ARTICLE XII – NATIONAL ECONOMY AND PATRIMONY

Sec. 1. GOALS OF THE NATIONAL ECONOMY

Three-fold goal:

1. More equitable distribution of opportunities, income and wealth;

2. Sustained increase in the amount of goods and services produced by the nation for the
benefit of the people; and

3. Expanding productivity, as the key to raising the quality of life for all.

The State shall promote industrialization and full employment

1. It should be based on sound agricultural development and agrarian reform

2. It should be through industries that make full and efficient use of human and natural
resources. Industries should also be competitive in both domestic and foreign markets.

Protection of Filipino enterprises

The State shall protect Filipino enterprises against unfair foreign competition and trade
practices.

Role of Private Enterprises

Private enterprises, including corporations, cooperatives, and similar collective

organizations, shall be encouraged to broaden the base of their ownership

Section 2. REGALIAN DOCTRINE

Distinction between Imperium and Dominium.

1. Imperium

Government authority possessed by the State which is appropriately embraced in

sovereignty.

2. Dominium

The capacity of the State to own and acquire property.

It refers to lands held by the government in a proprietary character: can provide for the
exploitation and use of lands and other natural resources.
Scope:

The following are owned by the State:

1. Lands of the public domain:

Waters

Minerals, coals, petroleum, and other mineral oils;

All sources of potential energy;

Fisheries;

Forests or timber;

Wildlife;
Flora and fauna; and

Other natural resources.

Alienation of Natural Resources

1. General Rule: All natural resources CANNOT be alienated

2. Exception: Agricultural lands

Exploration, Development and Utilization of Natural Resources

1. Shall be under the full control and supervision of the State

2. Means

A. The state may DIRECTLY UNDERTAKE such activities

B. The state may enter into CO-PRODUCTION, JOINT VENTURE OR

PRODUCTION-SHARING arrangements with

Filipino citizen or
Corporation or association at least 60% of whose capital is owned by such citizens
3. Limitations:

A. Period: It should not exceed 25 years, renewable for not more than 25 years

B. Under terms and conditions as may be provided by law.

4. In case of water rights/water supply/fisheries/industrial uses other than the

development of water power

The beneficial use may be the measure and limit of the grant.

Small-scale Utilization of Natural Resources

1. Congress may, by law, authorize small-scale utilization of natural resources by Filipino

citizens

2. Congress may also authorize cooperative fish farming with priority given to
subsistence fishermen and fishworkers in the rivers, lakes, bays and lagoons.

Large-Scale Exploration, Development and Utilization of Minerals/Petroleum/Other

Mineral Oils

1. The President may enter into agreements with foreign owned corporations involving
technical or financial assistance for large-scale exploration etc. of minerals, petroleum,
and other mineral oils. These agreements should be in accordance with the general terms
and conditions provided by law.

2. They should be based on the real contributions to economic growth and general
welfare of the country.

3. In the agreements, the State should promote the development and use of local
scientific and technical resources.

4. The President should notify Congress of every contract under this provision within 30
days from its execution.

5. Management and service contracts are not allowed under this rule.

Protection of Marine Wealth

1. The State shall protect its marine wealth in its

Archipelagic waters

Territorial sea &

EEZ

2. The State shall reserve its use and enjoyment exclusively to Filipino citizens.

Section 3. LANDS OF THE PUBLIC DOMAIN ARE CLASSIFIED INTO

1. Agricultural

2. Forest/timber

3. Mineral lands &

4. National Parks

Note:

1. Classification of public lands is an exclusive prerogative of the Executive Department

through the Office of the President, upon recommendation by the DENR.

2. Classification is descriptive of the legal nature of the land and NOT what it looks like.
Thus, the fact that forest land is denuded does not mean it is no longer forest land.

Alienable lands of public domain

1. Only agricultural lands are alienable.

2. Agricultural lands may be further classified by law according to the uses to which they
may be devoted.

Limitations regarding Alienable Lands of the Public Domain

1. For private corporations or associations

A. They can only hold alienable lands of the public domain BY LEASE

B. Period: Cannot exceed 25 years, renewable for not more than 25 years

C. Area: Lease cannot exceed 1,000 hectares

Note: A corporation sole is treated like other private corporations for the purpose of
acquiring public lands.

2. For Filipino citizens

A. Can lease up to 500 hectares

B. Can ACQUIRE not more than 12 hectares by purchase, homestead or grant.

Taking into account the requirements of conservation, ecology and development, and
subject to the requirements of agrarian reform, Congress shall determine by law the size
of the lands of the public domain which may be acquired, developed, held or lease and
the conditions therefore.

Means by Which Lands of the Public Domain Become Private Land

1. Acquired from government by purchase or grant;
2. Uninterrupted possession by the occupant and his predecessors-in-interest since time
immemorial; and

3. Open, exclusive, and undisputed possession of ALIENABLE (agricultural) public land

for a period of 30 years.

A. Upon completion of the requisite period, the land becomes private property ipso jure
without need of any judicial or other sanction.

B. Here, in possession since time immemorial, presumption is that the land was never
part of public domain.

C. In computing 30 years, start from when land was converted to alienable land, not
when it was still forest land

D. Presumption is that land belongs to the State.

Section 4. Congress shall, as soon as possible, determine by law, the specific limits of
forest lands and national parks, marking clearly their boundaries on the ground.
Thereafter, such forest lands and national parks shall be conserved and may not be
increased or diminished, EXCEPT by law. Congress shall provide measures to prohibit
logging in

a. Endangered forest and

b. Watershed areas for such period as it may determine.
Section 5. ANCESTRAL LANDS
Protection of Indigenous Cultural Communities
1. The State protects the rights of indigenous cultural communities to their ancestral
lands

A. Subject to Constitutional provisions

B. Subject to national development policies and programs

2. In determining ownership and extent of ancestral domain, Congress may use

customary laws on property rights and relations.

3. “ANCESTRAL DOMAIN”

A. It refers to lands which are considered as pertaining to a cultural region

B. This includes lands not yet occupied, such as deep forests.

Section 7. PRIVATE LANDS

General rule
1. Private lands CAN only be transferred or conveyed to:

A. Filipino citizens

B. Corporations or associations incorporated in the Philippines, at least 60% of whose

capital is owned by Filipino citizens

2. Exceptions

A. In intestate succession, where an alien heir of a Filipino is the transferee of private

land.

B. A natural born citizen of the Philippines who has lost his Philippine citizenship may
be a transferee of PRIVATE ALND, subject to limitation provided by law. Hence, land
can be used only for residential purposes. In this case, he only acquires derivative title.
C. Foreign states may acquire land but only for embassy and staff residence purposes.

3. Filipino citizenship is only required at the time the land is acquired. Thus, loss of
citizenship after acquiring the land does not deprive ownership.

4. Restriction against aliens only applies to acquisition of ownership. Therefore:

A. Aliens may be lessees or usufructuaries of private lands

B. Aliens may be mortgages of land, as long as they do not obtain possession thereof and
do not bid in the foreclosure sale.

5. Land tenure is not indispensable to the free exercise of religious profession and
worship. A religious corporation controlled by non-Filipinos cannot acquire and own
land, even for religious purposes.

Remedies to recover private lands from disqualified aliens:

1. Escheat proceedings

2. Action for reversion under the Public Land Act

3. An action by the former Filipino owner to recover the land

A. The former pari delicto principle has been abandoned

B. Alien still has the title (didn’t pass it on to one who is qualified)

Section 10. NATIONAL ECONOMY AND PATRIMONY/INVESTMENTS

Power of Congress
1. Congress, upon the recommendation of NEDA, can reserve to Filipino citizens or to
corporations or associations at least 60% of whose capital is owned by such citizens, or
such higher percentage as Congress may prescribe, certain areas of investment. This may
be done when the national interest dictates.

2. Congress shall also enact measures to encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.

National Economy and Patrimony

In the grant of rights, privileges and concessions covering the national economy and
patrimony, the State shall give preference to QUALIFIED Filipinos.

Section 11. FRANCHISES FOR PUBLIC UTILITIES

Power to grant:

1. Congress may directly grant a legislative franchise; or

2. Power to grant franchises may be delegated to appropriate regulatory agencies and/or

LGU’s

Public utility
1. In order to be considered as a public utility, and thus subject to this provision, the
undertaking must involve dealing directly with the public.

2. Thus, a Build-Operate-Transfer grantee is NOT a public utility. The BOT grantee

merely constructs the utility, and it leases the same to the government. It is the
government which operates the public utility (operation separate from ownership).

To whom granted:

1. Filipino citizens or
2. Corporations or associations incorporated in the Philippines and at least 60% of the
capital is owned by Filipino citizens.

Terms and conditions:

1. Duration: Not more than 50 years

2. Franchise is NOT exclusive in character

3. Franchise is granted under the condition that it is subject to amendment, alteration, or

repeal by Congress when the common good so requires.

Participation of Foreign Investors

1. The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital.

2. Foreigners cannot be appointed as the executive and managing officers because these
positions are reserved for Filipino citizens.

Section 16. FORMATION/ORGANIZATION/REGULATION OF CORPORATIONS

1. Private corporations

Congress can only provide for the formation, etc of private corporations through a
general law.

2. GOCC’s

They may be created by:

a. Special charters in the interest of the common good and subject to the test of economic
viability.

b. By incorporation under the general corporation law.

Sections 18-19. SPECIAL ECONOMIC POWERS OF THE GOVERNMENT

1. Temporary takeover or direction of operations:

A. Conditions

i. National emergency and

ii. When the public interest requires

B. May be used against privately owned public utilities or businesses affected with
public interest.

C. Duration of the takeover: period of emergency

D. Takeover is subject to reasonable terms and conditions

E. No need for just compensation because it is only temporary.

2. Nationalization of vital industries:

A. Exercised in the interest of national welfare or defense

B. Involves either:

i. Establishment and operation of vital industries; or

ii. Transfer to public ownership, upon payment of just compensation, public utilities and
other private enterprises to be operated by the government.
Section 19. MONOPOLIES
1. The Constitution does NOT prohibit the existence of monopolies.

2. The State may either regulate or prohibit monopolies, when public interest so requires.

3. Combinations in restraint of trade or unfair competition are prohibited.

Filipino citizenship or equity requirements:

ACTIVITY REQUIREMENTS CITIZENSHIP AND/OR

EQUITY

Exploitation of natural resources 1. Filipino citizens; or

2. Corporations incorporated in RP, with 60% Filipino ownership

Operation of Public Utilities 1. Filipino citizens; or

2. Corporations incorporated in RP, with 60% Filipino ownership

Acquisition of alienable lands of the public domain

1. Filipino citizens;

2. Corporations incorporated in RP, with 60% Filipino ownership;

3. Former natural-born citizens of RP, as transferees, with certain legal restrictions; and

4. Alien heirs as transferees in case of intestate succession.

Practice of ALL Professions Filipino citizens only (natural persons)

*Congress may, by law, otherwise prescribe

Mass Media 1. Filipino citizens; or

2. Corporations incorporated in RP, and 100% Filipino owned

Advertising 1. Filipino citizens; or

2. Corporations incorporated in RP, and 70% Filipino owned.

Educational institution 1. Filipino citizens; or

2. Corporations incorporated in RP, with 60% Filipino ownership

EXCEPT: Schools established by religious groups and mission boards.

*Congress may, by law, increase Filipino equity requirements for ALL educational
institutions.

Other economic activities Congress may, by law, reserve to Filipino

citizens or to corporations 60% Filipino owned (or even higher) certain investment areas.

PREAMBLE

We, the sovereign Filipino people, imploring the aid of Almighty God, in order to build a
just and humane society, and establish a Government that shall embody our ideals and
aspirations, promote the common good, conserve and develop our patrimony, and secure
to ourselves and our posterity, the blessings of independence and democracy under the
rule of law and a regime of truth, justice, freedom, love, equality, and peace, do ordain
and promulgate this Constitution.

ARTICLE II
DECLARATION OF PRINCIPLES AND STATE POLICIES PRINCIPLES

Section 1. The Philippines is a democratic and republican State. Sovereignty resides in

the people and all government authority emanates from them.

Section 2. The Philippines renounces war as an instrument of national policy, adopts the
generally accepted principles of international law as part of the law of the land and
adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all
nations.

Section 3. Civilian authority is, at all times, supreme over the military. The Armed Forces
of the Philippines is the protector of the people and the State. Its goal is to secure the
sovereignty of the State and the integrity of the national territory.

Section 4. The prime duty of the Government is to serve and protect the people. The
Government may call upon the people to defend the State and, in the fulfillment thereof,
all citizens may be required, under conditions provided by law, to render personal,
military or civil service.

Section 5. The maintenance of peace and order, the protection of life, liberty, and
property, and promotion of the general welfare are essential for the enjoyment by all the
people of the blessings of democracy.

Section 6. The separation of Church and State shall be inviolable.

STATE POLICIES

Section 7. The State shall pursue an independent foreign policy. In its relations with other
states, the paramount consideration shall be national sovereignty, territorial integrity,
national interest, and the right to self-determination.

Section 8. The Philippines, consistent with the national interest, adopts and pursues a
policy of freedom from nuclear weapons in its territory.

Section 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through
policies that provide adequate social services, promote full employment, a rising standard
of living, and an improved quality of life for all.
Section 10. The State shall promote social justice in all phases of national development.

Section 11. The State values the dignity of every human person and guarantees full
respect for human rights.

Section 12. The State recognizes the sanctity of family life and shall protect and
strengthen the family as a basic autonomous social institution. It shall equally protect the
life of the mother and the life of the unborn from conception. The natural and primary
right and duty of parents in the rearing of the youth for civic efficiency and the
development of moral character shall receive the support of the Government.

Section 13. The State recognizes the vital role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual, intellectual, and social well-being. It
shall inculcate in the youth patriotism and nationalism, and encourage their involvement
in public and civic affairs.

Section 14. The State recognizes the role of women in nation-building, and shall ensure
the fundamental equality before the law of women and men.

Section 15. The State shall protect and promote the right to health of the people and
instill health consciousness among them.

Section 16. The State shall protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature.

Section 17. The State shall give priority to education, science and technology, arts,
culture, and sports to foster patriotism and nationalism, accelerate social progress, and
promote total human liberation and development.

Section 18. The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.

Section 19. The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos.

Section 20. The State recognizes the indispensable role of the private sector, encourages
private enterprise, and provides incentives to needed investments.

Section 21. The State shall promote comprehensive rural development and agrarian
reform.

Section 22. The State recognizes and promotes the rights of indigenous cultural
communities within the framework of national unity and development.

Section 23. The State shall encourage non-governmental, community-based, or sectoral

organizations that promote the welfare of the nation.

Section 24. The State recognizes the vital role of communication and information in
nation-building.

Section 25. The State shall ensure the autonomy of local governments.

Section 26. The State shall guarantee equal access to opportunities for public service and
prohibit political dynasties as may be defined by law.

Section 27. The State shall maintain honesty and integrity in the public service and take
positive and effective measures against graft and corruption.

Section 28. Subject to reasonable conditions prescribed by law, the State adopts and
implements a policy of full public disclosure of all its transactions involving public
interest.