Land Rights Philippines

Working towards secured property rights in the Philippines

Senator Gordon keen on removing restrictions in the rural land market

May 12, 2017

In yesterday’s joint hearing of the Committee on Justice and Human Rights and Committee on Environment and Natural Resources, Senator Richard Gordon tackled the proposed bill to remove restrictions on agricultural free patents as provided in the 1936 Public Land Act or Commonwealth Act No. 141. These restrictions have been recognized to stunt the creation of wealth of farmer entrepreneurs.

“As you all know, one of the major challenges confronting the Philippines is how to accelerate inclusive growth by creating more and better jobs to reduce poverty. One of the primary reasons for the persistent poverty in the country is low agricultural productivity. One of the causes of this low productivity is insecurity of land rights and access to credit by agricultural farm owners due to the restrictions on transfer and conveyances imposed by the Public Land Act on lands covered by agricultural free patents”, said Senator Gordon, Chairman of the Committee on Justice and Human Rights.

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The Rural Bankers Association of the Philippines (RBAP) expressed their support on the proposed bill. Mr. Johnson Melo, member of RBAP’s Technical Working Group and Vice President of Lipa Bank shared that with the risky nature of the agriculture sector, banks usually ask for real property as collateral to mitigate the risk. However, most rural folks have properties that are covered by agricultural free patents, which unfortunately are unacceptable collaterals because of the restrictions. Farmers then become more vulnerable to onerous contracts and high cost borrowing from private lenders.

Meanwhile, Atty. Emelyne Talabis, Director of the DENR-Land Management Bureau (LMB) informed the Committee that LMB fully supports the bill and calls for its immediate passage. Director Talabis noted that the restrictions have limited the economic opportunities of the landowners. She also pointed out that conditions in 1936 are very different from the economic conditions of today.

Similar to LMB, the Land Registration Authority (LRA) also offers no objection. Atty. Joseph Dimaiyacan of LRA informed that the removal of restrictions will mean more transactions on mortgage and sale resulting in more registration fees that will generate more revenues for the government.

The Department of Justice as represented by Ms. Fina Ong, explained that the State policy towards preservation of ownership of land disposed by the State has become more liberal, citing laws that have removed these restrictions on transfers and sale. The Philippine Supreme Court has also adopted a more liberal view to support resources mobility on land. In addition, the existence of restrictions also confuses the Torrens title system because it creates a title that is less than indefeasible. Because of the restrictions on patent, patented properties are considered as lower in value as compared to decreed properties.

Former Register of Deeds and Law Professor Atty. Gabriel Dela Peña supports the bill but pointed some possible negative effects on the matter of reclassification of land and possible threat to food security.

The country’s top agricultural economists, Dr. Ramon Clarete and Dr. Raul Fabella of the School of Economics, University of the Philippines; Dr. Rolando Dy, Executive Director of the Center for Food and Agri Business, University of Asia and the Pacific and Dr. Bruce Tolentino, Deputy Director General of Communications and Partnerships, International Rice Research Institute, submitted their statement of support on removing restrictions on agricultural free patents. The statement says that: “These restrictions embodied in the law are no longer responsive to current economic conditions: these distort the land market and do not make the best use of the land which is detrimental to the owners of the patent. One hectare for traditional farming will not lift a person out of poverty. At least with freer transactions in the land market, farmers can have more options. It is up to the property owner to either use it productively or simply retain ownership of it for insurance purposes.”

The Foundation for Economic Freedom (FEF) strongly supports the removal of restrictions on agricultural free patents as these have created uncertainties in the rural land market which is a disincentive to investments and best use of the land. In addition, FEF pointed out that it should be recognized that the role of government is not to restrict rural land markets but rather to ensure that contracts are properly enforced.

Subject to the submission of data requested, Senator Gordon aims to have the bill ready for sponsorship by next week. The House is yet to deliberate on its own version of the bill.