Constitutional economics

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?