A study by the Philippine Development Institute (PIDS) found that Philippine companies remain slow to adopt artificial intelligence (AI) despite extensive access to computers and the Internet. New research found that adoptions are concentrated in large urban businesses, particularly large companies in the Information and Communication Technology (ICT) and Business Process Outsourcing (BPO) sector, leaving most industries and regions behind.
The study reports that “in the Philippines, AI integration into business and industry is still in its early stages, below the average AI preparation compared to other Asia-Pacific countries.”
According to the 2023 Asia-Pacific AI Readiness Index, “The Philippines ranks 12th out of 12 countries in the index, with an overall AI preparation score of 35.7 out of 100.”
Business preparation is also low. “From a business preparation perspective, the Philippines (25.4) ranks 10th out of 12 countries with a score of 25.4 out of 100.”
This research is ready for AI adoption in business and industry in the Philippines. The role of government in fostering innovation and AI-driven industrial development highlighted the gap between the use of basic and advanced technologies. “Although basic digital infrastructure is widespread, 90.8% of facilities have computers and 81% have internet access, but adoption of advanced technology remains limited.” Only 21.7% of facilities have websites and 31.2% are engaged in e-commerce.
AI adoption rate is low and concentrated
“When it comes to adopting certain AI, this paper reports that 14.9% of companies use AI and ML technology,” which puts the Philippines behind other technologies. “This follows the Internet of Things (IoT), 5G networks and automation as its fourth-most fire technology that uses AI.”
Overall uptake remains low. “In 2021, the overall AI adoption rate across the industry was 3.02%.” Furthermore, “Only 14.9% of companies using AI technology are concentrated in urban and large companies, particularly in the ICT and BPO sectors.”
Regional data show imbalance. “The regional distribution of AI adopters is 25.4, 14.3 and 11.8%, respectively, revealing the gaps led by the domestic metropolitan area, Western Visayas in VI and Region IVA (Calabarzon).” However, “unursized regions like the Muslim Mindanao (barmm), Region IVB (Mimaropa), and Region XI (Davao region) lags show that digital disparities could widen in the future.”
A solid size is also important. “We see large companies that outperform micro, medium and medium sized companies (MSMEs) at a rate of 5.29%.” The sector states, “BPO and ICT industries are leading by 7.19% and 5.94%, respectively, and are significantly higher than 1.55% agriculture.”
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Important barriers to businesses
Research shows that key barriers for local businesses include limited digital infrastructure, low awareness of AI technology, critical skills gaps, and insufficient funding opportunities.
“Overall awareness of fire technologies, including AI, is relatively low among companies in the Philippines, with only about one in five companies aware of these technologies,” the study states. We also identified gaps in education. “The quality of engineering and technology higher education score of 0.00 indicates the weaknesses of the education system for developing a skilled AI workforce.”
Human capital scores reinforce this weakness.
“The country faces major challenges in human capital development, as evidenced by the low score of 31.42 in the human capital aspect of the Oxford AI Readiness Index.” The study highlights “low scores for ICT skills (5.08) and quality of engineering and technology higher education (0.00), suggesting a large skill gap in the workforce.”
Infrastructure challenges continue to be bottlenecks. “Supercomputers (0.00) are completely lacking, limiting the country's ability to process large AI datasets and conduct complex AI research.” Investment is also lacking. “The limited funding opportunities present another important barrier to AI adoption, with the Asia-Pacific AI Reserve Index showing that venture capital availability is only 6.00.” This score was described as “very low, indicating a lack of funding opportunities for AI startups and innovation.”
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Government Initiatives and Roles
However, policymakers are taking steps to address these gaps. “The government has also begun taking steps to strengthen the adoption of AI, as seen in the development of a national AI roadmap aimed at establishing the country as a hub for AI research and development in Southeast Asia.”
“DTI” [Department of Trade and Industry] It is estimated that AI can boost GDP in the Philippines [gross domestic product] 12% or about $92 billion by 2030. In 2021, the agency launched the National AI Strategy Roadmap with the aim of positioning the Philippines as the region's AI centre.
The country has been well acquired in several policy aspects. “While the highest score, the vision (100.00) points to a strong strategic direction for government AI, the Data Protection and Privacy Act (100.00) reflects a robust framework for protecting personal data, a key component of building public trust in AI systems,” the study states.
But the gap remains in ethics. “The lack of AI ethical principles (0.00) indicates the gap in guidelines required for responsible AI development.” The Philippines also scored just 0.12 in the “Dimension of Regulation and Ethics.” The study emphasized that the role of government includes “market promotion, capacity building, and ecosystem coordination.”
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Business examples highlight possibilities
If adoption is rooted, companies report results. The BPO industry is at the forefront of AI adoption, implementing chatbot implementation, natural language processing and automated customer service solutions.
UnionBank deploys AI throughout operations. Its fraud detection system “allowed Union Bank to detect 19% fraudulent transactions and reduce turnaround time by 80% to identify these transactions.” The AI Credit Scoring system “doubled the bank's loan approval rate, making financial services more accessible, especially for non-banked banks.”
In retail, Lazada's white paper reveals that 88% of consumers choose to buy using AI recommendations, while 83% can pay for an AI-enhanced experience.
Utilities are also considering applications. AI is a key component of Maynilad's Non-Revenue Water (NRW) Management Program, aimed at reducing water losses throughout the West Zone and improving supply reliability.
Manufacturing is testing the production AI. Mitsubishi Motors Philippine Corporation (MMPC) redesigns its employee portal with IBM (NASDAQ: IBM) Watsonx.ai, leveraging Genai to enhance employee experience and analyse internal documents to provide faster responses to inquiries.
Telecommunications companies are one of the biggest recruits. “PLDT's conversational AI system with a Natural Language Processor (NLP) enables automated customer interactions such as invoice payment reminders and account verification.” The company also uses Wiz AI's TalkBot Pro, a voice assistant with AI that has 3.7 million outbound communications and reduced average call processing time in the first year of 6-3 minutes.”
The report generally reports that businesses benefit from AI and machine learning applications through reduced costs and increased efficiency in their operations.
For AI to work properly in the law and thrive in the face of growing challenges, it will need to integrate enterprise blockchain systems that guarantee the quality and ownership of data input. Check out Coingeek's report on this new technology to learn more about why enterprise blockchain is the backbone of AI.
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Watch: The Philippines is heading towards blockchain-enabled technology
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