Textbook on the Philippine Constitution [Hector S De Leon]

Article XII

~ATIONAL ECONOMY

AND PATRIMONY

SECTION 1. The goals of the national economy are a more
equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services pro·
duced by the nation for the benefit ofthe people; and an expand-
ing productivity as the key to raising the quality of life for all,
especially the underprivileged.

The State shall promote industrialization and full employ-
ment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of
human and natural resources, and which are competitive in
both domestic and foreign markets. However, the State shall
protect Filipino enterprises against unfair foreign competition
and trade practices.

In the pursuit of these goals, all sectors of the economy and
allregions ofthe country shall be given optimum opportunity to
develop. Private enterprises, including corporations, coopera·
tives, and similar collective organizations, shall be encouraged
to broaden the base of their ownership.

Concept of national economy
and patrimony.
£The national economy refers to the entire structure of economic life

in a country . It encompasses all the activities relating to or concerned with
the production, distribution, and consumption of goods and services, and
what are called "factors of production," i.e., labor (human resources),1 land

1Knowledge has become a most important economic resource in the new wvd d economy
of the 21st century- often even more important than capital, raw materials and technology.
A strong workforce that is s ki!led, highly trainable a nd adap table, in addition to being
proficient in English, is now one big factor for international competitiveness.

354

St:!c. 1 ART. XII.- NATIONAL ECON0~1Y :\NO PATRHvfO:--JY 355

{and other natural resources!, and capital which are utilized to carry out
these activit ies. The different enterprises engaged in these activities as
we11 as the government agenci~s charged with the 1mplementati(JJ) of laws
governing them also form part of the national economy.

Laws on the economy of a country are de~igned to achieve th~ goal of
economic grow th and development and the improvement of the mRterial
welfare of the people.

(2) The mU.i.fmJJl.p_aJril11<J.llY refer s primarily to the natur[tl r esou rces of
our country which under the Const itution include "all lands of the public
domain, waters, minerals, coal, petroleum and otht:-r mineral oils, all forces
of pote"·1tial energy, fisherie s, forests or timber. wildlife, flora and fauna ,"
and "all marine wealth in it-s archipelagic water:-:. territorial sea, and
exclusive marine zone." lSec. 2, pars. 1, 2.) Our .C.W..i.l.H~th~.rita~ (see Art.
XlV, Sees. 15-16.), including historical landmark:-: · ~.g .. Intramuros in
Manilal form part also of our national patrimony.

£.l.Lili.LD.<ll1lrq.l_J'e So1J.[C~.§...M~- ownqd by the Sta~. i.e., the Filipino
people as part of their common heritage frum their forefathers. Jt is the
obligation of every generation of Filipinos tu Jon? and ca re for their na-
t ional patrimony, to conserve and develop it for the bt:ncftt of succeeding
generations.

Three-fold goals of the national economy.

As stated in Section 1 (par. 1.), they are as follow~:

ffi .Eq't-lity.J. i.e., a more equitable distribution of opportunities, income

and wE)alth. There are many causes of economic inequalities (e.g., differ-
ences in abi lity, education, tax poli cies, etc. ) as there are as many stratc·
gies to lessen them (e.g., minimum wage lmvs, tax and price policies, ct.c. J.
One important aid in promoting equity is the control of monopoly and the·
prevention of unfair competi bon (s ee Sec. 19.};

Rt(Gtow.J.!J.J. i.e., a sustained in;::rease 1n the amount of goods and

services produced hy the nation fnr the benefit of the people. Economic
growth is conventionally measured by the increase of the gros::; domestic
product (GDPJ which is the estimated total value of a11 goods and services
produced by the economy in a given year and gross national product iGNPJ
which is equal to GDP plus receipts or income from abroad (e.g., mainly
overseas workers' earning rernitt.ances}.2 Economic growth is propelled,
among others, by improv~mcnts in techniques of production and increase
in capital inve:->tments: a nd

2By practic.e. w~ nvrma lly m~a:un: the cr!U nt ry's nation al ~n.1wth and decline in terms of
the yt:!arly comparislln ofG:'\P <md GOP. To ;;p(!ak uf ('OmpN iti,·''nl:'s~ is to measure oun;eh-e;;
against t he economic achil!,·t!m ents of to thc:r .::,lurot rit>s aud unt n,.,,·,:'ly by the rate of incre·
m ent;; to our economy a y(:ar. \\'e t t'nd to np·.:.rt our l:'conomH: ach il:'\'l:!ftH:'nt" with lirtb rnganl
to t.ht> re la tivl:! accomplishm+>nb of othE-r .:cunrnnic" in our rc giun. The fi,_ct i.; that many of
tht:!m are growing faster th<tn we arE'.

356 TBXTBOOK UN 1'Hi:' PHI LIPPJNI-: CONSTITUTION Sec. 1

,}X(£L<'d1Js;J.(tj,Jy., i. e.. a n expanding producti vity al:> the key to rai sing

the quality of life for all, especially the underprivileged. P roductivity is the
ability, capacity or degree of effectivenesR for ma king greater (and/or bet-
ter quality) outp ut out of every unit of input employed (e.g., per worker, per
hectare of land ). Labor, for example, is m ade more efficient by specializa-
tion, on-the-job training, or education. Use of labor-saving devices , applica-
t ion of scientiflc methods or knowledge in the production processes, mana-
gerial innovat ions, e fficie nt u se and a llocation of resources, etc. , ~romole
the rise of output. Better education and health also affect productivity
positively and significantly.;1

Strategies to accomplish goals.

Jn the pursuit of the goals of the national economy, the Const:tution
mandates the State in Section 19 of Article II and in Section 1 above, aside
fro m oth er provisions:

(1) to develop ~ self-reliant and independent national economy effec-
tively controlled by :Filipinos ,

(2} to promote industrialization a nd full empl oyme nt;

(3(to protect J.'ilipino enterprises against unfair foreign competition
and trade practices;

(4'1 to give all economic sectors (e.g., agriculture, industry, banking, ex-
port, etc.) and region!) of the country optimum opportunity to develop; and

(51" to encourage private enterprises, including corporations, coopera-
tives and similar collective organizations to broaden tlw bast': of the ir
ownership.

Guidelines in the development
of the national economy.

.. The Constitution in Section 19 of Article II sets three guidelines in the
development of our national economy, namely:

(1) Self-c.elig..nt scanomy.- In providing for economic self-reliance, the
intent is ·not to pursue a policy of econo mic seclusion from the international
economic community, for the Philippines cannot possibly be completely
self-sufficient as to avoid the need for imports or assistance from other
countries. Self-reliance simply means that the Philippines must have the
ability to cope with itR economic problems or to im plement its development
programs by the use of its own resources with a minim um of dependence
from foreign governments, investors or financing institutions for loans,

"R)iising productivity beginfl with investments in hu man capital, which means more
fu nding for public e du cation and hea lth. Schooling hnild~ and hones an indiv idual's s k ills,

allowing hi m to contribute more to the Philippine economy. Likewise, a healthy wor k er is a
more productive one, because he can generate better quality output, a nd more consiste ntly
because he iRn't sick and absent as often.

Sec. 1 ART. XII.- NATIONAl. ECON0:>1Y AND PATHTMO!'JY 3ii7

investments or aid. It does not mean economic self-sufficiency. No nation
produces everything its people need;

(2) lncleeenc:(f,IA' economv. - 1'he national economy must bt:- free from
undul:! foreign control or intervention. Thi~ i~ especially true in such vital
or strategic industries as the development of natural resources and public
utilities where foreign interference could cau~e incalculable harm to the
nation; and

(3 } .§so'J:.O..'!JX..!ft!s.t.~vs.Z'Y..J/2!l!~g..H~fL£v [iJJ£~liOS) - "T h e principal re-
sponsibility for developmen t belongs to Filipino citizens. They must be t he
principal determinants as well as the chier benefic iaries of economic
progress."4 While foreign capital is allowed t0 come in, the Constitution
limits the same to major industries but insurin ~ th a t control rests on the
h ands of Filipinos. It is the duty of the governmE-~t t o gi,.c full support and
assistance to Filipino businessmen and enterpn ~ t-;; in gaining more and
more control over the economic destiny of the nat i('.n and to S£~e to it that
the rewards of economic growth a re enjoyed chtetly bv th.:- Filipino people.

At the same time . the fact that in a free e~terpri ;:e :. y~tem, economic
growth depends primarily on the private ~ect or po;: e;: a challenge to Fili-
pino capitalists to ass ume the main re;:pon~ibility for a chie\"ing the goal of
economic self-reliance and inde pendence to gi\·e those of our countrymen
who live in poverty and misery a chance to attain a higher level of liveli-
hood.

The provisions of Article Xll are to be intC'rp reted with the above
guidelines in mind!'

Promotion of industrialization
and full employment.

(].) Importance and urgency in the Philippines. - For a developing
country like the Philippine s, with a large population growth and an excess
labor supply, there is an inherent advantage in adopting a development
strategy that promotes industrialization and full employment.

An impm·tant aspect of indu strialization is that it generates a high
level of e mployment. Factories a nd industrial sites create job opportunities
and thus create sources of livelihood for the people. The high incidence of
poverty in the country is rooted in the social scourge "that is unemployment .
Our nation will never recover economically, and social peace and politit·al
stability will never come to our land as long as the problem nfmass poverty

'"The Challenge to f ilipino But>incssmen," address of Pres. D. M f!vllp ago l befor e the 7th
National Convention of Filipino 13u;; in c~smen. Baguio, Feh. 21 , 196:t

"There are nationalist provision;; in Article XII :i.e., S!:!Cs. 2. 3 7. 10. 11.i which critics
claim have proven to be a bane rather than a boon for the~ coun try for ~hey have restricted or
discouraged the flow of direct foreign investments. While th<:s!'! prvvi .;; i~ms (see Art. XVI, Sec.
11.) may be very well·meaning and a ppea r to favor the intcrc~t::; of Filipino.;;, over the long
haul, t he country and the common good of all .Filipinos suffer. They believe in the ncP.d to
amend the Constitution to elimina te these protectionist provisions .

3ti8 TEXTBOOK ON THE PHJLIPPINE CONSTITUTION Sec. 1

per~ iHs. The first step towards the sol ution of the problem is, therefore,
the creation of massive work opportunities that will absorb the millions of
unemployed and underemployed labor in our country today, and this can
only be done through full and rapid industrialization.

(~} The governm ent should natur ally pursue an iudustrialization
policy that promotes a high rate of employment. For instance, in view of
the magnitude of th e unemployment situation a nd the dearth of domes-
tic capital resource, the government should encourage labor-intensive
industries first as against those which are capital-intensive.

(b) Also, industrialization need not be associated wi th large busi-
ness. Small and medium-scale industries require little investm ent but
employ more people per unit of capital-us e.

(c) The same is true of "industties that make full and efficient use
of human and n atura l resources." (par. 2.) E conomic efficiency mini-
mizes costs of production and prices of goods, thereby making them
more "competitive in both domestic and foreign markets." They gener-
ate a h igh d egree of e mployment and earn foreign exchange tor the
country while contributing to industrialization. These industties should
be given greater incentives .

(,.d ) Competitiveness implies the ability to compete with imports in
the local market a s well as the ability to export and compete in the
world market. It me ans producing goods th at satisfy consumers both in
their price and quality and are comparable with imported g~ods enter-
ing the domestic market. Inefficient Philippine industries cannot sur-
vive under a liberalized global trade era.

Capital and labor are sai d t o be com plementary. With more capital
invested in business, more labor will be hired . Hence, any development
policy must be de!:!igned to improve the climate for investment in all sectors
of the economy.

(2) Based on sound a_gricultural development and agrarian reform. -
Stati stics show that ove:t 70% of the country's population of about 65 mil-
lion are totally dependent on agri culture. It is not only the main source of
livelihood. It is also a source of supply of food, industrial raw materials,
labor a nd ca pital for other sectors of the economy,6 and ex port earnings. I t
provides a market for products of industry. Agricultural development is
important to a low-income country like the Philippines with a large agri-
cultural basf!. It should be gi ven more attention before undertaking large
projects in industry (e.g., shipbuilding) or even large-scale public works
projects (e.g., superhighways). Agrarian reform takes on a central posi tion
as component of policies for raising agricultural productivity. (see Art. XII,
Sec. 4.)

In fact, the P hilippines cannot industriRhze without agricultural dt!vel-
opment and agrarian reform. Industrialization needs surplus agricultural

"The agricult-ural ~ector is a significant fa ctor in GNP and GOP. (~;upra.;

Sec. 1 ART. XIL- NATIONAL EC0~0~1Y AND PATlm.!ONY J5H

crops as raw materials from developed agriculture and agrari.an ref()rm,
mass purehasing power resulting from increased income of tltt:> rural popu-
lation, labor snpply reh.>ased from the agri<.:altural sector a:-; it ancreases its
productivity, and capital from savings of farmer!; and lando\•;ners and from
lands (:l)vcrcd by agrarian reform. Agriculture as a source of export earn-
ings even assists industry in providing its foreign exchange need~. The
country can no longet· afford to neglect agriculture in a premature effort to
industrialize. All the "tiger economies" of Ea;;t Asia have anchored their
industrialization on agricultural modernizatil•n. ·

. ~3J Balance between agri~.:ultural developmdit (I nd industrialization. -
In mandating the promotion of industrialization and full employment based
on or consistent with sound agricultural de\'elopm(•nt and ns!rarian reform,
the Con!:ltitution means that the State mu~t pur5ue an agro-industrial
strategy of support for hoth agriculture and industry with the former
providing the vital support to the latter. In other words, the primary
emphasis shaH be on agriculture and as agricultural growth is being
achieved, the emphasis shall increasingly shift to ind~::strial development.

(41 Adoption of'a flexible economic polic_;·. -In any en~nt. ''all sectors of
the economy and all regions of the country shall be giYt-n optimum opportu·
nity to dPvelop" (Sec. 1, last par.}, meaning that the State can adopt a
flexible policy to decide on the appropriate balance between agriculture
and industry at any stage of the development process that will best achieve
the goal~ of the national economy. Agricultural deYelopment must be pur·
sued not at the expense of industrialization but on a complementary basis
to insure the growth of both.

Protection of Filipino enterprises against unfair
foreign competition and trade practices.

The pt"otcction guaranteed is not against foreign competition but uufai!:

for:eign_compclitivu and unfair. foreign.~rade practices,. The goYt:rnn~\."::1:
may grant protection through high tariffs or even import control.:; to :-·(;Cln~

and growing Filipino indu:.->tries to shield them from undue foreign <'orr.pt-:i-
tion in thei.r infant stages.

( l1 P<~nrwnent protedion not contemplq.ted. -- But protect1(•:: i~ not
intended as a permanent support for "non-infant" enterpris.-~.

(.f'-1. Absolute protection creates an t.>conomy of ind'ticit-~t :ndu.6tries
producing poor qualjty products exorbitantly prict'd. th<: high-eo~t of
which is borne by the people particularly the poor. !Oimply hPcau::le they

7A ~~lund rural devclopm.:-nt program is the antidote to th(· anrE-stricted rural-to-urban
populaLion mo\".:!mt•nt. Such program wvuld E-n<'ourag<: rural prJpu;ations to remain in their
provinces or town::; for it is <>xp.ected that employm~P.: c.~pe;rtunities and better living
C(>nditions would be gcncratt:d bv ~hP. program. Tcchnu'a: ;kilis and agricultural training

should be a vital component of the pwgram to a:;sur.:: it!' long-term success.

360 TEXTBOOK ON THE PHILIPPINE CONSTITUTlON Sec. 2

ar e not subject to sufficient competition. It perpetuates the "colonial
mentality" of Filipinos to prefer foreign goods a nd not local products.6

(.b) Fur thermore , it deprives the government of revenues by reason
ofreCluced imports or ban on imports.9 Where quantitative controls are
imposed, the tariff revenues tha t otherwise should have been coll ected,
go instead to the specific protected manufacturers. This is especially
without j ustification if the "infant" industry has developed to become
successful. Having attained greater efficie n cy, the price of its products
should fall and, hence, benefit consumers.

(S) It is a lso prejudicial t o some in dustries t hat need impor ted r aw
materials for processing of products for domestic sale or expor t.

(d) Finally, the Constitution reject s t he principle of absolute pro-
tectionis m also becaus e it would invite retaliatory measures by other
countries.

( 2 ) W..hen .Pr.C!~~~.Jjof!-..iJ!:.~tj[~e_4_. - On the other hand, tari!fs and quotas
a nd other barriers to trade (e.g., quarantine regulations for agricultural
products and standard regulations for industrial products) may be a fea -
t ure of the trade policy of other nations, or multi-national corporations
...rloing business in the Philippines may resort to unfair trade practice::; (e.!{.,
..dumping of excess products, · excess ive charging for royalties . denial of
access to t echnology, etc.) which are injurious t o local industries. In such
case, the government mus t t ake meas ures to pr otect local industries.

The Philippine government has the exclusive right t() defin e ·.vhat shall
constitute unfair foreign competition or trade practices j ustifying protec-
tion of Filipino enterprises.

SEC. 2. All lands ofthe public domain, w at ers, minera ls, coal,
p etrole um, and other mineral oils, all forces ofpotential energy,
fisheries, forests or timber , wildlife, flora and fauna, a n d other

n a tural resources are owned by the State. With the..exceptiQD..9f
~Jrri~!!Jll!t:~l.J.~t:l~~' ..!!ll.Q~h.~t . !1.!\!'!!l.:l.iJ. _,rEIS~!l,t~t;~s sl!.~U... l10t b e

.alienate d. The exploration , development, and u t iliza t ion ofnat u·
.=airesources shall be under the full control and supervision of
the State. The State may directly undertake such activities, or
it may enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations or
a ssociations a t leas t sixty per ce ntum of whos~ capital is owned

&'J.' he failed economic policies of rhe past continue to aff~:~ct th•': l:oun try. The culpri t is
excessive protectionism which has stifled competition and the grow~h of c nte rpri se t:\ a t the

gra!H>root;; l evel a nd allo wed a favored few large-scale, capital intensive, and urb11n·hased
industries to enj oy m onopoly privilegel:i and benefits from th~ir dominance of key J;ecton; of
the Philippine economy.

9High t ariffs on impor ts an d import controls in the pa;;t had made smuggli ng profitable
for ~he clever with poli t ical connections.

ART. XII. - NATIONAL ECO~O~tY AND PATRIMONY 361

by such citizens. Such agreements may be for a period not
exceeding ~Ye}!~$, renewable for not more than-twenty~
_fiy~ y~~!:..~ and under such t e rms and conditions as may be
provided by law. I n cases of water rights for irrigation, water
supply, fisheries, or industrial uses other than the development
of water power, b eneficial use may be the measure and limit of
the grant.

The State shall protect the nation's marine wealth in its
archipelagic wate rs, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to Filipino
citizens.

The Congress may, by law, allow small-scale u tilization of
natura l resources by Filipino citizens, as well as cooperative fish
farming, with priority to subsistence fishermen and fishworkers
in rivers, lakes, bays, and lagoons.

'J.1l:~~esi~~pt may enter into agreem ents " jtb foreign-
.C?W:ll.e~..~Q..-.;:po.rations involving eit:b.~r. techn.ic~_Q:r_ ~ancial as-
sistance for ~~.ttc_~.e explorati9J;11 cleveJgpment, ~~L~tiliza·

ti~m. Q{Pl.in_e_rab~ petroleum. and .other mineraloi Is according to

.the. ge~e-;~1 te~s and conditions provid~ d bylaw.,.hased on real
~.ntriputions to tb.e economic growth an~ ge nera) .~~l(.J!..re oft.he
~o~,n,t!Y. In such agreements, the State shall promote the devel·

opment and use of local scientific and t echnical resources.

#rhe .P.J:.~~j.~ball_~Q~#'y.J};t~L(:Q.~~~.ss. ()f. (;_l Y~IT. .!!..Q.I!ka<;:t

entered into in accordanc e· w-·-i·-t·-h-th-is-p·-r··Qvis·iOildYithin...t.h.irty

·-·ciai~.r.iO.~ l!~·~~~ec~tioo.
...

State ownership of natural resources.

The Constitution declares that all lands of the public domain and all
other natural r esources of the Philippines "are owned by the State." (par.
1.) In furtherance of the constitutional policy on natural r esources, S~ction

2 }:trohi.bits._the. tr.a.ns.fe..r o.r_c.OD.Ye~ce .to..alie.n.a of_priYa.te.Jands save in

ltere~i.~-~ r..Y._.~.!.l S~~s.ig_fl.. (Sec. 7, infra .)

U J Our Constitution adopts the &g_a.li.wui.o.c..tl:i.a£. with respect to the
natural resources of the country_ This doctrine holds that all minerals,
coal, etc. fo und eithe;r jrt.pp_P.l~. lands or in private lands belong to the
State_ The adoption of the Regalia.n doctrine was considered a necessary
premise for the recognition of the power ofthe State to control the explor a-
tion, development, and utilization of our natural resources.

(2) Under the doctrine, all lands of the public domain belong to the
State and lands not otherwise appearing to be clearly within private
ownership are presumed to belong to the State. Unless public land is shown
to have been reclassified as ali enable or disposable, and subsequently

36:2 TEXTBOOK ON THE PHILIPPINE CONSTlTV'riON Sec. 2

alienated by the State, it remains part of the public domain. Occu pation or
possession thereof by a person in the concept of owner, no matter how long
cannot ripen in ownership. l

Objectives of policy on natural resources.

The adoption of the Regalian theory of ownership oYer the national
resources of the country was deemed necessary:

(-I) to insure their conservation for Filipino po$terity;

~2) to serve as an instrument of national defense, helping prevent the
extension into the country of foreign control through peaceful economic
penetration; and

(3) to prevent making the Philippines a source of international con-
flicts with the consequent danger to its internal security and independ-
ence.

With respect to the second and third objectives, an example is atfo rded
by the case of Texas. This state was originally a province of Mexico. In
order to insure its rapid settlement and development, the Mexican govern-
ment offered free land to settlers in Texas. Americans responded more
rapidly than the Mexicans and soon they organized a revolt against Mexi-
can rule and then secured annexation to the United States. A new increase
of alien landholding in Mexico has brought about a desire to prevent a
repetition of the Texas affair. Accordingly, the Mexican Constitution of
1917 contains serious limitations on the right of aliens to hold lands and
mines in Mexico.2

The tendem~y of present legislation the world over is t.o place natural
resources under public ownership and controP

~nation of agricultural lands

· of the public domain.

The State is not authorized to alienate, not even to Filipino citizens,
~he natural r esources of the country. Only agricultural lands of the public
domain may be alienated (Sees. 2, 3.), and only to I•'ilipino citizens. Aliena-
tion is allowed because other provisions insure their conservation and
development by Filipino citizens (see Sees. 3, 5, 7, 8, 10.) so that such lands
may be utilized and developed for the benefit of Filipinos.

'C.A. No. 141 (Public Land A~_:t), a!! ame nded by R.A. No. 9176 (Nov. 11, 2002), provides

for the filling of applications for administra tive legalization (Free Patent} and judicial

confirmation of imperfect and inc(•mp!ete titles to alienable and disposabl e lands of the
public domain, e~tending the period for filing until ..»ecember 31 , 2020.

2Report of Committ ee on Nationalization and Preservat ion of Lands and Other Natural

Resources, 1935 Constitu tional Con vent.ion.
~v.G. Sinco, op. cit., p. 447.

Sec. 2 ART. XII. - NATIONAL ECONOMY AND PATRIMONY

. .Exploration, development and utilization
of natural resources.

(1) Fo rmer scheme. - Before, the exploration, etc. of any of the natural
resources may be granted by the government by license, concl:!ssion or lease
to citizens of the Philippines or to corporations or associations at least 60%
of the capital of which is owned by such citizens. Th e role of the goYern-
ment was merely to give the permission.

Under the licensing, concession, and/or lease scheme, the government
benefited from such activities only through fees , charges and taxes. Such
benefits were very minimal compared with the enormous profits reaped by
the licensees, concessionaires or lessees who had com plete cont rol over the
particular resource over which they had been giYen exclusive right to
exploit. Moreover, some of them disregarded the con:;ern1ti on of the natu-
ral resources.

(2) More active role by the State. - Section 2 now requires that the
State should take a more active role in the exploration. developm ent and
u tilization of natural resources. It provides that such act i ,·i tie~ sh:'\11 be
under the full control and supervision of the State. This is ccmsistent with
the declaration that all the natural resources of the country are owned by
the State. It is also in recognition of the importance of ou r natural r e-
sources to our n ational security and economic development.

(3) Options available to the State. - The State (a) may un dertake such
activities directly, or (b) it m ay enter into co-production. joint Yenture, or
production-sharing agreements with Filipino citizen~ or corporations or
associations at least 60% of whose capital is owned by such citizens (par.
1.), or (c) it may enter into agreements with foreign-owned corporations for
large-scale exploration, e tc.• (par. 4..) :I'he old system whl:!reby the natural

resources a re explored, ~tc.1 by license or concession without any participa-

tion of the State is no longer allowed.

With the new role, the State will be able to obtain a greatc~r sh ara in the
profits. It can also actively husband our natural resources and engage in
developmental programs that will be beneficial to tht1 nation.''

Period of agreement for exploration, etc.,
of natural resources.

( 1) The agreement for the exploration, development, or utilization of
any of the natural resources may be for a period not e xceeding twenty-five
(~5 ) years, renewable for not more than twenty-five (25 ) yea rs. (par. 1. )

'These three {3) major schemes are implemented by Executive Order No. 279 (July 25,

1987).
61986 UPLC Constitution Project, The National Economy and Patri mony, pp. 10-1 1.

TF:XTSOOI< ON Tim PHILTI-'1-'INE CONS'l'ITUTIO:'-< Sec. 2

1'his period is believed Long enough for capital , local and foreign, to r ealize
profit on investments in natural resources.

(2) With respect to water rights for irrigation, water supply, fisheries
or industrial uses (other than the development of water power in which
case the 25 -year limit is applicable), the mea::>ure and limit of the grant is
their beneficial use. (/ bid.) The peri od of twenty-five (25) year s is consid-
ered not a satisfactory criterion for these resources as it might be too short
in some cases and too long in others.

Agreement for exploration, etc., of natural
resources limited to Filipinos.

The agreement for the exploration. development, or utilization of any of
the natural resources of the Philippines is limited to citi:?.ens ofthe Phili p-
pines, or Lo corporations or assuciation:s at least 60% of the cupital of which
is owned by such citizen~. (par . 1.) The 60 % equity requirement is in-
tended, among other pu,·poses, for the congervation of indigenous natural
resources for Filipino posterity.

The participat1on of fureigne rs in the governing bodies of public utili-
ties is limited to th<!ir proporti(}_nate shar~ in the capital thereof. (Sec. lU
Such limitation is not necessary with respect to corporations for the explo-
ration, etc., of any of the natural resources because the Constitution ex-
pressly provides that the activities shall be under the full control and
supervision of the State. (see infra..)

., ·Protection of marine wealth.

;

The State has the obligation:

( 1) To protect the nation's marine wealth in its archi pelagic waters,
territorial sea, and exclusive economic zone \see Art. 1.); and

{2) To reserve its use and enjoyment exclu.c:;iuely to Filipino citizens.
{par. 2. )

Marine wealth includes everything found in the sea, life and non-life.
For economic reasons alone, the Philippines is fortu nate to have been an
archipelago. Scientists believe that, mile for mile, the sea which covers 70*
of the earth's surface will be able to produce more food t han the land. Yet,
at present, it is estimated that the oceans supply o_nly about 2(k of man's
food. And much of the treasures in the ocean depths are stil1 untouched
such as minerals, oil, gas, coal, silver, gold, aluminum, and other resource
deposits. At the rate man is destroying his environment and with the world
population growing at an alarming rate, he may sooner than expected turn
to the vast oceans and seabeds for survival - economic or otherwise. With
new technology and scientific skill, the sea can be the inexhaustible source
to meet the world's need for food , water, and e neq,ry.

The reservation of our marine wealth for the use and enjoyment of

s~c .!,! ART. XII. · NAT IONAL E CO :\O~lY A>i D PATH!t.IO~Y 365

Filipinos is directed at the unfair competit io n pos ed by fully t!quipped 1
foreign vessels that poach on Philippine w a t e r :;..•·

Small-scale utilization of natural resources

by Filipinos to be allowed.

Aside from the t.hree <3) major schemes fo r the exploration, de"e lop·
ment, and utilization of our n a tural resource:;. Congress may, by lay;, allow
( 1) their sma11-scale uti lizat ion by Fil ipino citi7.ens. a~ well as (2Ycooper a-
tive fish farming with pri~rity to subsistence fi :;h(>rmen and fishworker s in
rivers, lakes, bays, and lagoons. (par. 3; see Arr . XIII. Sec. 7.)

The provision is in recognition of the plight o f forest dwellers, gold
panners, marginal fi shermen and others simil a rly sit uated who exploit our
natural resources for their daily sustenance a nd ,;urYi\·al.'

Technical or financial assistance agreements
with foreign-owned corporations.

This refers to the third major s cheme for t he explor ation . development,
and utilization of our natural resources. The Con,::titut ion imposes the
foll owing conditions on such a greeme nts ente red i nt l) hy the President :

(.1.') The a greement must involve only either technica l or financial a s-
sista nce;

( ~) Tt must be for large-scale exploration, etc-. of minerals , petroleum
and ot h er mineral oils;

(;3-) Its provision s must be according to tht' g.,.ne ra l terms and condi-
tions provided by law, based on re al contrib ution:'= to the economic growth
and general welfare of t he coun try;

(4) The President 8hall subsequently notify Congress of the contract
with.in 30 days from its execution; and

(!;) In su ch agreement, the State shall promote the development and
use oflocal scientific a nd technical r esources. nast pa r .)

Under the form er servi ce contract provision of t he 1973 Constitution,
exclusive management and control could be given to foreign service con-
tractor, thereby legitimizing that which was prohibited by the 1935 Consti-
tution - the expl oit atiofl of the country's natural resources by foreign
nat ionals. The new rul e recognizes the need for foreign capit al and technol-
ogy to develop our natural resources without sacrifi cing our sovereignty
and control over such rf'sources since the foreign ~ nt.ity is j11st a pure

6R.A. No. 8550 t Fe h. 25. l~J9 !, '· o)t!'Jcrwise known ns : "Th£: Ph ilipp ine Fi E; h.eries Code of
1998 .'' provid os for the deve-lopm en t . man <~ ge :'IH· nt . and conser \'iJt ion of th e fisheric~; a nd

acqu 11tic r esources, a nd integrat es all la w" p~:runent thtri'H.>.
11986 UPLC Constitu t ion Pmject. not!' 4 . p. 11

TEXTBOOK ON THE PHILIPPINE CONSTITUTION Sec. 3

contractor nnd not a beneficial owner thereof.8 Note that service contracts
are permitted on ly with respect to those enumerated in No. (2).

,_ SEC. 3. l,ands of the public domain are classified into agri-
cultural, forest or timber, mineral lands, and national p arks.
Agricultural lands of the public domain may be further classi·
fled by law according to the uses to which they may be devoted.
Alienable lands ofthe public domain shall be limited to agricul·
t.ural lands. Private corporations or associations may not hold
such aliena ble lands of the public domain except by lease, for a
period n ot exceeding twenty-five years, renewable for not more
than twenty-five years, and n ot to exceed ~~~_!~_ll.~~8.:~.~ ~!_~~~~!"~§
in area. Citizens of the Philippines may lease not more than five
hundred hectares, or acquire not more than twelve hecta res
thereof by purchase, homestead, or grant.

Taking into account the r equirements ofconservation, ecol·
ogy, and development, and subject to the requirements of agrar-
ian reform, the Congress shall determine, by law, the size of
land s of the public domain which may be acquired, developed,
held, or leased and the conditions therefor.

~sslfication of lands of the public domain.

Thi~ provision classifies lands of the public domain into four (4) catego-

mries according to their specific uses, as follows:
Agricultural. - Land devoted principally to the raising of crops
such as rice , ~mgar, tobacco, coconut, etc., or for farming ;

(2'} Forest or timber. - Land producing wood, or able to produce wood,
or if agricultu ral crops on the same land will not bring the financial return
that timber wiJI , or if t he same land is needed for protection purposes;

(/J"(Mineral. - Land in which minerals exist in sufficient quantity or
quality to justify the necessary expenditures to be incurred in extracting
and utilizing such minerals; and

V¥(/vational parks. - Land maintained by the national government as
a place of beauty or of public recreation, like the Rizal Park, or forested
land reserved from settlement and maintained iri its natural state for
publ ic use (as by campers or hunters) or as wildlife refuge.

Congress may further classify by law agricultural lands of the public
domain according to the uses to which they may be devoted. For instance,
they may be classi fied as residential, resettlement, grazing, etc.

~Ibid., pp. 11 - 13.

Sec. 3 ART. XII.- NATIONAL EC0:\0:0.1Y A!'J"D PATRIMONY 367

Basis and rationale of classification.

(1) The classification of lands of the public domain is based on the
nature of the land. Under the 1973 Constitution, they are classified into
agricultural, industrial or commercial, residE-nria1 , resettlement, mineral,
timber or forest, and grazing lands, and such other classes as may be
provided by law.'

(2) The rationale for the change is to limit the lands of the public
domain which may be alienated to public agricultural lands. This would
prevent the widespread and indiscriminate disposition of public lands,
e specially timber and mineral lands which occurred in the past by the
simple expedient of classifying such lands into industrial, commercial,
residential or resettlement laads. The new classification provides a safe-
guard against land speculation.2

Determination of size of landholdings
and conditions therefor.

The Constitution authorizes Congress to detE-rmine by law the size of
alienable lands of the public domain which any qualified individual , corpo-
ration , or association m ay develop, hold or acquire. or lease, and t he
conditions therefor.

In the exercise of this power, Congress must take mto consideration the

conservation, ecological,a and developmental requirements of the natural

resources and subject to the requirements of agrarian r eform. (Sec. 3.) This

is so because there are irreplaceable natural re~ources. There are also

those that have to be replenished, like timber. If ther(! is no requirement

for reforestation, for..example, our couniry may become a desert. According

to studies made(~2% of the land area of the Phil ippi nes should be forest in

order t<l maintain-the proper ecological balance.• ·

Maximum size of landholdings.

The extent of landholdings by individuals and private corporations
satisfying the nationality requirement imposed by Section 3 (supra.) is
subject to restrictions imposed by the Constitution, as follows:

' Art. XIV, Sect.ion 10 thereof.
~ 1986 UPLC Constitution Projod, Note 4, p. 21.
JP1·e~cnt. la ws on environmental protection are Presidential DecrtJes No. 1121 iApril 18,
1977"1 which createl' t he Natioo ni'E n vironment Council; No. 1151 which embodie;, t he Philippine
environmental policy; Xo. 1152 !Jnn e 6, 1977) ~nt.i tled "Philippint> En vi ronmental Code" which

prescribes environment qualily s tllndards; and No. 1586 iJune I I., l 978• which establishes an
environmental imp;H.:t ~tatem•~nt sy~tem bast>d on the environmental st:lteml'nt required (under

Pres. Decret• Ko. 115li of all go"ernment and private entities for e,·ery proposed project and
undertaking which signiftcantly <1ffect~ the quality nf em·ironmt>nt. L'nder Article II, Section 16,

the State is mandated to ")-totE•d and l:ld,·an"e th" right of the pii>vple to a balanced and healthful

ecology in accord with the rhythm and harmony of n1:1ture."

•Del. .J.A. Madridejos, Sr.. "The Patrimony of the Nation,'' in C.R. Montejo, The 1973
Constitution, p. 250.

368 TEXTBOOK ON THE PHILIPPINE CONSTITUTION Sec.3

(l J....fu.div.idual,_- The maximum area of public agricultural lands that
may be acquired by purchase, homestead or grant is. 12 hectares (reduced
from 24 hectares) and by. iease, 5oo -·hectares. ·Aside from purchase and
homestead, grant by t he Sfate_h.as been added by the 1984 constitutional
amendments to the 1973 Constitution as a new mode for the acquisition of
lands of t he public domain by individual citizens. Aliens may lease private

~I?:~~----~-U.~. not l a~~s__?.!..~l)~ p~~h~ _4_()I.Ilfli!b and · ··· ··· · .... ···· · -- ······· ···

(2) C.Q.T:PQra_tioT?.§__a_rJd. JL?..SQ9.~~tj_g_n_~- - The maximum area that may be
leased is 1,000 hectares. The lease period shall not exceed 25 years renew-
able for not more t h an 25 years.6 Priy.ate corporations..o:r _a.l;lsociat.iQn~-~yen
liV.i.th.~.l90%. Filipino. capital, can qo longer acquir~ }ap_c,is__ g_f_.t_b_~ ___py_b_lic
d_qwain by purci?~~e- The prohibition limits. land owner ship t o private
individuals who may acquire not more than ~2 h ectares. Qualified corpora-
tions and associations may acquire p,riy~te lands but not alienable lands of
the public domain except by lease. <par. 1.)

The a bove provision was inspired by a desire to prevent t he forma tion
of big lande d estates which the experience of the Philippines as well as that
of other nations had shown to be the cause of many agrarian troubles and
social unrest, and at the same time to increase the number of landholders in
t he Philippines, thereby promoting social and economic stability. Indeed, the
purpose of the constitutional provision is to equitably diffuse land ownership
or to encourage "owner-cultivatorship and t he economic family-size farm,''6 as
a measure to bridge the widening gap between the rich and the poor.

Grant, now a mode for the acquisition
of public lands.

One of the controversial constitutional amendments to the 1973 Consti-
tution ratified by the people in the 1984 plebiscite is that which gives to thE'
government the authority to grant alienable and disposable public lands to
qualified individual citizens. By grant, of cour se, means that the recipient
will not pay for the land, although he ma y be made to shoulder the cost of
titling and sur veying. A~ conceived, the grant or distribution of public
lands will be integrated in the agrarian reform program which the State is
mandated to undertake (Art. XIII, Sec. 4.) and which is now being adminis-
tered by the Department of Agrarian Reform.

Proponents of this amendment claimed t hat it is necessary and desir-
able for the following reasons:

().) It is a timely step in making vast parcels of idle public lands
avaH'able to the less fortunate citizens and in boosting agricultural produc-
tion in the country;

~Jbid. l.Lo.dilr.f.r~~id,ential Decree No. 471, the maximum period allowable.for the dura·

J:ion.oU!.1.aSeS. Q(.W:lY.<I~~ lapcls.Jg.~.li~n..s.J.~.§.Y.~ .r~J!!!.WJI.J?l.~ f9r...~Mther p~r_icgl_ (!f ~R.S~

u pon mutua l air~..2i..D.9.ili.Jn.~.U114.l~J!e~tt:
~Ayog vs. Cusi, Jr., 118 SCRA 492, Nov. 19, 1982.

ART. XIl. - NATIONAL EC0~0~1Y A::-iD PATRI ~f();-.;y 369

(2) Before the amendment, individual citizens could acquire in owner-
ship , allenable lands of the public domain either by purchase or by home-
stead in areas not to exceed 24 hectares. ~lost of the landless small farm-
ers, who comprise the majority of the rural population, cannot afford or
find it burdensome financially to acquire public lands through purchase.
On the other hand, the other mode of land acquisition is often too tedi ous
and complicated. The cumbersome requiremenr ,; and procedures pro\·ided
in the Public Land Act IC.A. No. 141, as am E-nded. I tend to discourage
qualjfied applicants. Thus, only individuals with considerable resources
have been ahle to a cquire public lands, defeating ~he con stitutional inte nt
to benefit small settlers in ~he distribution of public lands to uninformed
hut deserving citizens within a relatively short period of time;

(P'} The land grant is designed to benefit only qualified farmers, land-
Jess agricultural workers, and other landless cit; z~n ::.. ~1oreover, the De-
partment of E nvironment and Natural Resources ha::. a lready reduced the
maximum limit of 24 hectares to six <6) hecta res ~to easure that every
landless Filipino will have the opportunity to acquire land." Under the
resettlement program being implemented by the De-pa nment of Agrarian
Reform, the maximu m limit is also six (6) hectare s:

<4·) A simple method of land acquisition ha,- become imperative to
legitimize the tenure of some three million la ndle-5-s agricultural workers
and landless families now occupying or "squatting.. on public agricultural
production and economic development; and

(~) The a mendment gives more meaning and ~ubstance to existing
provisions of the Constitution on social justice and renders public land
distribution mor e honored in practice than in theory . Besides, impleme nt-
ing legislations will provide safeguards to prevent abuses and to ensure
that public lands of suitable areas will go to the reall y deserving.

Those against the amendment have expressed fears of its being "abused"
contending that it involves too vast a power to give to anyone, involving as
it does the patrimony of the nation which the government is duty-bound to
preserve and protect. It is bad policy to grant - which means without
payment -lands of the public domain to any citizen which term covers not
onl y natural -born but also naturalized citizens, simply becaust! he is land-
less, without occupying or cultivating or working for it. Furthermore, the
amendment was claimed to be unnecessary because the 1973 Constitution
already provided sufficient bases for appropriate legislation under the
"social justice'' doctrine to .achieve the same objectives.7

7"Thc presen t provi ~ i o ns of thP. 11973) Cons titut ion tbc fl)re t.he 19H4 Am endment ! a re
adequate to s up port any program of the government for t he grant of publ ic lands to qualified

a nd deserving citizens or the implementation of urban land reform. Homesteads and free
paten ts are 'grants.' x x x Questions -:\os. 3 and~ lamendmec nt;; to Sees. 11 and 12, now Sec.
4 ;~nd Art. XHl, Sec. 9 , re~;pectively ] if ratified with an affirmative vote, will serve, at most a

symbolic purpose." (Aimano vs. Alha. 12/ SCRA 69. J a n . 25. 1984.)

TiO TEXTBOOK ON THE PHlLlPPINE CONSTITUTION Sec. 4

SEC. 4. The Congressshall, as soon as possible, determine by
law the specific limits offorest lands and national parks, mark·
ing clearly their boundaries on the ground. Thereafter, such
forest lands and national parks shall be conserved and may not
be increased nor diminished, except by law. The Congress shall
provide, for such period as it may determine, measures to
prohibit logging in endangered forests and watershed areas.

Congress to determine specific limits
of forest lands and national parks.

As a safeguard against the possible disposition or appropriation of any
portion of forest lands and national parks contrary to th0 Constitution,
Congress is required:

;0 l To determine as soon as possible by law the specific limits of forest
lands and national parks,1 marking clearly their boundaries on the ground;
and

(2) To provide, for such period as it may determine, measures to pro-
hibi-t logging in endangered forests and wntershed arNIS.2

Forest lands and national parks whose boundaries have bf.'en ma1·ked
as provided by law are to be consen-ed. It is prohibited to increase or
decrease their areas except as may be authorized by law. The prohibition
again~t logging takes into account the need to proiect our dwindling foregt
!'esources from further depletion and to prevent flood.;:;, soil erosion,:; siltation,
polluted rivers and drought which result from indiscriminate logging,4 not
to mention the loss of other things that make up our fore!'!t, such as the rare

'Many of th.c country's natiunal pa•·ks and nature rc1<Cl'V('!l deteriorate lw<'aU~<<~ of the

encroachment hy ("migrants, loggers. anJ minin~ and cnerg_v developer~. reclamat.icm, t:on·
version to non-park use, and inefficient admini;:tration.

1They arc regions or area;; houndcd periphr.rallr by a watH partiug and draining ultimately
to a particular wat.~r,·oursc or body of water. IWr.b;;tt>r'..; :~rd Int. Dictionary. p. ~5~4 .I

'Soil cro;;ion c><:cur:;; more s!:'riously nn dcnu.deci hill;;id~:; nr mountainsides. 'l'htc> erosion
<JI'topsoil ·--that thin up pel' crust of lhfl earth's s~rfac<! on whil~h m<tn piant,; hi~ food ct·op;; .....
is now an <-xtrcm!:'ly serious probkm in th<:> Philippim~,;. Wh<•t nat•:re take!! a very long time
to torm -·-· 2.5 em. of topsoil per century- enuld be wa;;h.,d away in 20 minut.f.!s o~ l~ss by just
one heavy rainfall in area~ wh(•rc land;; are not userl carl~fully. ln the Philippines, water
plays a major role in r.ausin~ sna>:sivc soil ..ro-<ion. A ~tudy made by Rnmeo C. Bruc-t? of U.P.
shows that some 9 milliou hectare!' of margir.al lands are so badly erud~d th11t virtually

nothing can he planted on them. Of the 12 million hectares ofroa:-!{inal hmds in thtc> country.
barely :3 million hectare~< still have topsoil. In all. about 23 million ht>ctare!; of cultivated and
marginal land~ undergo varying degrees of erosion every yeaz·. 1"H.P. Losing Top!loil at
Alarming Rate" hy H.D. Tacio. Manila Ru1lt~tin. p. 17, Sept.. 1.3, 1986.j

•The pre!<t'nt rate of annual n~fore;;tation is e.o;timated t.o be only about 1/4 of the rate of

:mnual deforestation In the 1950s. Philippine foresh wet·e estimated to be still at over 5<Y*'
of the original area. Today only abo•1t l/3 of the pre-war forests remains. l"ore~:;t destruction
is a rest:lt of several factor!\, e.g., illegal lt•gging, forest fires, kain.t:in-making, squatting in

fore;<tlands, and conver;:;ion of forest areal' into other uses. The most destructive uf these is
kain,l;'ir;-making. Th~ hotLom line is;;ues are m1:1s~ poverty, rapid population growth, and the
economic ill,; hese1ting nnr cnuntry. People will not resort to cutting trees if they have

s~c . 5 ART. XU.- ~ATI ONAL E C0.\"0:\!Y AND PA'T'RL\!0:\Y

birds and animals and f1ora which may be uDi que to th e Philippines. As the
fores t s hrinks. so docs t he wildli fe population. ;

SEC. 5. The State, subject to the provisions of this Constitu-
tion and national development policies and programs, shall
protect the rights of indigenous cultural communities to their
ancestral lands to ensure their economic, social, and cultural
well-being.

The Congress may provide for the app1icability ofcustomary
laws gove rning property rights or relations in d e termining the
ownership and extent of ancestral domain.

Protection of rights of indigenous cultural
communities to their ancestral lands.

Section 5 expressly recognizes the legal existence a nd Jdt>ntit~ of indig-
enous cultura l communities (see Art. II, Sec. 22. J and ~heir rights with
respect to their ancestral lands.

{1) Communal ownership o{lands. - In protecting ,:.aid right~ t o in·
sure the economic, gocial and cultural well-being of the indigenous cultural
communities, the Constituti on responds to th e sad plight of the~e commu-
nities. The gravest problem t hey face deals with ownership - their being
evicted from the lands they have occupied, lived in. and tilled s ince time
immemorial. This social injusti ce stems from the ha=--ic d ifference bctwt!en
the modern con cept oflandholding and that of t he cultural minorities. The
latter have a lways r egarded a ncestral lands as communal property bel ong-
ing to the tribe or cla n as a whole, and may not. therefo re, be titled exclu-
sively by one per son or fami ly.

Moreover, given t he pove rty and illiteracy in thE:>se communities, they
are handicapped by t heir inabi lity to articulate their needs especially their

alternative jobs and sources of livelihood. Worldwide, the fo rcf;t~ are said to be disappeari ng
at the rate of about the size of a football field eve ry se~~ond .

Foresls, like coral rl!efs. r ivers, oceans , and lands, are compll!te eco-sys te ms. ~umher­
ll!ss flora and fauna live in forests and depend on them for thcil' existence. E a~: h of thc:RC' iH.:o-
systems is interdependent with one a nother. Altogether, they di o>play the vC~ri e ty and rich-
oe~>s of life vi tal to hum11nity's el(istencc and future. Fores ts provide human ity many things
- recreation, leis ure, and gro unds for relaxation . They serve lo enr ich hum<tn Iif<' .spiritually
and cul turally. F orest s are thu s one criti~:al source for mank ind's well ·bl'in g: and develop-
ment.

"Philippin e for~sts h o:; t on•~ <.>f the world 's richt~;,;t gro up ph>n t an d anim ll l s pccil'11. They
har bor about 8 .000 :<ped~S of floweri ng pla nts; :~.500 s pecio.s of indij:t<'llllUS trees; a3 Spi!Cit'S
of gym nosperms; 640 speci~5 of mosses; 2, 400 spccit!:; of fi ><h : «nd 240 specil!s of mammals.
There a re 3,000 of plant ~ in Phil ippin~ for~,:ts found now h,~r·· <.>l se in the world. Forty-four
percent of the world's bird species. a nd 64 P'-'rcent of the w<'rld·s ma mmals exi:;t only in our
cou ntry. Such a treasure tro\'e must b<' con::E'r,·ed an d prci'e n ed. Sustainable deu~tlopment
means "insuring that development meets thf.' n e~ds oi the pre;;ent wi t hout compromising the
ability or fut.ure generations to meet th~ir own need:>...

372 TEXTBOOK ON THE PHILIPPINE CONSTITUTION Sec. fi

t

claim to ownership. 1 Consequently, the indigenous people under what is
called regalian doctrine (see Sec. 2.) and the torren.s system ofregistration
of land titles introduced by American rule, lost their legal rights to the
lands they occupied and cultivated and had to compete with other individu-
als applying for land titles.

(2) Applicability of indigenous customary laws. - The Constitution
has opened the possible State recognition by means of legislation of the
applicability of indigenous cust omary laws governing property rights or
relations, as part ofthe laws ofthe land, in determining the ownership and
ext ent of ancestral domain. (par. 2. i Ancestral domain embraces all lands
located within and generally belong to what is called a "cultural region,"
including lands which are not yet strictly occupied. It is to be distinguished
from ancestral lands which refer to the occupied portions of the ancestral
domain. Thus, deep forests that are not yet in effective use are part of the
former but not yet a part of the latter.

Th e constitutional mandate will, in particular, greatly benefit cultural
communities in Mus lim Mindanao and the Cordilleras as well as the
Mangyans in Mindor o and various Negrito groups. It will go a long way
towards t he solution of th e insurgency problem in the areas where unre-
solved land conflicts forced many of such cultural minorities to take up
arms against the government.

SEC. 6. The use of property bears a social function, and all
.economic..~~~nt~hall contribute to the common good. Individu-
a ls and private groups, including corporations, cooperatives,
and similar collective organizations, shall have the right to own,
establish, and operate economic enterprises subject to the duty
of the State to promote distributive justice and to intervene
when the common good so demands.

Use of property bears a social
function.

This principle is discussed under Social Justice and Human Rights.
(Art. XIII, Sec. 1, par. 2 .) In pursuit of the ends of social justice, "the State
s hall regulate the acquisition, ownership , use and disposition of property
a nd its increments."

In addition, it may be mentioned that the right t o own property is
derived from the right. to use it. Man has the right to use things in general
for his survival or development. In other words, m a n h as the right to own
things because he has the right to use things. This is the reason why the
right to property cannot be unlimited. Its use necessarily becomes relative

11986 liPLC Con8titu tion Revis ion Project, note 4 . pp. 15 -16.

SE:'r. o ART. XII. - NATIONAL ECOl'\0.:\fY :\:\D PATRIMON Y 37:3

to the rights of others. It bears a social funnion and must contribute to the
common good. (par. 1.)

Right to own, establish , and operate
economic enterprises.

(1) Many economic systems.- Different economit: systems have evolved
in history. Today, the mo~t common forms are ~?_Qi_l~.H~..m. ,.so~ and
communiam but the cen tral aim of each is tht- same: ~ -lll.Qre__.~ujtahl e
Q.ilit.ribution of goods or wealth, or_dlitr:ibut{{!e justi('t:. The main difference
is in the mechanism to accomplish this aim.

t'2 l F1·ce en terprise s.vstem. - Under this ~ys: (.>m. often called "f.tee
Qrivate CJl!.Q.mU:ie.,'' private individuals or association;: c,f persong can own
and operate business enterprises risking their own n:,:.•.mrces and thereby
taking t.he profits or the losses in consequence.

This system assumes that a man's self-intere::t will induce him to
employ h is capital such that it will give him the greatest val ue, i.e.,
produce at Iea:>t cost tho~e things for which there i:< biggest dt-!mand. In the
process, without actually intending to, he promote~ the public interest.
Consumers buy a ccording to the ir preference!-! depend ing on the price and
quality of goods and services. As a consequence, co~t,;, prices, and profits
are established at minimum levels. Efficient husine:;;,; enterprises receive
larger return~ tha n inefficient ones. Thus, efficient utilization of r esources
i~ encourttged, and production (volume and types of products ) is adjusted to
demand. Competition is tht~ r egulator of econom ic activitit~s.

The motto is laissez faire or "let-things-alone" which means that pri-
vate business should have the widest freedom in the direction of economic
a~:tivitie:> with the min imum of government interference or regul~tion. It
r ests on the beli ef that social good is best promoted by "less government ."
'fhus, it has often been said, that the private sector, not the governm ent. i;:
the engiM of economic growth . (see Art. II, Sec. 20.)

~3 J Intervention by the State. - Frequently, the struggle for econo!i1 ic
advantage by individuals and groups may deviate from pure compem:.:m .
Sellers may prefer a high price to a low oneA3usiness enterprises may fom1
combi nations in order to control price or re~ort to unfair trade practice:;.
,-Competi t ion may be absent or imperfect in some industries becau::.t: of the
presence of monopolistic elements . .Products may not be sold on the basis of
the quality or quantity advertised. Artificial surplus or scarcity may be

created for private gai ns. A group may he exploited by another. ~·aste and

ine fficien cy in t he use of resources may result. Und(>r these conditions,

public weifare suffers. rNs is the .~.~_'!_S.Q.~..~h.Y .@~e.rnment_regulation of.t.b&

~con omy is necessary.

(j) Regulated capitalism. - The free enterpri~e system does not mean

untl ammelled freedom of choice and action of private enterprise. Under.
J;b~L~Y.Rt~.m......th..e...int_e:rf.s.ts uf tb£LCUD.'3u.tners come_fust. Ours then is regu-

TEXTBOOK ON THE PHILIPPI NE CONSTITUTIO N S er.. 7

lated capitalism. In the words of the Constitution, it is ''the duty of the
Sta te to promote distributive justice 1 and to intervene when the common
good so demands." Government intervention t akes many forms, such as
through price control, inter e st rate ceilings, r ent control, exchange and
import controls, control of money and credit, u!'le of tax and spending
powers, grant of subs idy, etc.

SEC. 7. Save in cases of hereditary succes sions, no private
lands shall be transfe rred or conveyed exce pt to individuals,
corporations, or ass ociations qualified to acquire or hold lands
of the public domain.

Acquisition of private lands.

Private lands are lands of private ownership. They include those owned
by private individuals, corporations, or associa tions and those owned by
the State and municipal corporations Oocal gove rnments) which are not
intended for public use (e.g ., roads, public parks ), or for s om e public service
(e.g ., la nds occupied by public schools or public buildings), or for th e
development of the n a tiona l wealt h . (s ee Sec. 3..1

Only those who ar e "qualified to acquire or hold alienable lands of th e
public domain" m ay acquit·e private lands. Under th e Constitution, private
la nds may be transfe rr ed or conveyed to the following:

(1) · Filipino citizens;

(2) Corporations and associations at least 60% of the capital of which is
owned by Filipino citizens (see Sec. 2, par. 1.);

(3 ) Aliens but only in cases of l;l e redit ~.£Y .§U£~S~£l] (Sec. 7. ); and

(jl) Natur a l-born Filipino citizens who h ave lost their Phili ppin e citi-
zenship su bject to limit ations provided by law. (Sec. 8.)

Prohibition against alien landholding.

Th e above provision is intended to assure that th e limitation in the
dis position of lands of the public domain in Sections 2 a nd 3 is not defeated
or rendered nugatory whe n s uch lands are conve rt ed into private lands.

T he phrase "herediw_y_s uccession" in Sect ion 7 which enables aliens to
a cquire private lands sh~uid..be.int:erpreted to mean ~p~~gate s!!_ccessioq.

1Jt applies part icu larly t o t h e St ate. It is the part icu lar obligation of public officials an d
is violat.ed by favor itism and partia lity. As its name indicates, it requires a fair a nd proper
distribution of public benefit a nd burdens a mong t he m embers of the community. The ter m is
ttl be distinguished from commutatir.;e j u:.;tice which exists between man and man or between
groups of men negotiating on eq ual t crmR. Thus, in a contract , when one fulfills his part,
jus tice demands the other's fultillmont of his part. One who h as deprived another of some-
thi ng wt·ongfully is obliged in jus tice to restore it to him. Commutative justice remains
violated until proper performance, compensation, or r est itution hM been made to restore
ba la nce of equality. (Right Reason by Austin Fagothey, S.J., :3rd e d., 19 63 , pp. 202-203.)

Sec. 8 ART. XII. - - NATlONAL ECO!'l'O.\IY A!'illl'ATRL\10l'<Y 3i5

(bx_uue.J~JioP._9.f law) and1i'J..Q1 .testamen• an:.....~l. .u;cessi!lll~through a testa-
ment or will); otherwise, the prohibition will be for naught and meaning-
less. j\ny alien would he able to circumvent the prohibition by paying
money to a Filipino landowner in exchange for a devise of a piece of la nd.1

Consequence of violation of prohibition.

( 1) Restoration ol the status q uo. - _A_ ~ale of land ~Q. violation. of the

COl.l.Stitution.~l PfQhjl.!_itiQp __ ~~~~~!:_the_!;ransfer of lands t o aliens is void.
This being the case, the parties should be restored to the position they
occupied before the s ale took place. In other word£.. the seller can recover
the land from t he buyer (alie n) who ha!i a right tv be reimbursed with the
amount of the purchase price. .B..u--t-if the land had been ;;old by the alien to
a F ilipino citizen qualified to own a nd posses:> it. the sale to the latter
cannot he questioned anymore as t he land is alread~- owned by a qualified
person .2

(2 ) Where violation disguised. -The public polic:-; ro Cl)n serve lands for
the Filipinos would be def(!ated a nd it.::; con tinue d \'iolation ~anctioned, if
the courts would not order the restoration of t he property. And the parties
will not be permitted to r l:lsort to another transa ction for the purpose of
disguising the t ran sfer in violation of t1'te Cons titution. Accordingly , it has
been h eld that a contra ct whereby an alien is give n not only a lease but also
an option to huy a parcel of land by virtue of which the Filipino owner
can not sell or otherwise di spose of her property, this to las t for 50 years, is
a virtual t ransfer of owner Rhip and circumvents the constitutional ban
against alien landholding.3

SEC. 8. Notwithstanding the provisions of Section 7 of thi s
Article, a natural-born citizen ofthe Philippines who has lost his
Philippine citizenship may be a transferee of private lands,
subject to limitations provided by law.

Right of natural-born citizens who have lost their
citizenship to acquire private lands.

Section ~--p-~ r_l_!lits _n.a~~!"~J.:.l?.~!!l ..f~l~Pirws 1 _ Wh!Lhave lost their citizen-
~h._ip ~o__l>_~_i! __tr:~.Q~f~_re~ _ of pr_iv~t~_l_a~g-~___( ty~t ~aQd~ _qf t he public dom1iinl.
Congress ma y, by law, provide limitations, e.g. , maximum art'a ofth£> land

<.

1R am irl!-r. v,:_Vda. de R~<mircz, 111 SCRA 704, l<'eb. 1:1. 19R:2.
2H E'rrc ra vs T.uy Kim Guan , 1 SCRA 4013. Jnn :-)1. 1961 : Godine-z \'i' Fu ng Pak Yuen, 120
SCRA 22:3, .Jan. 21. 1983
"Phil. Banking Co rp. v,: _ Lui Sh•:. 2 1 SCRA !1 ~. Se>pt. 12. 1867.

1Scc Ci li7en skip Ret e>n ti on s an d Re<•cquisitiun .~ct cR..-\. :-\o. 9225. l under Artic-le TV,
Section 5.

3i6 TEXTBOOK ON THE PHILIPPINE CONSTITUTION s~c. 9

and the use shall be solely for residential pui·pose.2 It may authorize the
acquisition oflands by former citizens for other purposes.

The reasons for Section 8 are better explained by the "whereas clauses"
of Resolution No. 1 of the forme1· Batasang Pambansa proposing a 1981
amendment (as Sec. 15.) to the 1973 Constitution, to wit:

"Whereas, many natural-born citizens ofthe Philippines have migrated
to foreign countries, particularly to Hawaii and other states of the United
States of America, where they eventually acquired the citizenship of the
countries to which they migrated and as a consequence, lost their Philip-
pine citizenship;

Whereas, in spite of their new citizenship these former Filipino citizens
continue to maintain their filial links with their relatives in the Philip-
pines and feel a dose affinity to the Philippines and an identity with our
people;

Whereas, thousands of these former Filipino natural-born citizens ex-
pressed a desire to return to the Philippines and reside here permanently
so as to be able to spend the remaining years of their lives in the land of
their birth and contribute in whatever way they can towards the develop-
ment of our country and the well-being of our people;

Whereas, it is in the national interest to give encouragement to this
beautiful sentiment of our blood-brothers and to make it po~sible for them
to bring to fruition their expressed desire;

Whereas, it would be necessary to amend the Constitution so as to
enable these natural-born citizens of the Philippines to own the !.and on
which they would reside."

SEC. 9. The Congress may establish an independent eco·
nomic and planning agency headed by the President, which
shall, after consultations with the appropriate public agencies,
various private sectors, and local government units, recom-
mend to Congress, and implement continuing integrated and
coordinated programs and policies for national development.

Until the Congress provides otherwise, the National Eco-
nomic and Development Authority shall function as the inde-
pendent planning agency of the government.

2Section 15, Article XlV of the 1973 Constitution limits the acquisition to solely rP.siden·
tial purposes. l'nder B.P. Big. 185 (approved :.\1arch 16. 1982), th~ maximum area is 1,000
square meter!; in the case of urban land, or one t l't hectar~ in the case of rural land, including

any land already owned by the tr1nsfe1·ee. Effective March 26, 1996, former natural-born
citizens can now legally own up to'!i,OOO square met.ers of urban land cr Chree 13J hN:tHres of
rural land. CR. A. No. 7042. as amended by R.A. No. 8179. J

Sec. H AttT. XII . - ~A1'1 0NA L EC0~ 0:...1Y .-\XD PA'fH I~10XY 377

Independent economic and planning agency headed
by the President to be established.

(1) Need {or a central econ omic plan ning body. - Economic pla nning is
an essential part of development policy. It rna.\· cover the whole economy, or
only cer tain sectors of it. or parti cular regions of a country. llsually , the
plan is for a spe~.:ifi.c period of time te.g., 5-year d evelopment plan _.. or it
may also lay down a long-term fra mework rP..g.. up to year 2010 or longeri.

In any case, a development plan s tates the social and economic goats to

be achieved and the strategies or means to achit>,·e them within the period
covered. It provides guides to the government in undertaking programs
and projects to prom ot e economic development . It is, however, n ot an

inflexible guide to governmental a ction. It is often re,·ised or adjusted due

to changes in economic conditions or unforeseen domestic and external
developments affecting the economy.

The need for a Cl!nt,·al econ omic planning body tha t will prepare and
implement "continuing integrated a nd coordinated programs and policies
for nat.ional development'· 1par. 1.) has long heen felt in view of conflicting
economic policies pursued by ma ny governmental agencies in past year s
particularly b efore the operati on of the 1973 Constitution .

/

<-2! Featurefi and fimctiun.5. - The following a r e the features and func-
tionR of the economic and planning agency which Congress is manda ted to
establish:

faJ It is independent. i.e.. it is not subject to the control of Congress

in the implem entation of economic programs and policies approved by
t he latter;

(b l It is a central body for economic planning and policy. Thus, the
drawing of plans, their implementation and control emanate from a
central source;

(c) It is h eaded by the President 1/bid.j, making it the highest
economic poli<:y p lan ning organ. The appointment by the Constitu tio~
of the President as t he head of t he body emphasizes the importan ce <::f
the planning process in the government and assures that the e n:;ri?
governmenta l machinery will be mobilized to achieve our de'•e lopmen-
tal goals. It j s a fact of political life that key decision-making i :. .:-cono-
mic planni ng a nd implementation is the primary respon::-ihiE ty of the
political leadership which is headed by the Preside nt. Lack of a deq uate
gover nment support or "lack of political wiJl" will result in fa ilure in
t he implementation of.t.he be.st prepared plans;

(d) It shall prepare programs and policies for nanc. nal development
i n con.sultation with the appropriate public ag~ nc:it?~ . various private
sectors, and local government units. t Ibid.' Such programs, the refore,
will reflect a wide national consens us. In the di ::-c harge of its duties and
functions it may call upon any pri\'ate ~ector . p ublic agency, or local
government unit for such ,·iew.s or a dYice a:: may be pertinent to any
matter under its considerati()n ;

378 TEXTBOOK ON THE PHILIPPINE CONSTITUTION Sec. 10

(e) It shall prepare such programs and policies for approval of
Congress. Its function is only to recommend. (Ibid.) Hence, Congress
may still adopt other programs and policies; and

(f) It shall prepare, recommend, and implement "continuing, inte-
grated and coordinated programs and policies":

1} continuing because development planning and implemen-
tation is not a st<lp-and-go affair; it is a continuous process of
preparation, review and implementation, evaluation and follow -up
because the government is constantly faced with the task of assess-
ing project studies and proposals and changes in economic and
political conditions requiring adjustment of the plan;

2) integrated because it has to present a unified set of policiP.S
and activities which are consistent with each other covering as it
does different sectors a nd regions of the country; and

3) coordinated because cooperation and interaction among all
those involved in planning and implem entation are essential to th e
success of any development plan.

The Constitution speaks of "programs and policies for national
development." They include regional developm ent. plans to be formu-
lated after consultation with local government units of the regions.

(3) National Economic and Development Authority rNEDAj. - Unless
Congress provides otherwise, this body shall function as the independent
planning agency ofthe government.l (par. 2.) It is composed of the PreHi-
dent as Chairman, and the Director-General of the NEDA Secretariat as
Vice-Chairman, the Executive Secretary, and th e Secretaries of Finance,
Tradl:l and Industry, Environment and Natural Resources, Public Works
and Highways, Budget and Management, Labor a nd Employment, and
Interior and Local Government. The President may, however, revise the
membership of the NEDA board whenever the same is deemed necessary.2

SEC. 10. The Congress shallt upon recommendation of the
economic and planning agency, when the national interest
dictates, reserve to citizens of the Philippines or to corporations
or associations at least sixty per centum of whose capital is
owned by such citizens, or such higher perce ntage as Congress
may prescribe, certain areas of investments. The Congress shall
enactmeasures that will encourage theformation and operation
of enterprises whose capital is wholly-owned b y Filipinos.

'This body was created by Pref.<idential Decree No. 107 (Jan. 24. 1973), a!s amended hy
Presidential Decree~ No. 372, 622. 859, and 1206 pur.<:~uant to the 1973 ConstituLion; see also

Pre:>idential Decree No. 1450.
~Administrative Code of l9A7, Title ll. Subtitle C, Sect.ion 5.

Sec. 10 A}{'J'. XII. ···NATION AL F. CO :\ O ~IY .~SD PAT RIM OSY 379

In the grant of rights, privileges, and concessions co\'ering
the national economy and patrimony. the State shall give pref-
erence to qualified Filipinos.

The State shall regulate and exercise authority over foreign
investments within its national jurisdiction and in accordance
with its national goals and priorities.

Filipinization of certain areas
of investments.

Con gress shall reserve t o citizens of the P!-1:::;:: pir:es or to corporation:-
or associations at least 60% of whose capital i:3 . -,, :-:f:' d by such citizens or
such higher percentage as Congress may pre~c:: '::''=' up to 100%), certain
traditional areas of investments, upon certain cr·:.C:Jt:•)ns:

(1) There is a recommendation by the ecom :-:.:: :1 nd planning agency
(i. e. , National Economic and De velopment Autb.·:-:. : :.- until Congress pro-
vides ot-herwise); and

{2) The national interest so dictates. (par. 1

The existence of this provision leaves no doub: :.~:·)the con stitut ional-
ity oflegislatiom; implementing it as against thE- c: <-o::-:: that they violate the
guarantee of equal protection of the laws which p:•·c<?.:-t citizens as well as
aliens. In the case of public utilities (see Sec. 11. . :!':e natural resources

1:: . .(see Sec. 2.), mass media (see Art. XVI, Sec. ~ and educational

institutions (see Art. XIV, Sec. 4[2].), the re~E-r-..·s. ::(•n is made by the
Cons titution itself.

Higher percentage of Filipino ownership.

Due to differences in the nature of investment. Congress is given the
power to prescribe a higher percentage for certair: a r.:-a:3 of investment so
as to provide it a degree of flexibility .1 Congrcs:< i:" : t-•:juired by the Consti-
tution to enact measures that will encourage the fMr.1ation and operation
of wholly-owned Filipino enterprises. (par. 1.! Furt h C' rmore, pursuant to
the "Filipino firsl" policy adopted by the Con::;titut ion (see Sec. 12.), the
State must give preference to qualified Filipino:3 'although foreigners arc
more qualified) in the grant of rights, privilege~ and co ncessions covering
the national economy and p a trimony ( par. 2. J, wh ich in cludes not only the
nat u ral resources of our country (see Sec. 2. par:5. 1, 2. ) but also our
cultural heritage. (see Art. XIV, Sees. 15-16.)

While the Constitution recognizes the need t o attract foreign capital to
develop major industries, it s~eks to insure that Filipinos will continue to
be the first in their own land.

11986 UPLC Constitution Project. no te 4, p. 4:3.

TEXTBOOK l)~ THE PHTLTPPTt\E CO'NSTITL:TION Sec. 10

Existing laws limiting certain activities
to Filipino citizens or corporations.

Under present laws, activitiE'!S in the fol1owing, among others, are
limited to Filipino citi:r.ens or corporations wholly-owned by Filipino citi-

n)~ens:
Operation of r~ual banks;~
~Engaging in the retail trade bu;;ine.ss;a

(.() Opcn<tion of registered overseas shi pping;4

(4{flngaging in tht?. rice and corn indu stry;r.

1.5') Engaging in tax-free cottage industries;6
qp Contracts for tht·• supply of materials, equipment, goods and com-

modities for the government;" and

(7)!)peration of atomic energy fa<:i litics.n

Presently, the Board ()f Im·estments is empowered by law to reserve
certain areas ofinvestmcntf' to Filipino cilizens.~

Regulation of foreign Investments.

( ll Sources of investment. - Generally, they art!: domestic savings,
government expendit ure!', grants, foreign investments, and foreign loans.
In:ve.stment.i.s _~.J:CpeQQ.!_ture~ In economic!", it is also called ·:capital forn~a­

ti~~- "

( ~.) Kinds of' investrrent. ·- Jt is eit her direct or indi rect in the form of
loans _Din~ct investmerit may be ma de by a foreigner by: (a ) buying stocks
or bonds in a local company, (bl entering int o a joint venture (corporate
partnership) with a local company or host country, or (c) establishing a
business concern or fl fully-owned subsidiary. The parent company may be
a multinational corpo,-ation which is an ent erpri::.c dealing with a broad
range of products or services with operations cove,·ing more than one
country. The count,-y where the investment. is made is called the ·~t_
CQqnt;_r,y'' while the country where the investment comes from is referred to
as the "l.!.!>J!l:e country."

·" ---·····~ --

~3) Benefits and negative aspec:ts of forei gn direct investments.- To the
host country, it can be seen as a source of capital, "high" technology,

~R.A . No. 735:!.
"R.A. N(L 1180. Tllis law was repealed by R.A No. &762. An Act Libera lizing th e Retai l
TrHde BuS;iness. En tt~rprio e.s with ie:;~ than {J.S . 52.5 million paid-up capital are still
reserved (!XCiusively fur 1-'ili pino citizens.
' R.A. No. 1407.
''R.A. No. 3018.
6R.A. No. 3470.
'R.A. No. 518a.
•R.A. Nu. 5207 _
~so.:~; Executive Or der ~o. 226. !he Omnibus Investm en ts Code of 1987.

Sec~ 11 381

managerial expertiBe, and t~mployment.. On rh~· <1ther hand. fon·1gn 1nvcf"·
ton; compete with domestic enterprises, oft(·:;tHnes repatriatf~ exorhitant
profits, may nut provide sufficiently larg~~ L·mph).vment, and ha\·t~ lwcn
accused of resorting to undesirable busines~ p:actiecs disadvantageous to
the host country.

(4) Need for foreign im·estments in the Plu!cppi:·;e.'l.- Given the present
state of the economy and the inadequacy of domt-:-~i{· savings, and with the
government faced with so many competing dt-mar.d::. on its meager fina.n·
cial resources, foreign capital is needed to fill tia: gap in the country's
investment requirements. and to be able to acquir~ the technology and
managerial expertise needed to survive in the glo!:;~l:zed economy we are
now in. Since fin~ncial aids are not easy to come by. <l'<id(• from being associ-
ated with mendicancy and our country is already ht-aYil~· burdened with a
huge foreign indebtedness,''' the only option left is fore1~n din.u;t investment
especially in enterprises that significantly expand emp:O:.yment opportunities
for Filipinos, promote exports, or trcmsfer relevant tE-c!:r.·: ~c·gie~.

(Ji) Foreign inuestment policy. -Foreign inve::.tmt-:-:F havE:> played a
substantial role in the economic growth and den•lqJ~.t?!'H of many coun-
trie~. A closed-door policy will not be to the national i!!!E-!"E:-~t. On the other
hand, an open-door policy allowing the untrammelled t1o..,~· of foreign in-
vestments can bring more hurm than benefits to the c·.mntr~·.

The sensible policy is to choose the middle way whl?reby the benefits
and negative aspects of the investment are weig-hed in the light of the
national goals and prioritiesli ,.,·ith safeguards instituted to jnsure ~~ffec­
tive Filipino control of the economy. Tradt!·off.~ can~ot be avoided. For
example, it would be better ifownership and control of operation:; of public
utilities are exclusively in the hands of Filipinos but with our very iimited
local capital, an equity percentage of 60/40 in fanJr of Filipinos may b~
deemed the ideal arrangement that strikes a balanc~ wherein Filipino
control is still insured and at the same time for~ign equity level is just
sufficient to attract much nt.•edcd capital.

(6) Objective of'regulations.- In any case, the State shall regulate and
exercise authority over foreign investments within its national jurisdiction
so as to derive the maximum national benefit from them. (last par.) 'fhe
bottom line must always be what is good for the country and the Filipino
people.

SEC. 11. No franchise, certificate, 01· any other form of
authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations

111Estimated at more than S26 bil!ion in 19.S6 after th(' ·EDS.-\ RHolution."
' 1The Board of lnve~tments i:; the a gene:; charged with thP ta>'k of screening application
for foreign investments. Cnder the mdu~triai prl.:•n!i(·:-' plan. im·c;;tmcnt areas that arc
preferred and encouraged are listed with :;pe-ciiic mcent:,·c~ to undertake the projects that
are in the list. (see Pres. Decree l"o. 1';69.;

iHl2 T EXTAOOK ON THE PH ILIPPI NE C:ONST ITU1'lON Sec. 11

or associations organized under the laws of the Philippines at
least Rix ty per centum of whose c apit al is owned by such citizens,
nor shall such franchise, certificate, or authorization be exclu~
sive in charac ter or for a longe r period than fifty years. Neither
shall any such franchise or right be granted except under the
condition that it shall be subje ct to amendment, alte ration, or
repeal by the Congres s when the common good so requires. The
State shall encourage equity participation in public utilities, by
the ge neral public..}.'he participation offoreign investors in the
governing body of any public utility e nterprise shall b~ limited
to their proportionate share in its capital, and all the.executive
and managing officers of such corporation or association must
be citizens of the Philippines.

Meaning of franchise.

The term fra nchise includes any ;;pecial privilege or right conferred by
t he State on persons or corporations. It may mean either the:

(~1) Corporate or primary {rand1ise. which is the r igh t granted to a
group of individuals to exist and act a.;; a corporation. It is the one contem-
plated in Section 16; or

(~) Se.:ondary or special franch i~>e. which is the right gr anted to an
individual, or t o a corporation afte r its incorporation, to exercise certain
power::,\ and privilege~, including tho;;e conferred for purposes of public
benefit (such as the power of em ine n t domain) enj oyed by p ublic utilities
(e.g., telephone companie::.;, ieeplants. electric <.:ompanies, etc. J. This is the
franchjse referred to in S ection 11.1

Meaning of public utility.

ApyNf...t;__ut.il.jJ.z.. has hf:!e n described a s a business organization which
r egula rly s upplies the public with some commodi ty or ser vice, as electric-

ity, gas, water, tn:msporta.Lion, or telep hone ur telf:!graph service. Its distin-
guishing characteristic is t he devotion of p rivate property to s uch use that
t he public generally or t hat part of th e p ub lic which has been served a nd
has accepted the service, has the right to demand that the use or ser vice so
long as it is continued, be conductt~d with reasonable efficiency and under
proper charges. 2

~.!!hl.i~._\l_ti_li_ti.~?. a i:_e__a,l,r;g. k no~.!l-~.§..~ic_8£!:~~-c~_...£1!.!!!-J?.a~t:i.~.!.3 P-ublic
~ark.et. are public s ervices or utilities under the constitutional provision."

1See P eople vs. Quasha, 9a l'hil. :~33.

~51 c .•J.S. 5.

3See C.A No. 146; R.A. No. 776.
•Co Chiong vs. Cuadem o, 83 Ph il. 242; Co Chiong vs. Mayor of :VianiIa, 83 Phil. 257.

Sec. 11 A.RT. Xll. - NATIONA L l!:C0:\0:\IY AND PATRJ:\10:\1~ 383

limitations upon grant of franchise, etc.

The limitations upon th~~ grant of any franchi se, certificate or any other
form of authorization for the operation of a p:1blic utility are:

(l') The grantee must be a citizen of the P!":! li ppines or a corporation or
association (a) organized under the laws of the Philippines (b) at least 60o/t:·
of the capital of which is owned by citizens of th e Philippi nes. This means
that 40% of said capital may be ownt:!d by aliens:

(!) Such franchise, certificate, or authori2ati0n shall not be exclusive
in character;

(3) Such franchise, etc. shall not be for a io~ger period of fifty (50)
years; and

(4) Such franchise (although it is in the nat ure •:.f a contract between
the government a nd the grantee) or right gran:e-ci shall be subject to
a mendment, alteration, or repeal by Congress when the common good so
requires. (Sec. 11.)

'The provisiun is a recognition of the very strateg-;c position of public
utilities both in our country'~ economy and security.

Purpose of limiting period of franchise.

The limitation of the period of the franchise is intended to prevent the
grant of perpetual franchises because they will tie tht- hands of the legisla-
ture, and t o give the legislature a n opportunity for a periodic audit of the
pelformance of the franchise grantees.

It does not mean, howev(!r, that after the expi ration of the original
period, the leg[siature may not grant a new franchise to the existing
operator if he h ad proven himself to be capable of s~n·ing the public. The
framers of the Constitution were a wa re of the dire con:sequences of limiting
a public utility business to not more than the life of it s original franchise. 5

Equity participation in public utilities.

The State (Government) is cmjoined to encourage equity participation
in public utilities by the general public. (Sec. 11.)

Broadening the capital ba1;e of dominant and vital corporations re-
moves them from being manipulated against the general interest. lt is also
11\ line with the con1;ti tu.tional policy to disperse economic benefits t o as
wide a sector of the population as possible. (see Sec. 1, pars. 1 and 3.) The
public must be given a wider choice in becoming part owners of corpora-
tions that have establi~hed a track record in profitability and dividend
payments and also in investing in new entc~rprises that have a bright

r.Kentucky Utili t ies C"o. vs. Bllard of C:ommi;;:;ioners. i l SW 2nd. 1024; Ceder Rapids
Water Co. vs. Ala. Power Co.. 239 Ala. 54 i .

TEXTROOK 0~ THE PHILIPPINE CONSTITUTIOI'< Se<:. 12

potential for future growth to spur the development of the capital m arket
in the country a.nd promote faster economic g ro-..vth .

Foreign participation in any public utility.

(1) In vestment. - Foreigners may invesl in public utility enterpris es
but to the extent of not more than 40 r; of the capital of the same. (Sec. 11. )

Loans by G\he_n.sJQ._~ .PY.Pli« .ut.il.i.t.Y .~QWOr9,bQD.JlL~1'..§.9£jati.on ~h.ould not~

con.sidere..d .as J\lJ. "~~3~-~!_P.. ent" under Section 11.
The entry of foreign capital is allowed beeausc the establishment and

operation of public utilities may require th e investme nt of a big amount of
capital which Fili pino citizens may not affor d.

(2) Gouernin{S body and management.- Foreigners can even be elected
to the governing body of any publi c utility enterprises but their numb~r
shall.b@. .limited...to theil: pr.oportion!lJe .?.h_~!~)n the capital thereof. (]bid.)
F or example, if the aliens own :=!O(;k of t h e capital of a corporation with a
boa rd of ten (10) directors, they ca n elect not. m ore than three (3) a lien
directors. Furthermore, ~ll_t_i!~ ..~?!.9..£.~iY.~. ~.n,c\_II.l.a. .l'l.aging_ q_ff.\!;ers_~h-~t~Q f
JlJl J§t be Filipin9 cU;_ize_!l~..: (I bid.j

The evident purpose of the limita tion and the citizenship requirement
is to preve nt aliens fro m C~SSu.ming. control of public utili ties which m ay be
inimical to nat ional int erest and at the same tim e permit the inflow of
foreign capital for the operation of public utilities.

SEC. 12. The State shall promote the preferential use of
Filipino labor, domestic materials and locally produced goods,
and adopt measures tha t help make the m competitive.

Adoption of " Filipino First" policy.

This is a ll:>o provided in t.he above section .

(1) Duty of' the State.- The State ;;h a ll:

(a) promote the preferential use 1by both the government and t he
private s ector) of Filipino Labor. domes tic materials, and locally p ro -
duced goods; and

(b.l a dopt measures to make t hem competitive .

(2 ) Aim of policy. - Th e consl..itutional policy is to j:r,i ve preference or
dominance to Filipinos in their own country especially in the grant of
rights, pdvileges a nd concessions involving our national economy and
patrimony, and make them competitive as against foreigners in both do-
mestic and foreign markets but not to insulate them from foreign competi-
tion. (see Sec. 1, p ar. 2, last sentence; Sec. 10, par. 2 .) )t docs not contem-
plate absolute protectionism which is antithetical to our increasing a s pira-
tions towards econ omic self-reliance. (see Sec. 1, pa r. 2. 1 I t is also the

Sec. 13 ART XU.-- NATIONAL BCONCl:llY .-\:-\D PATRJl\10!\Y 385

constitutional policy to open thf! economy to foreign trade and investment
albeit with reasonable ~afeguards. (Sec. 10. last par.)

At the very core of the Filipino First Policy is the promotiu::1 of the
welfare ofmillions ofFilipino workers and consumers who will benefit from
widened employment opportunities and higher quality but less expe:1;::ive
goods and services that re~ult from competition in an open economy.

(3) Duty ofhuying public.- Many Philippine-made products are at par
with the world's best. It i::; the duty of every self-re~pec.:ting Filipino citizen
to buy the products of hi::; own countrymen. By doing so. he helps consern·
foreign exchange, boosts Philippine industry, helps domestic producers tv
become globally competitive, promotes employment. and stimulates the lo-
cal economy in general. It is time we abandon the defeatist attitude that we
cannot compete with foreigners even in our own home markets.

SEC. 13. The State shall pursue a trade policy that serves the
general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity.

Promotion of trade policy that serves
the general welfare.

( 1) Trade policy as an implement to achieve specific goals. - A trq..d~
Jl!2.LiCY. is a policy affecting exports and imports and domestic commerce
formulated to achieve specific goals.1 Thus:

(aJ High tarifl's or duties, import quotas or e,·en total import ban of
certain commodities may he imposed to protect local industries produc-
ing simllar articles;

(b) Tariffs are made relatively low so as not to discourage imports
and thus rai.se more revenues;

(c) Import controls are relaxed when they tend to encourage pro·
duction of goods that are high-priced and of low quality;

(d) A trade policy may be designed to promote export industries to
cam more foreign exchange or the domestic-oriented industries to
replace imports; and

(e) The government may impose dg_:p1pip...g.ct:ut~ on imported articles
~old in the Philippines at less than their fair market value or
countervailing duty on such articles granted subsidy in the country of
origin as a protection against unfair foreign competition, or grant
subsidy (e.g.. tax exemptions) to a local industry which is not granted to
a similar industry.

1Globalization of trade and inq•,;tm<mt;; i;; breaking down ecunomic barriers in almost
eveTy part of the world. With the influx of foreign goods and sen·ices, the only option for
domestic industries and enterpri;e." to :;urvi,·e is to be globally competitive. The world-wide
economic struggle among countries ha..; :\pawned a fast-paced search tor new technologies
!8ee Sec. H.) to boost their competitin edge.

3~ 6 TI!; XTBOOK 0~ THE PH fLIPPJNt: CONSTITUT ION ~ec. 13

(2) Paramount objective of trad.e poli~y. --- The ConlStitution makes it
clea'r that the trade pulicy which it r~4uires ihe State t o p1·omote must he
one that serves the gen eral welfare. Fo r example, a policy that favor s
import substitution I i.e., local manufacture of products over theil' importa-
tion), must not be pursued even al t he expense of the growth of export
industriel3 or in disregard of the right of consumers to quality but reason-
a bly priced goods. The economy must be open to import~ a nd competition to
fo rce local industries t o greater effi ciency, better quali ty, and lower costs.
· At the same time, a viable and profitable export trade should be developed
to stre ngthen the country's batim.ce of_l)a.xm~-n~~J~.of.>)__ p,o~iti()!.!;_~

It would be good for th e Philippines to seize every opportunity for
expanding existing avenues for bilateral trade with other countri~~ and
exploring new ones, instead of relying on foreign aid. Trade conduces to
self-reliance a nd independence, while aid encourages contin ued depend-
ence on credit, not to me ntion foreign interfe rence.

~3) Benefits frorn international trade. - International trade benefits a
country by allowing it to buy from othe r countries, goods ii; lacks, or ca nnot
produce better, or can produce only at a higher cost, and sell surplus goods,
or those it can produce better and cheaper. The resulting exchange en-
larges the availability of goods to the mutual advantage of the countries
engaged in it.

( 4:) Exchange rates of' different currencies. -·-- Howeve r , si nce countries
use different curr encie::~, mternational trade neees ::; ari l~ inYolvt•s exchang-
ing one into the other at the prevailing r alt> of ~Hha11ge . It is important
that exchange rates are fa irly stabl e: ut herwi;,;e, trade and inv~stments are
discouraged by the possibility of losses inl·urred t hrough changes in the
rates. For example, if th e excha nge r a te of th e pPso to the doll a r is P30.00
and it should suddenly move up to P40.00, exporters would receive more
pesos for their exports while import£-rs woul d have to pay more fo r their
imports. The exchange rate is determined largely by domestic monetary
policies.

(o·l Special problems a rising fro m internation al trade. - S pecial prob-
lem~ usually arise from international economic relations. Countries enter
into a greements or arra ngements (e.g.. common market. arrangements,
counter trade)3 to deal with such problems for t he purpose of enhancing
international t r adl-l. In it8 trade with other countriE~s, the Philippin~s must

c•rhe BoP account represents the country'f: :oral ti nanci tll trnnsactiou.s woth th~ r est. of
the world. Its compvnen t~; include direc t and por tfolio \S lock) investment;;, "s W<! ll a s lrade in
goods a nd St!rvices with other countries A strong BoP position hel ps st r engthen t he vAl ue of
the peso as it boost~ the governrn ent'A foreign currency st<Jck part.icularly thP. U.S . dollar
stock and hel ps the Ban.gko SP.rttral n.g l'ilipin as IBSPJ me et. the demal)ds fOr' dolhm; from
im por·ters.

3.(Q.u,ntertrade r efers to an arrangement that is premised on some forms of recip rocity in
interna tional trade, fi na ncing, industrial coope ration And rel ated internationa l tran~act ions:

l ai Uod.ex..~-Q ~RJ.e!.l2.¥I.~ft~·~, othe rwise known <IS co untercxports or counterdcli very, pa rallel

t ransactions, or reciprocal trade, the foreign su pplier reciprocally commits to purchase

Sec. 14 ART. XrJ.- XATIONAL ECOKO~IY A~D PATRI.:-.10!\Y 387

"promote a trade policy that serves the general welfare [of the Filipinos)
and utilizes all forms and arrangements of exchange on the basi:; of equal-
ity and reciprocity," without being restricted to any one form or arrange-
ment.

SEC. 14. The sustained development of a .re~E}!:Voir qf..na-
ti«:_>A~l.!~!~n.t~_ consisting of Filipino scientists, entrepreneurs,
professionals, managers, high-level technical manpower and
skilled workers and craftsmen in all fields shall be promoted by
the State.TheStateshallencourageappropriate technology and
regulate its transfer for the national benefit.

J'he pra_cti_ce of all professions in the Philippines sha.U .b~ .

limited t~ ~ilipjno citizens, s~y~ Jn. ~-~~ribed by law.

Promotion of national talent pool
of Filipinos.

HuiD...an~o_\lf.G~~ -:-::.peQple-:- are the most critica~ s0urcE-~ of economic
growth. They are the active factors of development (nat utilize through
their labor the passive factors (land and capital' to produce goods and
services needed by a growing economy. They determine the pace and
quality of economic, social and poll.tical development. A country is only as
good as its human resources.

The above is the reason for the mandate that -the State shall promote
the sustained development ofJLI1llti9D..~l.resert..:_oir of _t~.!~nts consisting of
Filipino scientists, professionals, managers, high le·.-el technical manpower
and skilled workers or craftsmen in all fields." (Sec. 14, par. 1.) Talents and
skills are acquired and improved not only by education but also by experi-
ence, on-the-job training, and further individual learning. With highly
skilled, professional and trainable human resource equipped to face compe-
tition in a complex and ever changing technological world, the country can
hasten the attainment of the go&l of economic self-reliance and independ-
ence. (Sec. 1.) The challenge to us today is to turn our country into a nation
of wealth creators and producers.

Encouragement of appropriate technology.

Another important sr.mrce of economic growth is technological innova-
tion - the application of new knowledge to the productive process. A
growing economy has to accommodate itself to successive changes in tech-

Philippine products or liervict->:< to be E!)(ported outside the country in exchange for the
Philippine government's importation or procurement. ;b, Cnder b~a.d.. the foreign sup-
plier of capital equipment, machinery or technology is partially or fully paid with the
resultant products manufactured or produc~d from such capital equipment, machinery or
technology.

TEXTBOOK ON T HE PHILrPPlN£ CONSTITUTION ::\O!C. 14

:-;~•Jj?"Y that raise productivity. (sec Sec. 1, par. 1. ) There tS aiways a
c.:.nstant cha1lenge t.o produce goods 1or services) f-It lower cost, h igher
quality goud~. or new p roducts. With the wave of new technology r f::volu-
tionizing the way busines s is conducted all t)Ver the world, tht! P hilippi nes
cannot aflord t o be left behind in terms of technological i nnovations and
application to develop world class products and services f(H' the emerging
new world J<>commerce.

In all advanced societies, technological progress is an i nherent feature
of developme nt. A developing country like the Philippines has to adjust to
technological changes if it. hopes to achieve rapid economic growth. The
State has the responsibility to promote technology but it must be that kind
of technology appropriate or suitable to our coun Lry. (Sec. 14, par. 1.) Jt'or
instance, superior production techniques should not be adopted if they are
expensive and do not contribute much to employment . (see S ec. 1, par. 1. )
The advantages and disadvantages of ~very proposed t echnological innova-
tion should be carefully studied and weighed in t erms of the bt.>nefit to the
nati onal welfare . (see Art. XIV, Sees. 10. 11, and 12.)

Regulation of technology transfer.

.f1) Benef/.t s from technolol{)' tran!'(er. - It is s afe to say that undt> nle -
veloped econom ies a re so because they continue to d epcmd on traditieonnl
technology particular ly in agriculture. The growth gap bet ween develnpeJ
and undeveloped countries is generally a s wide as th(' technolog ic<ll gap .
This is most evidenLin the gr owth of industries and labor employmcn I.

F ortunately, today's developing countri es need not havE> to huil d their
own techntllogy in all fi elds from the lowest s tage . T hey can adopt. a vailable
foreign technology and modify it if necessary. Our Asian neighbors that
have a ttained th e status of newly industri alized nations, have borrowed,
purchased, or obtained through other means certain foreign tech nologies
on which they have improved. They h a ve bee n able to benefit mCire from the
transfer of technology from advanced countries through thP.ir less r estri c-
tive or more attractive investment policies a nd r egulations.

(2) Safeguard;; against import of' inappropriate foreign tcchnol<,l{y. -
The tranRfer or appropria tion of technology, however, is not necessarily the
solution. The cruci al question a lways is: is it sui t a ble to the requ irements
of our economy or the needs of our soci<~ty? There n1ust be s afeguards
against the i mport of obsolete foreign techrwlu;;ic.s particularly where they
involve the payment of high charges s uch as roya lties and li cense fees. It
may happen that t he tra nsfer benefits more the foreign compa ny tha n the
host country or stunts efforts to develop Filipino technologic nl and s cien-
tific capabillty because of the presence of restr ictive condit ions. Or the
foreign technology may not blend with the lifestyle s, valu.~s, attitudes, and
consum E'r patterns of our society. F or example, a techn ology may encour-
a ge consumpti on and importation ofluxury goods. All these stress the need

SN:. 15 AHT. XII.-- N ATIONAL J<X: O::"G~I'Y A:"D l'A'fi{l \ !C.>:-;\' 3RH

to regulate technology transfer to insure th<, ! it s hall be f(-.r th t· national
benefit. (Sec. 1, par L}

In the flnal analysi,:l, t1eYelopmcnt, essE>n: i '.' !~·-is not a matter of tt:chnol-
ogy, for ultimately it ig the creativity and 1::c!u.,try of <-l pe(1plc propPrly
channelled and utilized that \vill enable th£>m t ·~ ;_:-,·<:t'Jmc a prosperous nation.

Practice of all professions limited
to Filipinos.

A p rofession has been defined a s "a calling wi-; ;ch requires the passing
of an a ppropriate government board or bar exa!T:: ::.:.:iun . sueh a s the prac-
tice of law, medicine, public accounta ncy, cngint-~~:--:~ . t' l c. "'

U.·l'Na ture of right to practice. - The practK.: -::·:: prof~ssion -i nvolves
public interest and is open only to pe rsons who he:·.-<' ..: ::dt:rgone the neces-
sary aC'ademic preparation and pa~sed the appropL..:: e: ; ·· ·:~rnnwnt exami-
nation and who po:ssesses such oth er special qual;:': -:..:: :...... , prescribed by
law . It is not considered a business where pro fit i:-. trE- ;:· ~:;lc lp:-d !HOtive but
an activity l~xercised in a s pirit of public seni ce al:~ : ·.:;:-:-; it may inciden-
tally be a m eans of livelihood. 'l'he right to pronict- .: p~0fe~.;:i•>n ii\ not a
nat.ural or constitutional right but is in the naturE' ~1i :i -prh· i!ege to be g1wn
or w ithheld by the State s ubject only to constitut ;c•:.Z< : !imita tion~.

(2)_Exercise. of pril•ilege by alien.<;. --The Con:"tl~ ~t: JOn limits the prac-
tice of all p rofessions in t he P hilippines to Fil.i<.'l!i•J ritil.en.:;. HoweYer,
Congress may pro llide otherwise in certain ca::-t-~ St:>e. U, par. 2. ), e.g. ,
pursuant to a treaty, or on grounds of rccipro~; it~-- er ·.nth n~sp cc r on ly to
cert ain professions s~ch a·s.me-ci}cinc, o-r in fa\'or of a particular fon~igner
for special reasons. Congres8 may impose cond itwn" for the exercise of the
privilege to protect public interest.2

SEC, 1-5. The Congress shall create an agency to promote the
viability aud growth of cooperatives as ins trume nts for social
justice and economic development.

Agency to promote viability and growth
of cooperatives to be created.

A COQ.Jl.fi.a.'t:i&.L is a type of busines:.:; unit through which i1trlividual
members cooperate in p;oviding specific types of services of mutual benefit
to the membership.

1Local Tax Code. •Pre:;. Dl>cr~t: ::\o. 231. St~c . :3: t>- i !. •

~Resolution No. 98-5-ti ;.Jan . :lO. 1998 , of the Ph i hppi n~ Rt::~lation Commission CPRCj, as
amendl!d by Resolution ::\o. 98 -549 ~ !arc h 10. 199&,, prbcnbes the guidelines for the r~;gistra ­
tion of foreign professionals all owed by laws to practice th(~ regulatf<d pmfcllsiom i n the Philip-

pines .

390 TEX'rBOOK ON THE PHI LIPPJNE CONSTITUTION Sec. 16

Cooperati ves operate under certain basic principles. 1 They may be
classified as consumers, producers, marketing, cre dit, or service coopera-
tives. The cooperative movem ent began in Rochdale, England in 1844.

Neither the 1935 nor the 197:1 Constitution so much as mentioned

~cooperatives." With the mandate to create an agency2 to promote t heir

viability and growth, the new Constitution now gives proper r ecognition to

the important role cooperatives can play "as instr uments for social justice

and economic development." The promotion of the cooperative spirit a mong

the people can h elp effect desired changes and reforms in the economic,

social and political structure of our s ociety . '

(1) Cooperatives can serve as a vehicle for attaining a more equitable
distribution of wealth by increasing the income and purchas ing power of
the low-income sector of the population and for providing nee ded services
not only for their members, but also for the community in gen eral.

(2) They encourage self-management and pa rticipa tion in decision-
making at the grasstoots, as well as a broader based ownership of private
enterprises. (Sec. 1, last par. )

(3) As a direct expression of the bayanihan spirit of the Filipinos , and
wi.th s trong government support, the cooperative movement can contribute
substantially to the national development a nd progress of the country.

SEC. 16. The Congress shall not, exce pt by gent!ral law,
provide for the formation, organization, or regulation of
private corporations. Government-owned or -controlled cor-
porations may be created or established by special charters
in the interest of the common good and subject to the test of
economic viability.

Formation, organization, and regulation
of corporations.

Under th is provision , Congress is prohibited from passing a s pecia l law
or cha rter for the formation, organization or regulation of specific private
corporations. Thes e matters are to be provided for by a general law, that is,
a law equally applica ble to all private corporations. Such is t he nat ure of
our Corporation Code,1 the law governing private corporations in the Phil-
ippines. The purpose then is to prevent di scriminatory practices wherein

1Such a s one-man. one-liote regardless of tht! number ofshares owned , limited income on
capital, and patronage refund in proportion to patronage of members.

~The Cooperatives D<:!velopment Authority und er the Office of the Presiden t , created
under R..A No. 6939 {Ma rch 10, 1990) is the n ew agency charged with the authority and
responsibility for implementing the program of cooperatives development under R.A. No.
6938 (~t.y1arch 10. 19901, the law which ordains a Coo perative Code of t he Philippines .

:natas Pamhan:;t\ Big. 68.

Soc. 17 ART. XI[.-- NATIONAL F;CO!'\O~lY XND PATRI::\10:'\Y :391

special privileges are granted to a few without giving other~ the right to
obtain those privileges or the ~ame condition:>.:!

The exc~ption n.~late~ tc pri vat~! corporations that are owned or control-
led by the gov•~rnment or any subdivision or in~trumentality thE-r(·uf. The
reasun for this exception hes in the fact that :ouch corporation!}~re organ-
ized not primarily for profit but for blazing the trail for privatecapital and
initiative towards new and unexplored areas of in\·estments.'':l

Creation of government·owned
or -controlled corporations.

These corporations may be created or established by a special charter
or law but only ~in the interest of the~common good and subject to the test
of economic viability.··

The limitations are in re.-ponse to the big increase in the number of
governm(mt corporations~ which has spawned a ho~t of problems, mostly
associated with lack of clear definition of government involvement in busi-
ness, overlap or duplication of aelivitie:-;, and inad~quate monitoring and
contr(JI. Many of these ftorporation;;; lwcame "white elephants" and were
included in the list of tho::;e slated for privatization.

"Economic viability:· means that the government corporation will have
the capability te make profits and will not have to d~pend on budgetary
appropriations or special assistance from the government.

'fhe limitation that thE? creation must be in the interest of the common
good is u recognition that the private sector should be the "engine" of
national economic progress while the government should engage in busi-
ness only wh~n it i!-1 absol-.;tely necessary. Our Constitution adheres to free
enterpris~ in the l:lOCial and economic system subject to ihe limitations in
Sections 3, 17, and 18. The government, therefore, should only engage in
industrie~ that are capital intensive, high-risk, or pioneering in which
private enttlrpri!'!e i~ reluctant to invest or which it is not capable to
undertake, and those that are vital to national interest. In the end, the
policy of the government should be to turn over these industries to the
private sector once they become stable or when national defense or welfare
• )s no longer involved.

SEC. 17. In times of national emergency, when the public
interest so requires,.the State may, dut·ing the emergency and
under re&.sonable terms prescribed by it, temporarily take over
or direct the operation of any privately owned pubHc utility or
business affect(~d with public interest.

"City and County of San frath:i,co \::' Spring \·allt::y Wat~>r Wnrks. 48 Cal. 493.
3Del. V.C. Yancha. •franchises :1nrl Public Ctilitu~.;;.·· in C.R :\1ontejo, supra., p. 245;
City and County of San Franl"l H~u \-~- SpTJTlJ' I;" :ley Watt!r Works, 41; Cal. 493.
•From 70 in H:l70. goH•rnmtnt (;orpcrat i~:>n:; have groY. n in n\tmber to 250 m 1985.

392 TEXTBOOK 0~ 'l'HE PHILIPPi:'\F. CONST11'UT101': Sees. l l:l- 19

Temporary take-over or direction of private
business by the government.

Under t his provision, the Stat~ 1 Government) in times of national
emergency (e.g .. rebellion) when the public interest so requires (e.g. , to
prevent the paralyzation of economic activities), may either temporarily
take over the operation of any privately-owned public utility or bus iness
affected with public interest, or merely direct the operation of said public
utility or bu::;iness.

ln the first case, the government. virtually becomes owner of the utility
or business. In either case, the tem porary take-over or direction by the
government. must n ot last beyond t he period of the public emergency and it
must be under reasonable terms prescribed by it. There is no compensation

involved since there is no transfer of ownership.

The President m ay declare a sta te of nati onal emergency and exercise
t he powers granted by Section 17 without net:d of an emerg<:!ncy powers law
enacted by Congress as provided under Section 23(2) of Article Vl.

SEC. 18. The State may, in the interest of national welfare or
defens e, establish and operate \'ital indus tries and, upon pay-
ment of just compensation, transfer to public ownership utili-
ties and other private enterpris es to be ope rated by t h e Govern-
ment.

Government ownership of business.

Under this pr ovi sion, the State may do two t 2 i things :

(.1) Establish and operate vital industrie::: 't'-# .. means of transporta-
tion and communication); and

(2) T ransfer to public ownersh ip. utiii til:!:; a nd oth er private enter-
pris es , upon payment of just com pensation. to be operated hy the govern-
ment.

The government is allowed to take action in this respect not only whE\n
national de fense requires it but in all cases where th e national welfare
makes it imperative as when th ere is eco nom ic monopoly or su bjugation by
alien~ prejudicial to public intere~>t i n the ownership a nd operati on of
certain vital industries. The courts may not interfer~ (:Xcept. in t he determi-
nation of just compensation.

Section 18 involves an outri ght transfer of ow nership of public utilitil:!s
and other p rivate enterprises from the p rivate owner to th t: gover n m ent.

SEC. 19. The State shall regulate or prohibit monopolies
when the public interest so requires. No combinations in re·
straint of trade or unfair competition shall be allowed.

ART. XII.- .:-.:ATIONAL EC0:\0:\IY ..l..XD PATRIMONY 393

Meaning of monopoly.

Thtlre is monopoly where a single sellH ·· r ~~ group of seller:;: acting in
concert actually control~ or possesses i..he p.: ·' -:-:· to control market prices. 1
The bigness of a cotr..pany is not by 1tselfind~.:,:,:i·d~ of a monopoly."

The real test is "big market power"- at.·.·.:::. to influence or to deter-
mine the price which will be charged in the :::-_,;.::-;;N pla(:e, independent of
normal economic pres8ures of supply and d€-r:-..;:-. ~-

Regulation or prohibition of private
monopolies.

Even without the above provision, the :3: _:. :-: :-:.:'.'- Rt.ill regulate or
prohibit private monopolies when the public ::-_:-::-·c·-~ ~o requires in the
exercise of its police power.4 With this provisic.:-_ ~- ... ~--. ~·r. a law prohibit-
ing private monopolies cannot be attacked as uu. :-. < ·.:·_;:ion a] for being an
unreasonable interference with the right to lib.,:-::.. :- ;::.::-. ;.:t>rty. :\Ionopolies
that operate in restraint of trade (infra.! du ~-., .::_:. ·,;, :::-: fre~ and open
competition and, therefore, are inimical to tht: :::-.:.,.:-.,.=-: _:·:::._.consuming
pubhc.

The usc of the word "regulate" in the Con,;t:: .:::::--. ::;ci:ca:e::. that some
monopolies, properly regulated, are in the pu~.:: ~ ::::.:-rest. Competition
when left. wholly free, might he destructive ()f p·.;~: ·..:- ; ntE-rest.:

Meaning of restraint of trade.

The phrase restraint of trade is U!$ed !.11 in r.:-:'t-:E'nce to combinations,
acts, or practices which interfere with the norma: ;>rc•duction and supply of
commoditjcs by the suppression of competition :"::erein or by other means
and (2) ahw with referenc~ to contractual re5::-i..:t:<)n upon the right of a
per·son to engage in trade, business, or professio.!1.

While the law cannot compel competition. it can in the interest of
public policy, remove unreasonable restraint!' on competition.1;

Meaning of competition.

(ompetition implies a struggle for advantage between two or more
f(m~es each poss£~ssing, jn substantially similar, if not identical, degree,
cer-tain characteristic~ essential to the busine~s sought. It mean~ an inde-
pendent endea\'O!' of two or more persons to obtain the butiiness patronage

=soe Anwrican Tob~cc:o Co. vs. t:nited Statc8, a~8 C.S. 38; United States vs. Paramount
Pi(:I.Ul't'S, ;~:H U.S. I:H.

~{}niterl State;; \"i'. Swift. '286 L'.S. 106.
~Ferretti. National Economi<"~. p 22.
~see Revised Penal Codt.>. Artld€' 186: sec commentt< undf.'r Anide IV, Section 2.
::see OIHr.k, IV Modern Corporanc.r: Law. p. 191.
~36 Am. ,Jur. 480, 41:\7

394 TE XTBOOK ON T HE PHI LIP P{~£ CONSTITUTION Sec. 20

<! f a third by offf!ri11g· more a dvantageous t erms as inducemen t t,1 s ecure

tr3 de. 7

Meaning of unfair competition.

In its broad sense, as it is used in the Constituti on , unfair competition
i s the unju st a ppropriation of, or i njury ro. the goodwill or business reputa-
tion of anot her. It includes unfair com petitivn in its na rrow sense which is
the s imu lation by one per.son of the name. :;y m bol:;. or devices employed by
a busine:ss riv a l so as to induce t he purch ase of his goods under a false
impression as to their origin or ownenhip:

Our Civil Code prov ide!!> that "unfair competition in agricultural, com-
mercia i or industria l en te rpris es or in labor, th rough the use of force,
intimidati on, det:ei.t, machination or a ny other unjust, oppressive or high·
h anded method sha ll give rise to a right of action by the person who
thereby suffers the damage."!\ The ll•rm is used in thP. Civj\ Co dE:: in its
broad sense.

Combinations in restraint of trade and unfair
competrtion prohibi1ed.

The Constitution altogethe r prohibit;; co mbination s in restra int of trade
and unfair competition. lS ec. 19.1 n~ moc rary becom HS a veri table mockery
if a ny person or gr oup of per sons by a ny unjust or high-handt~d method may
deprive others of a fair cha:oc(:! to engagt in busin~s.s or earn a living.10 The
provisi<m seek:;; to preserve competition in fl wholesome and free atmos-
phere, so that neith er in capit al nor in labm· may t here be a monopoly
through u njur.t m ean::. 11

Note tha t what the Const itution prohibits is unfair competition. So long
a s fair or legitim ate means a re used. competition is proper . Thus, rival
ma nufactur·e,·s may lawfully compete for the patronage of the public in the
qua lity and price of thei1· goods , in the beauty a nd appe al of their packa ges
or containers , in the extent of their advertising, and in the employm ent of
agents .12

SEC. 20. The Congress shall establish an independent central
monetary authority, the members of whose governing board
must be natural-born Filipino citizens, of known probity, integ·
rity, and patriotism, the majority of whom shall come from the
private sector. They s hall also be subject to such other qualifica-
tions and disabilities as may be prescribed by law. The authority

~ Gokongw ei, Jr. vs. S.E.C., 89 SCRA 336, April 11, 1979 .
k52 Am. Jur. 867.
~Article 28 thereof.
' 0Rcport of the Code Commi:;s io n, p. 31.
11A. T olenti no, op. cit., p. 114.
•·?coat. vs. Merrick Th t•eat. Co.. 149 U.S. ll62.

Sec. 20 ART. Xil.- NATIONAL ECONO::.fY .-\~D PATRDIIONY 395

shall provide policy direction in the areas of money, banking,
and credit. It shall have supervision over the operations of
banks and exercise such regulatory powers as may be provided
by law over th~ operations of finance companies and other
institutions perfonning similar functions.

Until the Congress otherwise provides. the Central Bank of
the Philippines, operatingunderexistinglaws, shallfunction as
the central monetary authority.

Central monetary authority to be
established.

This provision directs Congress to establish an independent central
monetary authority with the powers and function~ mentioned therein. The
Central Bank of the Philippines created by R.A. ~o 265 has been consti-
tuted as the central monetary authority pursuant t0 the 1973 Constitu-
tion.1 Congress has established a new monetary autho~~y.

(1) Responsibilities and objectives. -The importa::ce 0f a central mon-
etary authority may be seen by looking at the re~por:5-ibilities and objec-
tives of the Bangko Sentral ng Pilipinas (Central Ba:::k of the Philippines)
as p1·ovided by the new Central Bank Act:

,(a) To provide policy directions in the areas : :· :-::·:·ney. banking, and
credit;

(p) To supervise and regulate the operatic:-.:" of banks, finance
companies, and non-bank financial institution:;:

(c). To maintain price conducive to a balanced and sustainable
gro"~<vth of the economy; and

(d) To promote and maintain monetary stability and convertibility
of the peso in other currencies.2

(2) Qualifications of members of governing board. -The members of
the governing board of the central monetary authority must be natural-
born Filipinos because of the nature of their functions. The requirement
that the members must be persons of known probity, integrity and patriot-
ism and that the majority of the members shall come from the private
sector is designed to promote the independence of the central monetary
authority. It seeks to prevent the recurrence of the board being composed

in the past of alter egos of the President.

1Article XV. Section 14 thereof; See Presidential Decree .No. 1801 (dated Jan. 16, 1981).
2Repuhlic Act No. 7653, Sec. 3. The Central Bank is tasked with the control of money
supply and the supervi1;ion and regulation of the operations of the country's banking system.
It is the solely authorized issuer of om· currency. Because it is designed primarily to service
banking institutions, the Central Bank is often referred to as the bankers' hank. Function·
ally, it differs from ordinary banking institutions. For instance, it docs not accept deposits
from the public; neither does it lend to individuals. The Central Bank also functions as fiscal
agent of the government.

TEXTBOOK ON THE PHlU PPI NE CONSTITUTIO N Sect~ . 21-22

SEC. 21. Foreign loans may only b e incurred in accordance
with law and the r egulation ofthe monetary authority. Informa-
tion on foreign loans obtained or guaranteed by the Government
shall be made available to the public.

Rules with respect to foreign loans.

Section 21 seeks to prevent, once and for all, the injudicious contracting
of foreign loans in the past on the sole init.iative of the Preside nt eve n
agains t t he advice of the Monetary Board of the Central Bank. Now,
foreign loans, whether public or private, m ay only be incurred in accord-
ance with law and the regulation of the monetary authority. Furthermor e,
the contract or guarantee must be with the prior concurrence of t he Mon-
etary Boa rd. But congressional approval is not required.

As it is the people who will ultimately shoulder the payment of the
country's indebtedness, the Constitution also requires that information on
foreign loans obtained (public loans) or guaranteed (private loans) by the
government shall be available to the public.

SEC. 22. Acts which circumvent or negate any of the provi-
sions of this article shall be considered inimical to the national
interest and subject to criminal and civil sanctions, as may be
prov ided by law.

Acts which circumvent or negate
Article XII.

Sect ion 22 declares that:

(1) Acts which circumvent or negate any of the provisions of Article XII
a re inimical to t he nat ional interest; a nd

(2) They shall be subject to civil and criminal sanctions as may be
provided by law.

This provision basically prohibits. foreign use of Filipino dummies and
seeks to prevent the e njoyment of a right, franchise, privilege or property
r eserved for Filipinos by those who a re not qualified. It is in response to
r evelations of abundant violations of constitutional provisions r eserving to
Filipinos and Filipino-controlled corporations certain areas of in vestment.

Civil s anctions may include forfei ture offoreign equity as well as loss of
franchise or privilege to do business in the Philippines. The criminal
penalties s hould be severe enough as to dis courage employment of dum-
mies by aliens.

-oOo -

·3

Article XIII

SOCIAL JUSTICE*
AND HUMAN RIGHTS

, SECTION 1. The Congress shall gh·e highest priority to the
enactment ofmeasures that protect and t>nhance the right ofall
the people to human dignity, reduce social. economic, and
political inequalities, and remove cultural inequities by equita-
bly diffusing wealth and political power for the common good.

To this end, the State shall regulate the ac-quisition, owner-
ship, use, and disposition of property and its increments.

SEC. 2. The promotion of social ju.sti~ shall include the
commitment to create economic opportunities based on free-
dom of initiative and self-reliance.

Concept of social justice.
Social justice is not a mere catchy slogan t':, express concern for the

plight of the poor and the downtrodden. As a mandate imposed by the
Constitution, it requires the adoption by the State •Government} of meas-
ures that guarantee the right of all the people to equality of opportunity in
all fields of human endeavor and to equitable sharing of the fruits of social
and economic development with special emphasis to such measures that
ameliorate the standard of living of the underpri\-ileged groups.

/'

/ The end of social justice measures or programs should be to assure that
"those who are less favored in life be more favored in law."

Duty of State to promote social justice.
(1) Aims of policy to promotP. social justice. -The Constitution man-

dates the State to promote social justice in all phases of national develop-

'The pro,·isivn;; relat ing to S(K:ial j u stice were contained merely as part of Article II -
Declaration of Principles and State Policies in the 1973 Constitu!.ion . The new Charter spells
out in bold relief the measures that will be necessary to implement thl:' goals of social justice.

Article Xlli has widenE-d C'e>Miclt~rahl~· thE' r<'neE'pl of sm:i<ol j\l~tice embodied in the 1973
Charter to cover not just economi C' matte r,; . It ha~ bN·n dt•,;crilwcl a!; thE' "centerpie~e." of the
Constitution.

397

398 TEXTBOOK ON THE PHILIPPINE CONS1TrVTIO~ s~cs. 1-2

ment (Art. II, Sec. 10.) - social, economic, political, and cultural - to
ensure the dignity, welfare and security of all the people, or as others put
it, freedom from want. 1 More specifically, the aims of the policy to promote
social justice are:

(a) to protect and enhance the right of all the people to human
dignity;

(b) to reduce social, economic and political inequalities; and

{c) to remove cultural inequities. {see Art. XIV, Sec. 18.)

(2) Measures to achieve aims. - These aims are to be achieved by the
enactment of measures to which Congress shall give the highest priority, that
seek to "equitably fdiffuse] wealth and political power (see Sees. 15-16.) for the
common good." The diffusion of wealth will, in turn, be accomplished by
regulating the acquisition, ownership, use and disposition of property and its
increments (Sec. 1.), i.e., fruits or gains. Inequalities or distinctions among
individuals will always exist but they must at least be reduced; but inequities
(i.e., injustices) must be removed or eliminated, not merely reduced, as they
are evil and should not be permitted to exist in any form.

(3) Commitment to create economic opportunities. - The promotion of
social justice must include a commitment on the part of the State to create
economic opportunities for all the citizens based on the freedom of initia-
tive and self-reliance. (Sec. 2.) This implies that while it is the duty of the
State to create economic opportunities, it is al~:>o the obligation of the
individual to exert efforts to equip himself with knowledge and skills
necessary for productive employment or livelihood without having to de-
pend on the State or other members of the community for his needs. "He
must not learn to accept fish; he must learn to fish in order to feed himself
for a lifetime."2

Beneficiary of social justice policy.

While the end of social justice is to ensure the dignity, welfare, and
secul'ity of all the people, it is a well-recognized fact, however, that for the
well-being and economic security of the higher income groups, social justice

'See V.G. Sinco, op. cit. , p. 124.
2Work plays a crucia l and even an ind is~ns able role not only in 11 man's life bui a lso in
t h e whole society. Withou t wo r k. m an fa ils to mak~ use of his endowm~nts, to realize IUs
God-given potentials, and to Httain his goals; he stagnates. In the most basic level, without
it, man can fail t o p1·ovidt! for himself and for his family; h e he<;Omes a burden to society.
Right now, with so m1my problems confronting our nation, there is a great need Caside, of
course, from competent, honest, and dedicated public officials) for skilled and productive
citizens who understand and appreciate the value of work and live by it, to finally bring

a bout lasting pr•.>greils and prosperity to our land, at least on par with our economically
d~veloped neigh hors in the Southeast Asian Region. The creation of more jobs and the
employ ment of mor~ people who need them can contribute more to a lleviate poverty than any
program to help the poor.

Sees. 1-2 ART. XIII.-- HOCIAL JCf\TICE A~D HC'MAN RIGHTS 399

is not necessary. They are so situated that through their own efforts and
without governmental help, their well-bei:--,~ and economic ~eeurity are

assured. The beneficiary of a social justice v· !icy should right l~· be. there-

fore, the common tao, the "little man" so-u.. ::.:-d - the slum dwellers, the
landless. the till~1·s of the soil, the laborer:;. : :~c- economically underprivi-
leged - who, if they were to rely on the:~ · .'. :· exertions alone \\ ithout

governmental succor and support, would :-.. : ::!\ely be able to attain a
decent standard of living befitting human b.:;.,n~~

In the words of President Ramon ~ta;;:.:-.:,:.-~.:.:.-. they deserve "a little
more food in their stomachs. a little more:'!:-:-.:·.·:- -..::r their heads, and a
little more clothing on their backs:' The:'!.;:.:-='~-:..:.: .,-ndeavor to help the
poor who find it difficult to make the pro,·t-:-~::-.. ~<~- ends meet and who
suffer privat~ons in the universal struggle !or,_,:_<,-::-.:.:. ·In ord•~r to achieve
the goals of ~wcial justice, it \Viii be con~:!t:.;.:· :-:. ._ : -:--:;Ji:;,;ib!c in many
cases for the State to tilt the scale in faYr:·r ::· ::-.,. :-·~-~-::,-. t!le weak. and
the handicapped a1; again::t the more pr:,·:>:-~:;:: :-:-.--· --:-· ::·. ou!· society."

Social justice and property rights. I

!lJ Right to prope~~.-• .- .... ::-;:.·.-::.· :· --····· ·- ~:·:.:.. ~;.!\\"€''.'€!'.

does not propose to destroy ·:·r u::-,.:t'~.::-_-: ;~:;:..;-:.:• ":"-.<:.~.:-• :,i,oc<HI?
orequal dit>tribution of wealth. W auth.:·;:Z€- :!-,.:-:.a~~::~ : :·;;. ::-_..:.: > .::-. t::X(t-0.~

of one's personal needs and the gi'ing it to anotht-r. The :.;;;:..: : :.:-:-:·;Jt-:-~y

legally acquired is also one of the rights enshrined in tht- C.::::-.:-:::..:::.·::1.

including the right to be protected against deprivation without d'..<.:- ;: :- :d~

of law. (Art. III, Sec. 1.)

(~) Poverty not an excuse for violating right of'property owner.- Socal
justice should not be understood to mean that property or rights belonging
tn one should be given to another who .is not entitled thereto simply
becau:;e the latter is poor. Thus, a squatter cannot claim that under this
principle, the government should protect him in ihe possession of the
premises occupied by him hecau8c he is poor and that he ha~ no place to
stay. Charity and social justice cannot be Uf-I(Hl to trample upon the rights
of otherf; or to commit an injustice agninst the more fortunate classes to

~~ee Tanada and Fernando, ThP. Con:;tit.ution of t.he Phil., p. l.i4 i 1952); Bakc~r v.;;. Pc:rez.
iCA} No. 25476-R, Dec. 27, 1961. R.A. No. 8·125 1.Dec. lL 1997j institut.ionalile~ th~ Social
Reform and Poverty Alleviation Progr~m. cre~tes for the purpose the Nat.ional Anti-Povl!rty

Commis:;ion C!I<APCj u>1dcr the Office ofthe President, and defines it5 power1; and functions.
~:xec. Onler ~o. :!G:l (Aug. 24, 2004• increases the composition of the Commisl'ion, including
the Vice-Prc!.::ident a;; ex-officio Alternate Chairman and the Lead Convenor of the Commis-
8ion as th~ Secretary General. Proclamation !.\'o. 717 /Oct. 18, 20041 declare:; the pcriocl from

October 17 tr. 23 of cvl!ry yl!ar as the -National Week for Ovt'rcoming Poverty.''

'Ayog vs. Cusi, Sr.. 118 SCRA 492, Nov. 19, 1982.
';ln the government',;, poverty allc\·iat;on prograrn. what ~hould be avoided is a dole-out
systerrt$With cxcl!ption ob\·iously of the really sick and phy~icall)· handicapped. A~ far a~
possible, the poor and disad\'antagcd should he helped to help th•:m.~elves. In short, to be

self-reliant instead ofjust waiting for the "manna frum heaven."

400 TEXTROOK ON TJI F. PHlT.lPPI:-JE COt\S1'ITUTION Sees. l ·2

impro\·e the lot of the le.ss fortun ate ones. Property owners are also enti tled
to prot ection under the Constitution.

Social justice neither social/economic
nor legal/political equality.

( l·l Social and economic di stinction s will always e:xist. - ~Q.£i..~Jjy::;~_i~.c
!§_!1o_t~~..£~.!'l:LQ~ ec~~1_9_!!_l_k_~~~li~..1. b~c.?.~.~~- ~.f!~l!~!i.!-:t ~i.l.!..C!.1~.1;1.Y~. ex. ~~ .as .

,lD.o.g .au.oC:i.aL~tiQn.a.d.epend...on.pe.r.s.on.~.l. Pr .subj~c_tive.. Pr.Qdiviti~~-· l"or

instance, social distinctions may and do often obtain between the r1ch and
the poor. ~ow, a person has absolute right to choose the group with which
he desires to associate or r.ommingle. Under the Constitution, equality of
privil eges, wh ich are purely social or pri vate, is outside t he pale of its
protection . Absolute social and economic equality among individuals is not
possible. The aim is not to remove but to "reduce social and economic
inequality" and this is accomplished by raising t he quality oflife of th e less
fortun ate members of !'lociety to a level worthy of human di gnity.

{J ) Equal, not .'lame, treatment under the law contemplated. - It is
neit'ller absolute legal nor political equality, because the latter term is
relative and is necessarily premised on differentiations based on personal
and n atural conditions, such as age, sex, mentality, physical capacity,
citizenship, etc. Thus, one below 18 years of age has no legal right, equa lly
with other s who are qualified, to vote. Equality under the law implies that
person;, are entitled to the same rights if they are similarly situated or
circumstanced. (See Art . HI, Sec. 1.)

Social justice through regulation of property
and diffusion of wealth.

As one of the means for attaining the ends of social justice, the Consti-
tution empowers the State in Section 1 to equitably diffuse wealth and
political power for the common good. It sb a ll regulate the acquisition,
ownership, use , and disposition of private pro perty and its increments (e.g.,
profits, increase in value} in c~rder to assure that the greater number of
people can benefit thereby economically and s ocially.

The equitable diffusion of wea lth also r educes politica l inequality . In
the Philippine millieu, the poor h a ve practicall y no chance of being electe d
to public office.

U } Property ownership impressed with social function. -- ThL~~

t.hat.Jh~ .Q.W..n.~rh~l~~'l.b$ulute right over his property -is.no longerrecogni 7.eQ..
Prop~!.~...o~~~_r.~h~.P.. !iJ~9.-<:!lr!.i.e.!' . wit.h -~t_ ~-~-~~-~~tf~n.ctio!l. wh,ic_h obliges the

~.n.~ili...l.:l-~~-hi§ .P.X.QP.~r.ty .119t.()nly to 'b~ J?.efJ t.him?~l.f hut aqe ast. indirectly

soci~ty-~~ w_e!). This is an application of the f!tewg,.!.4..t:()_n_cepJf?f_pr_ope_r_ty. We
are mer e stewards of the endowments entr~"£0 "us."We cann6fnang on
to them forever; we h old t hem in trust. Irrespective ofthe number and qual-
ity of our talents and resources, a ll of us have the fiduciary duty to take
care of them, devel op them, and put them to good use not for our personal

Sec'". 1-2 AKT Xllf. --SOCIAL .JUSTICE .-\XD m;MAN HifiHTS 401

purposes or gains alone but for the common :;ood of the broader community
and the country. Thus. the State has the right to limit property holdings
(Sees. 4, 9; see Art. XII. Sees. 1, ~n, to abolish share tenancy and replace it
with a system ofleaseholding tsee Sec. 4.f. to require that pri\'ate property
be used or enjoyed in certain definite ways. or ~c· see to it that profits in any
business activity are shared equitably. (Jbid .. 3ec. 11, 3rd sentence. i

t'2) Aim of'pmri.~inn. - A basic ill in th~? P~.::~ppi1ws today is the e\·er-
widening gap between the rich and the poor. W.:-9-:~h is concentrated in the
hands of the pri\·ileged fe·w while a great ma_:(~:~y of the people suffer in
deprivation and misery. The overriding aim of::::-:- J•n5titutional mandate
is to bridge that gap by a~suring that more ::;,;. : ~: :<.- will be able to own
property sufficient to satisfy the basic needs of ·:i.£:-(·~·::: living and to main·
tain human dignity and self-respect. But there :~ :-:: :-:-.andate to condemn
the rich or violate their rights in order to impro\.;- ~::-.-:· ~:·t of the poor.

Social justice through promotion
of equality of opportunity.

One of the observation!' generally belieYed ,_. : .:~ ;-~:-pl€' is that our
society is <~ligarchic in Rtructure which, in turr:. ~~~·..::~~ :~. ,~ go\'l:!rnment
that is plutocratic in practice. This st.ructura: .:~:·.:-c: (.f ;:>'.!r :,;ociety i8
traceable to the age-old problem of poverty and its ~.,:.;:,_·,nive consequence:;.
like unemployment, underemployment, low level 0! ::-.·20::•me. and low level of
production. ln order to solve these problems. it :~ necessary to provide
equality of opportunity. Tt is noted that inequa.i:~:· of opportunity and
income is partly due to unequal distribution of ?'':.perty and to uneVfm
distribution of skills as a result of uneven educatir,:-.. '

Education is necessary in promoting equality (·f ·jpportunity and ena-
bling an individual to acquire inteltectual and W•Jr~ skills for productive
activities. Education is thus an effective measurE" i;, correcting the social,
economic, politicaL and cultural inequities that cau!'e mass discontent.

The provisions of the Constitution on the regula:i(.>n of property (Sec. 1,
par. 2.), on the distribution of ag1·icultural lands w landless farmers and
farm workers (Sees. 4, 6. par- 1.), and on free ~ducation (Art. XIV, Sec.
212].) are mandates which the State through Congress is obligated to
implement to secure equality of opportunity and thus achieve a more
egalitarian social system.7

Constitutional provision~ on social justice.

In order that the declaration of the principles of social justice may not
be just an empty nwdley of words, the Constitution in Article XIII has
provided the means iowards its realization.

'Sec Social Reform.;; for the Common .l\1an in the :"ew Charter, by Del. F.mmanucl T.
Santos, Phil. Panorama. Dec. 31. 1973. p. 9.

"Ibid.

402 TEXTBOOK ON THF.: PH!Lll'PI~E !":O NSTITUTlON Sec. 3

Other provisions promote social justice by mandating:

,1) the prohibition against the imposition of literacy , property, and

other substa11tive require ments for the exercise of suffrage (Art. V, Sec. 1.);

e qu (~ t he imposition of t he requirement t hat taxation s hall be unifo:-m.
i'tab l e, and pro. gr~ss ive I.Art. VI , Sec. 2811].) so t hat i ts burden will fall

on those better able to pay;

(~) sectoral representation in the Hous e of Representatives (Art. VI,
Sec. 5[2].) and in legi~lative bodies of local governmen ts I. Art. X, Sec. 9. );

(4') the maintenance of an independent judiciary (Art. VIII, Sees. 21par.

2.], 7l31, H-12 ; Art. XI, Sec. 2.), for social justice cannot be fully achieved if

equa ljustice is not administered to all;

(5 } the encouragement of broader-~ased ownership of private enter-
prises, and equity participation in public utilities and imposing upon the
State the duty to promote distributive justit:e and to intervene when the
common good so demands in connection with the owner~hip, establishment
and operation of pr\vat.e en terprises !Art. XII, Sees. 1, last par. , 6 , 11.);

<(}) small scale utili ~a tion of natural r esources by Filipino citizens
(Ibid., Sec. 3, par. 3.);

(7 ) the limitation of the- area of lands of t he public domain that may be
acquired by lease, purchase, hom estead. or grant Ub1:d., See. 4. J.:

(8.) the protection of the right.s of indige nous cultural communities to
their ancestral lands ([bid., Sec. 5.);

(9) the creation of an agency to prom ote cooperatives as instrume!lts
for so'cial justice (Ibid. , Sec. 15.);

( 10) the regulation or prohibition of private monopolies Ubid., Sec. 19.)
to protect the consum ers especially the poor from exorbitant prices; and

( ll ) the maintenance of free education; the gram of scholarships, etc.
to deserving students espocially the underprivileged; the encourag~ment of
non-formal learning; the gi ving of vocational training to adult citize ns, the
disabled and ou t-of-school youth; a nd the givi ng of the highest hudgetary
priority to education. (Art. XIV, Sees. 2, 5l4 1. )

The Constitution requires the President, Vice-Pre::-;ident, or Acting Presi-
dent to subscribe to an oath to the effect tha t he will "..d.o j!!~t~~~. ~g_ e.Y.f;!_Y
..m~.Jl.'' (Art. VII, Sec. 5. )

LABOR

SEC. 3. The State shall afford full protection to labor, local
and overseas, organized and unorganized~ and promote full
employment and equality of e mployment opportunities for all.

It shall guarantee the rights of all workers to self-organiza-
tion, collective bargaining and negotiations, and peaceful con-

Sec. 3 ART. XIll. -- SOCIAL JUSTIC F. ..l,l\: D HFMAN RIGHTS
Labor

eerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane
conditionsofwork,and a livingwage. Theyshallalso participate
in policy and decision-making processes affecting their rights
and benefits as may be provided by law.

The State shall promote the principle of shared responsibil·
ity between workers and employers and the preferential use of
voluntary modes in settling disputes. including conciliation,
and shall enforce their mutual compliance therewith to foster
industrial peace.

The State shall regulate the relations betwe-en ·workers aud
employers~ recognizing the right oflabor to i ts just sh a re in the
fruits of production and the right of ent.erp~ to reasonable
r e turns on investments~ and to expansion and gTQ9!""th.

Protection to labor.

Th e aboYe declarat ion i~ broad enough: -: ~: -::.- -: -' ·· ~: : :-.: ~ :.:.:-tion to
labor, local and overseas.: organ ized and "J :-.::-;:.:.:-.::.:.:.

MTRight to one's labor deenl~a· pr'.•pc- -~_.•. - The- !"lgh: : .: ~ ~:: : ~ ·:.. :.1
constit utional as well as a statuto1·y right . E\·ery man has a :!a: .ira: :--:,;::-,~
to the fruits of his own industry. A man who has been employed to undt::r-
take certain labor and has put into it his time and effort is entitled to be
protected. The right ofa person to his labor is deemed to be property within
the mea!ling of constitutional guarantees. (see Art. lll, Sec. l.J That is his
means oflivelihood. He cannot be deprived of his labor or work without due
process of law.2

~Labor, a primary social economic force. --·The: con s titutional policy
of s ocial justice has been m ade more rea] when it impoKes upon the State
the duty t o give protection to labor. It. recognizes t he basic fact that human

1lt is common knowledge that rnany Filipino worker.!' ahroad ha\"f~ been cheated and/or

subjected to abuse or maltreatment hy gove-rnment personnel. labor recruiters. and foreign
employer~. Even disrega1·ding the fact that their earnings account fnr !I s izea ble portion of our

total foreign exchange, it is the duty of the govern ment. to eKtend adequate protection to them.
B.P. Blg. 79 (June 16, 1980) creates the Co mmission on Filipinos Overseas to prornott~ the well-
being and uphold the interests of Filipi nos overseas. R.A. No. 8042 lJun e 7, 19~Jn .l. entitled

"Migrant Workers and Overseas Filipinos Act of 1996" insti tutes the policies ofoverseas employ-
ment and e~la bl i :;hes a higher sta nda rd of protection and promotion of t he welfare of migrant

workers, their famil ies a nd overseas Filipi nos in distress. Exec. Order No. 346 \June 14, 1996).

amending EKec. Order No. 728 (providing for the organizational structurl! ;md guidelines of the
Commission's Secretariat.i and Exec. Order No. 938 I authorizing the c~tabli shmcnt of it;; over-

seas officesi, redefines the organizational structure and functi rm al t-hrusts, and provides for the
operational guidelines of the Commission. The Commission i.'i trans f'r:>rr~d from the Department

of Foreign Affairs to the Office of the President (Exec. Ordcr No. ;{43. Aug. 5, 2004.1
2The more important laws affording protection to labor are the Social Security Act UtA. No.

1161, as amended.), the Revised Philippin e ~edicarc Care A.ct iP.D. No. 1519, as amend~d.J, and

the L11bor Code of the Philippines . •Pre.;. Decree No. 442. "" amended .) The Labor Code
consolidated and updated existing la hor a nd social laws under on~ book.