MAP Insights

What is PAX Silica?

 

Pax Silica is a U.S.-led international coalition of investors launched in December 2025 for the purpose of establishing a global supply chain for semi-conductors, artificial intelligence (AI) infrastructure, rare earth elements, and other materials that are essential in the production of digital devices, such as microchips and processors. The project was initiated primarily for the purpose of reducing global dependence on China for semi-finished materials that are vital for many digital technologies.

 

Aside from the U.S., the other major participants in PAX Silica include South Korea, Japan, Singapore and Australia.

 

One of the over 30 participating countries in this massive partnership is the Philippines where a 1,620-hectare AI and advanced manufacturing hub will soon rise in New Clark City, Tarlac, Philippines.

 

Costs and Benefits of Pax Silica

 

Since its incipience, PAX Silica has been the subject of heated debates in political, business and academic circles. The controversies center largely on the economic costs and benefits associated with this major initiative.

 

There is general consensus on the economic benefits from PAX Silica. The project is expected to attract billions in investments – between $40 Billion and $70 Billion by one estimate – and to generate both high tech and manual jobs during the extended life of the project. It will also spur the development of small and medium enterprises that will form part of an extended value network, with Taiwan-based Foxconn serving as the primary anchor investor and first major locator for the Philippines. Moreover, by serving as an extended global supply chain, PAX Silica will avert having to reshore everything locally.

 

There is much less agreement on the economic, political and environmental costs associated with PAX Silica.

 

To begin with, data centers and AI hubs entail huge energy requirements. The project is estimated to require around 3 gigawatts of electricity-generating capacity, equivalent to 16% of Luzon’s current grid capacity. This enormous demand for power will most certainly exert pressure on the cost of electricity in the country, which, next to Singapore, is the highest in the region

 

Economists are concerned with the likelihood that PAX Silica will lock in the Philippines, the poorest among the 30 participants, into a low-value raw material export role rather than in high-end manufacturing.

 

Some critics worry that the country’s association with foreign countries with strategic interests in the region, notably the U.S., Japan and Australia, might expose the country to unnecessary security risks from potential aggressors.

 

Environmentalists are particularly concerned about Pax Silica’s likely impact on the eco-system. foremost among which being the damage to the environment due in part to carbon emission and unsound waste disposal practices.

 

A major reason for concern is the economic and environmental damage resulting from the enormous amount of water required to cool the 1,620-hectare facilities which consist of IT hardware and physical facility systems such as powerful servers, storage systems, networking gear consisting of routers, and switches, and power supply and cooling support systems, all of which need water to operate.

 

Supplying this huge water requirement will drain water away from the millions of farmers and households in Tarlac and adjoining provinces.

 

Technical and Environmental Issues

 

A likely solution is to use sea water instead. Data centers can use sea water for cooling, but this will require extensive and costly system design modifications because the direct use of sea water causes severe damage to equipment

 

The use of sea water for cooling can be made possible by piping in water from either Subic Bay or Manila Bay. However, not only is this option costly, but it may also upset the already delicate ecological balance in the Central Plain of Luzon, the largest lowland area in the country, some parts of which are prone to occasional flooding, and others, including New Clark City , suffering from extended dry weather periods during the year. Water can also be piped in from the Candaba Swamps during the rainy parts of the year.

 

Fortunately, there are a number of feasible solutions to choose from.

 

To my mind, one viable option is to pipe in water to Clark from where it is in abundance, such as Subic Bay, or from Candaba swamps and surrounding areas including Metro Manila and portions of Bulacan and Pampanga where rainwater accumulates during the long rainy months. This can be done by installing powerful pumps to pipe water from low to high elevated areas where water can be stored, such as Lake Pinatubo , and from where water can be released gradually to users in the immediate vicinity. This can be done by a process called siphoning by which water flows down from higher to lower elevations, where the pull of gravity is greater.

 

Impact on Income and Wealth distribution

 

Finally, there is a strong likelihood that Pax Silica will adversely affect the distribution of income and wealth in the region. Investors in the project and their highly paid managerial and technical staffs are bound to enjoy substantial financial rewards from it, while unskilled manual workers could be displaced by workers with advanced technical skills (or by self-operating equipment). These developments will most likely worsen the existing unemployment problem in the region.

 

Regrettably, the government cannot be reasonably relied upon to address this issue for the reason that the interests of corrupt government officials and rapacious corporate heads coincide. The unfortunate losers are farmers, manual workers and small businesses.

 

Additionally, the project will add to the financial burdens of thousands of farmers, households, and small businesses in the region. in the form of higher cost of water and electricity

 

This situation is patently unsustainable and needs a strong government (such as that of Singapore, or Vietnam) to enforce feasible solutions. Unfortunately, ours is among the weakest governments in the world!

 

Civil society, enlightened business leaders and concerned citizens should assume the responsibility given up by the state, take up the cudgels for the hapless citizens, and take a firm stand on the issue.

 

A Final Word of Caution

 

All the above arguments for and against Pax Silica are already water under the bridge, and we now face an impending danger of global proportions.

 

Current discussions among knowledgeable people in academe, business and media center on the possibility that the phenomenal build up in AI may turn out to be a house of cards, to use a popular expression.

 

In his daily essay of July 23, 2026 entitled “The Crash of 2026,” Robert Reich lists a number of early warning signs. He notes, for example, that enormous AI infrastructure spending such as the planned investment in Pax Silica is driving stock prices sky high and any minor sign of panic is bound to trigger a resounding market crash all over the world.

 

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or MAP. The author is a member of the MAP Shared Prosperity Committee and Retired Professor of Economics and Management at UP Diliman. Feedback at <map@map.org.ph> and <nspoblador@gmail.com>).