Why the Pax Silica-backed Luzon AI hub sparked a sovereignty debate in the Philippines

Here is what to know.

What to know about the hub and the Luzon Economic Corridor

The proposed hub will be a 9,450-ha government-developed industrial and smart city built on former US military land in New Clark City, about 100km north of Manila, in the province of Tarlac on Luzon, the Philippines’ largest and most populous island.

Luzon sits at the northern end of the Philippine archipelago, facing the South China Sea to the west and Taiwan to the north, giving it major strategic significance in the Indo-Pacific. Its location is significant:

The Philippines is home to some of the world’s largest nickel reserves, and is positioning itself as a potential processing hub for minerals used in batteries and data centres.

Over 20 companies have recorded their interest in investing, covering sectors such as robotics, electronics manufacturing and renewable energy, the Manila Bulletin reported Monday (May 25).

Luzon Economic Corridor (Source: US Embassy in the Philippines)

The hub is an integral part of the wider Luzon Economic Corridor (LEC), a connectivity project by the Philippines, US and Japan, which was formed in 2024 to invest in transportation, clean energy, semiconductor supply chains and other critical industries. The corridor links key ports, industrial zones and logistics hubs across western Luzon, along some of the Philippines’ busiest maritime trade routes.

The LEC was announced as the outcome of the first-ever trilateral summit among the trio in April 2024, which followed a joint meeting of their national security advisors and a joint naval exercise in 2023. The initiative also comes amid rising tensions in the South China Sea, where the Philippines and China have repeatedly clashed over disputed maritime features and naval activity.

Announced as the first Partnership for Global Infrastructure and Investment (PGI) corridor in the Indo-Pacific, the LEC enhances connectivity between Subic Bay, Clark, Manila, and Batangas. Subic Bay, a former major US naval base northwest of Manila, and Batangas, south of the capital, are among the Philippines’ most important deep-water ports. Clark, meanwhile, hosts a major international airport and logistics hub.

The project is estimated to attract up to $100 billion in investments over the coming years.

In May, the partnership was expanded to include Australia, Canada, Denmark, France, Italy, the Republic of Korea, Sweden, and the United Kingdom. This broadening participation reflects growing Western and allied efforts to build alternative supply chains and infrastructure networks outside China.

The disagreement

According to the WSJ report, the hub would enjoy diplomatic immunity, with protections similar to those afforded to an American embassy, and operate under U.S. common law. In practice, this would mean that the site grants US personnel unprecedented legal safeguards and would be exempt from the jurisdiction of local courts.

If implemented, this would be the first arrangement of its kind worldwide, while the two-year lease could be renewed for 99 years.

However, Joshua Bingcang, president and chief executive of the Bases Conversion and Development Authority (BCDA), refuted the report and said that the Philippines had rejected this proposal. Instead, the hub will be governed by the Special Economic Zone Act, which governs investment incentives and operations in Philippine economic zones, and the BCDA Law, which oversees the conversion of former US military bases into special economic zones.

The clarification is politically sensitive in the Philippines, where the continued American military presence and sovereignty issues remain contentious domestic topics.

What is Pax Silica?

Pax Silica is a US-led initiative that aims to secure the full technology supply chain, from the critical mineral components to advanced manufacturing and data infrastructure.

Overall, it aims to counter China’s dominance in new-age sectors such as critical minerals, which has resulted in a wide gap in the price points of Chinese products and those produced elsewhere. The US has been engaged in a trade war with China, and it aims to decouple due to the widening trade gap.The initiative aligns with a broader US strategy of “friendshoring”, a term used by former US Treasury Secretary Janet Yellen to describe shifting critical supply chains towards allied and partner countries.

According to the US, Pax Silica aims to bring “friendly and trusted” countries together to reduce “coercive dependencies”, protect materials and capabilities “foundational to artificial intelligence”, and “ensure aligned nations can develop and deploy transformative technologies at scale”.

Measures under Pax Silica include pursuing new joint ventures and strategic co-investment opportunities, protecting sensitive technologies and critical infrastructure from undue access or control by countries and building trusted technology ecosystems, including Information and Communication Technology (ICT) systems, fibre-optic cables, data centres, foundational models and applications. India, for instance, has had concerns over China’s involvement in critical infrastructure, such as telecom.

The focus on AI infrastructure, semiconductors and critical minerals also reflects intensifying US-China competition over advanced technologies and digital infrastructure across the Indo-Pacific.