AI and Philippines’ economic strategic directions

By Cesar Polvorosa, Jr.

(Part 2)

Transcending the existing roadmap requires a grounded and adaptive national strategy.

The first and most important pillar is human capital. The Philippines must invest heavily in producing AI engineers, data scientists, cloud architects, cybersecurity specialists, computational modelers, and machine learning researchers. This demands a coordinated national talent initiative that spans scholarships, graduate programs, industry mentorships, and international partnerships designed to build an AI-capable workforce within a decade. The universities cannot carry this burden alone; they need sustained funding, industry integration, and curricular modernization.

The second pillar is infrastructure. A national AI ecosystem requires reliable broadband, energy stability, data center capacity, and secure cloud environments. Without addressing high electricity costs and grid vulnerabilities, large-scale AI adoption — especially in manufacturing, data analytics, and AI model training — will remain constrained. Investments in renewable energy, intelligent grids, and regional connectivity are thus inseparable from any credible AI strategy.

The third pillar is industrial alignment. The Philippines must prioritize sectors that yield the greatest productivity gains and strategic leverage: IT-BPM, manufacturing, agriculture, transport and logistics, financial services, and health. AI applied in these sectors can increase resilience, expand exports, enhance food security, and reduce economic vulnerabilities. Philippine Industrial Policy should therefore work in tandem with AI policy, offering incentives for technology upgrading, targeted industries, workforce reskilling, and AI-enabled enterprise transformation.

A fourth pillar is MSME — micro, small, and medium-sized enterprises — integration. MSMEs account for 99.6% of Philippine firms, meaning AI adoption confined to large enterprises is exclusionary. A responsive strategy must include MSME AI adoption grants, pooled professional services, and simplified access to cloud tools and technical support. Otherwise, AI adoption will remain shallow and geographically imbalanced.

Finally, regulatory readiness must be strengthened. AI requires clear rules regarding transparency, accountability, data protection, algorithmic fairness, and safety. The Philippines must move from voluntary ethical principles to enforceable standards and sector-specific guidelines. A national AI governance authority modeled after successful country cases would streamline regulation, harmonize standards, and build public trust.

VULNERABILITIES AND OPPORTUNITIES
The rise of AI will redefine Philippine economic structures, creating both winners and losers. Understanding industry-level vulnerabilities and opportunities is crucial for policy and strategy.

The most vulnerable industries are those dependent on routine, rules-based, and repetitive tasks. First among these is the voice-based segment of the Information Technology and Business Process Management (IT-BPM) sector like call centers, where conversational AI and automated customer service systems have already begun replacing first-level support functions. Unless the industry shifts rapidly toward higher-value analytics, cybersecurity, and augmented professional services, job displacement could intensify. Second, clerical and administrative work in both the public and private sectors faces pressure from automation tools capable of handling documentation, record management, and transactional processing. Third, segments of retail, banking, and insurance reliant on manual verification and standardized processes may experience accelerated automation unless they innovate toward AI-augmented decisioning and customer intelligence.

On the other hand, several industries possess exceptional potential for AI-driven growth. The IT-BPM sector remains well positioned to evolve into a hub for AI operations, data annotation, machine learning model monitoring, and knowledge-intensive professional services. Manufacturing, particularly electronics, automotive components, semiconductors, and food processing, can benefit from AI-driven quality control, predictive maintenance, and supply-chain optimization. Agriculture, long constrained by low productivity, offers some of the highest national returns on AI adoption through precision farming, climate modeling, disease surveillance, and logistics intelligence. Healthcare presents major opportunities through AI-assisted diagnostics, telemedicine, pharmaceutical analytics, and hospital workflow optimization. Logistics and e-commerce can achieve significant efficiency gains through route optimization, inventory prediction, and intelligent warehousing.

The distribution of opportunities and vulnerabilities underscores a central truth: AI is not inherently job-destroying or job-creating; its effects depend on effective adaptation. With the right strategy, the Philippines can transition vulnerable industries into higher-value segments while expanding opportunity sectors into engines of economic transformation.

GOVERNANCE, ETHICS, AND THE STATE’S ROLE
A competitive AI system requires not only technological capability but strong governance. The Philippines must articulate a coherent regulatory framework that protects data privacy, and mandates transparency in automated decisions. The government also has a responsibility to ensure that AI adoption does not exacerbate inequality. Public institutions must invest in accessible digital services, inclusive training programs, and community-based digital literacy. AI should enhance, not undermine, democratic governance and social equity.

Public-sector AI capacity is central to this vision. Government agencies need skilled personnel, interoperable systems, and modern procurement processes. AI can revolutionize disaster response, healthcare delivery, tax administration, transportation planning, and social protection — but only if government institutions themselves become AI-ready.

CONCLUSION
The National AI Strategy Roadmap provides an important foundation, but the Philippines must transcend planning and visioning to comprehensive execution. The global race toward AI-driven productivity, competitiveness, and innovation is accelerating, and the country cannot be stifled by incremental progress. A responsive strategy — one rooted in talent development, infrastructure upgrading, industrial alignment, MSME integration, and strong governance — will determine whether AI becomes a missed opportunity that widens existing economic gaps with neighboring countries or a catalyst for inclusive and accelerated national progress.

(Read Part 1 here: AI and Philippines’ economic strategic directions – https://tinyurl.com/2729j69f)

Cesar Polvorosa, Jr. is professor of Economics and International Business at a Canadian University. He is an occasional contributor to current affairs publications including the Philippine Star and Interaksyon. His literary publications in North America and Asia have been anthologized.