Pax Silica and the Philippine Economic Transition: A Dynamic Recursive CGE Assessment of Infrastructure-Led Development Amid Geopolitical Realignment

This study presents a dynamic recursive Computable General Equilibrium (CGE) analysis of the Pax Silica Initiative—a US-led multilateral economic security framework established in December 2025 to strengthen semiconductor manufacturing, artificial intelligence technologies, critical minerals supply chains, and secure data ecosystems. The Philippines formally joined the initiative in April 2026, designating a 1,620-hectare AI-native industrial and manufacturing enclave within New Clark City, Tarlac. Using a ten-year recursive dynamic CGE model calibrated with Philippine-specific data from the Philippine Statistics Authority (PSA), Bangko Sentral ng Pilipinas (BSP), Department of Energy (DOE), Mines and Geosciences Bureau (MGB), and the United Nations Development Program (UNDP), this study simulates three distinct phases of economic adjustment: (1) Construction & Investment Inflow Shock (2026–2028), (2) Resource & Supply Squeeze (2029–2032), and (3) Geopolitical Shock & Steady State (2033–2035). The model incorporates sectoral capital accumulation, nested CES production functions with energy and water constraints, household income distribution across ten deciles, and Human Development Index (HDI) components. Results indicate that while GDP expands from $494.2 billion to approximately $580 billion during the construction phase, the subsequent resource squeeze induces significant polarization: the Gini coefficient rises from 0.44 to 0.49, water stress escalates from 28.5% to 35.6%, and CO₂ emissions increase from 140 to 180 million tons. However, HDI improves modestly from 0.720 to 0.758, driven primarily by income gains. Policy simulations reveal that fiscal recycling (Scenario A) reduces inequality to 0.46, renewable energy mandates (Scenario B) limit emissions to 150 million tons, and water tariffs with recycling (Scenario C) contain water stress at 30.2%. The study concludes that without targeted policy interventions, Pax Silica risks exacerbating structural inequalities and environmental degradation despite delivering aggregate growth nevertheless, to address the CGE simulation's findings of concerning outcomes, and the study further recommends operationalizing Roxas's area economics through community-anchored economic zones and institutionalizing Ostrom's polycentric governance for common-pool resource management to ensure inclusive and sustainable development outcomes.

Computable General Equilibrium; Pax Silica; Philippines; Infrastructure Investment; Dutch Disease; Human Development Index; Energy Transition; Water Security; Industrial Policy

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