Artificial intelligence (AI) is providing transformative opportunities in the Association of Southeast Asian Nations (ASEAN), with the AI market projected to reach US$8.92 billion by 2025 and $30.30 billion by 2030 to present vast opportunities for the region’s digitally engaged population and offer benefits to key sectors, says a new report.
The policy brief released by the Economic Research Institute for ASEAN and East Asia (ERIA) said AI is estimated to contribute 10% to 18% of ASEAN’s gross domestic product (GDP) by 2030, translating to nearly $1 trillion.
Key sectors poised to benefit from AI adoption include manufacturing, where AI enhances efficiency through automation and predictive maintenance; retail and health care, where it enables personalized recommendations and diagnostics; and agriculture, where it optimizes crop yields and reduces food waste.
Beyond economic benefits, AI is transforming public services. With ASEAN’s urban population set to grow from 280 million to 370 million individuals by 2030, AI-driven smart cities can improve traffic and urban planning. AI can also facilitate personalized learning in education and enhance health care accessibility and diagnostics.
In addition, AI is crucial in energy management and sustainability. As ASEAN’s energy demand rises, AI-powered smart grids help balance supply and demand and integrate renewable energy sources. These innovations enhance energy efficiency and support sustainability goals.
However, the report found that AI integration also highlights challenges, including governance gaps, disparities in AI readiness among member states, data governance issues, and sustainability concerns.
To leverage AI opportunities, the ERIA report highlighted the importance of having explicit AI strategies, noting that currently only six AMS have them, while others rely on broader digital policies with limited AI focus.
“AMS with dedicated AI strategies score higher in the governance and ethics dimension of the Government AI Readiness Index (GAIRI) and are projected to experience greater economic benefits from AI,” said the paper. “While governance and ethics are not the only factors, they highlight how national AI policies enhance governance capacity and ensure that AI systems are deployed responsibly to support economic potential.”
Research also shows that while ASEAN’s potential for AI adoption is vast, the region also faces gaps in AI readiness, with Singapore leading with strong governmental support and infrastructure, while less-developed AMS face gaps in infrastructure, skills, and AI ecosystems.
Member states should respond to these challenges by including flexible, forward-looking AI and emerging technology frameworks grounded in ethical principles, ensuring alignment with global standards while fostering responsible AI use and adaptability, said the document.
Talent shortages and workforce mismatches are also further slowing AI adoption in many AMS, raising concerns about job displacement.
To address this, ASEAN should strengthen cooperation with dialogue partners to launch regional AI-focused capacity-building initiatives for public and private sector employees as well as partnerships with academia to integrate AI into curricula.
AI adoption also remains low among micro, small, and medium-sized enterprises (MSMEs) and startups. The primary barriers are high costs, technical complexities, and a lack of expertise. These constraints prevent these smaller businesses from fully leveraging AI’s potential.
AMS should establish AI adoption programs for MSMEs, including AI upskilling initiatives in collaboration with universities and industry. AMS should likewise provide financial incentives and support, such as tax benefits and grants, and regulatory sandboxes that allow MSMEs to experiment with AI applications in a controlled environment, advises the policy brief.
Finally, the report recommends offering fiscal incentives and strengthening public-private partnerships to advance green technologies, such as smart grids and green data centers, while building the technical capacity for responsible AI deployment.