Philippine economy

Inside the planned Luzon economic corridor: Freight trains, green energy, factories

Ralf Rivas

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Inside the planned Luzon economic corridor: Freight trains, green energy, factories

ECONOMIC FORUM. The Indo-Pacific Business Forum on May 21, 2024.


(1st UPDATE) The Philippines is banking on investments from the US and Japan to build the railway China abandoned, and encourage chip makers to set up shop here

MANILA, Philippines – The US and Japan will help the Philippines link the ports in Subic, Manila, and Batangas and build an industrial area free of slow traffic and powered by renewable energy, positioned to rival the capital in economic output.

The steering committee tasked to build the Luzon Economic Corridor met in Manila on Monday, May 22, in the inaugural Indo-Pacific Business Forum. 

The committee is comprised  of: 

  • Frederick Go, Special Assistant to the President for Investment and Economic Affairs 
  • Amos Hochstein, US Senior Advisor to the President for Energy and Investment 
  • Helaina Matza, US Acting Special Coordinator for Partnership for Global Infrastructure Investment 
  • Ishizuki Hideo, Japan Ministry of Foreign Affairs Director-General for International Cooperation 

The Luzon Economic Corridor is a pet project of the G7 Partnership for Global Infrastructure and Investment (PGI), which is a collaborative effort of G7-member nations to fund infrastructure projects in developing nations. The Luzon Economic Corridor is the first in the Indo-Pacific region.

Details of what projects will comprise the corridor are still under discussion, but the Philippines has already pitched the freight railway that will link Subic Bay, Clark, Manila, and Batangas. Recall that China was supposed to fund the P51-billion Subic railway, but it was scrapped amid political tensions between the Philippines and Beijing. 

What’s an ‘economic corridor’ anyway?

Economic corridors are more than infrastructure.

Hochstein explained that economic corridor projects of the US involve coordinated investments in high-impact infrastructure projects, as well as incentives for the private sector.

“The idea is not to invest in a narrow fashion, but to grow the aperture, expand it, looking at how you get investment into multi-sectors,” Hochstein said.

PARTNERSHIP. Amos Hochstein, US Senior Advisor to the President for Energy and Investment. Photo by Ralf Rivas/Rappler 

The US’ first corridor project was Lobito, Africa, which connected Angola to Congo and Zambia. Its goal was to unlock the natural resources and investments in landlocked countries to the global economy by going to a coastal country.

“The role of government is not to make the investment, that’s not what we wanna do. You have to look at how you spend government dollars in the most efficient way possible to spur growth in investment in sectors we believe are the most attractive,” he added.

The Philippines has proposed the Subic-Clark railway, as well as the expansion of the Clark International Airport, and the Clark National Food Hub for the said corridor.

Hideo said the economic corridor aims to reduce costs of goods and services through efficient transport infrastructure.

Why Luzon?

Go said Luzon was chosen as the area for the economic corridor as it houses the most active ports in the Philippines. The ports of Clark, Manila, and Batangas already comprise 80% of all port traffic nationwide.

Subic, a former military base, is also where a shipyard, formerly controlled by Korean firm Hanjin before it declared bankruptcy, is also located.

American investment firm Cerberus Capital Management was its white knight, renaming it to Agila Subic shipyard. Just recently, its subsidiary inked a deal with global shipbuilder HD Hyundai for a lease agreement.

President Ferdinand Marcos Jr. hopes the deal will “restore the glory days of shipbuilding” in the country. Go said the area will be the “largest single dry dock space in the world.”

Clark is also home to many semiconductor companies, as well as those involved in making aircraft and automotive parts, IT services, and cold storage facilities. Go hopes to entice pharmaceutical companies to locate there through the planned infrastructure projects.

Go emphasized that Clark Global City is also located there. With around 10,000 hectares of land, it aims to be the new business center and could be the better choice other than Metro Manila.

The Clark Freeport Zone also has 18 hotels, making it an enticing tourist destination and convention site.

Who’s funding what?

Funding details are still under wraps, but Philippine Trade Secretary Alfredo Pascual said that the US Trade and Development Agency could provide grants to the Philippines for the feasibility study. 

Meanwhile, Hochstein declined to give specific figures, but noted that other multilateral agencies can support studies on a “piece by piece” basis.

The Philippine government earlier said it expects to generate as much as $100 billion in investments from the project from Japan and the US over the next decade.

The US-China angle

Talks of creating the Luzon Economic Corridor comes amid escalated tensions over the West Philippine Sea.

The US-China trade wars have also continued to escalate amid Russia’s invasion of Ukraine, as well as tensions between Beijing and Taiwan.

US President Joe Biden has been making sweeping efforts to slow down China’s technological capabilities.

The US Commerce Department issued a broad set of prohibitions on exports to China of semiconductors and other tech amid military tensions and the boom of artificial intelligence.

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This export ban, alongside incentives for US chip makers to relocate to countries that it deemed friendlier, has been viewed as Biden’s clear strategy of capping China’s potential in various technological developments, including surveillance and military capabilities.

The Philippines is one of seven countries that the US has identified as partners to diversify its semiconductor supply chain amid these sanctions against China.

The corridor also has geopolitical and security aspects. The shipyard’s takeover by an American firm, for instance, was once described by former finance secretary Carlos Dominguez III as an “ideal harbor for [the Philippine Navy’s] rapidly expanding fleet facing the West Philippine Sea.”

“The Philippines is a fast-growing economy, a very capable country with a workforce that is dynamic and capable and educated, and has a history with the United States of both on the security side and the economic side.  We have multiple American companies that are already here. So we wanted to invest in the Philippines because it’s a friend and a partner and an ally,” Hochstein said. –

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.