Rethinking Patrimony

canteenThe word patrimony is one that frequently bubbles to the surface of the stew of political discussion these days. What it really means is “an inheritance or endowment from one’s father”; used here, it means “the reservation of the land and resources of the Philippines to the ownership and control of Filipinos,” with “resources” having a broad meaning that includes natural and other economic resources, particular kinds of businesses, and many professions. The careful identification and care-taking of the national patrimony is, for any nation, a matter of survival. But when the initiative does not have the desired outcome of increasing national prosperity, and worse, even aggravates already overwhelming social and economic problems, it must be changed.

The Foreign Investment Act of 1991 (RA 7042, amended by RA 8179 of 1996) was intended to loosen some of the constitutional obstacles to foreign investment, but has fallen woefully short of actually encouraging much, and only served to reinforce those parts of the laws – in particular, the restrictions on foreign ownership in domestic corporations and retail enterprises – that, along with the blanket constitutional ban on foreign ownership of property are responsible for many of the real economic problems that affect the country.

In the case of domestic corporations, also known as Philippine Domestic Market Enterprise, foreign ownership is, in general, limited to 40%. The ‘dummy corporations’ used by expats to circumvent the ban on property ownership – something which, incidentally, is routinely suggested by over-eager real estate agents – fall under this category. Exceptions to the general rule are permitted if the enterprise has paid-up capital of $200,000 or more, employs 50 or more people, or uses “advanced technology,” and provided the enterprise is not otherwise covered by either of the two extensive “Exception Lists” that are included in the FIA. In retail trade enterprises, foreign ownership is permitted without restriction provided at least $2.5 million in paid-up capital is invested with at least $830,000 being used for establishing a store, or in the case of a business that specialises in “high-end or luxury products”, at least $250,000 paid-up capital per store. Foreign equity is not permitted with investments less than those amounts.

It could be argued that the problem may not be with the foreign ownership restrictions per se, but that the government has consistently failed to provide the necessary support to the people in terms of property ownership and small- and medium-enterprise development to take full advantage of the protected patrimony. Under the loophole-riddled CARP, for example, the Department of Agrarian Reform admits that about three-fourths of those who received land for farming did not receive any support services, and as a consequence, an average of one in four CARP beneficiaries – and in some areas, more than half of the beneficiaries – sold or simply abandoned their land. In other sectors, unnecessarily complex, poorly-administered, and in some cases corrupt business regulation and registration procedures force hundreds of thousands of would-be entrepreneurs into the informal economy; that in turn becomes institutionalised in poor contract enforcement and the refusal of banks to extend credit. Efforts to increase property ownership in residential real estate are hampered by the almost complete lack of a middle class – which in all developed economies is the bulwark market for real estate – obliging property developers and agencies such as Pag-Ibig to court the C- and D demographics with substandard housing that still cannot be made affordable, with correspondingly high foreclosure rates; at last count, Pag-Ibig’s list of foreclosed properties for sale was approaching 70,000.

Solving these root problems could, conceivably, avoid the need to address and moderate the position against foreign ownership. The trouble with that notion is that most of the problems are systemic, and require significant restructuring of the government and its policies to solve (read: Charter Change) and even once the useful framework is put in place, the work of building new systems and undoing nearly a quarter-century of disastrous management will take time, time in which the population will continue to grow and the productivity of the nation will continue to slip further down the scale of every objective measure development and output. While that necessary work is being done, foreign ownership, under reasonable limits, presents a ready offset to the continuing decline by providing investment, development, job creation, and community stability at the level where it is needed most and where its effects are most palpable.

The sentiment of ‘anti-colonialism’ that underlies the Filipino point of view towards patrimony is a clever and appallingly effective canard floated by the elite business class – so effective, in fact, that even supposedly-progressive sectors and media agents have become shills for it. It is well worth remembering that the Constitution in which most of the prohibitions against foreign meddling are enshrined is the product of a group of vested interests hand-picked by a Cojuangco. The Philippines for the Filipino – provided the Filipino has the right last name, and money that’s been in the bank for at least half a century. The eagerness of foreign investors to put their resources to work in the Philippines, as expressed in the pointed criticism of the Philippines’ protectionist stance by the US, the EU, Japan, and the World Trade Organisation, should be at least a little bit of a hint to the 90-odd percent of the population that is benefitting not at all from the current policies: patrimony is only as good as the number of people it serves, and sometimes, less really is more.

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About bkritz

I'm a writer, and I do things my own way. That might sound cool to you, unless you're one of the people who actually knows me, in which case you're probably shaking your head in exasperation at the depth of that understatement.
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7 Responses to Rethinking Patrimony

  1. Great analysis. You nailed it on the head. The 1987 Constitution’s economic provisions effectively set the disastrous and corrosive economic policies of the 1950’s Garcia administration in concrete. And the Philippines has been paying the price ever since. “Filipino First” programs ultimately put the Filipino last. See http://www.forumcash.com/wordpress/why-is-the-philippines-poor/

    Your article also implies (and I agree with this) that the economic provisions effectively made local Pinoy business elites mere JV partners instead of active/proactive wealth builders. In effect, “nangongomision” lang. Look at the recent Smartmatic JV deal for a clear example of this–the Pinoy partner’s only ‘investment’ is some token capital and the fact that they are a Pinoy company. The rest–the technology, the assets, the capital, is provided by the foreign partner.

    We truly have come a long way towards how Alan Greenspan described Latin American economies: Wealth is not created, it is apportioned.

  2. lester2k1 says:

    i think it is worth mentioning as well that the foreign exchange rate policies of the philippines played a major role as well to the economic quagmire we are in. check out the book The Peso Exchange Rate: why are we so poor? (review here: http://elpo2001.multiply.com/reviews/item/4)

  3. GabbyD says:

    why does the ownership limit matter?

    if u, for example, had 100k USD, why not invest in a business at 40% ownership?

    what are the downsides? are there NO upsides?

    • BenK says:

      Provided it’s a straight-up deal where the 40%-60% accurately reflect the level of investment of the participating parties, there’s nothing wrong with it. That, however, almost never happens. Most investment opportunities (at the SME level) for us expats involve us putting up 100% of the investment for a 40% stake — which we can partially compensate for by obtaining, if we can, sole signatory status on the corporation’s bank account. That is, however, a flimsy way to structure a company.

  4. blogsngpinoy says:

    hi! sorry i can’t seem to find a place anywhere else in your blog to leave this message..your blog is very interesting thus i’m inviting you to register for free at (,”) BLOGS NG PINOY (“,), the online directory of blogs made by pinoys worldwide! 🙂 registering is just like an exchange links concept. click on the “MAGPALISTA NA!” link on the page for instructions 🙂 take care!

  5. lester2k1 says:

    i think it is worth mentioning as well that the foreign exchange rate policies of the philippines played a major role as well to the economic quagmire we are in. check out the book The Peso Exchange Rate: why are we so poor? (review here: http://elpo2001.multiply.com/reviews/item/4)

  6. Craig says:

    i love your phrase “patrimony is only as good as the number of people it serves,”

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