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Last April 2023, the leaders of the Philippines, Japan, and the US introduced the Luzon Economic Corridor (LEC) project. This groundbreaking initiative has the potential to inject US$100 billion into the Philippine economy over the next decade.
The LEC will feature these initial projects:
- $868-million Subic-Clark railway, linking the Subic Bay Freeport Zone with the Clark Freeport and Special Economic Zone in Central Luzon
- $174-million development of a second runway and additional critical infrastructure at Clark International Airport
- $152-million Clark National Food Hub covering 64 hectares will aim to enhance the local agricultural industry.
The LEC is the first project in the Indo-Pacific under the US-led G7 Partnership for Global Infrastructure and Investment (PGI). This initiative represents a collaborative effort by G7 member countries (Canada, France, Germany, Italy, Japan, UK and US) to fund and support infrastructure developments in the region.
The Luzon Corridor includes major ports— and economic zones like Subic and Clark, which were former U.S. military bases before being converted into commercial areas. The summit document highlighted that the LEC hopes to speed up coordinated investments in significant infrastructure projects like rail systems, telecommunications networks, and port upgrades.
Economic corridors explained
Though the focus of LEC is infrastructure, economic corridors go beyond buildings and facilities. These are regions where efforts are focused on enhancing economic growth and infrastructure to stimulate commerce, investments, and other market activities. Such corridors are usually linked to principal cities, ports, industrial hubs, and other significant economic zones. The objective is to foster economic expansion by enhancing transportation, communication, and other critical infrastructure.
Key components of economic corridors include:
- Infrastructure development
- industrial & commercial hubs
- Trade facilitation
- Urban development
- Regional integration
More about LEC
A month after the project’s initial announcement, an Indo-Pacific Business Forum was held in Manila. Here, the Philippine government outlined other priority projects for the LEC, which involve electronics and semiconductors, food production and storage, and renewable energy sourcing. These initiatives offer funding and growth opportunities along the corridor, linking Luzon’s major economic centers of Subic Bay, Clark, Manila, and Batangas.
Business leaders from the three countries formed a tripartite steering committee, which will monitor the economic corridor’s progress. US President for Energy and Investment Amos Hochstein pointed out that the establishment of a local office for the US International Development Finance Corp. serves as strong evidence of the American government’s commitment to the ambitious project.
Director-General of the International Cooperation Bureau in Japan Hideo Ishizuki emphasized his country’s commitment to advancing the project, having shown their continuous support for the region through JICA (Japan International Cooperation Agency).
Meanwhile, President Ferdinand Marcos Jr. expressed his goal to ensure business operational stability and establish the Philippines as a key center for agribusiness and logistics in the Asia-Pacific region. The launch of the Luzon Corridor was accompanied by government statements emphasizing the significant economic benefits for the country, including job creation, improved livelihoods, and increased financial opportunities.
Choosing Luzon as the project site
Special Assistant to the President for Investment and Economic Affairs Frederick Go stated that Luzon was selected for the economic corridor because it hosts the Philippines’ most active ports. The ports in Clark, Manila, and Batangas already handle 80% of the country’s total port traffic. Moreover, Luzon offers reliable and secure structural facilities, including power stations, transmission pipelines, and thoroughfares to the wider Filipino population.
President Marcos envisions the agreement to restore the glory days of shipbuilding in the country. Clark, Pampanga will most likely be the site for this industry, hopefully housing, as Go put it, the “largest single dry dock space globally”. Currently, Clark is home to many semiconductor companies, along with businesses that manufacture aircraft and automotive parts, offer IT services, and provide cold storage solutions. The government plans to add pharmaceutical companies to the mix. Additionally, the presence of the 10,000-hectare Clark Global City, makes it possible for the area to emerge as a significant business center, being a preferred location aside from Metro Manila.
Sustainable measures in LEC
Sustainable energy will be a key feature of the LEC, powering industrial and urban areas to reduce carbon emissions and promote cleaner energy usage. Other ways it plans to promote green initiatives are through:
Efficient transportation
Projects like the Subic-Clark Railways target to decongest traffic and lower transportation emissions. This and other transport infrastructure can move goods and people more efficiently, which reduces carbon footprint.
Sustainable industrial development
LEC will host industries that focus on technology, including semiconductor manufacturing companies from the US. These follow the CHIPS Act, which promotes the adoption of cleaner technologies.
Green building standards
New developments within LEC are being encouraged to comply with green building standards, with an emphasis on energy efficiency, waste reduction, and sustainable building materials.
Conclusion
While the G7-nation initiative has undertaken projects in Africa and South Asia, the LECmarks its first significant venture into Southeast Asian infrastructure . The Philippines is among seven nations identified by the US as key partners for broadening its semiconductor supply sources. Additionally, Philippine President Ferdinand Marcos Jr. has pledged to allocate 5 to 6% percent of GDP annually towards infrastructure spending for the remainder of his term.