Can Southeast Asia capitalize on artificial intelligence?
Diaan-Yi Lin, Senior Partner & Managing Partner,
Artificial intelligence (AI) technologies can benefit Southeast Asia in many ways, from making much-needed services more accessible, to enhancing the quality of jobs across the region. Attaining these improvements won’t be easy, but positive outcomes will be more likely if the right investments, education programs, and policies are in place.
The good news is that all of ASEAN’s member states are engaged in AI research already, with Singapore leading in multiple industries. In a recent paper, my colleagues at the McKinsey Global Institute (MGI) and I explored the implications of this activity: how it can help the region, and what companies and governments can do to maximize the benefits of AI.
Three of MGI’s findings on the potential of AI for Southeast Asia stood out to me.
1. AI technologies can help provide services that millions of Southeast Asians truly need.
AI could expand access to financial services, power new models for providing health care, and develop personalized learning plans for everyone from schoolchildren to mid-career professionals, among other applications. In an example from outside Southeast Asia, Alibaba used advanced analytics to develop Zhima Credit, an in-house credit bureau in China. In ASEAN, such a service could help financial institutions lend to unbanked groups.
2. AI technologies can improve the working lives of Southeast Asians.
AI is essential to most forms of automation, from machine learning to robotics. And automated equipment and computer systems can be used to perform many of the activities that human workers do today, including repetitive and physically stressful tasks. That would free humans to concentrate on work requiring creativity and thought.
3. AI can create value for companies and consumers. MGI’s research suggests that early adopters of AI report higher profit margins—and return the extra value to consumers, so they can set themselves apart from competitors. Financial services, high tech, and telecom companies in ASEAN have led the way in adopting AI technologies. The providers of public services like health care and transportation have also embraced certain AI applications. According to MGI’s estimates for Southeast Asia, organizations that proactively adopt AI could create nearly more $900 billion in economic value than their less proactive peers.
AI’s prospects for creating economic and social benefits in Southeast Asia do not ensure that the technology will be deployed quickly or widely. But several courses of action identified by MGI can help accelerate and broaden the adoption of AI.
1. Companies can ramp up their investments in AI.
As noted above, it appears likely that early adopters of AI will capture most of the benefits. Tech giants, mostly in China and the United States, have made more than three-fourths of all AI investments to date. In ASEAN, companies in the finance, high tech, and telecom sectors account for more than half of the region’s AI applications. Investment and innovation have been slower in manufacturing and transportation, the two sectors that MGI sees as having the largest untapped opportunities to create value with AI.business model capability).
2. Companies can make profound changes to the way they do business.
Some businesses in ASEAN have seen their AI initiatives come up short because they aren’t set up to make full use of the technology. Telecom operators, for example, have struggled to scale up their uses of AI because they lack the right digital talent. The playbook for adopting AI is similar to that for adopting other digital technologies: create robust systems for collecting, organizing, and storing data; embrace a culture of making decisions based on data; and train and hire the right talent, from the data scientists who work directly with AI systems, to “business translators” who act as an intellectual bridge between managers and technical experts.
3. Governments can guide the development of AI toward positive social outcomes.
By creating region-wide policies, ASEAN can help expand the development and adoption of AI technologies. Policies that make the regional data environment more open, safeguard user privacy as well as intellectual property, and respond to cybersecurity threats could all be considered in this regard. National governments in the region could also make seed investments in hubs for AI innovation, talent development, entrepreneurship, and commercialization.
4. Companies and governments can work together to manage the labor dynamics that AI will create. Looking again at automation (which is not synonymous with AI, but does relate to it closely), MGI estimates that just 5 percent of occupations could be fully automated with current technologies, while many more could be partly automated. Helping people to adjust to the resulting changes in their occupations will likely involve coordinated action by companies and governments. Governments, for example, might look at how their investments in lifelong education can help workers develop the skills to succeed in the digital economy, while business leaders can help reorganize roles and organizational structures to maximize the time that workers spend on higher-value activities.MGI’s research strongly suggests that AI can benefit large numbers of people — and that institutions across the region can maximize the economic and social gains from this technological shift. This will, however, require reskilling and upskilling of talent to ensure that people are prepared for the changes. Earlier advances in technology have given Southeast Asia’s companies and governments valuable experience in navigating economic transitions that were brought about by innovation. I am confident that we can draw on this experience to steer the development of AI toward positive outcomes.