Majority of firms in S-E Asia that invested in AI struggle to reap financial benefits: Report
Sign up now: Get ST's newsletters delivered to your inbox
Minister Josephine Teo (right) at the fireside chat moderated by Mr Daniel Pacthod on Feb 11, 2026.
ST PHOTO: GAVIN FOO
- Southeast Asian firms use AI for efficiency but struggle to translate gains into significant financial returns, despite allocating 11-40% of tech budgets.
- This is because firms often focus on individual AI applications rather than integrating AI to transform entire work processes for greater overall value.
- Talent shortages are a key barrier; Singapore plans to evolve its AI talent strategy
AI generated
SINGAPORE - The majority of companies in South-east Asia that invested in artificial intelligence (AI) initiatives struggle to reap measurable financial gains, an inaugural report on AI adoption in South-east Asia found.
The survey, conducted between July and August 2025, found that more than three in five companies had allocated between 11 per cent and 40 per cent of their technology budgets to AI initiatives.
But nearly one in five companies reported no discernable impact on earnings, and more than three in five firms said AI contributed less than 5 per cent of total operating profit.
These findings came from the 63-page report titled AI In Southeast Asia: An Era Of Opportunity, by consultancy McKinsey & Company, government agency Economic Development Board and tech publication Tech in Asia.
At the launch of the report on Feb 11, Mr Vivek Lath, a partner at McKinsey & Company, said this could mean that companies had prioritised the wrong applications or areas to spend money.
He said the lacklustre results could also be due to the lack of employee adoption.
The report is based on in-depth interviews with executives from 330 companies in Indonesia, the Philippines, Singapore, Thailand and Malaysia.
The companies span 10 sectors, including consumer goods and retail, healthcare and financial services.
“One of the executives actually said he had more AI pilots than the pilots at Singapore Airlines,” Mr Lath said, noting that some companies participated in isolated trials that did not involve an entire business workflow.
A system in a manufacturing plant that monitors and sends alerts on which machines require maintenance, and orders the parts needed for maintenance and repair, is one example of AI use that involves an entire business workflow, he said.
Companies had focused on use cases like simple chatbots or an AI-searchable repository of guidelines and best practices when they should have integrated AI into current work processes to achieve specific business outcomes, he added.
Speaking at the launch event, Minister for Digital Development and Information Josephine Teo pointed out that Singapore’s thinking around defining AI talent has shifted, as the technology ecosystem has transformed and become more complex in the past few years.
Singapore currently focuses on building AI talent in three areas
But Mrs Teo signalled that this approach is set to change, with some changes set to be announced at Budget 2026,
Using the expansion of Changi Airport’s Terminal 5
“If you extrapolate this and think about what AI can potentially do for us – transforming manufacturing, healthcare and banking, the real value is not just that they are individually transformed as industries and as enterprises within industries, it is when you add them up and they interact with one another in brand-new ways that were not possible before,” she said.
As a result, there will be talent needed in “every nook and cranny, and at every level”.
“What (PM Wong) is going to say reflects this sort of maturing in our thinking about what it takes to make this technology really come alive, and enable this democratising and general-purpose technology to really give us an uplift that we have not even possibly imagined the full extent of,” said Mrs Teo.
