Accounting for over 99 percent of all firms and employing a significant portion of the workforce in Southeast Asia, small and medium enterprises (SMEs) are integral to the region’s economy (ERIA & OECD, 2024). Given the rapid rate of technological progress in recent years, SMEs can benefit significantly from emerging technologies such as artificial intelligence (AI). The global economy’s transition towards digitalization also presents an opportunity for SMEs to integrate into regional and global markets. However, while AI offers immense potential to improve efficiency and productivity in SMEs to make them more competitive, several critical barriers make adoption a challenge. Common barriers to AI adoption include a shortage of skilled workers, insufficient talent development programs, inadequate digital infrastructure, and high financial costs. However, challenges can vary across countries, as some are more AI-ready than others. For example, the skills and talent gap is a greater concern in Indonesia, the Philippines, and Vietnam than in Singapore, which boasts a highly skilled workforce. If not addressed, the disparity in AI readiness among countries in the region can also lead to a digital divide and increased digital inequality. To guide the development, responsible adoption, and sectoral integration of AI, national AI strategies or roadmaps ensure that policy objectives are aligned. Targeted support for AI development can also assist SMEs in overcoming adoption barriers and in becoming more competitive in the global market.
This publication gives an overview of AI readiness and adoption in Southeast Asia, with an emphasis on the potential benefits and obstacles for SMEs, followed by a qualitative study that gathers insights on AI adoption among Philippine manufacturing SMEs. It aims to understand general perceptions of AI, identify key factors influencing its adoption and impact, and explore how AI has affected their operations.
The views, conclusions and recommendations expressed in this report are solely those of its author(s) and do not reflect the views of the Konrad-Adenauer-Stiftung, or its employees.
