ARTICLE XII NATIONAL ECONOMY AND

PATRIMONY

Protection of Filipino enterprises

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

Sec. 1. GOALS OF THE NATIONAL

practices.

ECONOMY

Role of Private Enterprises

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 produced by the nation for the
benefit of the people; and an expanding
productivity as the key to raising the quality
of life for all, especially the underprivileged.

Private enterprises, including corporations,

The State shall promote industrialization

and full employment 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.

Section 2. REGALIAN DOCTRINE

In the pursuit of these goals, all sectors of

the economy and all regions of the country
shall be given optimum opportunity to
develop. Private enterprises, including
corporations, cooperatives, and similar
collective
organizations,
shall
be
encouraged to broaden the base of their
ownership.

agricultural lands, all other natural

Three-fold goal:

activities, or it may enter into co-

1. More equitable distribution of opportunities,

income and wealth;

cooperatives, and similar collective

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

All lands of the public domain, waters,

minerals, coal, petroleum, and other
mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora
and fauna, and other natural resources are
owned by the State. With the exception of
resources shall not be alienated. The
exploration, development, and utilization of
natural resources shall be under the full
control and supervision of the State. The
State may directly undertake such
production, joint venture, or productionsharing agreements with Filipino citizens,
or corporations or associations at least

2. Sustained increase in the amount of goods

sixty per centum of whose capital is owned

and services produced by the nation for the

by such citizens. Such agreements may be

benefit of the people; and

for a period not exceeding twenty-five

3. Expanding productivity, as the key to raising

the quality of life for all.

years, renewable for not more than twentyfive years, and under such terms and
conditions as may be provided by law. In

The State shall promote industrialization

and full employment

cases of water rights for irrigation, water

supply fisheries, or industrial uses other

1. It should be based on sound agricultural

than the development of water power,

development and agrarian reform

beneficial use may be the measure and limit

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.

of the grant.
The State shall protect the nations marine
wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and
reserve its use and enjoyment exclusively
to Filipino citizens.

The Congress may, by law, allow smallscale utilization of natural resources by

Filipino citizens, as well as cooperative fish
farming, with priority to subsistence
fishermen and fishworkers in rivers, lakes,
bays, and lagoons.

Flora and fauna; and

Other natural resources.
Alienation of Natural Resources
1. General Rule: All natural resources

The President may enter into agreements

with foreign-owned corporations involving
either technical or financial assistance for
large-scale exploration, development, and
utilization of minerals, petroleum, and other
mineral oils according to the general terms
and conditions provided by law, based on
real contributions to the economic growth
and general welfare of the country. In such
agreements, the State shall promote the
development and use of local scientific and
technical resources.
The President shall notify the Congress of
every contract entered into in accordance
with this provision, within thirty days from
its execution.

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-

Distinction between Imperium and

PRODUCTION, JOINT VENTURE OR

Dominium.

PRODUCTION-SHARING arrangements with

1. Imperium
Government authority possessed by the State

1. Filipino citizen or
2. Corporation or association at least 60%

which is appropriately embraced in

of whose capital is owned by such

sovereignty.

citizens

2. Dominium
1. The capacity of the State to own and
acquire property.
2. 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.

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

Scope:

development of water power

The following are owned by the State:

The beneficial use may be the measure and

1. Lands of the public domain:

limit of the grant.

Waters

Small-scale Utilization of Natural Resources

Minerals, coals, petroleum, and other mineral

1. Congress may, by law, authorize small-scale

oils;

utilization of natural resources by Filipino

All sources of potential energy;

Fisheries;

citizens
2. Congress may also authorize cooperative
fish farming with priority given to subsistence

Forests or timber;

fishermen and fishworkers in the rivers, lakes,

Wildlife;

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

may lease not more than five hundred

hectares, or acquire not more than twelve
hectares thereof, by purchase, homestead,
or grant.
Taking into account the requirements of
conservation, ecology, and development,
and subject to the requirements of agrarian
reform, the Congress shall determine, by
law, the size of lands of the public domain
which may be acquired, developed, held, or
leased and the conditions therefor.
LANDS OF THE PUBLIC DOMAIN ARE
CLASSIFIED INTO
1. Agricultural

welfare of the country.

2. Forest/timber

3. In the agreements, the State should

3. Mineral lands &

promote the development and use of local

4. National Parks

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.

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

Protection of Marine Wealth

nature of the land and NOT what it looks

1. The State shall protect its marine wealth in

like. Thus, the fact that forest land is denuded

its

does not mean it is no longer forest land.

Archipelagic waters

Alienable lands of public domain

Territorial sea &

1. Only agricultural lands are alienable.

EEZ

2. Agricultural lands may be further classified

2. The State shall reserve its use and

enjoyment exclusively to Filipino citizens.
Section 3. CLASSIFICATION OF THE
LANDS OF THE PUBLIC DOMAIN
Lands of the public domain are classified
into agricultural, forest or timber, mineral
lands and national parks. Agricultural lands
of the public domain may be further
classified by law according to the uses to
which they may be devoted. Alienable lands
of the public domain shall be limited to
agricultural lands. Private corporations or
associations may not hold such alienable
lands of the public domain except by lease,
for a period not exceeding twenty-five
years, renewable for not more than twentyfive years, and not to exceed one thousand
hectares in area. Citizens of the Philippines

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

1. a.

Endangered forest and

2. b.

Watershed areas for such period

as it may determine.
B. Can ACQUIRE not more than 12 hectares
by purchase, homestead or grant.

Section 5. ANCESTRAL LANDS

Taking into account the requirements of

The State, subject to the provisions of this

Constitution 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.

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

The Congress may provide for the

applicability of customary laws governing
property rights or relations in determining
the ownership and extent of ancestral
domain.

1. Acquired from government by purchase or

Protection of Indigenous Cultural

Communities

grant;

1. The State protects the rights of indigenous

2. Uninterrupted possession by the occupant

cultural communities to their ancestral lands

and his predecessors-in-interest since time

A. Subject to Constitutional provisions

immemorial; and
3. Open, exclusive, and undisputed
possession of ALIENABLE (agricultural) public
land for a period of 30 years.

B. Subject to national development policies

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

A. Upon completion of the requisite period, the

customary laws on property rights and

land becomes private property ipso jure without

relations.

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

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.

it was still forest land

D. Presumption is that land belongs to the

Section 6. The use of property bears a

State.

social function, and all economic agents

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

shall contribute to the common good.

Individuals 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.

Section 7. PRIVATE LANDS

Save in cases of hereditary succession, no
private lands shall be transferred or
conveyed except to individuals,
corporations, or associations qualified to
acquire or hold lands of the public domain.

Remedies to recover private lands from

disqualified aliens:
1. Escheat proceedings
2. Action for reversion under the Public Land
Act

General rule
3. An action by the former Filipino owner to
1. Private lands CAN only be transferred or

recover the land

conveyed to:
A. The former pari delicto principle has been
A. Filipino citizens
B. Corporations or associations incorporated in
the Philippines, at least 60% of whose capital

abandoned
B. Alien still has the title (didnt pass it on to
one who is qualified)

is owned by Filipino citizens

2. Exceptions
Section 8.Notwithstanding the provisions of
A. In intestate succession, where an alien heir
of a Filipino is the transferee of private land.

Section 7 of this Article, a natural-born

citizen of the Philippines who has lost his

B. A natural born citizen of the Philippines who

Philippine citizenship may be a transferee

has lost his Philippine citizenship may be a

of private lands, subject to limitations

transferee of PRIVATE ALND, subject to

provided by law.

limitation provided by law. Hence, land can be

used only for residential purposes. In this
case, he only acquires derivative title.

Section 9. The Congress may establish an

independent economic and planning

C. Foreign states may acquire land but only

for embassy and staff residence purposes.

agency headed by the President, which

shall, after consultations with the

3. Filipino citizenship is only required at the

appropriate public agencies, various private

time the land is acquired. Thus, loss of

sectors, and local government units,

citizenship after acquiring the land does not

recommend to Congress, and implement

deprive ownership.

continuing integrated and coordinated

4. Restriction against aliens only applies to

acquisition of ownership. Therefore:
A. Aliens may be lessees or usufructuaries of
private lands

programs and policies for national

development.
Until the Congress provides otherwise, the
National Economic and Development
Authority shall function as the independent

B. Aliens may be mortgages of land, as long

planning agency of the government.

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.

Section 10. NATIONAL ECONOMY AND

PATRIMONY/INVESTMENTS
The Congress shall, 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 percentage
as Congress may prescribe, certain areas
of investments. The Congress shall enact

measures that will encourage the formation

and operation of enterprises whose capital
is wholly owned by Filipinos.
In the grant of rights, privileges, and
concessions
covering
the
national
economy and patrimony, the State shall
give preference 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.
Power of Congress

their proportionate share in its capital, and

all the executive and managing officers of
such corporation or association must be
citizens of the Philippines.
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
LGUs

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.

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).

National Economy and Patrimony

To whom granted:

In the grant of rights, privileges and

1. Filipino citizens or

concessions covering the national economy

and patrimony, the State shall give preference
to QUALIFIED Filipinos.
Section 11. FRANCHISES FOR PUBLIC
UTILITIES
No franchise, certificate, or any other form
of authorization for the operation of a public
utility shall be granted except to citizens of
the Philippines or to corporations or
associations organized under the laws of
the Philippines, at least sixty per centum of
whose capital is owned by such citizens;
nor shall such franchise, certificate, or
authorization be exclusive in character or
for a longer period than fifty years. Neither
shall any such franchise or right be granted
except under the condition that it shall be
subject to amendment, alteration, or repeal
by the Congress when the common good
so requires. The State shall encourage
equity participation in public utilities by the
general public. The participation of foreign
investors in the governing body of any
public utility enterprise shall be limited to

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

b. By incorporation under the general

executive and managing officers because

corporation law.

these positions are reserved for Filipino

citizens.

Section 17. In times of national emergency,

when the public interest so requires, the

Section 12. The State shall promote the

preferential use of Filipino labor, domestic
materials and locally produced goods, and
adopt measures that help make them
competitive.

State may, during the emergency and under

Section 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.

utility or business affected with public

Section 14. The sustained development of a

reservoir of national talents 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. The State shall
encourage appropriate technology and
regulate its transfer for the national benefit.
The practice of all professions in the
Philippines shall be limited to Filipino
citizens, save in cases prescribed by law.
Section 15. The Congress shall create an
agency to promote the viability and growth
of cooperatives as instruments for social
justice and economic development.
Section16. FORMATION/ORGANIZATION/R
EGULATION OF CORPORATIONS
The Congress shall not, except by general
law, provide for the formation, organization,
or regulation of private corporations.
Government-owned or controlled
corporations may be created or established
by special charters in the interest of the
common good and subject to the test of
economic viability.
1. Private corporations
Congress can only provide for the formation,

reasonable terms prescribed by it,

temporarily take over or direct the
operation of any privately-owned public
interest.
Sections 18-19. SPECIAL ECONOMIC
POWERS OF THE GOVERNMENT
Section 18. The State may, in the interest of
national welfare or defense, establish and
operate vital industries and, upon payment
of just compensation, transfer to public
ownership utilities and other private
enterprises to be operated by 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.

etc of private corporations through a general

law.

2. Nationalization of vital industries:

2. GOCCs

A. Exercised in the interest of national welfare

They may be created by:

or defense

a. Special charters in the interest of the

B. Involves either:

common good and subject to the test

i. Establishment and operation of vital

of economic viability.

industries; or

ii. Transfer to public ownership, upon payment

of just compensation, public utilities and other

*Congress may, by law, otherwise prescribe

Mass Media

private enterprises to be operated by the

government.
Section 19. MONOPOLIES
The State shall regulate or prohibit
monopolies when the public interest so
requires. No combinations in restraint of
trade or unfair competition shall be allowed.
1. The Constitution does NOT prohibit the
existence of monopolies.
2. The State may either regulate or prohibit

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

monopolies, when public interest so requires.

1. Filipino citizens; or

3. Combinations in restraint of trade or unfair

2. Corporations incorporated in RP, with 60%

competition are prohibited.

Filipino ownership

Filipino citizenship or equity requirements:

EXCEPT: Schools established by religious

ACTIVITY REQUIREMENTS CITIZENSHIP

AND/OR EQUITY
Exploitation of natural
resources
1. Filipino citizens; or

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

2. Corporations incorporated in RP, with 60%

Filipino ownership

corporations 60% Filipino owned (or even

higher) certain investment areas.

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)

Section 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, integrity, and patriotism, the
majority of whom shall come from the
private sector. They shall also be subject to
such other qualifications and disabilities as
may be prescribed by law. The authority
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 the operations
of finance companies and other institutions
performing similar functions.
Until the Congress otherwise provides, the
Central Bank of the Philippines operating
under existing laws, shall function as the
central monetary authority.
Section 21. Foreign loans may only be
incurred in accordance with law and the
regulation of the monetary authority.
Information on foreign loans obtained or

guaranteed by the Government shall be

made available to the public.
Section 22. Acts which circumvent or
negate any of the provisions of this Article
shall be considered inimical to the national
interest and subject to criminal and civil
sanctions, as may be provided by law.