The Philippine Constitution contains many strong restrictions targeted against
the flow of foreign capital in specific areas of economic activities. These restrictions
were the same ones that were incorporated into the nationalistic provisions of the
1935 Constitution when its framers were anticipating future political independence.
This paper discusses the beneficial aspects of lifting or liberalizing these restrictions
on foreign capital in the Philippine context. Specifically, the restrictions relate to the
prohibition of foreign individuals to engage in land ownership, in the exploitation of
natural resources, and the ownership of public utilities. Corporations are allowed to
participate in these activities only if they have equity ownership only to the maximum
extent of 40 percent. In other words, foreign capital can only be a strict minority
participation in corporate enterprises to be allowed in these economic activities. These
provisions have hurt Philippine development over the years. Despite the liberalization
of many aspects of the economy, including those in the area of trade, industry, and
other aspects of the economy, these economic restrictions continue to hold because
they are part of the Constitutional document. Some of these provisions of the
Constitution could be relaxed through more liberal citizenship rules. But the basis of
citizenship — jus sanguinis or blood relations— is also very restrictive. The need to
improve the performance of the Philippine economy requires that these restrictions be
examined and reformed. A direction of such reforms would be to place them out of
the Constitutional framework — as is the case with most modernizing countries — and
put them within the realm of ordinary legislation. In this way, they can be debated
more openly and the policies could be suited up to changing conditions and the need
for change of the economy.
