A latest report from the Philippine Institute of Development Studies (PIDS) said most local government units (LGUs) in the country are not prepared for artificial intelligence adoption, pointing to the need for policy support for infrastructure investment, skills development, governance reforms, and resource allocation.

PIDS discussion paper examined the results of an AI Readiness Index and interviews with LGU officials, the outcome indicating most LGUs exhibit low to moderate levels of AI readiness.

The study found that adoption of AI was hampered by critical bottlenecks such as shortages of information and communications technology and AI-related skills, limited last-mile internet connectivity, and minimal budget allocations for digital initiatives.

The study also stated that LGUs face the challenge of balancing between providing essential public services that have immediate political dividends and the longer-term process of implementing and adopting AI for local governance.

The PIDS report highlighted the importance of increasing the readiness of LGUs as AI is expected to contribute significantly to Philippine growth and productivity in the coming years.

“Local government units (LGUs) may leverage on this new technology in providing enhanced public service delivery to their respective constituencies,” said the paper written by Francis Mark Quimba, Christopher Ed Caboverde and Alliah Mae Salazar.

The research authors point out that the AI sector in the Philippines is expected to expand from the projected value of $772.1 million in 2024 to about $3.5 billion by 2030.

The Department of Trade and Industry said AI could potentially contribute 12 percent of the country’s gross domestic product by 2030.

However, this expansion necessitates robust digital infrastructure and regulatory frameworks to ensure sustainable development.

Unfortunately, a newer form of digital divide appears to be emerging, as digital technologies are still not widely accessible across the country.

“For instance, internet use has mostly been concentrated in Luzon, with a few areas in Visayas and Mindanao exhibiting considerable internet usage rates. This could pose challenges in facilitating digital technology and AI adoption by various entities, such as businesses and LGUs,” the paper said.

The Index also indicated that an average LGU has only partially accumulated the foundational conditions necessary for AI adoption in terms of the six pillars of AI readiness — data readiness, economic foundation, governance and policy, digital infrastructure, innovation ecosystem, and human capital and skills.

Innovation registered the highest average score, followed by economic foundations and data readiness. In contrast, governance and skills emerged as the weakest pillars, while infrastructure remained only modestly developed.

“These results indicate that the principal bottlenecks to AI readiness lie not in the absence of innovation potential, but in institutional and human capital constraints,” the document said.

Moreover, another finding relates to AI readiness across LGUs by income classification. As expected, first-class LGUs displayed the highest AI readiness. Fifth- and sixth-class LGUs demonstrated lower scores, reflecting structural constraints including limited ICT investment, difficulty in attracting skilled ICT staff, and weaker institutional systems for data management and innovation.