Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HO BILL NO. 40 oi

Introduced by HONORABLE ROMERO “MIRO” S. QUIMBO

EXPLANATORY NOTE

Agriculture remains as one of the sectors with the highest share in total
employment. Data from the Philippine Statistics Authority (PSA) show that
out of the 37.61 million total employment in the country, 12.09 million of
which is in the agricultural sector. This shows a thirty-two percent (32%)
share of agricultural employment in 2012.

Nevertheless, from 2003 to 2009 farmers were identified as the group with
one of the highest poverty incidence among the country’s basic sectors, as
identified by the National Statistical Coordination Board.? This poverty in
the agricultural sector, according to the World Bank, is driven by
competition in key sectors, insecurity of property rights, complex
regulations, and severe underinvestment by the government and the private
sector, which thereby impede the growth of this sector.3

Apart from these, another hindrance to agricultural growth is the
restrictions laid down in laws pertaining to the distribution of agricultural
land. Under the Public Land Act or Commonwealth Act No. 141, grantees of
agricultural free patent are restricted from mortgaging or selling their lands
within five (5) years from the issuance of the free patent. Further, after the
five-year restriction when conveyance is allowed, the original owner is
allowed to repurchase the land within another five (5) years.

These restrictions have been found to push the agricultural landowners
further into poverty. Because of these restrictions, access of the grantees to
credit has been impeded. Banks and other private financial institutions have
low confidence in extending loans to these landowners as they deem patents

* Rodriguez, Fritzie. “PH Agriculture: Why is it Important?” Rappler website, September 1, 2015.
«<http://www.rappler.com/move-ph/issues/hunger/52372-agriculture-hunger-food-security, accessed August
30, 2016.>

? ibid.

* Tiamson, Erwin L. “Freeing the Land Market: How Legal Restrictions Hamper Agricultural Development and
Poverty Reduction.” Foundation for Economic Freedom, February 2016.


as flawed titles when used as collateral.‘ Thus, despite their ownership over
these lands, grantees still suffer low potential for investments, which they
could have used to increase their economic productivity.

In addition, poor access to credit markets led to the development of informal
credit markets, wherein grantees engage in trading their usufruct rights to
the land, which defeats the very purpose of these restrictions.

The inability of the grantees to alienate these lands also hinders potential
capital turnover to the national economy. One study estimates that
agricultural land/asset covered by the five-year restriction amounts to at
least Php 387 Billion, potentially rendered idle due to limits in disposition.°
In the same study, it was projected that this amount may even reach trillion
pesos if it will include those lands under patents issued prior to 1980 which
are covered by the “right to repurchase” restriction.

Hence, in the objective of increasing the potential productivity and income
from land distributed through the agricultural free patent, this bill proposes
the removal of these restrictions embodied in Section 118 and 119 of
Commonwealth Act No. 141. Through this measure, we can ensure the
optimal utilization of the lands by the grantees, boost their financial capital,
and provide them access to formal credit markets. These will consequently
help broaden their opportunities for economic and financial growth.

It is in this light that the passage of this bill is earnestly sought.

ROMERO “MIRO” S. QUIMBO
Repyfsentative
Second Djtrict Marikina City

* Uanto, Gilberto M. and Ballesteros, Marife M. “Land Issues in Poverty Reduction Strategies and the
Development Agenda: Philippines.” Philippine Institute for Development Studies, Discussion Paper Series No.
2003-03, March 2003. <http://dirp3.pids.gov.ph/ris/pdf/pidsdps0303.pdf, August 31, 2016.>

° Uanto, Ibid.

“Tiamson, Ibid.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

SEVENTEENTH CONGRESS
First Regular Session

House sit no. $091

Introduced by HONORABLE ROMERO "MIRO" S. QUIMBO

AN ACT REMOVING THE RESTRICTIONS UNDER SECTIONS 118 AND 119 OF
COMMONWEALTH ACT NO. 141, AS AMENDED, ON FREE PATENTS ISSUED
UNDER SECTION 44 THEREOF

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “Agricultural Free
Patent Reform Act.”

SECTION 2. Removal of Restrictions. ~ Agricultural public lands alienated or
disposed in favor of qualified public land applicants under Section 44 of
Commonwealth Act No. 141, as amended, shall not be subject to restrictions
regarding encumbrances, conveyances, transfers or dispositions imposed under
Sections 118 and 119 of Commonwealth Act No. 141, as amended.

SECTION 3. Retroactive Effect. - This Act shall have retroactive effect and
restrictions regarding encumbrances, conveyances, transfers or dispositions
subject to Sections 118 and 119 of Commonwealth Act No. 141 as amended, on
free patents issued under Section 44 thereof before the effectivity of this Act shall
likewise be removed and are hereby immediately lifted.

SECTION 4, Repealing Clause. All laws, decrees, executive orders, rules,
regulations or other issuances or parts thereof inconsistent with the provisions of
this Act are hereby repealed or modified accordingly.

SECTION 5. Separability Clause. If, for any reason, any section or provision of
this bill is declared unconstitutional or invalid, other sections or provisions hereof
shall remain in force.

SECTION 6. Effectivity. This Act shall take effect fifteen (15) days after publication
in a newspaper of general circulation or in the Official Gazette.

Approved,