Policy State of Play: Artificial Intelligence in Southeast Asia

Artificial Intelligence (AI) is projected to generate considerable economic and social value in Southeast Asia. By 2030, AI adoption could improve the region’s total gross domestic product (GDP) by between 13 and 18 percent, a value nearing US$1 trillion.^[1] Buoyed by a burgeoning digital economy and a young, tech-savvy demographic, AI can play a major role in the region’s next phase of industrial development, from energy systems to warehouse management as well as facilitating positive social outcomes such as financial inclusion and improved public services.^[2] Careful but decisive policy choice will be essential to ensuring Southeast Asian countries leverage AI’s potential.

Read the full report here.

Southeast Asia is still in the early stages of AI adoption and market maturity varies greatly. Singapore is a clear standout in overall AI readiness^[3] and investment^[4] while the rest of the region still lags behind more advanced countries by two to three years.^[5] For example, there is a stark divide in AI venture capital investment: around 75 percent of total AI venture capital investment in the region is concentrated in Singapore (US$8.4 billion) — significantly surpassing other large ASEAN economies such as Indonesia (US$1.9 billion) and Vietnam (US$95 million).^[6] Measuring AI investment per capita, Southeast Asian countries receive less than $1 per capita, except for Singapore at $68; by comparison the US receives US$155 per capita and Canada US$34.^[7]

The key to realizing AI’s trillion-dollar potential in Southeast Asia lies in creating the right environment for investment, technology development and widespread adoption throughout industry, business and society. This can only be achieved through careful but decisive policy choices. Policymakers must wrestle with a range of challenges: how to mitigate risks and ensure AI is safe, how to create a conducive environment for adoption, and how to leverage AI for national priorities across national security, economic growth or public services. These challenges are compounded by adjacent policy issues around the use of national and personal data and access to AI infrastructure, in addition to fears around job displacement and the impact of the high energy demand.

Most countries in the region have taken initial steps in AI policy development with the publication of a national AI policy or strategy, in addition to guidelines for the use of AI in specific sectors. At the regional level, ASEAN has published a Guide on AI Governance and Ethics and is discussing policies around generative AI.^[8]

Although some governments have approached regulation – including Thailand and Malaysia – no market has yet issued binding rules on AI. This reflects concerns in the region that over-regulation could stifle adoption and innovation. Instead, governments have mainly prioritised boosting AI investment and capabilities, especially skills and training.

As such, the region overall has a more ‘hands-off’ approach to AI, especially in comparison to the pro-regulation approach of the EU – with its AI Act – and even in the context of multilateral discussions through the Global AI Summit series. Notably, there is less need for immediate high-level governance policy given the lack of foundation models based in the region. Though this will inevitably change.

While there is significant diversity across the region, there are core themes emerging, especially among the five to six leading digital economies.

Key takeaways: AI policy-making progress in ASEAN

All of the six ASEAN economies studied have national AI strategy and upskilling initiatives. Only Singapore and Indonesia have guidelines on AI, though there have been discussions in Malaysia. Five countries – Malaysia, Vietnam, Thailand, Indonesia, and the Philippines – have held discussions on legislation; no countries have implemented binding regulations.

Key Themes in Southeast Asia

1. Wait-and-see, hands-off approach

Eager to respond to AI’s economic potential but concerned about over-regulating and disincentivizing industry development, Southeast Asian governments have generally taken a hands-off approach to regulating AI. While leading digital economies in the region have published a national AI strategy or roadmap, none have issued binding regulations on AI use and development, though some – including Malaysia and Thailand – have considered it, and others are still considering options. In the meantime, many markets are sensibly making use of their comprehensive lawbooks on digital regulation in areas such as online safety and data. 

2. Limited international engagement

Except for Singapore, Southeast Asia’s engagement in global discussions regarding AI policy and regulation has been limited. Indonesia and the Philippines joined the first Global AI Summit in 2023 and endorsed the outcomes, but there has been limited follow-up. Some governments including Thailand and Vietnam have acknowledged the role of global standards through international bodies such as the ISO. However, in terms of international engagement, other issues such as cross-border e-commerce and payments remain a more tangible priority. It is important that the region remains engaged to avoid being a rule-taker. 

3. National political concerns will influence AI policy development

Southeast Asian countries are fully aware of the economic and development benefits that the AI revolution can potentially bring to their citizens and economy, including growth, upskilling, and industry competitiveness. However, AI’s status as an emerging technology with no overarching regulatory framework has sparked nationally-focused concerns. In the Philippines, there are concerns around labor displacement given the significant offshoring industry. In other markets – especially those with more stringent online content regimes – there are concerns around the impact of AI on scams, fraud, misinformation, and disinformation, and the impact on political stakeholders and broader social harmony.

4. Lack of government capacity

Regulators and policymakers responsible for drafting AI policy in Southeast Asia face the challenges of developing policy for a cutting-edge technology and are hindered by a lack of technical understanding and capacity. Thailand’s attempt to draft AI laws in 2022, for example, was reportedly put aside partly due to issues of technical capacity. While upskilling programs in AI are growing in places like Singapore and Malaysia to court AI talent and investment in the private sector, further developments in AI regulations and policymaking must be accompanied by enhanced capacity building for government officials.

5. Ambition and recognition of the importance of adoption

Singapore has placed tech at the centre of its economic strategy, especially its position as a regional hub. Malaysia too has ambitions to be a top 20 global AI player, while other economies clearly recognize the importance of AI. While countries in the region may not have engaged in global discussions on AI safety, the focus has been on adoption and skills, which will have the greatest impact in any case.

References (full bibliography included in report) Download Report Here

^[1] Kearney research

² McKinsey research

³ Campaign Asia

⁴ Kearney research

⁵ Ibid. Refers to investments in AI solution provider.

⁶ OECD

⁷ Ibid.

⁸ ASEAN