Philippine Advantages & Barriers

Amid recent developments, the Philippines is still positioned to transform itself into an AI-driven economy, and be a Center of Excellence in AI R&D. With a sustained national direction in place, the assets of the country will be the drivers of the country’s leadership in the global AI arena.

People

AI is powered by human intellect and the creative and analytical capacities of people to use the technology to actually drive innovation. This places the Philippines at an advantageous position. The Philippines has a vast young and tech-savvy talent pool that can be tapped to drive the country’s AI and data science workforce. With 118 million people, a median age of 26 – one of the youngest in the world – and a tech-savvy attitude, having high exposure to the digital space, the Philippines is in a bright spot in terms of availability of talent ripe for training.

The country produces more than 800,000 college graduates every year; more than 200,000 of which come from Science, Technology, Engineering, and Mathematics (STEM) courses. The workforce is deemed highly trainable by industries owing to Filipinos’ ability to adapt in the workplace and their fluency in the English language.

While the talents in the workforce are readily available, the critical challenge lies in upskilling and reskilling millions of Filipinos to fulfill various roles at each stage of the value chain in the AI economy. Once equipped with the necessary skills aligned with industry needs, these trained professionals can significantly bolster the edge of the Philippines, with millions of Filipinos driving innovation, developing cutting-edge technologies, and delivering AI solutions across industries around the world.

In the quest to churn out more AI talents in the country, many Philippine universities and colleges have begun offering more specialized data science and AI programs at the graduate and undergraduate levels. Notably, the Asian Institute of Management’s (AIM) Master of Science in Data Science (MSDS) program is one of the globally renowned data analytics masters’ programs in the region. AIM has also launched a Bachelor of Science in Data Science and Business Administration program and a Ph.D. in Data Science program. In addition, the University of the Philippines - Diliman introduced its doctoral program in AI at the College of Engineering in 2022, to expand the field of AI via state-of-the-art dissertation research.

The Department of Science and Technology (DOST) and the Development Academy of the Philippines (DAP) implemented the Smarter Philippines through Data Analytics, R&D, Training, and Adoption (SPARTA) Project, which offered online education scholarships for thousands of individuals in Data Science and Analytics (PCIEERD Innovations, nd).

The Philippines also hosts an active ecosystem of global technology providers, offering accessible and structured learning pathways for new learners and practitioners. In 2022, Amazon Web Services (AWS) launched the re/Start program to provide free skills training to inspire Filipinos to transition into a career in cloud computing (Dela Cruz, 2024). In 2023, Google Philippines launched a free AI skills development course to help bring AI and machine learning education to Filipinos (Ronda, 2023). In 2024, Microsoft committed to train 100,000 Philippine women on AI and cybersecurity (France-Presse, 2024).

Industries

The Philippines possesses robust global industrial capabilities in the fields of Information Technology (IT) and Business Process Management (BPM), boasting more than 1,300 companies, an annual revenue of USD 35.5 billion, and a workforce of 1.7 million individuals (Desiderio, 2024). It is a global leader in providing voice and non-voice services, enabling it to be the country’s top services export, and a major strength of the Philippine economy. It remains to be a top destination for global investments in outsourced services serving many of the world’s biggest brands in various industries.

More recently, global companies have made investments into R&D services activities in the country, signaling the capacity of the Philippines to move up to higher-value services activities. Dyson, a global appliance brand, invested PhP 11 billion in its Technology Centre in Batangas to perform innovations in software, AI, robotics, and electronics (Crismundo, 2023). Samsung, one of the world’s biggest semiconductor and electronics companies, continues to expand their strong pool of Filipino software engineers at its R&D Center in Taguig and is engaged in developing cutting-edge solutions related to Cloud, Web, and Data Intelligence.

Beyond the league of large corporations, the Philippines is also witnessing the rise of AI-as-a-service and AI-enabled startups, leveraging AI to deliver specialized solutions and services. Startups like Senti AI and Instalimb offer a range of AI capabilities catering to diverse industry needs such as automation, data analytics, and predictive modeling. In the Philippines, this trend is expected to rise given the country’s burgeoning tech-savvy talent pool and increasing digital adoption rates.

Economy

Located at the heart of the dynamic Southeast Asia, the Philippine economy continues to be one of the rising economies in the world, on track to be an upper middle-income economy by 2025, classified as those with Gross National Income (GNI) per capita between $4,466 and $13,845.

It exhibits robust and sustained economic growth with a solid 5.6% growth in 2023, followed by an impressive 5.7% in the first quarter of 2024 (PSA, 2024). Looking ahead, optimistic projections foresee continued growth rates of above 6% for both 2024 and 2025, highlighting the country’s strong potential for continued expansion (World Bank, 2024).

According to S&P (2023), the Philippines has fully regained its high growth momentum after the pandemic, and is on track to breach the USD 1 trillion economy mark by 2034 alongside China, Japan, South Korea, Taiwan, and Indonesia.

The country’s huge and growing domestic market signals greater economic activities that will increasingly require new technologies like AI to enhance efficiency, innovation, and competitiveness across various sectors, crucial for economic transformation.

With a population that has a large footprint in the digital economy, the 2023 Google e-Conomy Southeast Asia Report likewise reports that the Philippine digital economy is in a fast growth momentum. It is projected to reach USD 35 billion by 2025 in Gross Merchandise Value (GMV) and is estimated to grow even more in the coming years, potentially reaching USD 80-150 billion by 2030. This digital economy’s rapid growth brings with it increasing market opportunities for data science and AI services.

Barriers

Since the launch of the first roadmap, significant strides have been made in alleviating the previously identified barriers to AI development in industries. However, alongside these advancements, new challenges have emerged that require more targeted solutions. The NAISR 2.0’s strategic framework continues to prioritize dismantling the barriers to AI development and adoption in the Philippines, namely:

1. Limited Local Use Cases. While GenAI has made the concept of AI more relatable and tangible for the general population, especially the youth, the challenge among industries, especially for Small and Medium Enterprises (SMEs), is to navigate how they can maximize its use to specifically help their products and processes across various business areas. Consequently, companies are not willing to invest money and other resources into something whose value and impact are not explicit nor tangible to them.

   There is still a scarcity of information on potential local use cases of AI in industries. While many concrete examples exist outside of the Philippines that are readily accessible via the news and from online resources, many local enterprises cannot connect or relate to these examples. Many still seem far-fetched to local enterprises and the workforce. There is a need for more potential use cases that are locally generated, so as to paint a more compelling picture for local stakeholders.

2. Limited Human and Physical Resources. This constraint is categorized into two forms: equipment (computational resources) and manpower (human resources). First, many enterprises, mostly SMEs, in the Philippines are resource-challenged in terms of the capability to set up their own computational resource, including cloud computing resource, and/or even acquiring business intelligence (BI) software to aid them in their data and system analysis.

   Second, most, if not all, industries in the country, especially those that have started to invest in AI and Data Science, have been restricted by the scarcity of data experts, which include data analysts, data scientists, machine learning engineers, data engineers, data architects, and data stewards, among others. Furthermore, many of the data-skilled talents lack the required business skills to make AI R&D projects practical and profitable for the enterprises.

   This hinders enterprises to fully adopt AI to optimize their processes and more so to perform product or service innovation using AI.

3. Lack of Enterprises’ Capacity to Develop Data Strategies. Data Strategy or AI strategy is essentially a vision for how organizations should invest their resources towards building capabilities in data science and AI, anchored particularly on each company’s strategic imperatives and business objectives. A common misunderstanding is that a data strategy is all just about the data and the technology—e.g., how/what to collect, where to store, what BI platforms to use, etc. Rather, it is about how acquiring technologies and technical capabilities can help enterprises achieve their strategic goals.

   Without the right tools, concepts, and guidance, the adoption of AI by enterprises, especially SMEs, can be risky and costly. Most SMEs lack the technical expertise to develop a robust data strategy and the financial resources to engage business consultancy services for this purpose.

4. Emerging Legal & Regulatory Uncertainties. Despite the growing consciousness about the risks on AI development, the existence of global AI frameworks, and local efforts to institutionalize governance measures, the discovery of new AI application in various areas inevitably give rise to new risks and challenges, such as the proliferation of deep fakes and false information, infringements on intellectual property especially in creative content, plagiarism on educational outputs, and other emerging concerns. New areas of concern are anticipated to emerge alongside new discoveries and innovations using AI.

   By setting out universal principles for AI use and effectively implementing targeted and application-specific guidelines, the rights of Filipinos will be protected and innovations in AI will be promoted.