World Bank Sees Promise in Pax Silica, But PH Faces Hurdles to Higher-Value Industries

MANILA, Philippines – The World Bank sees promise in Pax Silica as the kind of long-term technology investment that could help the Philippines move into higher-value industries, even as it warns that the global artificial intelligence (AI) boom may encounter temporary slowdowns. The development lender said announcements of “quality investment” are generally good news for the country, particularly if they bring advanced manufacturing, technology, and better-paying jobs. Pax Silica is envisioned as a hub for semiconductors, AI, data centers, advanced manufacturing, and critical mineral value chains. World Bank lead economist Gonzalo Varela said the project could support the Philippines’ next stage of growth but only if it is backed by more competitive energy, transport, and logistics systems and stronger investments in Filipino skills. At the same time, the World Bank also identified a possible reversal in the global AI investment cycle as a key risk to the Philippine economy, given the country’s exposure to electronics and semiconductor exports. A slowdown in spending by big technology companies could temporarily weaken demand for Philippine-made components, data centers, and related investments. But World Bank senior country economist Jaffar Al-Rikabi said short-term swings in AI spending should not derail long-term industrial investments such as Pax Silica. (READ: [OPINION] Pax Silica and the Philippines: Will we build the future or simply build it for others?) “You could have in the short term cyclical aspects that could result in more or less AI investment,” Al-Rikabi said when Rappler asked whether a reversal in AI spending could disrupt the initiative. The investments and strategies behind Pax Silica, however, “are very much needed, and they shouldn’t be impacted by this short-term aspect,” he said during the launch of the Philippines Economic Update on Monday, August 3. This brings us to the other big question: Can the government actually power its AI dream? Must Read Why Energy Secretary Garin says Pax Silica is ‘too dangerous’ to plug into grid DEPDev: Investors to bring their own power The Department of Economy, Planning, and Development (DEPDev) said the government was already considering how to address the project’s heavy demand for electricity and water. DEPDev Undersecretary Rosemarie Edillon said investors in Pax Silica would be required to provide part of their own power supply, with a certain proportion coming from renewable energy. Investors would also need to generate or secure part of their own water requirements, potentially through measures such as rainwater collection. The government, however, has not yet decided what percentage of electricity and water must be self-provided. “We realize that there are advantages and disadvantages. There are benefits, there are costs,” Edillon told reporters along the sidelines of the World Bank event. “The key really is to make sure that we mitigate all those costs if we can do things as early as now.” Edillon said Pax Silica could also address a long-standing loss of Filipino talent. The Philippines produces engineers and scientists, including graduates sent overseas for advanced studies. But many do not return because the country lacks enough opportunities matching their skills. Pax Silica could create high-tech careers at home and allow knowledge and investment to spread beyond the hub, initially through the Luzon Economic Corridor and eventually to the rest of the country, she said. [Vantage Point] Pax Silica: America’s blueprint for the AI economy The Management Association of the Philippines (MAP) has taken a similarly supportive but cautious position. MAP called Pax Silica one of the country’s most consequential economic opportunities in decades. But it warned that promised jobs, investments, and technology capabilities “cannot be assumed.” “They must be deliberately negotiated, contractually protected, and institutionally monitored,” the business group said. MAP said industrialization and value addition should be central to the project so that the Philippines does not merely become a location for mineral extraction, assembly, or other low-value activities. The group also proposed an independent oversight body composed of representatives from government, business, universities, labor, civil society, and technical experts. MVP: ‘Baka assembly na naman ito?’ That said, what do local business leaders make of Pax Silica? Few are better placed to weigh in than tycoon Manuel V. Pangilinan, who has spent decades building an empire spanning energy, telecommunications, and data centers. Pangilinan described the ambition of building a Philippine version of Silicon Valley as a “great” idea but cautioned that announcing a technology hub is far easier than assembling the talent, capital, and infrastructure that made successful innovation centers possible. “I think the notion of creating a Silicon Valley for the Philippines is a great one. The question has always been: How do you do it?” Pangilinan told reporters on July 29. Silicon Valley benefited from a deep pool of engineers coming from universities such as Stanford and the University of California, Berkeley, as well as venture capital willing to finance young companies and risky ideas. The Philippines must first determine whether it has enough engineers to fill the companies it hopes to attract, Pangilinan said. It must also decide what part of the technology supply chain it wants Pax Silica to occupy. “Which part of the supply chain are we looking at? Baka assembly na naman ito (This might just be assembly),” he said. The Philippines is already the world’s ninth-largest chip exporter, but much of its participation has historically been concentrated in assembly, testing, and packaging. It still has no front-end wafer-fabrication facility and remains underdeveloped in higher-value activities such as chip design, advanced manufacturing, and intellectual property creation. Pangilinan acknowledged that beginning with lower value work may still be a practical starting point. “But probably we need to start with that. Maybe the basement of the supply chain. That’s okay,” he said. The challenge is ensuring the country eventually climbs beyond the basement. “If they need power, Meralco will build a power plant. We need to build data centers, as well. So, we have to put the pieces together,” Pangilinan said. “It depends [on] how ambitious we want to be.” – Rappler.com [Tech Thoughts] We need to be more responsible if we’re taking the Pax Silica route