Crafting a Philosophy of Land

Along the stretch of Roxas Boulevard from Baclaran to Luneta, passing through the service road, one senses a distorted philosophy of land or the absence of it. This stretch is perhaps the most expensive piece of property in the Philippines. Yet private enterprises and enterprising traders have taken over part of this property. The government has allowed institutions such as San Juan de Dios Hospital and the U.S. and Japanese Governments in the far south; and Bayview and Diamond Hotels in the far north to use such expensive property for parking or for security reasons. In between these two land segments must be hundreds of institutions and companies that benefit from the use of this public space.

Within the vicinity are various retail stores and businesses such as banks and retail stores that have taken over part of the street as an extension to give their clients space for parking. They barricade this part of the street and put a sign post “for customers only”. Further east, we see squatters squatting on prime land. In Divisoria and Baclaran (unless something really drastic has been done lately), vendors have taken over the sidewalk and streets with no extra revenue to the government.

An expensive property used for parking or illegal housing and vending must yield minimal or no income to the government. Economist Allan Tolentino estimated that cities and towns of Metro Manila lose more than P200 billion in land tax revenues per year due to undervaluation of publicly generated land value and generous policies in the use of idle land. As the value of the land increases, the amount the government loses naturally increases.

This amount has yet to be validated. But from what I see as unwarranted and inappropriate use of land in the metropolis, it is obvious that there is a big loss. In fact, enterprising mayors who dared to generate more revenues through land-based revenues are able to do more for their cities. What was deemed regressive created positive ripple effects. However, what these few mayors have done is still not enough. They can still be more creative and generate more funds for development. The most visible sign is overcrowding. For as long as demand for space remains, there is a slack between the optimal and current value.

I do not have to mention the situation in the country side where huge tracts of land owned by few families remain idle or underutilized. Idle or underutilized land yields limited income for the government and prevents government and the community from fully utilizing the value of the land.

Now that there is an attempt to amend the constitution, perhaps it is timely to define a philosophy of land that would preserve the rights of society to impose conditions on how land is used and maximize revenues which government can use for development. Indeed, the principles governing land ownership need practical articulation so that land transfer can be done in cases where community benefits coming from it are best optimized.

The concept of land ownership evolved from a materialism perspective based on what we now know as the principle of best returns. Even Feudalism, viewed in its materialistic perspective, is a term used to represent an economic system of land ownership that encourages land use and management – obviously to get the most returns from a finite resource.

Economist Paul Pilzner reminds us of our Christian roots and how it influenced modern economy. He writes that Abraham became the first person to recognize land as individual property that can be improved, purchased, and sold. Accordingly, the concept of real and intellectual property ownership, as originally conceived in the laws of Abraham, is probably the foundation of modern economy. This is in fact what differentiates the farmer from the Nomad. As pointed out by Pilzner, the Nomads take food from the land until they have exhausted the supply, at which point they move on to different land with more food, while farmers plant seeds and grow a continual supply of food on the same piece of land.

But the value of land is not simply what it is worth in the real estate market but also what it is worth including the natural resources that can be extracted from it and the sea that forms part of the territory. The principles of maximum returns obtaining from the land must necessarily cover not only the land itself but whatever resources that can be mined from it including mineral, water, oil and others. Recent technology even extends the economic scope of the land to include air.

We have enough cases in the recent past to evaluate economic returns from the land. Toledo City, for instance, was downgraded from a first class municipality to a third class municipality after a big mining company closed down. Without dwelling on the ecological repercussions, the mining activity of the past generated the better returns. In fact, two of the company’s divisions which were sold out continue to be the major tax payers for the city. No wonder, city officials are excited about the possibility that the mines will soon be operational. On the other hand, when Subic was vacated by the Americans and converted into an economic and trade zone, it generated more employment and investments. The sale of Fort Bonifacio generated income for the government, and additional employment and investments. It certainly makes economic sense to convert military land for economic use.

Fred Harrison claims that the main reason for the emergence of tax-driven friction in the economy is the failure of governments to develop a philosophy of land that respects the territorial right of others and allows the community to generate the best returns. For the Philippines to develop, the state must recognize the inherent and historical value of land. This can be done by incorporating a philosophy in the long-term development plan mandating the use of land as a platform for progress and development.

(Originally published in BusinessWorld. For comments, email to nick.fontanilla@gmail.com or abfontanilla@yahoo.com)