# Southeast Asia’s AI Race: Can ASEAN Stop Competing Against Itself?

- Link: https://www.thailand-business-news.com/asean/279886-southeast-asias-ai-race-can-asean-stop-competing-against-itself
- Published: 2026-01-19T09:42:00+07:00
- Author: J. Allan

Across Southeast Asia, a high-stakes competition for artificial intelligence supremacy
is intensifying, and regional leaders worry it could undermine their collective 
future.

## Key takeaways

 * ASEAN member states are competing against each other for AI investment through
   divergent strategies – Malaysia offers 0% tax rates, Indonesia prioritizes digital
   sovereignty with local language models, and Thailand leverages energy diplomacy.
 * The Digital Economy Framework Agreement (DEFA), expected in 2026, could unlock
   a $2 trillion digital economy by 2030 – but only if member states shift from 
   zero-sum rivalry to functional specialization as an integrated value chain.
 * ASEAN’s strategic advantage lies in becoming a neutral digital hub where U.S.
   and Chinese tech ecosystems coexist under regional protocols – evidenced by payment
   interoperability already working across Indonesia, Thailand, Malaysia, Singapore,
   and the Philippines.

ASEAN’s 10 member states are deploying starkly different strategies to capture global
tech investment. Malaysia offers corporate income tax rates as low as 0% in special
economic zones like the Johor-Singapore Special Economic Zone (JS-SEZ), attracting
hyperscalers priced out of Singapore.

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The Malaysia Data Center Market is projected to grow from $6.14 billion in 2025 
to $11.40 billion by 2031.

> “Indonesia has chosen digital sovereignty over infrastructure. NVIDIA’s investment
> in Solo through Indosat’s Sahabat-AI initiative aims to build large language models
> in Bahasa Indonesia, trained on local data and cultural contexts. “

> Indonesia is not content to be a server farm,” explained Dr. Maya Indrawati, a
> digital policy analyst in Jakarta. “They want to refine intelligence, not just
> rent infrastructure.”

Thailand leverages energy diplomacy, offering a green utility tariff guaranteeing
long-term, low-cost renewable electricity for data centers. Prime Minister Srettha
Thavisin has personally courted tech leaders, including NVIDIA’s Jensen Huang and
Apple’s Tim Cook.

> These competing strategies reveal a dangerous dynamic: ASEAN is fragmenting precisely
> when it should consolidate. “The risk isn’t external competition,” warned former
> Singapore diplomat Bilahari Kausikan. “It’s ASEAN competing against itself and
> losing the sovereign capacity to shape AI governance, ethics, and interoperability
> standards.”

The stakes are quantifiable. ASEAN Secretariat projections suggest the region’s 
digital economy could reach $2 trillion by 2030 if the Digital Economy Framework
Agreement (DEFA), expected to be signed in 2026, is fully implemented.[ ](https://www.weforum.org/stories/2025/10/asean-defa-digital-economy-pact-negotiations/)

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DEFA aims to transform ASEAN from 10 competing destinations into one integrated 
digital value chain through functional specialization: Indonesia as the innovation
testbed, Singapore as the governance laboratory, Malaysia providing semiconductor
infrastructure, Thailand as the logistics gateway, and Vietnam anchoring hardware
manufacturing.

Real coordination already exists at the street level. Indonesian QRIS payment codes
work seamlessly in Thailand, Malaysia, Singapore, and the Philippines, demonstrating
regional interoperability that policymakers have yet to scale.

According to Lenovo research, 96% of Asia-Pacific enterprises are increasing AI 
investments in 2026, with Singapore leading at $68 per capita. 

The fundamental question confronting ASEAN is whether the region can shift from 
asking “who wins?” to “what can we become together?” As DEFA negotiations continue
through 2026, that question will determine whether Southeast Asia emerges as a coherent
digital power or fractures into rival tech hubs competing for scraps from Beijing
and Silicon Valley.