Building the foundations for an AI-ready Philippines

The Philippines has placed a bold bet on artificial intelligence (AI), with the planned AI industrial hub in New Clark City in Tarlac province under the United States (US)-led Pax Silica initiative envisioned as a gateway to higher-value manufacturing, semiconductor production, and the global AI supply chain.

The potential gains are substantial. State-run Bases Conversion and Development Authority (BCDA) estimates that the 1,619-hectare (ha) hub could generate as much as $200 billion in additional exports once fully developed over 30 years, alongside hundreds of thousands of direct and indirect jobs. The first phase, covering about 500 ha, is targeted to begin development in 2028.

Yet amid the debate over whether Pax Silica will ultimately benefit the country, a more immediate question deserves government attention: Are the Philippines’ basic foundations ready to support an AI-driven economy and convince investors to put their money here?

Two recent Manila Bulletin reports suggest that much work remains to be done. The warnings are especially timely as the government moves from promoting the project’s promise toward laying the concrete foundations needed to deliver it.

The Washington-based World Bank warned that weak and fragmented data systems could hold back the country’s AI ambitions. It found gaps in data infrastructure, governance, and institutional arrangements, alongside shortcomings in broadband connectivity, data center capacity, and cloud adoption.

Telecommunications infrastructure investment as a share of gross domestic product (GDP) even declined to 0.39 percent in 2024 from 0.64 percent in 2018.

The Bangkok-based United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), meanwhile, classified the Philippines among the region’s “emerging performers” in digital transformation. Its latest assessment highlighted affordability and governance gaps as economies prepare for AI-native infrastructure, where connectivity, computing, and intelligence increasingly operate as an integrated system.

These findings should not be viewed as arguments against Pax Silica. On the contrary, they provide the government with a practical checklist of what must be fixed if the project—and the broader Philippine AI strategy—is to succeed.

Investors considering advanced manufacturing, semiconductors, data centers, and other AI-related operations will look beyond incentives, available land, and ambitious projections. They will require reliable and competitively priced electricity, high-speed connectivity, sufficient computing capacity, secure and interoperable data systems, skilled workers, and clear, predictable regulations.

New Clark City itself is already preparing some of these requirements, including a dedicated power connection. But an AI hub cannot prosper as an isolated island of world-class infrastructure surrounded by broader national weaknesses. The benefits of Pax Silica should extend beyond Tarlac by strengthening the digital ecosystem that Filipino businesses, workers, and communities use nationwide.

The government should therefore treat the World Bank and UNESCAP findings as an urgent reform agenda. Agencies must accelerate investments in broadband and digital infrastructure, improve data collection and interoperability, strengthen cybersecurity, establish clearer data governance and AI rules, and coordinate policies that are now spread across multiple institutions. Equally important is ensuring affordable and dependable power, without which even the most sophisticated digital infrastructure cannot compete.

Pax Silica offers the Philippines a rare opportunity to move higher in global technology value chains. But attracting investors requires more than announcing an AI hub or setting impressive targets. The country must demonstrate that the foundations beneath those ambitions are equally strong.

The government has time before the first phase of development begins. It should use that window wisely. If the Philippines wants to become an AI investment destination, it must first build an economy that is genuinely ready to host, support, and sustain AI.