Bill on 99-year land lease for foreigners seen to boost PHL investments

By John Victor D. Ordoñez, Reporter

A MEASURE seeking to extend the maximum term for land leases entered by foreigners to 99 years is likely to help the Philippines attract more investments, analysts said.

“Investors may be more inclined to commit to projects in the Philippines when they see the availability of longer-term leases as an assurance of stability,” Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

He said industrial parks, economic zones and tourism-related projects are expected to benefit as foreign firms are more likely to invest if they can be assured of longer land leases.

Last week, the House of Representatives and the Senate approved separate bills allowing foreigners to lease land up to 99 years from 75 years. Both bills allow foreign investors to sublet properties, unless barred by a contract.

Under both versions, foreign private land leases related to tourism will be allowed if the investments are not less than $5 million. Of this amount, 70% must be infused in the project within three years after a contract is signed. 

The bill is one of President Ferdinand R. Marcos, Jr.’s priority measures, that the administration aims to approve before June 2025.

Lawmakers have yet to come up with a reconciled version of the measure through a bicameral conference committee.

However, Mr. Rivera said the government must come up with clear guidelines for the measure and ensure safeguards for local stakeholders.

“There may be concerns that longer lease terms could encourage speculative investments, where land is tied up for extended periods without being used productively,” he said.

“Extending lease terms could also lead to potential disputes with local communities over land use and allocation, especially in areas where indigenous peoples’ rights and agricultural interests are at stake.”

The 1987 Constitution bars foreigners from owning land in the country, but the 31-year-old Investors’ Lease Act allows foreign investors to lease private land for 50 years, renewable only once after 25 years.

“The 99-year lease bill, if passed into law, will contribute to a more favorable investment climate for foreign investors,” Foundation for Economic Freedom President Calixto V. Chikiamco said in a Viber message.

He cited a provision in a Senate bill that requires a lease to be registered with the Land Registration Authority (LRA), which he said would improve the “security and bankability” of leases.

Both bills allow foreign investors to lease land for agriculture, agroforestry and ecological conservation purposes.

They will also be allowed to enjoy longer leases to build industrial estates, factories, assembly or processing plants and tourism sites.

Sublease contracts must be registered with the registry of deeds under the LRA, according to copies of both the House and Senate bills.

The proposed measures also impose a fine of P1 million to P10 million on people who enter into illegal lease agreements.

Only the Senate version imposes jail time of up to six years for lease agreement violators. Congressmen removed the imprisonment penalty.

The upper chamber’s version also provides that in cases of corporations, associations or partnerships violating lease deals, the president, manager, director, trustees or other officers will be held criminally liable.

Both versions also mandate that only the Board of Investments or relevant investment promotion agencies may review and approve long-term lease agreements.

Lease contracts will also be subject to termination if an investment project is not initiated within three years.

Leonardo A. Lanzona, an economics teacher at the Ateneo de Manila University, said the government is better off coming up with a comprehensive plan that would ease the entry and exit of foreign companies in local markets.

“We are going to replace the restrictions to attract huge corporations that aim to take control of our markets in the long run because of their absolute control over the land,” he said in a Facebook Messenger chat.

Mr. Rivera said the Philippines still needs to work on improving the general investment environment.

“Investors look at lease terms as part of a broader environment for investment, and the Philippines must continue to improve other aspects of its investment climate,” he said.