Foreign Direct Investment Multiplier Effects and Economic Impact Assessment of Multilateral AI Infrastructure Investment: A Case Study of Pax Silica, Philippines
Year: 2026
Type: article
Abstract: The race to control the physical infrastructure behind artificial intelligence has pushed governments worldwide into the most aggressive wave of industrial policy in decades. This dissertation offers the first methodologically transparent economic impact assessment of Pax Silica—a United States-led coalition of 23 nations established in December 2025 to secure global supply chains for AI hardware, semiconductors, and critical minerals. At the heart of the coalition's ambition is a 1,620-hectare Economic Security Zone in New Clark City, Capas, Tarlac, Philippines, managed by the Bases Conversion and Development Authority, with an estimated investment commitment on the order of US$10 billion. The study asks a deceptively simple question: can a multilateral coalition channel foreign direct investment into a middle-income economy and generate lasting economic value, or will the returns fall short of the political promises that launched the project? To answer that question, the study integrates four analytical methods designed to triangulate rather than duplicate. A Leontief input–output model, calibrated to Philippine Statistics Authority production data, measures the direct, indirect, and induced effects of the investment across the domestic economy. A structural gravity model, estimated using Poisson pseudo-maximum likelihood (PPML), tests whether coalition membership redirects existing investment flows or creates genuinely new ones. A structured comparative case study benchmarks the project against four internationally recognized precedents—Shenzhen, TSMC Arizona, Intel Ohio, and Samsung Taylor—to ground the projections in observed outcomes elsewhere. And a scenario-based fiscal model, discounted over a 15-year horizon, evaluates whether the public revenue generated by the zone justifies the incentives extended to attract it. The findings tell a nuanced story. The semiconductor sector's Type I output multiplier of 1.737 exceeds the Philippine economy-wide average by 18 percent, confirming that advanced manufacturing does generate above-average ripple effects—but roughly half of each additional peso of activity leaks abroad through imported inputs, a sobering reminder that multiplier magnitude, while real, is bounded by the structure of domestic supply chains. The gravity estimates produced a genuinely counterintuitive result: the coalition coefficient is negative and significant (β = −0.876 to −1.109 across specifications), indicating that member states have historically underinvested in the Philippines relative to what their economic mass and institutional quality would predict. Rather than diverting capital that would have arrived anyway, Pax Silica appears to be creating investment that gravity fundamentals alone could not have delivered—a finding that materially strengthens the additionality case for the coalition. The fiscal model returns a positive central-scenario net present value of PHP 74.2 billion (approximately US$1.31 billion), with break-even projected by Year 6, though the returns are heavily back-loaded and modest relative to the headline commitment. Comparative analysis places the project's projected capital intensity at roughly US$53,000 per job—a figure that stands in sharp relief against the US$8.5–10.8 million per job observed at U.S. fabrication megaprojects, a contrast rooted in the difference between a single-purpose fabrication plant and a diversified zone ecosystem. Beyond its empirical contributions, the study advances theory in three directions: a coalition-augmented extension of Dunning's eclectic paradigm that accounts for multilateral investment architectures, a multilateral specification of the FDI gravity model, and a replicable, publicly sourced analytical framework for evaluating plurilateral technology-infrastructure investment. Taken together, these contributions offer scholars and policymakers a disciplined foundation for judging whether strategic industrial coalitions deliver on their economic promise—or merely repackage ambition as arithmetic.
Author: Pokorny, Laszlo
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7203713038
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