TLDR: A recent study by the Philippine Institute for Development Studies (PIDS) reveals that local businesses, particularly micro, small, and medium enterprises (MSMEs), are significantly behind in Artificial Intelligence (AI) adoption despite high rates of computer and internet access. Only 14.9% of firms utilize AI tools, with overall industry usage at a mere 3%. PIDS advocates for a comprehensive national strategy focusing on digital infrastructure, human capital development, and robust governance frameworks to accelerate AI integration and boost domestic industries.
MANILA, Philippines – The Philippine Institute for Development Studies (PIDS), a state-run think tank, has issued a stark warning regarding the country’s lagging Artificial Intelligence (AI) adoption among local businesses. Despite widespread access to digital tools, only a small fraction of firms are leveraging AI, prompting PIDS to urge the government to implement a comprehensive national strategy to boost domestic industries.
The study, titled “Readiness for AI Adoption of Philippine Business and Industry: The Government’s Role in Fostering Innovation- and AI-Driven Industrial Development,” highlights that a mere 14.9 percent of companies currently employ AI tools. This adoption is predominantly concentrated in larger firms located in urban centers, particularly within the information and communications technology (ICT) and business process outsourcing (BPO) sectors.
Contrasting this low AI uptake, the PIDS report, citing data from the Philippine Statistics Authority (PSA), notes that 90.8 percent of establishments nationwide possess computers, and 81 percent have internet access. However, AI usage remains limited, with an estimated overall adoption rate of just three percent across all industries. Even in leading sectors like ICT and BPO, adoption rates hover between six to seven percent, while the agriculture sector trails significantly at only 1.5 percent.
“The overall awareness of AI and other Fourth Industrial Revolution technologies remains notably low among Philippine firms, with only about one in five cognizant of these technologies,” the study stated. This lack of awareness is compounded by several critical barriers identified by PIDS.
Key obstacles include significant gaps in human capital, with the Philippines lagging in ICT proficiency, engineering, and technology education, leaving its workforce ill-prepared for AI-intensive industries. These weaknesses exacerbate existing challenges such as limited broadband connectivity, insufficient data infrastructure, and weak regulatory mechanisms. Furthermore, the study pointed to insufficient funding opportunities, noting the country’s low score of 6.00 in Venture Capital Availability, which hinders businesses from securing necessary capital for AI investments.
To address these multifaceted barriers, PIDS has called for a comprehensive, multi-agency approach. The think tank recommends substantial investment in digital infrastructure, including expanding broadband coverage nationwide, especially in underserved areas, and developing data centers and cloud computing facilities to support growing AI requirements.
Governance reforms are also crucial, advocating for the opening of public datasets and the adoption of clear data-sharing policies, potentially benchmarking against countries like South Korea, which aims to release 45,000 datasets. PIDS also urged the establishment of an independent data governance body to oversee privacy protection and cybersecurity, while ensuring regulations are flexible enough to adapt to rapid technological change. Promoting AI ethics and transparency through guidelines on responsible AI use and algorithmic accountability is also a key recommendation.
The report acknowledged ongoing government initiatives, such as the Department of Trade and Industry’s (DTI) National AI Strategy Roadmap and plans to establish a Center for AI Research (CAIR) to foster research and innovation. The Philippine Development Plan (2023–2028) also underscores the importance of emerging technologies, including AI, in revitalizing industry and services.
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Ultimately, PIDS emphasized that the country’s AI strategy must focus on enabling innovation while safeguarding public trust, ensuring transparency in resource allocation, and involving industry and civil society in independent evaluation frameworks.
