Shall We Dance (Cha-cha-cha)?

As foreign ownership of land is talked up in the Philippines, other countries like Brazil and Australia are looking to limit it.

Brazil began last year when it decided to treat farmland as a strategic asset on par with oil when the government invoked an old law from 1971 limiting the amount of rural land that foreigners are able to buy. It is estimated that as a result of this about $15 billion of planned agriculture investments will be dropped.

Australia followed suit early this year when its Parliament passed a resolution that would see for the first time their bureau of statistics (the ABS) collate a list of direct foreign ownership of agricultural land, water rights and businesses. This is seen as a first step towards taking any necessary action to safeguard the food security of the nation.

What spooked the federal governments in both cases were growing reports of sovereign wealth funds and state owned or state-backed enterprises buying up vast tracts of prime agricultural land. With the world population set to rise from 7 billion to about 9 billion by mid-century, the quest for food security is forcing countries like Qatar, China and Singapore to look overseas for their food supply.

Unlike the Philippines which has a constitutional restriction against foreign ownership of any kind of land, Brazil and Australia are not seeking to resrtrict foreign ownership, but merely monitor and manage it, to ensure that it doesn’t pose a national security risk or lead to speculative bubbles.

I think these considerations should give our legislators reason to pause and consider their plans for liberalizing participation of foreigners in certain sectors like communications, education, professional services and land. Liberalizing services may be necessary for the Philippines to join the Trans-Pacific Partnership and gain market access to signatory countries in the Asia-Pacific. Opening up real property is another matter.

Opening up land to foreign acquisition would require us to have a few necessary safeguards in place. How would the country maintain food security for instance? Should there be a requirement to seek government approval once the scale of land purchase breeches a certain amount? If so, what should that amount be?

The case involving the lease of one million hectares to Chinese interests for grains and bio-fuel crops which was halted by a petition to the Supreme Court due to its constitutionality will almost certainly become mute once constitutional restrictions are removed.

If stronger states such as Australia and Brazil start to place increasing scrutiny towards the use and sale of their land to foreigners, will the affected foreign firms turn to weaker states like the Philippines in order to pursue their agenda? Once these assets are sold, it will be very hard to retrieve them.

It makes the question of lifting constitutional restrictions all the more poignant. While it is true that it might stimulate much needed investments and exports, what will happen to us as a nation once our ability to feed our people is traded away?

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • Doy,
    Great post. Don’t you think that sadly, there is also too much land-ownership abuse by those holding (or taking… or simply using up all the resources) right here in-country? That’s another issue, but to me, one that needs attention.

    • GabbyD

      i think  that is the crucial question.

      opening up to foreign funds is like adding more money. 

      the question is: how will that money likely be used? i can imagine the answer is: the way its always been used, except now theres more of it.

      • Anonymous

        The business plans submitted by the foreign investors should provide a clue on what they plan to do.   I doubt that many of them will want to buy land so they can do a Gokongwei and build shopping malls.  I doubt that many of them will want buy-and-hold (like Hacienda Luisita sitting on the land waiting for when the Clark land-area becomes more commercial as government departments get ‘invited” to move there).
            If I had the beaucoup-dollars,  I’ll go for Manny-Villar projects, also in Clark area (housing — but a bit more upscale).  Or I’ll team up with some folks to put up more retirement homes (with golf courses, blah blah blah).  Also possible — honest-to-goodness farming —  sheep/lamb and goats (but not rice, what with Noynoy (and whoever follws him) enamored with the GuloMA policy of buying cheap broken-rice from Vietnam.   One of the things that is most likely — that the projects’ target customers will be “not-in-the-Phlippines” — again, the China-model.

  • GabbyD

    do you know what the legal argument is against long term lease of agri land?

    isnt this legal?

  • Regulation, if ever would be our best shield against  abuse of letting foreigners take any  land grabbing opportunity if the cha-cha would take place.

  • J_ag

    I forgot to mention that the Philippines compared to other countries is the most already globalized emerging market on this planet. 

    The people adapt easily since they have been exposed to different cultures. The forces of globalization created this country. A remarkable fusion of Asian and Western cultures. It was unfortunate the Catholics in this country used their dominance to discriminate against the minority Muslims in economic freedom most especially on issues of land.  

    • Joe America

      Interesting point, how globalized the Philippines is. But I’ve never seen a place where more value is placed on pride than on progress. Ego rules. What are the other English-speaking nations in Asia? Singapore. Hong Kong is preserved by China for precisely the door to the West that it represents. Both are economic dynamos. Yet pride in the Philippines closes a lot of economic doors, seems to me. It prevents many people from embracing anything but “the way we are”. Which means staying that way.

      So why even discuss foreign ownership? It won’t happen. Maybe it shouldn’t happen. But sea walls should happen. And zoning should happen. And warning systems should happen. And hospitals. And education should happen, so that kids understand what it means to aspire rather than follow orders.

      • Anonymous

        A “thinking outside the box” way for this “foreigners-and-Pilipinas-land” is to think of the transaction as a very-long-term lease no different than granting Russia the rights to operate an air force base in Mactan or India the right to operate a naval base in Palawan.   Especially for China  once they get a 25-year-or-longer lease on land, I wouldn’t be surprised if China acts imperiously (albeit politely… but still imperiously as they do with Spratly)  towards protecting their “rights to Pilipinas land”.

        In other words…. ChaCha not super-important.  Senate and Malakanyang??? Supra-important.

    • Don’t forget the minority non-Catholic-non-Muslims. Everybody is happy to steal or ravage their land! =)

  • J_ag

    The bigger picture on cha cha on removing any bar to foreign participation in the domestic economy should be welcomed in the light of  the globalization of finance capitalism. 

    Financial relations today define economic relations and in the final analysis human relations. 

    Watching the aftermath of the typhoons in Central Luzon make it clear that the country is ill equipped to handle the management of our river systems and resource systems. 

    The country had about 30% of land as arable and this has slowly been lost due to erosion and the lack of management of trees that once covered the mountains in Luzon. 

    The role of the State is crucial in managing the resource asset base of the country. 

    The mercantile and the creditor class in this country own the political system and are keeping this country backward. 

    It is going to cost billions to repair this kind of damage to the natural ecosystems in the country. What happened in Luzon and what is going to happen all over the country must not be allowed to happen.  There is a tipping point for the ecology that may happen that may not make the situation salvageable. 

    The mercantile and creditor class of this country have their safety nets in the more advanced countries of the world. 

    Get it done and do it quickly. The country has dug itself a huge ecological hole that may turn into a black hole. Roxas Blvd formerly Dewey Blvd seawall was built by the Americans. They knew then about storm surges. The Pinoy simply just let it happen. 

    It is the State that has to look out fore these things. What happens when the State is missing in action.

    Why bring in the nationalist card when there is no nation. It has been long used to maintain the backward mercantile and creditor class. Pinoys have to leave the country to survive. 

    Bring it on… 

    • One of the things that this article points out is that this issue is not just about the liberalist vs nationalist debate. No one is saying that liberalisation cannot or should not happen, but that there has to be an ordered process towards it.

      We cannot simply swing from absolute restrictions to absolute free markets without having some regulatory supervision to look after the national interest. If as you say the state does not exist or is missing in action, it is time to bring it back in.

      First in telecoms, one wonders if anti-trust laws or competition regulators could address the concentration of the industry after recent mergers and acquisitions by the dominant players.

      Second in education, I am all for the entry of foreign players but they need to be subject to the same local accreditation processes as local schools and colleges.

      Finally with respect to land. The fiscal incentives towards property that have led to a glut (or bubble) have to be withdrawn or lowered and then the vexed issue about  having a land use policy and a regulatory board to oversee large sales or leases involving foreign governments has to be addressed.

      There is more to it than just removing restrictions is my point. Transitional arrangements or laws have to be in place and not just simply “left to Congress to legislate” after these restrictions are lifted.

  • GabbyD

    so specifically about land:

    currently, i’ve heard that there’s lots of idle land. why is this land idle? 

    is it coz of — lack of money?
    is it coz of — lack of things to do with it?

    until we answer that definitively, we shouldnt open up ownership to foreigners. 

  • Manuelbuencamino

    Yes. I too am wary of opening too many doors and windows.

  • As to economic reforms and provisions covering foreign participation and ownership then let the bicameral congress tackle its job of creating new laws deemed beneficial and essential to the good interests of the country and to the Filipino people.  Explain and disseminate the good points to the people and the people themselves will be the ones to press on their Congressmen and Senators to go on with such new laws. 

    Here’s one of Doy’s sentences: “They perhaps knew that a weak state would find it difficult to prevent policies and regulations covering foreign participation and ownership to be corrupted.”  

    Maybe Doy was talking about past Philippine governments so I should like to rephrase Doy’s sentence, thus: ‘They perhaps knew that a corrupt state would find it difficult  to prevent policies and regulations covering foreign participation and ownership to be corrupted.’

    In Noynoy’s government? At their own risks!

  • Joe America

    The essential question is whether the Philippines wishes farming to be an employer of the indigent, small scale farms, free land poorly tilled or fought over by relatives. Or agribusiness. Agribusiness requires big dollars for sophisticated equipment, fertilizers, and marketing. The two everlasting questions, will we accept putting people out of work as laborers in hopes that we can build a real industry that will hire even more people. And will we bring the expertise we need from abroad and give them the right to make profits in our country, for export to theirs (ala Smart today, which ships huge dividends to Great Britain). I don’t care. I’m retired. But you young Filipino whippersnappers looking into the future ought to care. 150 million people fed by hand? Center of Asia, with negligible trade or financial might.

  • The forces at play seeking to revamp our constitution’s economic provisions range from the US and its free market ideals to the People’s Republic of China seeking to push off-shore its agricultural production as it rapidly industrializes on the mainland using neomercantilist policies.
    In between these competing geopolitical players, the Philippines seems to be caught.
    This should make us think twice before consigning the economic provisions of our constitution to the dustbin of history. By the looks of it, the framers seem now to be prescient (instead of out-dated) in hard-coding these constraints. They perhaps knew that a weak state would find it difficult to prevent policies and regulations covering foreign participation and ownership to be corrupted.
    The difficulty of revising the constitution with a super-majority from both houses at least buys us some time to build the necessary knowledge and capacity to withstand such influence from foreign governments and their surrogates if and when these restrictions are finally lifted.

  • The forces at play seeking to revamp our constitution’s economic provisions range from the US and its free market ideals to the People’s Republic of China seeking to push off-shore its agricultural production as it rapidly industrializes on the mainland using neomercantilist policies.

    In between these competing geopolitical players, the Philippines seems to be caught.
    This should make us think twice before consigning the economic provisions of our constitution to the dustbin of history. By the looks of it, the framers seem now to be prescient (instead of out-dated) in hard-coding these constraints. They perhaps knew that a weak state would find it difficult to prevent policies and regulations covering foreign participation and ownership to be corrupted.

    The difficulty of revising the constitution with a super-majority from both houses at least buys us some time to build the necessary knowledge and capacity to withstand such influence from foreign governments and their surrogates if and when these restrictions are finally lifted.

    • Anonymous

      Of course,  cha-cha is not a zero-one proposition.

      The next Pilipinas constitution can have changes for (1) presidential terms (like back to 4-4);  (2) land ownership stays  but allowing foreign ownership of media, telecom, schools,  water- and electricity utilities;  (3) “teeth” to anti-dynasty  so that BongBong, Mikey, Jinggoy, maybe even Kris Aquino gets barred from running for 2016 presidency; (4) other “for-the-good-of-Pinoys-in-Pinas” provisions.

      • Anonymous

        …  and allowing constitutionality of guLLOO idea —- MOA-Ad.

  • Chacha is for Gloria and her minions who were salivating for the rule that would last them forever. It’s a dream that fizzled out due to the alert watchfulness of the Filipino people.  It’s not a change of government that is the solution to the problem of governance but a change of  attitude by those corrupt government officials.

    Greed is greed, whatever the form of government, hence Chacha is not a form of reforming greedy people.

    Chacha is not for Noynoy.

    • Anonymous

      No cha-cha-cha  did not prevent GuLLOOO to give China   access/control to huge tracts of Philippine agricultural land.  PresiNoynoy (over 10 some months ago) did the same, didn’t he???  — giving china access to acreage Phlippine agricultural land.