Manila, Philippines – 02.28.2022: The busy international container port of Manila, Philippines.
Ports, factories, and supply chains can be built with capital, but they succeed or fail on governance.
In the first installment of this series, I described economic freedoms as resting on three pillars: fair competition, rule of law, and civic voice. A recent trip to the Philippines showed me all three at work, and what happens when the foundations slip.
The trip focused on two initiatives: the Luzon Economic Corridor (LEC) and Pax Silica. The LEC, launched in 2024, aims to strengthen connectivity among Subic Bay, Clark, Manila, and Batangas, a corridor that generates roughly half of Philippine GDP. What began as a partnership among the United States, Japan, and the Philippines has since expanded to include eight additional countries.
Pax Silica is a U.S.-led effort to secure supply chains for critical minerals, semiconductors, and AI-related technologies. In the Philippines, the initiative centers on a proposed 1,600-hectare economic security hub in New Clark. Both initiatives exist to draw in constructive capital before Corrosive Capital® fills the vacuum. In the first installment, I described how weak economic freedoms distort China’s own economy. Its outbound investment exports those distortions, infecting others.
Yet, in the Philippines, the ultimate success or failure of LEC and Pax Silica will depend on the Philippines own economic freedoms, not Chinese influence. Are the rule of law, civic voice, and fair competition sufficiently robust in the Philippines to realize the vision of these initiatives?
Three lessons from my visit:
Lesson 1: Rule of Law and Ghost Projects
The Philippines continues to face significant public-accountability challenges. The Atlantic Council’s Freedom and Prosperity Indexes rank it 88th of 171 countries on freedom.3 Sub-indices on rule of law issues such as bureaucracy/corruption and clarity of the law are especially low.
In the headlines, the problem has a recent incarnation: “ghost projects.” No one yet knows how much money was lost, and that’s the point. Verifying whether a flood control project existed required physical inspection because records alone could not settle the question. Of 421 projects initially tagged as possible ghost projects, the Department of Justice had confirmed 14 as non-existent as of January 2026. Authorities said discrepancies in recorded coordinates and actual project locations were complicating verification of the remaining projects. 4
How do projects disappear? Not for want of rules. The Philippine Government Procurement Act of 2024 is built explicitly on transparency, competitiveness, and open contracting.5 Projects are vulnerable to diversion not just because enforcement is weak, but because the broader accountability framework is incomplete. Effective oversight requires supporting measures such as robust freedom of information laws, mandatory asset disclosures, and transparency around beneficial ownership. CIPE partners have worked this ground for years. The People’s Freedom of Information Act finally cleared the Senate in May 2026, more than three decades after the first such bill was filed. The measure still requires bicameral action before it can become law.6
The lesson for the corridor is clear: without accountability, major infrastructure projects are vulnerable. Strengthening the rule of law helps safeguard the investment.
Lesson 2: Civic Voice and Policy Continuity
Trade is core to business in the Philippines, accounting for roughly 67% of Philippine GDP in 2025. The corridor’s payoff depends on the country’s ability to move goods.7 In Manila, I met business associations working on trade facilitation who described technically excellent reform roadmaps and real progress, then explained that the work had stalled. The government changed, and good plans went into a drawer.
Active civic voice should prevent this. Business associations exist, in part, to remind successive governments of commitments that outlast them, especially on issues that are not politically contested. That has proven harder than it should be.
During my visit, the concern surfaced repeatedly around the May 2028 elections. The concerns came in two parts. First, a future administration may reassess initiatives perceived as aligned with strategic competition involving China. Second, political transitions could weaken policy continuity or alter implementation priorities. The first concern may be beyond the business community’s reach. The second is squarely within it, if the local private sector makes the corridor a business priority rather than a political slogan.
Lesson 3: Rule of Law, Imported
Now the good news: history shows the Philippines can deliver infrastructure, ghost projects notwithstanding. We can learn from the successes.
A preliminary scan of 25 foreign-financed infrastructure projects by CIPE’s Philippine partner finds wide variation in transparency. Using a methodology similar to prior CIPE research, the study assesses projects financed by the World Bank, ADB, and other donors, suggesting transparency practices differ significantly across funders and projects.
While validation is ongoing, early findings show a pattern of strong disclosure during project design, procurement, and closeout, but a sharp drop during implementation. Most projects do not disclose contract changes, cost and scope revisions, or the reasons behind them. These gaps are where cost overruns and hidden risks tend to emerge.
LEC and Pax Silica should not invent a governance model. They should copy the arrangements used by the projects already scoring 90% and require disclosure through implementation, not just at groundbreakings and ribbon cuttings.
Concluding Thoughts
The highlight of my trip was the Aquino Center and Museum in Tarlac, which tells the story of Senator Benigno “Ninoy” Aquino Jr. Ninoy defied the Marcos regime, spoke the truth the country needed to hear, and was shot dead on the tarmac at Manila International Airport in August 1983. The airport now carries his name. His death did not end the dictatorship – it moved millions of Filipinos to end it themselves, the business community among them.
The spirit of People Power can move the Philippines ahead again. Not with a revolution this time, but through sustained civic pressure. The business community can play an important role in this new movement through calls for transparency, accountability, and policy continuity.
Paul Pleva is senior director for Strategy and Impact at the Center for International Private Enterprise, where he leads CIPE’s work on economic freedoms. He began his career at the Millennium Challenge Corporation and then served as a Foreign Service economist and senior official at the U.S. Agency for International Development, including in USAID’s Office of the Chief Economist. He has lived and worked across Africa, Asia, and the Middle East addressing economic growth, infrastructure, finance, and business-enabling reforms. He brings over two decades of experience linking policy analysis to field implementation.
Sources
- Luzon Economic Corridor expansion and corridor description: Luzon Economic Corridor Expands Partnership to Accelerate Investment and Regional Prosperity, U.S. Embassy in the Philippines, May 12, 2026. Corridor share of GDP: Luzon Economic Corridor Fact Sheet.
- Pax Silica overview: Pax Silica, U.S. Department of State. New Clark City hub: S. and Philippines Plan the Launch of Historic 4,000 Acre Economic Security Zone to Shore Up Supply Chains, U.S. Department of State, April 16, 2026.
- Freedom and Prosperity rankings and the 2026 Atlas chapter on the Philippines by Cesi Cruz: Freedom and Prosperity Indexes, Atlantic Council; Atlas Philippines 2026 summary, Atlantic Council Freedom and Prosperity Center.
- Flood control project totals and contractor concentration: Five Reveals from the Flood-Control Data, Philippine Center for Investigative Journalism, August 31, 2025. Confirmed ghost projects: DOJ confirms 14 flood control ‘ghost’ projects, Philippine News Agency, January 19, 2026.
- Procurement principles: Republic Act No. 12009, the New Government Procurement Act, July 20, 2024.
- Executive order covering only the executive branch: Executive Order No. 2 (2016). Senate passage of the FOI bill: Senate passes FOI bill anew; House backing urged, Philippine News Agency, May 4, 2026.
- Trade as a share of GDP: Trade (percent of GDP), Philippines, World Bank.
Published Date: September 24, 2026