Southeast Asia stands at a fascinating inflection point in the global AI revolution. While hyperscalers pour over $50 billion into regional infrastructure and adoption rates outpace global averages, a troubling paradox emerges from McKinsey’s latest research: companies are moving fast, but they’re not making money from it.

The Paradox

• Southeast Asia is rapidly adopting AI, with 46% of companies scaling implementations — above global averages.
• Despite heavy investment (over $50 billion from hyperscalers), 67% of firms report <5% EBIT impact.
• The issue isn’t technology, but execution and monetization.

The newly released “AI in Southeast Asia: An era of opportunity” report reveals a region sprinting toward an AI-powered future yet stumbling over the chasm between deployment and profitability. This disconnect should concern every C-suite executive, policymaker, and investor betting on Southeast Asia’s digital transformation.

The Adoption Illusion

The headlines look impressive. Nearly half (46%) of Southeast Asian companies have moved beyond AI pilots to scaling implementations, edging ahead of the global average and outperforming most of Asia-Pacific excluding China and India. With 680 million consumers, a population of 380 million under age 35, and mobile penetration reaching 930 million connections, the region appears primed for AI dominance.

Singapore alone hosts over 60 AI centers of excellence. AWS, Google, Alibaba Cloud, and Tencent have collectively committed tens of billions to data centers across Indonesia, Malaysia, Thailand, and Vietnam. The Southeast Asia-Japan Cable 2 went live in 2025, promising the low-latency connectivity that AI applications demand.

Yet beneath this glittering surface lies an uncomfortable truth: 67% of surveyed organizations report that AI has delivered less than 5% impact on their earnings before interest and taxes. 

This is not a technology problem. It’s an execution crisis.

The Value Capture Gap

The McKinsey research identifies three structural barriers preventing Southeast Asian firms from monetizing their AI investments:

Barriers to Value Capture

1. Talent shortage — lack of skilled AI professionals.
2. Integration complexity — legacy IT and fragmented data hinder scalability.
3. Unclear ROI — companies spend boldly but measure poorly.

First, the talent drought is real and worsening. Twenty percent of respondents cite lack of internal AI expertise as their primary obstacle, not budget constraints, not regulatory concerns, but the simple inability to find people who can make AI work. As Alexandro Seminiano, CTO at Bank of the Philippine Islands, notes: “We need people who understand the business and the context of the data being generated.” 

Second, integration complexity is killing scalability. Sixteen percent of companies struggle to embed AI into existing systems, a problem compounded by legacy IT infrastructure and fragmented data environments that plague the region. AI isn’t plug-and-play; it requires fundamental workflow redesign that most organizations resist.

Third, the ROI remains unclear. Despite 64% of organizations allocating more than 11% of their technology budgets to AI initiatives, the business case for transformation remains murky. Companies are spending boldly but measuring poorly.

What High Performers Do Differently

The report’s most valuable insights come from studying the outliers, the 8% of Southeast Asian companies that have achieved full-scale AI deployment. These high performers share three distinguishing characteristics:

They redesign workflows fundamentally rather than layering AI onto existing processes. High performers are twice as likely to integrate AI at the core of operations, not the periphery. Grab exemplifies this approach: their merchant AI assistant, deployed to over 1.2 million merchants, has driven 10% business growth by embedding intelligence directly into seller workflows. 

They invest boldly and consistently. High performers are 2.2 times more likely to expect enterprise-wide transformative change from AI, not incremental improvements. This isn’t about pilot projects; it’s about business model reinvention.

They embed rigorous AI governance. Nearly half of high-performing organizations demonstrate senior leadership ownership and commitment to AI initiatives, with formal governance structures that balance innovation with risk management.

The Agentic AI Wildcard

Perhaps most intriguing is the emergence of agentic AI, autonomous systems that act on behalf of users with minimal human intervention. Ninety percent of surveyed companies plan to experiment with AI agents in 2026, with IT (37%), software engineering (35%), and knowledge management (32%) leading adoption.

This represents a quantum leap beyond today’s generative AI applications. Yet scaling agentic systems beyond technical functions will require precisely the custom development and MLOps expertise that the region currently lacks. The companies that solve this capability gap first will dominate the next competitive cycle.

The Geopolitical Advantage and Risk

Southeast Asia enjoys a unique strategic position as the battleground where Chinese and American tech giants compete for influence. AWS’s $9 billion Singapore commitment, Google’s $2 billion Malaysian data center, Alibaba Cloud’s expansion across the region, and Tencent’s Jakarta operations create a competitive ecosystem that benefits local enterprises through choice, pricing pressure, and accelerated innovation.

As Mayank Wadhwa, President of Microsoft ASEAN, observes: “Southeast Asia is not just a consumer of AI; it’s become a massive co creator.” 

Yet this geopolitical dividend comes with risks. International hyperscalers could inadvertently marginalize local innovation if governments fail to support domestic AI development. With over 1,200 languages spoken across the region, culturally-aware, locally-developed AI systems remain essential for inclusive growth.

The concerning reality: Southeast Asia’s AI start-ups received only $1.7 billion of the $20 billion in venture investment across Asia-Pacific in 2024, representing just 122 of 1,845 AI funding deals. While Q2 2025 saw venture investment jump to $172 million (the highest in three years), the capital gap remains dramatic compared to the scale of infrastructure investment by foreign tech giants.

The Micro, Small, and Medium Enterprise Challenge

The region’s economic backbone, MSMEs that contribute 44.8% to GDP and employ 85% of the workforce, face acute challenges in the AI transition. While platforms like Grab, Sea, and Shopee are democratizing access, smaller enterprises struggle with pricing pressures and capability gaps that threaten to create a two-tier economy of AI haves and have-nots. 

Singapore’s minister for digital development and information, Josephine Teo, emphasizes the importance of leadership: “For AI to truly be transformative, leadership must drive the change. The CEO, C-suite, and board members all play a critical role.”

The Path Forward

The McKinsey report proposes a collaborative framework across five pillars: enabling trusted data flows, strengthening infrastructure and inclusion, expanding regional talent pipelines, catalyzing sector collaborations, and promoting responsible AI at scale.

These recommendations are sensible but insufficient without confronting hard truths:

Companies must stop confusing activity with progress. Piloting 50 AI projects doesn’t create value; scaling three transformative applications does. The discipline to kill experiments and double down on winners separates leaders from laggards.

Governments must balance openness with strategic autonomy. Attracting hyperscaler investment is necessary but not sufficient. Malaysia’s and Singapore’s investments in sovereign AI infrastructure represent the right instinct, retaining local capability while benefiting from global capital.

The talent crisis requires radical solutions. Traditional upskilling programs won’t close the gap fast enough. Singapore’s National AI Strategy 2.0 points the way, but the region needs aggressive immigration policies, stronger university-industry partnerships, and incentives for AI practitioners to relocate to Southeast Asia.

Value measurement must improve dramatically. If two-thirds of companies can’t quantify AI’s business impact, they’re measuring the wrong things. High performers obsess over outcome metrics, revenue growth, cost reduction, customer satisfaction, not deployment statistics.

A Region at the Crossroads

Southeast Asia’s AI moment is unfolding against a backdrop of genuine opportunity and legitimate concern. The fundamentals are strong: young populations comfortable with technology, competitive infrastructure investments, and healthy competition among global tech powers creating optionality for local enterprises.

But momentum without execution is just motion. The region’s 73% adoption rate means nothing if it doesn’t translate into the productivity gains, new business models, and inclusive growth that AI promises. 

As Vivek Lath, McKinsey Partner, frames it: “Leading the AI charge in Southeast Asia requires bold, transformative ambition. It’s about moving beyond isolated use cases to fundamentally reinventing business models with AI at their core.”

The question isn’t whether Southeast Asia will adopt AI, the data shows it already is. The question is whether the region can close the gap between adoption and impact before competitors elsewhere figure out the formula first. With $4.12 trillion in GDP and 4.1% annual growth, Southeast Asia has too much at stake to settle for being fast followers who never capture the value they create.

Other People are Reading

Aye Finance is set to list on the BSE and NSE on February 16, with grey market signals pointing to a cautious debut.
The IPO is currently quoting at a negative grey market premium (GMP), indicating that shares are trading below the issue price of Rs 129 per share in the unofficial market.

While GMP is not an official indicator, it often reflects near-term sentiment. A negative premium suggests the possibility of a discount listing, although actual performance will depend on broader market conditions and institutional support.

The IPO, which was open from February 9 to February 11, saw modest investor response. The issue was subscribed 1.04 times overall. Qualified institutional buyers (QIBs) subscribed 1.62 times their quota, while retail participation remained weak at 0.81 times. The non-institutional investor (NII) category was largely undersubscribed at just 0.05 times, indicating limited high-net-worth investor appetite.

Ahead of the public issue, Aye Finance raised Rs 460.51 crore from anchor investors. The IPO comprised a fresh issue of Rs 710 crore and an offer for sale of Rs 300 crore by existing shareholders.

Also read: Risk-on trade back? Smallcap stocks rally up to 28% in 2026, but market breadth stays weak

Business and financials

Aye Finance is a non-banking financial company (NBFC) focused on providing small-ticket secured and unsecured loans to micro and small enterprises (MSMEs). It serves over 5.86 lakh active customers across 18 states and three union territories.
For FY25, the company reported total income of Rs 1,504.99 crore and profit after tax of Rs 175.25 crore. For the six months ended September 2025, income stood at Rs 863.02 crore, while PAT came in at Rs 64.60 crore, reflecting some moderation in profitability.With subscription only marginally above 1 time and negative GMP signals, investors will closely track institutional participation and secondary market mood on listing day. The performance could hinge on sentiment towards financial stocks and appetite for NBFC names in the current market environment.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

The UK’s gender pay gap will not close for another three decades if progress continues at its current rate, according to the Trades Union Congress (TUC).

Analysis of official earnings data by the union body shows that the average disparity between men’s and women’s pay stands at 12.8%, equivalent to £2,548 a year. At that pace of improvement, the gap would not be eliminated until 2056, the TUC said.

The gap varies sharply by sector. In finance and insurance it is widest at 27.2%, while in leisure services it is just 1.5%. Even in female-dominated sectors such as education and health and social care, the pay gap remains significant at 17% and 12.8% respectively.

The gender pay gap reflects the difference in average earnings between men and women across organisations and industries. Companies with more than 250 UK employees are legally required to publish gender pay data.

The TUC said the disparity means the average woman “effectively works for 47 days of the year for free” compared with male colleagues.

“Women have effectively been working for free for the first month and a half of the year compared to men,” said TUC general secretary Paul Nowak. “With the cost of living still biting hard, women simply can’t afford to keep losing out.”

The pay gap is largest among workers aged 50 to 59, a trend the TUC attributes partly to the long-term impact of women pausing or scaling back careers to take on caring responsibilities.

The union federation is calling for improved access to flexible working, expanded childcare provision and stronger parental leave policies to help narrow the gap. Nowak described the government’s recent Employment Rights Act as “an important step forward”, but argued further action was needed so parents could better share caring duties.

Business groups have previously warned that additional employment rights and benefits could increase costs for employers. Matthew Percival, director of the future of work and skills at the Confederation of British Industry (CBI), said firms were already facing significant pressures.

“The cost of doing business is leading to job cuts,” he said. “With major changes to employment laws coming, the government must take care not to add further strain.”

Under new rules, employers will be required to publish action plans setting out how they intend to reduce their gender pay gap.

A government spokesperson said ministers were “tackling the root causes of the gender pay gap” through measures including expanded childcare entitlements, strengthened protections for new mothers and changes to flexible working rights.

Despite incremental progress in recent years, the latest figures suggest that without faster reform and structural change, pay parity remains a distant prospect.

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A nationwide recall has been issued for a baby fruit purée after federal testing found elevated levels of patulin, a toxin that can pose health risks with prolonged exposure.

Initiative Foods announced Friday that it is recalling one lot of its “Tippy Toes” Apple Pear Banana Fruit purée following the test results.

Patulin is a naturally occurring toxin produced by molds that can develop in fruits, particularly apples. Prolonged ingestion of the substance may lead to adverse health effects, including potential immune suppression, nerve damage, headaches, fever and nausea.

According to the U.S. Food and Drug Administration, no illnesses or injuries have been reported.

RECALL EXPANDS TO NEARLY 1M FRIGIDAIRE MINIFRIDGES SOLD AT TARGET OVER FIRE HAZARDS

The product was distributed nationwide in grocery stores in all states except Alaska and may also have been sold in Guam and Puerto Rico, the FDA said.

Consumers are urged to check the “Best By” date stamped on the bottom of each plastic tub for “BB 07/17/2026.” The affected packaging is also marked with code “INIA0120.”

TRIO OF DAIRY GIANTS RECALL INFANT FORMULA OVER CONTAMINATION FEARS

The company advises anyone who purchased the product with that date to stop using it immediately and dispose of it or return it to the place of purchase for a refund.

Consumers with health concerns after consumption should contact a healthcare provider.

13K POUNDS OF READY-TO-EAT GRILLED CHICKEN BREASTS RECALLED OVER POSSIBLE LISTERIA CONTAMINATION

Retailers have been instructed to check inventory and remove the affected lot from sale or distribution.

“At Initiative Foods, the safety of our consumers and their families is our highest priority,” CEO and President Don Ephgrave said. “We are cooperating with the FDA to ensure strict review and enhanced safety measures across all our products. We thank our retail partners and customers for their understanding and prompt action on this matter.”

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For additional recall information, consumers and retailers can call 1(855) 215-5730.

Mumbai: India’s largest bourse, the National Stock Exchange of India (NSE), has hit another roadblock in its decade-long journey to go public. A writ petition has been filed in the Delhi High Court challenging the no-objection certificate (NOC) issued by the Securities and Exchange Board of India (Sebi) for NSE’s proposed initial public offering (IPO). The petition, filed on February 10 by New Delhi resident and former judicial officer KC Aggarwal, 72, questions Sebi’s January 30 clearance and could delay NSE’s much-anticipated listing once again. ET has reviewed the petition.

The exchange has been trying to go public since 2016, but repeated regulatory scrutiny and past controversies have kept the plan on hold. The Delhi High Court is expected to take up the matter on Monday or later this week, with its decision likely to influence the next steps in NSE’s listing saga.

At the heart of Aggarwal’s petition is Sebi’s framework on Corporate Action Adjustments (CAA), introduced to ensure “value neutrality” in derivatives trading during bonus issues, stock splits and extraordinary dividends. In simple terms, it means derivative traders’ economic positions should remain unchanged before and after such corporate actions. Aggarwal alleges that NSE violated this framework. Instead of adjusting both price and quantity, NSE changed only prices, debiting dividend-equivalent amounts directly from derivative traders’ accounts, including that of Aggarwal. Under the Securities Contracts (Regulation) Act, dividends belong only to shareholders, not derivatives traders.

“The impugned debit is therefore ultra vires the statute,” he said in the petition.

Aggarwal said his complaints to NSE were closed without a hearing, and Sebi upheld the exchange’s actions without independent review. Right to Information (RTI) requests seeking details of the debited funds were repeatedly rejected, creating a “complete information vacuum” and emails to the Sebi chairperson remained unaddressed as of January 2026, he added.

His complaint to Sebi outlined how funds were misappropriated from derivatives traders under the pretext of CAA in violation of Sebi rules, the impermissibility of off-market derivative transactions and the serious implications for investor protection and market integrity. He had asked that Sebi not grant any approval for NSE’s IPO until the matter was fully investigated and addressed.

Despite unresolved statutory violations, opaque fund flows and systemic concerns, Sebi cleared NSE’s IPO, Aggarwal said. The writ seeks “regulatory accountability, enforcement of statutory and circular-based duties, and an interim restraint to prevent irreparable prejudice to public investors.” Sebi didn’t respond to queries on the matter.

The market regulator’s January 30 NOC allows NSE to formally kick off the IPO process–appoint bankers and legal advisers and start drafting the listing documents.

The wait for the exchange’s IPO has been one of India’s most prolonged and closely watched, with the first application submitted to Sebi on October 18, 2016. The regulator initially withheld approval due to concerns related to a co-location case, governance lapses at the bourse, and issues with its technology infrastructure. Since then, NSE has repeatedly approached Sebi for clearance. After Tuhin Kanta Pandey took charge as Sebi chief in March 2025, he formed an internal committee to examine the NSE IPO issue.