Despite near-universal access to computers and the internet, Philippine businesses remain slow in adopting artificial intelligence (AI) with only only 14.9 percent of firms use AI tools, with adoption concentrated in large companies in urban centers, particularly in the ICT and BPO sectors, according to a new study by the Philippine Institute for Development Studies (PIDS).
The study, Readiness for AI Adoption of Philippine Business and Industry: The Government’s Role in Fostering Innovation- and AI-Driven Industrial Development, authored by PIDS Senior Research Fellow Francis Mark A. Quimba, former Supervising Research Specialist Neil Irwin S. Moreno, and former Research Analyst Alliah Mae C. Salazar, highlights a widening gap between basic digital penetration and advanced technology use.
The authors identified structural barriers hampering AI uptake, including weak digital infrastructure, limited awareness of emerging technologies, significant skills gaps, and scarce funding opportunities
According to the study, overall AI adoption is just 3 percent across industries, with ICT and BPO sectors at 6 to 7 percent and agriculture trailing at 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 firms being cognizant of these technologies,” they noted.
These challenges are compounded by gaps in human capital. The Philippines lags in ICT proficiency, engineering, and technology education—producing a workforce unprepared for AI-intensive industries.
Geography also widens the divide: while Metro Manila and CALABARZON lead in AI adoption, rural areas are left further behind.
Even basic connectivity is uneven. Although most businesses are equipped with computers, not all are fully online.
Data from the Philippine Statistics Authority (PSA) show that 90.8 percent of establishments in the country own computers and 81 percent have internet access, yet AI use across industries remains limited—especially among micro, small, and medium enterprises (MSMEs).
Government response
Government agencies have begun laying the groundwork for AI readiness. The Department of Trade and Industry’s National AI Strategy Roadmap and the planned Center for AI Research (CAIR) aim to position the Philippines as a hub for AI research and innovation.
“The current policy environment in the Philippines strongly supports the promotion of AI use across various sectors,” the authors observed.
However, they noted that many firms, especially MSMEs, remain in the early stages of digital transformation.
The Philippine Development Plan (2023-2028) also stresses the role of emerging technologies, including AI, in revitalizing industry, services, and research.
Translating policies into actual business-level adoption, however, remains a challenge.
Policy directions
The authors stressed that the country must play an enabling role in ensuring AI adoption benefits industries and citizens alike.
“AI has the potential to drive significant economic growth by enhancing productivity, reducing operational costs, and enabling the development of new products and services,” they emphasized.
The study proposes interventions in three domains: market facilitation, capability building, and ecosystem coordination.
“[There is a] need for coordinated action across government agencies, substantial investment in digital infrastructure and education, and the establishment of clear governance frameworks,” the authors explained.
PIDS’ take on AI for DPRM 2025
These findings are timely as the nation observes the 23rd Development Policy Research Month (DPRM) this September, with the theme “Reimagining Governance in the Age of AI.”
The observance aims to highlight how effective governance and sound policy frameworks can harness AI to enhance public administration and promote inclusive development.
As PIDS leads this year’s DPRM celebrations, the insights from this study provide crucial evidence for policymakers, industry leaders, and civil society to shape a future where Filipino businesses and workers can thrive in the age of AI.
Stakeholders and the general public are encouraged to join DPRM 2025 activities and gain insights on leveraging AI for national development.
