In the first half of 2024, Southeast Asia (SEA) attracted over US$30 billion (1 trillion baht) in artificial intelligence (AI) infrastructure investments, according to the 2024 e-Conomy SEA Report from Google, Temasek, and Bain & Company.
Our paper "One Asean Startup White Paper" also highlights over $50 billion invested in AI by tech giants, including Microsoft, Google, and Amazon, since January 2023.
The influx of investments reflects the growing recognition of Southeast Asia as a burgeoning hub for AI innovation -- a shift that could drive the region's economy forward. The Association of Southeast Asian Nations (Asean) has projected that AI could boost the region's gross domestic product by 10% to 18%, potentially adding $1 trillion by 2030.
While these developments and the region's growing interest in AI present promising opportunities, significant challenges remain. What steps must Southeast Asia take to fully harness AI's potential and position itself as the next frontier for AI?
Private-Sector Push
Having acknowledged AI's importance, some Southeast Asian governments have formulated national strategies, such as Indonesia's National Strategy for AI and Singapore's NAIS 2.0, to integrate the tech across various sectors. Singapore has also invested $70 million to develop models tailored to regional cultures, among other efforts.
At the regional level, Asean has launched initiatives such as the Asean Guideline on AI Governance and Ethics and established the Asean Working Group on AI (WG-AI) to promote collaborative efforts and ethical AI use across its member states.
Furthermore, the Digital Economy Framework Agreement (Defa) is also expected to help synergise cross-border data regulations in the region, potentially leading to more reliable and accurate AI systems.
Beyond government initiatives, the private sector has been driving AI adoption. A report titled "2024 e-Conomy SEA" -- prepared by Google, notes that 54% of generative AI projects advance from idea to production within six months, and 71% yield Return on Investment (ROI) within 12 months. With an impressive short turnaround, regional tech majors such as Gojek, Grab, and Lazada leverage AI in their business operations.
Obstacles to Overcome
Despite the strong AI investment and adoption in SEA, significant challenges remain. Mentioned reports by our organisation and those of Google highlight digital talent scarcity as a key challenge, as 61% of Asean youth aged 10 to 24 were not taught formal digital education in school. This further exacerbates the digital divide and limits regional competitiveness in attracting AI investment.
Furthermore, differing scores in AI preparedness amongst SEA countries -- with only Singapore, Malaysia, and Thailand scoring above the Asia-Pacific average -- create barriers to cross-border growth and lead to regulatory inconsistencies, particularly in data governance and cybersecurity.
While AI offers immense benefits, it also presents challenges that could threaten the region's energy transition and sustainability goals. For instance, the surge of data centre investments, fuelled by AI development, could strain the region's resources and undermine efforts to reduce energy intensity by 32% by 2025.
To truly capitalise on AI's transformative power and establish Southeast Asia as the next frontier in the field of AI, a unified and strategic approach is essential.
1. Fostering talent growth in Southeast Asia requires a sustained, long-term commitment to educational investment and collaboration between Southeast Asian nations and the private sector. Increasing education funding is crucial, as Asean countries -- aside from Singapore -- lag in both the latest PISA rankings and the availability of leading global universities that cater towards AI training, research, and industry-academia collaboration, all of which are vital for developing a more inclusive and competitive AI ecosystem.
Additionally, expanding vocational programmes in IT is necessary to bolster practical skills in the field and meet the demands of the digital economy. Regional cooperation should also prioritise talent mobility and retention strategies, including initiatives such as digital nomad visas, to attract global talent and promote knowledge exchange.
Public-private partnerships for reskilling and upskilling must be expanded, drawing inspiration from successful examples such as SEA Bridge's and Amazon Web Services' initiatives mentioned at the ERIA Asean Startup Roundtable.
Furthermore, upcoming programmes such as AI-Ready Asean, spearheaded by the Asean Foundation in partnership with Google, should receive strong support to enhance AI skills throughout the region.
2. Advancing the digital infrastructure through sustainable and safe data management. This requires investing strategically in cybersecurity infrastructure, raising data awareness, and promoting intra-regional data sharing. Furthermore, data centres should implement sustainable data centre practices, as outlined in the Asean-Huawei white paper, to reduce their environmental footprint and support energy-efficient operations, aligning with Asean's sustainable energy goals while still meeting the demand of the growing digital economy.
3. Strengthening Southeast Asia's AI ecosystem through Asean-led initiatives. As mentioned previously, the launch of the Asean Guide on AI Governance and Ethics and the establishment of the Asean WG-AI provide a foundational ethical framework to harmonise AI policies for its member states. Asean should also further advocate for more collaborative investments in infrastructure, data governance, and public engagement to equip the workforce with essential AI skills, as highlighted during the Asean Ministerial Meeting on Science, Technology, and Innovation on June 7.
Ongoing partnerships with allies, such as China, Japan, South Korea, the US, and the EU, can provide expertise, capacity-building and talent development opportunities, and avenues to tackle shared challenges.
Southeast Asia can unlock AI's full potential with a unified strategic approach and a commitment to responsible innovation. By investing in proper digital infrastructure, nurturing local talent, and harmonising AI policy initiatives through Asean-led efforts, the region can create a resilient, inclusive, and ethically grounded AI ecosystem.
With this approach, the region can solidify its position as the next frontier in AI, driving sustainable development and improving the lives of millions.
Satria Mahesya Muhammad is Assistant, Research Activities, Economic Research Institute for Asean and East Asia (Eria), a Jakarta-based think-tank supporting regional initiatives for sustainable growth and quality of life for the people in Asean and East Asia.