, and Hong Kong, on the other hand, allow foreigners to own
land, yet they are also growing financially. It must be noted, however, that Singapore and Hong Kong are
countries forced to rely on trade and tourism and other similar businesses in the first place, since they are
very, very small. The Philippines, on the other hand, is quite rich in land and other resources, and it is far
more profitable for us to develop these resources on our own. We are agriculture-based and depend on
these very lands to support our large population. Meanwhile, in the U.S., although owning land is allowed
to non-U.S. citizens, there is a high tax for it, and so it balances out. Unfortunately, we cannot impose a
high tax on foreigners like that here in the country, given that our countrymen are poor themselves and
will suffer greatly from even higher tax rates.
So upon comparison, the Philippines lacks the conditions for allowing foreigners to own land the
way other countries do more good reason to reject the proposal. Allowing them to lease the land instead,
like in China, presents itself as a very good alternative to owning lands for foreigners should they want to
establish their corporations here. After all, 50 years is more than enough, because if we look at it
differently, in 50 years the country has already gone through 6 presidents, 3 revolutions, and 3

Constitutions sufficient time for a company to finish its business here and find prospects somewhere
else. Its practically the same as owning land, and more flexible at that!
Now then, this should be sufficient to explain why the Constitution is not what Congress should
be focusing on, and that there are better ways of improving the economy apart from depending on FDI.
But let us take a step further and assume that we have no other option but to allow foreigners to own land
here. It will become clear that land ownership will not be the deciding factor in FDI inflow in fact, it
hardly has much of an impact on it.
The government will have to force companies to be more transparent about proprietors if they
think that our Constitutions 60:40 rule and bans on land ownership are preventing FDI inflow into the
country. The truth is, there has already been an infiltration of the country by foreign capital, and that has
come in the form of the Salim empire. Anthoni Salim, an Indonesian tycoon, is practically the proprietor
of Meralco, PLDT, and Smart, among other companies. While he may own only a small part of these
companies by name using proxy men like Manny Pangilinan, he is the one who profits behind the scenes,
effectively bypassing the 60:40 rule. The fact that the general public is unaware of this highlights the fact
that it is actually quite easy for foreign investors to disregard the restrictive provisions in the Constitution.
All things aside, this underscores that land ownership rules in the country do not really act as hindrances
to FDI (whether legal or not).
Now, assuming we actually open our lands to foreigners, its not like they will come rushing in to
make contracts with Congress. In her article in Inquirer, Winnie Monsod, an economist and professor
states that there are already barriers to foreign investment in the country, and lists what investors actually
prioritize when considering a host country. These are: necessary infrastructure, high-quality human
capital, proper regulation, transparency and fairness of the competition, and the stability of the economy
(Collas-Monsod). As far as I can tell, the only requirement we meet is economic stability; apart from that,
there are plenty good reasons why investors would be turned off, land ownership or not.
More factors are brought into the equation, as companies also prefer countries with low wage
rates, lower educational level, lower information transfer and transaction costs, and the presence of local
suppliers and growing industries (Changwatchai). I will concede that we satisfy the low wage and
education conditions, but when it comes to industrial growth and local suppliers we are severely
underdeveloped. The small and medium enterprises (SMEs) in the country are starved of support from the
government and have remained unable to cope with the increasingly high-tech processes and equipment
overseas.

Not so surprisingly, investors consider a lot of factors that take priority before land ownership
laws, which, by the way, are easy to bypass for them. Furthermore, while true, FDI does improve the level
of welfare of the population, it will require a proper economic environment, a healthy domestic market, as
well as some competition and a productive labor force to be effective (Nurrachmi). Basically, even if the
country, say, somehow meets the previous requirements, and manages to attract some investors, it will
still not be enough to bring about a positive change in the economy, or in the lives of Filipinos, at that.
Due to mass poverty our citizens have such a low purchasing power they do not even qualify as a healthy
domestic market and due to poor education and training, coupled with unemployment, our supposed
large labor force cannot even be put to good use.
In one more respect, at least, the nation as it is now does have a way to benefit from FDI. A study
on corruption and FDIs effect on national development finds that countries with higher corruption
actually benefit more from FDI (Okada and Samreth). But can this really apply to us? I will acknowledge
that our country is corrupt enough, ranking 85th least corrupt in the 2014 Corruption Perception Index
results, but that is no reason why we should try to fit in this criterion. The authors even pointed out that
because corruption negatively affects the society in many ways beyond just economic development, ...[it
does not] imply that corruption should be encouraged.
It does not end there. For even if we do find investors willing to put up with our too low market
prices (low to them, anyway), our country also lacks the capacity to make use of the more important
benefits of FDI: knowledge transfer and spillovers. This will require some explanation. The reason why
FDI has been hot on todays economy talks is because of its ability to benefit both parties involved
immensely. The theory goes that as the multinational corporation brings its infrastructures, specialists,
and equipment into the host country, the host country eventually learns to make use of this new
knowledge by implementing it through the various related industries. This in turn will force good
competition from local enterprises such as SMEs learning to imitate the new technology, as well as from
innovators who base their products off their foreign competitors. However, this all heavily relies on the
absorptive capacity of the SMEs.
As it stands, our governments failure to encourage the growth of these SMEs in many sectors,
especially in electronics (a major export) and manufacturing has led to poor absorption of foreign tech. A
2010 case study on the spillover effects of FDI on our manufacturing industry serves testament to this, as
the spillover effects of FDI on domestic firms have remained limited due to the domestic firms weak
competitiveness and inability to absorb the technology or knowledge being transferred. (Aldaba and

Aldaba). Were unfortunately wasting what little FDI we receive if we keep relying only on foreign
capital to raise our economy.
The reasoning of those who are pro-foreign ownership regarding FDI has now been debunked on
two levels. First, opening up our lands to foreigners is not going to lead to an immediate influx of FDI.
Second, even if some FDI enters the country, there is almost no guarantee well even be able to make
efficient use of it. While I hope that by now, there is little doubt that amending the Constitution will bring
only minimal improvement to our current economic situation, I will provide one last reason why it is not
necessary to allow the foreign ownership of land in the country.
As has been pointed out in the previous argument, making efficient use of FDI requires
entrepreneurs and innovators who can step up and compete with the multinational corporations. The fact
is, most of our laboring countrymen, from innovators, to the humble workers, have been neglected by the
government in its pursuit of FDI. And that is unfortunate, because if we rely on foreigners too much, we
fail to satisfy the goals of Article XII of the Constitution the very same article Congress is trying to edit.
From Article XII of the 1987 Constitution of the Philippines: Section 1. The goals of the national
economy are a more equitable distribution of wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding productivity.
[I]ndustrialization and full employment , through industries that make full and efficient use of human
and natural resources, and which are competitive in both domestic and foreign markets In the pursuit of
these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives, and similar collective organizations,
shall be encouraged to broaden the base of their ownership. [emphases added]

The Constitution wants the Filipino to lead himself out of poverty, and it even states exactly how
it wants him to do it. Instead of forcing some capital into the country, why not slowly generate our own?
It seems the proponents of RBH1 forgot to read this part of the Constitution! Even Supreme Court
jurisprudence is in favor of the fair Filipino ownership of lands. In Chavez vs. Public Estates Authority
(G.R. No. 133250 May 6, 2003), it ruled that the constitutional bans were there to prevent corporations
from amassing huge landholdings never before seen in this country as is what is feared will happen
especially to agricultural land if foreigners are to be allowed to own land here. In Borromeo vs. Descallar
(G.R. No. 159310 Feb 24, 2009), the reason for this strictness is further explained: the ban on aliens is
intended to preserve the nations land for future generations of Filipinos
So its a bit questionable as to why there have been so many plans on amending the Constitution
that in spirit contradict its provisions. Jurisprudence reinforces why the restrictive policies are there
theyre so that Filipinos will be able to use the land to develop enterprises that will generate wealth and

benefit the people. Is there even any need to go into economic debates about land and investment theory
when it comes to deciding how Filipinos are to prosper? The numbers generated by economic research are
cold numbers, they do not take into account the hardships working class Filipinos and the poor go through
daily. Yet here it is, in our Constitution, stated clearly that in order to prosper, we have to encourage
growth of our own industries first, maximizing our resources. The Constitution leaves very little room for
foreigners to butt in on our pursuit of progress, much less own land here.
The Philippines has long been called the sick man of Asia. When a human is sick, the problem
is not in its soul, is it? The problem must be in the body or in the mind. In our case, the problem is in both
our body (the citizens and the businesses) is malnourished, and our brain (the government) is
misguided. If we truly want economic reform, we should stop barking up the wrong tree, as both
Walden Bello and Winnie Monsod state, in their separate articles, at that.
To sum it up, the true reason why were so poor right now is because through the years the
internal economic structure of Philippines has been neglected and left to become tangled and decaying,
and as they went by our government has been mistaken in going about reviving the economy. Congress
points to land ownership as the reason why foreigners put so little of their money into the country, but it
doesnt admit that our poor internal structuring is actually both why were having financial problems and
why FDI cant even help us efficiently. A strong FDI inflow isnt even dependent on land ownership, and
when it does come in we arent even properly prepared for it.
The government will have to adjust its industrial and fiscal policies if it wants to see positive
changes. Encourage lending capital to entrepreneurs to help with their start-ups. Increase the purchasing
power of the consumers. Improve telecommunications and transportation systems. Create an economic
environment friendly to both locals and foreigners. End corruption. Improve education. Fund
technological research and send ambassadors to developed countries in order to learn new industrial
engineering and scientific techniques.
Many critics of the government say this a lot, but it is indeed true that we have to focus on
structural reforms first. It is in the essence of a good soul that the body and spirit are revived. Perhaps the
masses might even see structural reforms as being a nationalistic movement and be more cooperative.
Who can tell? But if anythings for sure, its that we dont have to tamper with our Constitution anytime
soon.

Bibliography:
1897 Constitution of the Republic of the Philippines. Art. XII, Sec. 1.
Aldaba, Rafaelita, and Fernando Aldaba. Do FDI Inflows Have Positive Spillover Effects? The Case Of
The Philippine Manufacturing Industry. Philippine Journal of Development 37.2 (2010):
21-33.
Bello, Walden. Charter Change: Why Beijing Would Love It. Philippine Daily Inquirer 2014. Web. 14
Dec. 2014.
Borromeo vs. Descallar, G.R. No. 159310, February 24, 2009
Changwatchai, Piyaphan. The Determinants Of FDI Inflows By Industry To ASEAN (Indonesia,
Malaysia, Philippines, Thailand, And Vietnam). Ph. D. University of Utah, 2010. Print.
Chavez vs. Public Estates Authority, 403 Phil. (2003)
Collas-Monsod, Solitas. It Is Not Necessary To Cha-Cha. Philippine Daily Inquirer 2012. Web. 14 Dec.
2014.
Nurrachmi, Rininta. The Causality Of FDI Inflow And Economic Growth In Indonesia. Malaysia:
International Islamic University. Mpra.ub.uni-muenchen.de. N.p., 2010. Web. 14 Dec.
2014.
Okada, Keisuke and Sovannroeun Samreth. How Does Corruption Influence The Effect Of Foreign
Direct Investment On Economic Growth? . Japan: Kyoto University. Mpra.ub.unimuenchen.de. N.p., 2010. Web. 14 Dec. 2014.