On Nograles Cha-Cha Reso: Foreign Land Ownership Has Weak Link To Investment

While the committee on constitutional amendments prepares to vote on Speaker Prospero Nograles’s Resolution 737, research group IBON Foundation says that changing the charter to allow foreign business to own land does not necessarily increase foreign investment.
The Nograles bill seeks to amend the economic provisions of the Constitution to allow foreign corporations and associations to own land. Charter change proponents argue that allowing foreign business to own land in the Philippines will increase foreign investment flows which will lead to development.

“The experience of our Asian neighbors proves that the relationship between foreign land ownership and overall levels of investment is weak,” said IBON research head Sonny Africa. “This reinforces the suspicion that HR 737 is a ruse to justify charter change for self-serving political ends.”

With the current constitutional restriction on foreign land ownership, the Philippines had foreign direct investment (FDI) inward stock of US$19.0 billion in 2007 which was equivalent to 13.1% of gross domestic product (GDP). It is made to appear that this is a major factor in the country’s underdevelopment.

Yet Vietnam does not allow foreign land ownership but had inward FDI stocks of US$40.2 billion or up to double or triple the value of foreign investment in the Philippines. Indonesia, meanwhile merely gives land cultivation or building rights but had inward FDI stocks of US$59 billion.

Thailand, with its US$85.8 billion in investment, also prohibits foreign ownership of land as a general principle. Foreign companies can own land only upon approval of its Board of Investment, by ministerial permission or by virtue of treaty provisions.

Singapore, with its massive US$249.7 billion in FDI inward stock, is often cited as underscoring the benefits of foreign land ownership. This “ownership” though is more in the form of long-term leaseholds and not freeholds or title-deeds. Malaysia which has US$76.8 billion in investment also allows foreigners to acquire industrial land only on a leasehold basis.

There are many factors affecting FDI such as domestic market size and prospects, production costs and efficiency, infrastructure, economic stability and extent of corruption, said Africa. Foreign land ownership in itself is neither necessary nor sufficient– while raising the danger of land speculation and greater foreign control of the domestic economy.

It must also be accepted that foreign investment does not necessarily lead to development and the government has to create the conditions for the country to benefit, said Africa. More importantly, Cha-cha proposals such as the Nograles bill undermine national interest, surrender the country’s economic sovereignty, and legalize foreign corporate plunder of natural resources.