Article XII

National Economy and

Patrimony

Section 1
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.
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.
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.

 National Economy
- refers to the entire structure of economic life in a
country.
National Patrimony
- refers primarily to the natural resources of our country
which under the Constitution.
Goals of the National Economy:
Equity
- more equitable distribution of opportunities income and
wealth.
Growth
- sustained increase in the amount of goods and services
produced by the nation for the benefit of the people.
Productivity
- an expanding productivity as the key to raising the
quality of life for all, especially the underprivileged.

Strategies to accomplish goals:

1. To develop self-reliant and independent national
economy effectively controlled by Filipino.
2. To promote industrialization and full employment
3. To protect Filipino enterprise against unfair
foreign competition and trade practices.
4. To give all economic sectors and regions of the
country optimum opportunity to develop
5. To encourage private enterprise, including
corporations, cooperative and similar collective
organizations to broaden the base of their
ownership.

Section 2
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 agricultural lands, all other natural 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 activities, or it may enter into
co-production, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixtyper centumof whose
capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five
years, and under such terms and conditions as may be provided by law. In
cases of water rights for irrigation, water supply fisheries, or industrial uses
other than the development of water power, beneficial use may be the
measure and limit 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 small-scale utilization of

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

 the Constitution declares that all lands of the

public domain and all other natural resources
of the Philippines are owned by the State.
Our Constitution adopts the Regalian doctrine
with respect to the natural resources of the
country.
Regalian doctrine
-A principle in law which means that all natural
wealth - agricultural, forest or timber, and mineral
lands of the public domain and all other natural
resources belong to the state.

 Objectives of policy on natural resources:

1. To ensure their conservation for Filipino posterity.
2. To serve as an instrument of national defense,
helping prevent extension into the country of
foreign control through peaceful economic
penetration.
3. To prevent making the Philippines a source of
international conflicts with the consequent
danger to its internal security and
independence.

Section 3
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 twenty-five years, and not to exceed
one thousand hectares in area. Citizens of the Philippines 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 therefore.

Classification of lands of the public domain:

1. Agricultural
2. Forest or Timber
3. Mineral
4. National Parks
Basis and rationale of classification
a. The classification of lands of the public domain is
based on the nature of the land.
b. The rationale for the change is to limit the lands
of the public domain which may be alienated to
public agricultural lands.

Maximum size of landholdings

Individual
- the maximum area of public agricultural lands
that may be acquired by purchased, homestead
or grant is 12 hectares and by lease, 500
hectares
Corporations and associations
- the maximum area that may be leased is 1,000
hectares. The lease period shall not exceed 25
years renewable for not more than 25 years.

Section 4
The 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 nor diminished, except by
law. The Congress shall provide for such period as
it may determine, measures to prohibit logging in
endangered forests and watershed areas.

 Congress to determine specific limits of forest

lands and national parks.

Congress is required:
1. To determine as soon as possible disposition or
appropriation of any portion of forest lands and
national parks, marking clearly their boundaries
on the ground.
2. To provide, for such period as it may determine,
measures to prohibit logging in endangered
forests and watershed areas.

Section 5
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.
The Congress may provide for the applicability of
customary laws governing property rights or
relations in determining the ownership and extent
of ancestral domain.

 Protection of rights of indigenous cultural

communities to their ancestral lands.
a. Communal ownership of lands
- in protecting the said rights to insure the
economic, social and cultural well-being of the
indigenous cultural communities.
b. Applicability of indigenous customary laws
- the Constitution has opened the possible State
recognition by means of legislation of the
applicability of indigenous customary laws
governing property rights or relations, as part of
the laws of the land, in determining the
ownership and extent of ancestral domain.

Section 6
The use of property bears a social function, and
all economic agents 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.

 Right to own, established, and operate economic enterprises.

a. Many economic systems

- an organized way in which a state
ornationallocatesitsresourcesand apportionsgoods and
servicesin the nationalcommunity.
b. Free enterprise system
- under this system, often called free private enterprise, private
individual or associations of persons can own and operate
business enterprises risking their own resources and thereby
taking the profits or the losses in consequence.
c. Intervention by the State

- the struggle for economic advantage by individuals and

groups may deviate from pure competition.

Section 7
Section 7. 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.

 Private lands
- are lands of private ownership. They include those
owned by private individuals, corporations, or
associations and those owned by the State and
municipal corporations which are not intended for
public use.
Under the Constitution, private lands may be
transferred or conveyed to the following:
1. Filipino citizens
2. Corporations and associations at least 60% of the
capital of which is owned by Filipino citizens.
3. Aliens but not only in cases of hereditary succession.
4. Natural-born Filipino citizens who have lost their
Philippines citizenship subject to limitations provide
by the law.

 The phrase hereditary succession in Section

7 which enables aliens to acquire private lands
should be interpreted to mean intestate
succession and not testamentary succession.
Otherwise, the prohibition will be for naught and
meaningless.
Consequences of violation of prohibition:
1. Restoration of the status quo.
2. Where violation disguised.

Section 8
Section 8. Notwithstanding the provisions
of Section 7 of this Article, a natural-born
citizen of the Philippines who has lost his
Philippine citizenship may be a transferee
of private lands, subject to limitations
provided by law.

Right of natural-born citizens who have lost

their citizenship to acquire private lands.
Whereas, many natural born citizens of the
Philippines have migrated to foreign countries,
particularly to Hawaii and other states of the
United State of America, where they eventually
acquired the citizenship of the countries to which
they migrated and as a consequence, lost their
Philippine citizenship.
Whereas, in spite of their new citizenship these
former Filipino citizens continue to maintain their
filial link with their relatives in the Philippines and
feel a close affinity to the Philippines as an identity
with our people.

 Whereas, thousand s of these former Filipino natural-born

citizens expressed a desire to return to the Philippines
and reside here permanently so as to be able to spend
the remaining years of their lives in the land of their birth
and contribute, in whatever way they can towards the
development of our country and the well-being of our
people.
Whereas, it is in the national interest to give
encouragement to this beautiful sentiment of our bloodbrothers and to make it possible for them to bring to
fruition their expressed desire.
Whereas, it would be necessary to amend the
Constitution so as to enable these natural-born citizens
of the Philippines to own the land on which they would
reside.

Section 9
Section 9. The Congress may establish an
independent economic and planning agency
headed by the President, which shall, after
consultations with the appropriate public
agencies, various private sectors, and local
government units, recommend to Congress, and
implement continuing integrated and coordinated
programs and policies for national development.
Until the Congress provides otherwise, the
National Economic and Development Authority
shall function as the independent planning agency
of the government.

 Independent economic and planning agency

headed by the President to be established.
1. Need for a central economic planning body.
2. Features and functions.
3. National Economic and Development Authority
(NEDA)

Section 10
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 sixtyper centumof 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.

Certain conditions:
1. There is a recommendation by the economic and
planning agency (NEDA).
2. The national interest dictates.
Existing laws limiting certain activities to Filipino citizens
or corporations:
. Operation of rural banks,
. Engaging in the retail trade business,
. Operation of registered overseas shipping,
. Engaging in the rice and corn industry,
. Engaging in tax-free cottage industries,
. Contracts for the supply of materials, equipment,
goods and commodities for the government, and
. Operation of atomic energy facilities.

Regulation of Foreign Investments:

1. Sources of investment.
2. Kinds of investment.
3. Benefits and negative aspects of foreign direct
investments.
4. Need for foreign investments in the Philippines.
5. Foreign investments policy.
6. Objective of regulations.

Section 11
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 sixtyper centumof 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 their proportionate
share in its capital, and all the executive and managing officers of
such corporation or association must be citizens of the Philippines.

Franchise
-includes any special privilege or right conferred by the
State on persons or corporations.
It may mean either the:
Corporate or primary franchise
Secondary or special franchise
Public Utility
- has been described as a business organization which
regularly supplies the public with some commodity or
service.
Public utilities are also known as public service
companies.
Foreign participation in any utility:
Investment
Governing body and management

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.

Adoption of Filipino first policy.

1. Duty of the State
2. Aim of policy
3. Duty of buying public
Filipino first policy
-that the Filipinos come before anyone else.

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.

 Trade Policy
- is a policy affecting exports and imports and
domestic commerce formulated to achieve specific
goals.
Promotion of trade policy that serves the general
welfare:
1. Trade policy as an implement to achieve specific
goals.
2. Paramount objective of trade policy.
3. Benefits from the international trade.
4. Exchange rates of different currencies.
5. Special problems arising form international trade.

Section 14
The sustained development of a reservoir of
national talents consisting of Filipino scientists,
entrepreneurs, professionals, managers, highlevel 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

Promotion of national talent pool of Filipinos

Human resources (people)
- are the most critical sources of economic
growth.
-They are the active factors to produce goods
and services needed by the growing economy.
Practice of all profession limited to Filipinos.
Profession
- a calling which requires the passing of an
appripriate gowernment board or bar
examination.

Appropriate technology
Another important source of economic
growth is technological innovation. The
application of new knowledge to the
productive process.
A growing economy has to accommodate
itself to successive changes in technology
that raise productivity.

Section 15
The Congress shall create an agency to
promote the viability and growth of
cooperatives as instruments for social
justice and economic development.

Cooperative
- is a type of business unit through which individual
members cooperate in providing specific types of
services mutual benefit to membership.
Cooperatives can serve as a vehicle for attaining a more
equitable distribution of wealth by increasing the income
purchasing power of the low-income sector of the
population and for providing needed services not only for
their members, but also for the community in general.
They encourage self-management and participation in
decision making at the grassroots, as well as a broader
based ownership of private enterprise.
As a direst expression of the bayanihan spirit of the
Filipinos, and with strong government support, the
cooperative movement ca contribute substantially to the
national development and progress of the country.

Section 16
The Congress shall not, except by general law,
provide for the formation, organization, or
regulation of private corporations. Governmentowned 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.