House passes bill allowing foreigners 99-year leases

By Kenneth Christiane L. Basilio, Reporter

THE House of Representatives on Tuesday approved on third and final reading its version of a measure setting the maximum length of land leases for foreigners at 99 years from 75 previously, with the bill touted as a means of attracting more foreign investment.

By a 175-3-2 vote, legislators approved House Bill No. 10755, which also includes protections for foreign investors entering into lease agreements.

The Senate passed its version of the measure on Monday.

The 1987 Constitution prohibited foreigners from owning land in the country, but the 31-year-old Investors’ Lease Act allowed foreign investors to lease private land for an initial period of 50 years, renewable once for a maximum of 25 years.

The proposed law was declared a priority measure by President Ferdinand R. Marcos, Jr. It had been introduced in June by Senate President Francis G. Escudero, after efforts to amend economic provisions of the 1987 Constitution stalled in Congress.

A total of $8.9 billion in foreign direct investment flowed into the Philippines in 2023, well behind Singapore’s $159.6 billion, Indonesia’s $21.6 billion and Vietnam’s $18.5 billion.

The bill seeks to allow foreign investors to sublet properties, unless prohibited under the lease contract. Sublease contracts longer than 25 years or more are required to be registered with the Register of Deeds, while sublet contracts less than 25 years are exempt.

The measure listed the approved purposes of land leases by foreigners to include industry, agro-industrial, commercial, tourism, agriculture, agroforestry and ecological conservation.

The inclusion of agroforestry purposes was designed to “spur foreign investment in tree plantations and carbon farming on private land,” Calixto V. Chikiamco, president of Foundation for Economic Freedom, said via Viber before the bill’s approval.

The measure stipulates that Board of Investments approval is required for lease agreements outside economic zones or freeports.  

George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry, said legislators should consider setting other conditions for such leases, such as the size of the investment, the jobs to be created, and the project’s contribution to the economy.

“We don’t want the land to be tied up for that long if they’re not putting in effort on the investments,” he said via phone before the bill’s approval.

Foreign investors that fail to initiate their planned investment projects on the leased sites within three years risk having the contract terminated by the Secretary of Trade or the heads of the economic zones or freeport areas, according to the bill.

The bill also imposes a prison term of up to six years and a fine of as much as P6 million for lessees and investors using the leased land in a manner contrary to Philippine law.

“While this reform would help improve the country’s investment climate, we believe additional reforms are needed to further promote investments and jobs in the Philippines,” American Chamber of Commerce of the Philippines Executive Director Ebb Hinchliffe told BusinessWorld via Viber before the bill’s approval.

“For example, we strongly support amendments to the Electric Power Industry Reform Act to help boost energy security and economic development;  the rationalization of the mining fiscal regime; the International Maritime Trade Competitiveness Act; the Konektadong Pinoy bill to expand internet connectivity; and the creation of the Philippine Airports Authority to improve our airports and support aviation and tourism sectors,” he added.

British Chamber of Commerce of the Philippines Executive Director Chris Nelson told BusinessWorld by phone that “compared (to other countries that allow) direct ownership, it is not the same… While we would welcome the extension, we would actually say that they should also be looking at the possibility of having land ownership.”

The Philippines should also consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to entice more foreign investments into the country, he added, speaking to BusinessWorld before the bill’s approval.

The CPTPP is a trade pact comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The UK last week became its 12th member.