Pax Silica highlights need for clearer industrialization policy

Pax Silica has been presented by the government as a major opportunity for the Philippines. But before the country commits to anything, there appears to be a more fundamental question to answer: What kind of industrial economy does the Philippines actually want to build? That question emerged repeatedly during Rappler’s Ask Me Anything on Pax Silica, where lawyer Carlo Ybañez and IBON Foundation researcher Luisa Gabriela offered differing perspectives on the initiative, but found common ground on several safeguards the Philippines should demand. Both argued that the country should not simply be swept up by the scale of the promised investments. Instead, the Philippines needs transparency, careful negotiations, and a clear industrial policy that defines what it wants to get out of foreign investment. In light of that, Ybañez argued, November — the month that the Bases Conversion and Development Authority (BCDA) has targeted for the signing of a framework deal between the Philippines and the US — may simply be too soon to sign. Pax Silica is not yet a treaty One of the most important points raised in the discussion: Pax Silica, as it currently stands, is not yet a binding treaty for the Philippines. Ybañez said the Philippines has joined through a declaration, but the details of any eventual treaty, including its obligations and implementation, have yet to be finalized. A treaty would have to go through the Philippine process, including Senate ratification, before it becomes binding. “That has the effect of laws,” Ybañez said. “We are not yet there.” That is why Ybañez believes upcoming Congressional hearings are necessary and crucial. These should be part of the process of determining whether the eventual agreement is acceptable in the first place. Before the Philippines commits itself, Filipinos should know exactly what the country is committing to, on the issues of foreign ownership and sovereignty, jobs, technology transfer, and energy and water consumption. Start with Philippine industrial policy, not foreign investment For Gabriela, however, even transparency and safeguards are not enough. The Philippines needs to step back and ask a more fundamental question: What is its own national industrialization plan? Without one, the country risks evaluating Pax Silica based on whatever numbers are placed in front of it: billions of dollars in investment, hundreds of thousands of jobs, or potentially billions more in exports. Those figures can be attractive but they do not automatically mean the Philippines is industrializing, the researcher argues. “It’s very flashy at first, but how does it serve us?” Gabriela asked during the AMA. “How does it develop us, the Philippines?” Her argument is that industrial policy should come first. The country needs to determine which industries and capabilities it wants to develop, how it intends to build domestic firms and skills, and what kind of jobs it wants Filipinos to have. She looks further, and notes the policy should include the foundations of the economy — from agriculture and food security to education, manufacturing and infrastructure. That’s when the Philippines can properly assess where something like Pax Silica fits. Otherwise, the country risks doing the reverse: adjusting its development priorities around whatever foreign investment happens to arrive, she argues. Transparency before commitment One of the demands that came up most clearly in the AMA was transparency. Ybañez argued that the public needs to know where the negotiations stand: What is being considered? What conditions are being demanded? And what is the Philippine government’s position on those demands? “Before we can actually make our own opinions, kailangan malaman muna natin nasaan na ba tayo (we need to know where we currently are),” he said. Even the Philippine government’s description of the proposed development has evolved. BCDA officials have emphasized advanced manufacturing and an industrial ecosystem, while earlier descriptions had put greater emphasis on data centers and AI infrastructure. The goal shouldn’t just be investment. It should be capability. Neither argued that the Philippines should simply reject foreign investment. Instead, they said investment should create capabilities that remain in the Philippines. Technology transfer is a major example. Ybañez argued that if Pax Silica is supposed to help the Philippines participate in the future of AI and advanced technology, Filipinos cannot simply become users of technologies developed elsewhere. “They have to teach us about the technology,” he said, “and not just teach us how to use it, but teach us how to develop future AI technology.” That requires more than a company handing over a piece of technology. It means developing Filipino engineers, researchers and workers who can understand the technology, improve it and eventually create their own intellectual property. This requires education and skills development, which is precisely why the country needs to think about industrial policy before it signs on to individual projects. The same principle applies to employment. Large industrial projects will almost certainly create jobs, Ybañez says. The more important question is what kind. Are Filipinos getting high-value, secure and dignified jobs? Are Philippine companies becoming part of the supply chain? Are local workers gaining skills that can be used beyond a single foreign investment? That is where performance requirements become important: the idea that foreign investors should have measurable obligations that contribute to the host country’s economic development. The two agree: If the Philippines wants technology transfer, skills development and stronger domestic industries, it needs to negotiate for those outcomes, built upon a solid industrial policy, rather than simply assuming they will happen because an investment is large. Environmental concerns Pax Silica’s proposed development in New Clark City could require significant amounts of land, electricity, and water. The AMA discussion raised concerns over the scale of those requirements, including estimates of potentially 3 gigawatts of power and large volumes of water. Those numbers need to be examined independently and publicly. Will the Philippines, which already has energy and looming water problems, have enough resources and infrastructure to support the project without undermining the community at large on issues including electricity access, affordable power, agriculture, water security, and land use? Claims that communities have already been accounted for need to be tested against the experiences of farmers and Indigenous peoples who say they remain affected. The industrialization also has to account for the people and communities. The Philippines’ self-determination There is also an unavoidable geopolitical dimension. Pax Silica is part of a broader effort to strengthen semiconductor supply chains as the United States and China compete for influence over critical technologies and minerals. But that does not mean the Philippines has to approach the initiative as a choice between the two powers. Gabriela’s argument is that the country should instead ask what benefits the Philippines. “We choose the Philippines,” she said, describing the approach as “aggressive neutrality.” The measure should be the country’s own economic interests, not any other country’s. That is why an independent industrial policy is so important. It gives the Philippines a basis on how to answer foreign proposals, Gabriela argues. Without that framework, the country is more vulnerable to being persuaded by the size of an investment or the strategic priorities of a more powerful partner. What the AMA showed is that there is a possible middle ground in the Pax Silica debate. The Philippines does not have to reject foreign investment but nor does it have to accept every proposal simply because it promises jobs and billions in capital. It can negotiate, Ybañez explains. But negotiating effectively requires knowing what the country wants. Again, that means greater transparency about the emerging terms of Pax Silica; independent studies of its economic, environmental and social impacts; extensive hearings with affected communities and stakeholders; and clear conditions for technology transfer and skills development. And it also means protecting Philippine sovereignty and ensuring that Philippine laws continue to govern Philippine territory. And above all, it means developing a national industrialization strategy against which Pax Silica can actually be measured. – Rappler.com