A pact for Asean’s digital economy

Governments and corporations in the Philippines and the rest of Southeast Asia are going full speed ahead with plans to ramp-up investments in and adoption of artificial intelligence or AI, deemed humanity’s “greatest invention” since the internet.

Billions of dollars are rapidly pouring into this revolutionary technology that enables man-made machines to perform tasks that used to be exclusive to humans—including learning, problem-solving, analysis, and content creation—on the belief that AI could turbocharge growth and fast-track transformation of industries.

The Philippines is deemed well positioned to harness the power of AI, which in turn is the major driver of the overall digital economy, because of certain advantages, including a young, tech-savvy population and willingness to innovate. This, according to Google Philippines country manager Prep B. Palacios, makes the country a “digital powerhouse.”

The value of the Philippines’ digital economy is projected to grow from an estimated $36 billion in 2025 to between $70 billion and $140 billion by 2030, driven by the rapid adoption of e-commerce, transport and delivery services, digital finance, and AI.

Policy and capacity gaps

“This momentum is not a temporary spike; it’s a sustained, systemic transformation, a convergence of innovative platforms, a tech-positive regulatory environment and our uniquely AI-curious Filipino consumers with real spending power,” Palacios underscored.

The Marcos administration has indeed already baked AI adoption into its Philippine Development Plan 2023-2028. Just last January, the Department of Education launched its Accelerating Governance and Adaptive Pedagogy through Artificial Intelligence as part of broader efforts to “future-proof” the education system and subsequently, the Philippine economy.

For Southeast Asia, the digital economy is projected to be worth as much as $2 trillion by 2030.

But that potential in the country and the Association of Southeast Asian Nations (Asean) is at risk of being dashed before it can be unleashed, primarily due to foundational hindrances such as the lack of skilled workforce who will be able to maximize the use of these AI tools and the right policy and regulatory environment that will make the digital economy flourish and not flounder.

The private and public sectors must therefore collaborate closely to close these yawning policy and capacity gaps lest the region misses out on the opportunity to accelerate their economic and social development plans with the help of technology.

Upskilling and reskilling

This was among the top recommendations of the United States-Asean Business Council (US-ABC) and the Asean Business Advisory Council Philippines during last week’s high-level roundtable discussion in the Philippines on the Asean digital economy and workplace development as part of efforts to conclude a Digital Economy Framework Agreement (Defa) for the region.

At the end of that discussion, the leaders agreed to work together to, among others, scale workforce upskilling and reskilling initiatives aligned with industry needs so that the current workforce will not be rendered obsolete by technology.

Asean leaders are also working together to enhance regional cooperation on cybersecurity and digital trust frameworks and strengthen public-private collaboration to accelerate digital adoption among micro, small, and medium enterprises.

“Asean’s digital economy is expanding faster than the policy environment can keep pace,” stressed Herminio Bagro, the Philippine chief representative to the US-ABC, “The opportunity now is to turn Defa commitments into interoperable rules, strengthen digital infrastructure, and align workplace development with industry demand–so businesses can scale and growth translates into quality jobs across the region.”

A place in Asean history

The Philippines is especially concerned about jobs given that as much as 40 percent of Philippine jobs are at risk of being disrupted by AI, with up to 14 percent–including those in business process outsourcing, retail, and basic manufacturing–are facing direct displacement, according to economist and former Albay Rep. Joey Salceda.

As Kiko Benitez, secretary of the Technical Education and Skills Development Authority said, at the center of the effort to forge an agreement is the urgent recognition that the development of a skilled workforce will ultimately determine whether the Philippines and the region will succeed in fostering rapid growth through technology or fall behind in the age of the digital economy.

The Philippines must thus endeavor to carve a place in Asean history at this critical juncture where the digital economy is expanding rapidly. It can leverage its unique position as Asean chair to craft a Defa that will lead to shared prosperity for all the economies within the fast-growing Asean region.