The current foreign direct investment boom in South East Asia’s tech sector reflects a longer-term trend in the region where “a lot of countries that have moved into that upper middle class have been very interested in being more at the front of new innovations”, according to Suzanne Moon, a professor of the history of technology at the University of Oklahoma and author of Technology in Southeast Asian History.
Speaking on an episode of the newly launched Investment Monitor podcast, Moon says various countries have “really spent a lot of time in the last 20 years, say, building infrastructure”. She highlighted Thailand as an example, saying it hosted a major project aimed at digital infrastructure in 2015, and Indonesia, which is already a “very digital ready kind of economy”.
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“From a national perspective, all of those countries are really well positioned to consider becoming a real player in AI and not just a follower,” Moon says. She notes that “there is a really nice alignment” with the development of the AI industry and the decades of preparation that have now put South East Asia in a position “to be able to take advantage of it”.
While some major US companies like IBM and Microsoft have investments in the region that go back quite a few years, Moon says these are not comparable to what we are seeing now. However, “we definitely have companies that have kind of kept their eyes on South East Asia over time”.
In terms of cultural attitudes towards AI investment and integration, Moon notes that these vary in the region.
On one hand, there are some major concerns regarding what AI will mean for the workforce. “I was reading a report recently that suggested, in the Philippines, there is a fairly strong concern about labour replacement,” Moon notes. Countries in the region with major populations, like Indonesia and the Philippines, are particularly weary of this risk because “historically, labour exploitation, underuse of labour and poverty, those things have been really connected in those areas”.
The Association of Southeast Asian Nations (ASEAN) has been developing a regulatory framework to address some of these concerns. However, “it is all voluntary, and it will probably be subject to a little bit of different players trying to get an advantage in different parts of the AI market”.
Still, Moon says “there is going to be a fair amount of positive tech sentiment in the area”. She notes this sort of attitude is a constant of the region’s history, where there is “just generally an openness to integrating new technologies, new ideas. That is something you see over a really long term and I feel like that plays out now.” However, an approach that acknowledges the downsides seems to be crucial to ASEAN’s regulations.
“What sort of technological guard-rails can we put in place to help build trust that this [technology is] going to be doing positive things?” Moon notes.
Many countries have also ingrained the potential of this technology to transform their societies into their industrial policies. “It is a little bit more than just hand-waving,” Moon says.
“It seems to me that the policies, they are not just blue sky. They seem to be really solidly grounded in ideas about where AI could really help them – and, as a consequence, I feel like for investors, what that means is this probably isn’t going to just peter out after a year or two.”
One of the main draws of the region has also been its relative political stability, particularly at a time when conflict and uncertainty are on the rise worldwide. Moon highlights that, going back to the Cold War, there is a “strong sense of trying to be […] flexible in the face of these kind of conflicts. So while we certainly have countries that are going to have stronger alignments with one country or another […] there is a kind of neutrality, at least superficially, in terms of not favouring one investor over the other.”
