The majority of companies in Southeast Asia that have invested in artificial intelligence initiatives are finding it challenging to achieve measurable financial benefits. A Straits Times report on AI adoption in the region reveals that over 3 in 5 firms have allocated between 11% and 40% of their technology budgets to AI projects. However, nearly 1 in 5 of these companies reported no noticeable impact on their earnings, while more than sixty per cent indicated that AI contributed less than 5% to their total operating profit.
This information comes from a comprehensive report titled "AI In Southeast Asia: An Era Of Opportunity," produced by consultancy McKinsey & Company in collaboration with the Economic Development Board and Tech in Asia. During the report's launch, Vivek Lath, a partner at McKinsey, suggested that the disappointing results may stem from companies prioritising the wrong applications or areas for investment. He also pointed out that a lack of employee adoption could be a significant factor in these outcomes.
The report is based on in-depth interviews with executives from three hundred and thirty companies across Indonesia, the Philippines, Singapore, Thailand, and Malaysia, spanning ten different sectors, including consumer goods, retail, healthcare, and financial services. Lath noted that one executive claimed to have more AI pilots than the pilots at Singapore Airlines, highlighting the tendency for companies to engage in isolated trials rather than integrating AI into their entire business workflows.
For instance, a manufacturing plant that utilises AI to monitor machinery and automatically order necessary parts for maintenance exemplifies a more holistic approach to AI implementation. In contrast, many companies have focused on simpler use cases, such as chatbots or AI-searchable repositories of guidelines, rather than embedding AI into their existing processes to achieve specific business outcomes.
At the launch event, Minister for Digital Development and Information Josephine Teo remarked on the evolving landscape of AI talent in Singapore. She noted that the technology ecosystem has become increasingly complex, prompting a shift in how the country defines and develops its AI talent. Currently, Singapore is concentrating on building AI expertise in three key areas: creators who are top-tier talent engaged in cutting-edge AI, practitioners involved in developing AI solutions, and users of AI-powered products.
However, Teo indicated that this approach is set to change, with new strategies expected to be announced in the upcoming budget. She likened the potential impact of AI to the expansion of Changi Airport's Terminal 5, suggesting that the true value of AI will be realised when it connects and interacts with existing systems and processes across various industries. This interconnectedness could lead to transformative changes in sectors such as manufacturing, healthcare, and banking.
Teo emphasised the need for talent at every level and in every aspect of the industry to fully harness the potential of AI. She stated that the upcoming budget announcement would reflect a maturation in thinking about what it takes to make AI a truly transformative technology, capable of delivering benefits that have yet to be fully realised. The minister's comments underscore the urgency for companies to rethink their AI strategies and focus on integration rather than isolated applications to unlock the financial benefits of their investments.
Many Southeast Asian firms struggle to achieve financial gains from AI despite significant budget allocations.
A lack of integration in AI applications is a major barrier to realising benefits.
Employee adoption of AI technologies is crucial for success in AI initiatives.
Singapore is evolving its AI talent strategy to meet the demands of a complex technology ecosystem.
