Southeast Asia pulls ahead of global average on AI adoption

Image credit: McKinsey

Southeast Asian firms are outpacing global peers in AI adoption, but many companies are struggling to translate pilot projects into enterprise-wide deployments, according to a joint survey by the Singapore Economic Development Board (EDB) and McKinsey (read the full report here).

The survey of 330 respondents found that 73% of companies in Southeast Asia are already at the “piloting” or “scaling” stage of AI adoption, higher than the global average of 57%.

Yet, only 8% reported that AI has been implemented across the whole organization, compared with 13% among US firms.

These results show that Southeast Asia’s AI challenge “is not about catching up,” but about whether companies can scale the technology across markets, says Paul Beaumont, partner at McKinsey.

Adoption varies by sector and function

More companies in Southeast Asia are shifting from experimenting with AI to full deployment.

“In the past six months, we’ve seen enterprises move from proof of concept to large-scale experimentation and scaling production,” says Vikram Rao, director of growth markets and strategic accounts for ASEAN at Amazon Web Services.

Progress varies by sector. Technology, media, and telecommunications, as well as advanced industries, are leading the region in AI adoption. About six in 10 companies in these sectors reporting that they have scaled AI deployments.

The gap between trial and full deployment remains pronounced. Both the manufacturing and the sales and marketing sectors report pilot rates exceeding 7%, but fewer than 30% of companies in these industries have achieved scaled AI implementation.

By function, IT leads adoption, with 37% of companies in the sector using AI to support daily operations, followed by software engineering at 35% and knowledge management at 32%.

Agentic AI and rising spend

Interest is growing in agentic AI, systems designed to act autonomously on behalf of users. About 90% of surveyed companies said they plan to experiment with AI agents in 2026.

Spending on AI as a whole is rising across the region, with 64% of organizations allocating more than 11% of their technology budgets to AI initiatives.

Despite this, financial returns remain limited: 67% of respondents said AI has delivered less than a 5% uplift to earnings before interest and taxes.

Talent and system integration remain key barriers

Executives point to talent shortages and system integration challenges as the key blockers to scaling AI. Other barriers include legacy IT infrastructure, fragmented data environments, and insufficient data governance.