In the first half of 2024, Southeast Asia attracted over US$30 billion (RM133 billion) in artificial intelligence (AI) infrastructure investments, according to the 2024 e-Conomy SEA Report from Google, Temasek and Bain & Company.

The ERIA One ASEAN Start-up Whitepaper highlights over $50 billion invested in AI by tech giants including Microsoft, Google, and Amazon since January 2023.

This reflects the growing recognition of the region as a burgeoning hub for AI innovation, a shift that could drive the region’s economy forward.

ASEAN has projected that AI could boost the region’s gross domestic product by 10 per cent to 18 per cent, potentially adding $1 trillion by 2030.

With over half of ASEAN youth already digitising a significant portion of their tasks, the region’s tech-savvy youth presents a key advantage in accelerating AI adoption.

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?

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 language models that are 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 the establishment of 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), which is in the works, 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, with the 2024 e-Conomy SEA report noting that 54 per cent of generative AI projects advance from ideation to production within six months, and 71 per cent 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.

From demand prediction to personalised recommendations, AI is enhancing their business operations and profitability.

Despite the strong investment and adoption, significant challenges remain.

The ERIA One ASEAN Startup Whitepaper and the 2024 e-Conomy SEA Report highlight digital talent scarcity as a key challenge, as 61 per cent of ASEAN youth aged 10 to 24 years old 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 among ASEAN countries, with only Singapore, Malaysia and Thailand scoring above the Asia-Pacific average, creates barriers for cross-border growth and leads 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 per cent by 2025.

To truly capitalise on the transformative power of AI and establish the region as the next frontier in the field of AI, a unified and strategic approach is essential.

Addressing talent scarcity in Southeast Asia requires a sustained, long-term commitment to educational investment and collaboration between the 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 toward AI training, research and industry-academia collaboration.

Additionally, expanding vocational programs 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.

Upcoming programs such as AI-Ready ASEAN, spearheaded by the ASEAN Foundation in partnership with Google, should be given strong support to enhance AI skills throughout the region.

Fostering robust data-driven ecosystems is also essential. This requires investing strategically in cybersecurity infrastructure, raising data awareness and promoting intra-regional data sharing.

Furthermore, data centers should implement sustainable data center practices 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.

ASEAN has played a pivotal role in coordinating efforts to create a more inclusive AI ecosystem for its member states and should continue to champion this mission to ensure equitable AI development.

In addition to providing 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.

On-going partnerships with regional allies, such as China, Japan, South Korea, the United States and the European Union, can provide expertise, capacity-building and talent development opportunities, and avenues to tackle shared challenges.

In conclusion, Southeast Asia stands at a critical juncture in its digital transformation journey, with AI emerging as a powerful engine for the region’s digital economy growth.

The region 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 the field of AI, driving sustainable development and improving the lives of millions.

The writer is an assistant for research activities at the Economic Research Institute for ASEAN and East Asia (ERIA). The views are personal.