Philippines Bets on Luzon Corridor, Pax Silica for Investment Amid Eroding Human Capital

BUSINESS LEADERS said Pax Silica projects in the Philippines as well as the development of the Luzon Economic Corridor (LEC) will drive an uptick in foreign investment starting late this year because of their potential to diversify the sources of the Philippines’ competitive advantage. “If we get our act together, sets the stage for significant investments to come in, starting maybe by end of the year or early next year,” Makati Business Club Chairman Edgar O. Chua told reporters last week. “That will be a big deal because if they see that we are really preparing our country, then it would help drive confidence and investment,” he said. Mr. Chua added that the Philippines’ participation in Pax Silica and the LEC will help diversify the country’s growth drivers. “The only thing that’s keeping our country maybe an attractive destination is the quality of our people, human resources. But even that is at risk,” he said, citing the Philippines’ low rankings in global education readiness. The Philippines ranked 76th out of 81 countries in the Organization for Economic Cooperation and Development’s 2022 Programme for International Student Assessment, amid low scores in reading, mathematics, and science proficiency. Mr. Chua noted that the Philippines’ participation in Pax Silica and the LEC will help the country keep pace with its regional peers in terms of economic development. “In the ’60s, we were second only to Japan in the Asia-Pacific, but we now maybe second only from the last, and that’s because of missed opportunities,” he said. The Philippines joined the Washington-led Pax Silica bloc in April, marking a big push to bolster its participation in the global value chain for artificial intelligence (AI) chips manufacturing. Under Pax Silica, the country is developing a 1,619-hectare AI-native industrial hub in New Clark City, Tarlac, which will specialize in semiconductor manufacturing. However, plans for Pax Silica-related developments in the Philippines remain subject to intense scrutiny, with critics raising concerns over its projected strain on power and water grids, as well as its broader environmental impact. The Philippines and US are currently finalizing the governing framework for the Pax Silica hub. Meanwhile, the LEC is a multi-country initiative with the US, Japan, and other partners to boost the connectivity of key hubs like Subic Bay, Clark, Manila, and Batangas. This corridor seeks to invest in infrastructure such as rail and ports, as well as strategic investments in semiconductors, clean energy, and supply chains. Aboitiz InfraCapital President and Chief Executive Officer Cosette V. Canilao said the Philippines cannot miss the opportunity to become a stronger player in global supply value chains under the Pax Silica initiative. “It will be good for the economy… This is like the next (tech) revolution we cannot not be a part of,” she told reporters separately. “We have just to set the right guardrails but let’s not say no immediately,” Ms. Canilao added.