Singapore's pursuit of artificial intelligence (AI) leadership is encountering significant hurdles, according to a recent survey by Deel. Conducted by Milieu Insight, the research reveals that while the potential of AI to enhance productivity is widely acknowledged, adoption remains cautious due to economic pressures and a persistent skills gap.
The survey indicates that 81% of local businesses have experienced negative impacts from global tariffs, with 56% reporting increased operational costs. These financial strains have led to difficult decisions, such as wage freezes (60%), reduced hiring (48%), and retrenchments (43%). Even companies at the forefront of AI adoption are feeling the pinch, with 86% reporting wage pressures.
Despite these challenges, businesses that have deployed AI tools report notable benefits, including increased efficiency (71%), operational optimisation (61%), and cost savings (50%). Furthermore, 31% of organisations have accelerated their AI efforts in response to global disruptions, highlighting a proactive approach among some sectors.
“Singapore’s businesses are being squeezed from both sides—by rising costs and the need to invest in innovation,” said Nick Catino, global head of policy at Deel. He emphasised that while AI adoption can drive productivity, it is not a panacea for broader economic issues, leading many companies to hesitate due to concerns about upfront investments and uncertain long-term returns.
The survey also highlights that 68% of businesses remain in the early stages of AI adoption, with larger enterprises making more progress than small and medium-sized enterprises (SMEs). A significant barrier to scaling AI is the shortage of skilled talent; 47% of respondents reported an insufficient local talent pool, citing high salary expectations (51%) and skills mismatches (47%).
To address these shortages, 62% of businesses are open to hiring international talent, recognising the need for knowledge transfer to enhance local capabilities. However, only 20% have allocated budgets for workforce reskilling.
Furthermore, while 92% of respondents view government support as essential for AI adoption, engagement with existing initiatives is limited. Only 5% are actively engaging with Singapore’s National AI Strategy, indicating a disconnect between governmental plans and business participation.
The findings underscore the urgent need for strategic action to align policy, talent, and technology.
