Tilting Pax Silica in our favor

Last April, the Philippines announced its plan to join Pax Silica, a United States-led initiative aimed at reshaping supply chains for critical minerals and technologies.

At the heart of this plan is to designate 4,000 acres of the New Clark City within the broader Luzon Economic Corridor (LEC) as a key industrial hub in the Indo-Pacific.

Many have welcomed Pax Silica, with Finance Secretary Frederick Go noting that through the initiative, the country can harness its “mineral resources and strategic location [to build] the industries of the future.”

Yet Pax Silica risks embedding the country within Washington’s broader economic and security architecture. Critics have condemned it for advancing US military interests and resource plunder, while masquerading as economic cooperation. With the goal of building an “economic security zone,” the proposal implies a clear security dimension that jeopardizes the country’s geopolitical position. Given this, one must ask: are the gains commensurate with, or greater than, the risks?

Assessing Pax Silica’s promise. Though the initiative is still in its infancy, there are already signs of what is to come.

First, Pax Silica will likely stimulate investment and employment. This comes amid efforts, especially from the US, to diversify supply chains and relocate production to allies. Israel, Japan, South Korea, United Arab Emirates, and some European Union countries have expressed interest in investing in the country.

Second, it could jumpstart the country’s minerals processing industry. The Philippines holds among the world’s largest reserves of copper and nickel—inputs for technologies that the West wants to secure. Yet it remains largely confined to exporting raw minerals. By attracting investment in downstream activities, Pax Silica could enable the country to capture more value from its resources.

Third, the country stands to benefit from infrastructure initiatives associated with the LEC. Projects such as the Subic-Clark-Manila-Batangas Railway could help address infrastructure gaps that have long hindered Philippine manufacturing.

The opposite side of the coin. Except for mineral processing, the country may be pursuing a familiar strategy. For decades, the Philippines has relied on attracting foreign investment through ecozones—a strategy that has never let the country graduate from lower-value segments of the supply chain.

The semiconductor industry is a case in point. Albeit the largest export industry, assembly, testing, and packaging (ATP) dominates, while higher-value front-end activities such as design and fabrication remain limited. A major reason is that past initiatives often lacked a clear vision for developing domestic firms and facilitating technology transfer, leaving many ecozones as “enclave economies.”

Ecozone-oriented Pax Silica may reproduce these patterns. Discussion so far has focused on attracting investment and building infrastructure, with less attention paid to how domestic firms will participate, how technology will be transferred, or how supporting industries will be developed—all crucial considerations if the country is to foster broad-based development.

Seizing the opportunity. Policymakers can still seize this opportunity, but this requires prioritizing local industrial development.

First, local firms should have a seat at the table when policies and incentives are designed. Otherwise, the country risks repeating mistakes in which foreign investment generated jobs and exports without corresponding spillovers to the domestic economy.

Likewise, Pax Silica and the LEC must be guided by a clear industrial vision. The objective should be to build an integrated ecosystem from front-end activities, such as design and fabrication, to back-end, advanced ATP. Equally important are fostering supporting industries, like chemicals and metals, and addressing longstanding constraints, such as high electricity costs.

Policymakers must also promote industrial clustering in New Clark City, following Taiwan’s Hsinchu. Its success came not from attracting investment alone but from fostering linkages among domestic firms, multinationals, universities, research institutions, and government agencies.

Finally, the country must recognize its growing strategic importance. Rather than just offering land, labor, and minerals, the government must seek commitments on technology transfer, workforce development, research and development collaboration, and investments in higher-value segments such as design and fabrication.

If domestic capacity-building and upgrading are achieved, Pax Silica could become a game changer. Otherwise, it risks repeating past mistakes, in which national interests remain at the margins and development potential is left unrealized.

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Lianne Angelico C. Depante, Frances Dominique V. Ho, Kirsten Mae C. Dedase, and Leo Mendel D. Rosario are researchers from Tokyo’s National Graduate Institute for Policy Studies, the Philippine Institute for Development Studies, and the University of the Philippines.