Navigating Asia's AI Policy Challenges Insights for Businesses

11 Jun, 2024

Navigating Asia's AI Policy Challenges Insights for Businesses

Asia's patchwork approach to regulating artificial intelligence is increasing uncertainty for companies eager to roll out the technology across the region, according to legal experts, industry analysts and businesses themselves. From China to Singapore, governments have hesitated to pursue regionwide rules, opting instead for AI policies tailored to their own national agendas. This approach, which stands in contrast to the European Union and its recently approved AI Act, risks creating a minefield for companies.

"Where it becomes problematic is if, say, 15, 20 major countries in Asia start enacting markedly different laws," Adrian Fisher, Asia head of technology, media and telecommunications at British law firm Linklaters, told Nikkei Asia. "When you're launching a product right then, you've got to understand exactly what you're supposed to do in each country, which is quite difficult."

Professional services company KPMG recently cited "AI governance gaps" as a key risk to business growth in the coming year, despite investment in the field surging more than fivefold from 2013 to 2023. Cross-border regulation has been a hot topic since the emergence of generative AI in 2022, including at the U.N. The U.S. and China, keen rivals in the field, met in Switzerland this year for their first formal discussion of AI risks, though nothing concrete came out of the meeting. The EU, meanwhile, pulled ahead with its approval of the AI Act, billed as the world's first comprehensive law governing use of the tech. The law will apply to providers and developers of AI systems that are marketed or used within the EU, and is expected to go into effect in stages in the coming months.

In Asia, China has been arguably the most proactive government in terms of AI regulation. Although a general AI law is not yet in place, a set of administrative guidelines for the industry has been in effect since 2022, ranging from recommendations on algorithms to guidance about deep fakes and the need for AI to "promote the core value of socialism." A general AI law was incorporated into the State Council's annual legislative plan in 2023 and the Chinese cabinet aims to submit a draft law to the country's legislative body for review this year.

"Asian countries currently regulate AI as part of their respective nationwide technology legislations, which lack clarity on processes and systems that are specific to AI," Laveena Iyer, analyst at the Economist Intelligence Unit, told Nikkei. "China is the only exception, where the government progressed from hurriedly issuing guidelines in 2023 ... to drafting a national AI law that could be released for debate in 2024."

Some governments, however, are wary of scaring off businesses with heavy-handed regulation and missing out on the AI investment rush. Until recently, Japan has let companies self-regulate based on government guidelines. Now it is considering regulating large domestic and foreign AI developers to limit risks such as the spread of misinformation. The government's AI strategy council started discussions in May on creating a legal framework and is expected to analyze approaches in the U.S. and Europe as part of the process.

In South Korea, the Act on Promotion of AI Industry and Framework for Establishing Trustworthy AI is under review. In contrast to Europe's AI Act, this bill is based on the principle of technology adoption first, regulation later, according to partners from law firm Lee and Ko. "While there is no specific framework act for AI at present, several legislative bills related to AI have been introduced," partners Hwan Kyoung Ko and Il Shin Lee said in April. "South Korea is proactively evolving its legislative and regulatory environment to enhance the AI sector's global competitiveness and manage emergent risks."

Singapore has also shied away from sweeping, EU-style rules, opting instead to issue guidelines for the technology. In the absence of clear legal frameworks, some businesses have taken it upon themselves to self-regulate. U.S. telecommunications firm Verizon, which in May unveiled AI tools to analyze customer profiles to more accurately serve their needs, has promised "responsible use of AI." The company, which has a presence in Asian countries including China, South Korea and Singapore, told Nikkei that it wants to work with regional policymakers to set "commonsense laws and regulations." Priya Mahajan, Verizon's head of public policy for the Asia-Pacific, said countries should consider setting up a single regulatory body for AI to "prevent gaps in regulation ... and avoid duplicative enforcement of AI rules across multiple agencies."

Enterprise software provider SAP, which uses AI to generate reports for customers, told Nikkei that governments and regulators have a critical role to play in building the frameworks and policies to establish trust in AI. "Continued regulatory clarity and consistency will enable businesses to fully benefit from AI innovations," Paul Marriott, president of SAP Asia-Pacific and Japan, said. A failure to negotiate regionwide rules could have another unwanted outcome for Asia: less of a voice in the global AI conversation. "The EU has become the global epicenter for AI governance," said Scott Shackelford, provost professor of business law and ethics at the Indiana University Kelley School of Business. "Its new AI Act will likely become a default global standard." But such an outcome may be hard to avoid. Asia's political and digital diversity make crafting a common AI policy in the region extremely difficult, according to Amita Haylock, technology, media, and telecom partner at law firm Mayer Brown. "Businesses operating in Asia should prepare themselves to understand and engage with varying and at times competing sets of regulatory frameworks