AI-Driven Sustainable Cooperation in APEC

Asia-Pacific economies harness artificial intelligence (AI) to strengthen digital resilience, foster competitive innovation, and pursue sustainable growth. Collaborative initiatives across APEC are aligning technology with strategic goals – from cross-border cybersecurity partnerships to AI-enabled climate action – uniting developed and emerging members in a shared digital future. This analysis applies Porter’s Diamond Model to disucss how different economic tiers in APEC are leveraging AI and digital transformation for competitive advantage, and highlights key practices and forward-looking trends.

APEC economies invest heavily in digital infrastructure, talent development, and AI innovation to boost economic resilience and competitiveness.

Resilient Digital Economies: A Porter’s Diamond Analysis

APEC’s 21 member economies range from high-income tech leaders to developing markets, offering a spectrum of digital capabilities. Applying Porter’s Diamond Model across six dimensions reveals how each group builds digital economy resilience and competitiveness:

Factor Conditions: Infrastructure & Talent. Most APEC economies enjoy robust digital infrastructure – in 2023, median fixed broadband speed in APEC reached ~133.4 Mbps, with 11 economies exceeding 100 Mbps. Nearly 8 in 10 people in APEC were internet users by 2021, ensuring a broad base of digital consumers. Advanced economies (e.g. USA, Japan, Singapore) boast highly skilled workforces and heavy R&D investment, while middle-income members (e.g. China, Malaysia) rapidly improve human capital. Notably, 8 APEC economies rank among the global top 20 in digital skills readiness, reflecting strong education and training systems. Massive public and private funding bolsters these factors – for example, China’s government has poured $184 billion into over 20,000 AI R&D deals since 2000, fueling an ecosystem holding 74.7% of global AI patents.

Demand Conditions: Tech-Savvy Markets. The Asia-Pacific is home to 2.9 billion people and a fast-growing digital middle class. Rising internet and smartphone penetration have created huge demand for e-commerce, fintech, e-government and AI-driven services. Digital trade in APEC was already worth $1.68 trillion in 2018 (about 20% of intraregional trade) and has grown substantially since, accelerated by the pandemic’s push to online platforms. Consumers in advanced APEC markets expect cutting-edge digital experiences (driving demand for AI in retail, finance, health, etc.). At the same time, emerging economies see surging adoption of mobile banking, online education, and smart city tech. By 2030, AI is expected to contribute $366 billion to the GDP of Indonesia alone, exemplifying the enormous growth potential in developing APEC markets. This robust and rising demand for digital solutions incentivizes firms across all tiers to innovate and scale new technologies.

Related & Supporting Industries: Tech Clusters & Supply Chains. APEC economies benefit from strong supporting industries – from semiconductor and electronics manufacturing (dominated by economies like the United States, Taiwan, Korea, Japan) to thriving startup ecosystems and venture capital networks in hubs like Silicon Valley, Shenzhen, Seoul, and Singapore. These clusters provide critical inputs for digital innovation (e.g., advanced chips, cloud infrastructure, AI platforms) and foster collaboration among tech firms, universities, and suppliers. Cross-border supply chains within APEC enable the efficient production of digital devices and the diffusion of innovation. For instance, components designed in the US or Japan may be assembled in Malaysia or Vietnam and sold region-wide. Such interlinked industries enhance resilience by diversifying sources and encouraging knowledge transfer. Public-private partnerships also emerge as crucial support: many economies are forming cybersecurity alliances between government, private sector, academia, and civil society to bolster innovation and safety. This rich network of related industries and partnerships strengthens each economy’s digital competitiveness.

Firm Strategy, Structure & Rivalry: Innovation from Competition. Intense competition within and between APEC markets drives continuous improvement. In advanced economies, firms aggressively invest in AI and digital transformation to gain a strategic advantage – the U.S. Big Tech and China’s tech giants exemplify this dynamic, competing globally in areas like cloud AI, e-commerce, and fintech. Domestic rivalry is also fierce: e.g. Japanese and Korean conglomerates race in robotics and electronics, while startups across Southeast Asia battle to scale super-apps and digital services. This rivalry spurs R&D and adoption of AI for efficiency and competitive intelligence, as companies leverage data analytics to outperform peers. As a result, several APEC economies have become world leaders in cyber capabilities – recent rankings show the United States, Singapore, and South Korea among the top five countries in global cyber-defense readiness. The pressure to remain competitive propels firms to embrace AI-driven productivity and creative business models, reinforcing overall resilience.

Government: Policy Catalysts & Initiatives. Across APEC, governments play a strategic role in nurturing the digital economy. High-income members have launched national AI strategies and digital economy blueprints (e.g. Australia’s AI Action Plan, Singapore’s AI Governance Framework), while emerging economies focus on catching up via capacity-building and regulatory reform. Cooperative governance is also evident: APEC forums facilitate alignment on digital policies, such as the APEC Internet and Digital Economy Roadmap, which guides innovation and bridges the digital divide. Regulators and trade officials in APEC are advancing AI standards cooperation to ensure interoperability and safe innovation across borders. Many governments fund AI research, incentivize startups, and update data privacy and cybersecurity laws. They also actively partner with industry – for example, Indonesia’s government collaborates with tech firms to transfer AI knowledge and skills nationally. Such supportive policies and public-private partnerships are crucial in driving digital competitiveness while managing risks.

Chance (Opportunities & Shocks): Global Events & Breakthroughs. Unforeseen events have significantly influenced APEC’s digital trajectory. The COVID-19 pandemic was a prime example: it accelerated digital transformation across the region, forcing businesses and governments to digitize operations virtually overnight. This shock underscored the importance of digital resilience. It sparked lasting changes – from remote work normalization to telehealth and online education, which expanded markets for AI and cloud services. Technological “chance” events also play a role: the recent leap in generative AI (e.g. large language models in 2022–2023) created new opportunities and challenges, pushing APEC economies to adapt regulatory frameworks and invest in AI capabilities. Geopolitical shifts can also be chance factors: evolving trade relations or conflicts may disrupt tech supply chains or spur re-shoring of semiconductor manufacturing, altering competitive dynamics. Overall, economies that stay agile and collaborative in the face of such uncertainties – by sharing threat intelligence, standardizing protocols, and co-innovating – enhance their capacity to withstand shocks. In fact, a harmonized approach to AI development among regional partners can reduce geopolitical risks and create a more cohesive innovation environment.

By analyzing these six dimensions, we see each tier of APEC economies leveraging its strengths: advanced economies benefit from cutting-edge infrastructure and innovation ecosystems, middle-income economies capitalize on huge consumer markets and improving skills, while developing members tap into regional knowledge networks and digital leapfrogging opportunities. All members recognize that AI adoption and digital connectivity are key to economic resilience and future competitiveness.

Securing the Digital Future: Network Security and Data Collaboration

AI’s strategic role in APEC isn’t limited to commerce – it’s also pivotal in cyber defense and secure connectivity. With cyber threats rising globally, APEC nations are collaborating to fortify network security as a foundation for sustainable digital cooperation. Cross-border data flows are a focal point: smooth yet secure data exchange enables AI development, e-commerce, and innovation across economies. To balance openness with security, APEC economies have pioneered frameworks like the Cross-Border Privacy Rules (CBPR) system, which implements the APEC Privacy Framework to protect personal data while enabling its transfer across borders. This system, now evolving into a new Global CBPR Forum, reflects public-private collaboration – companies voluntarily certify to meet data protection standards, giving consumers and regulators confidence in international data.

At the same time, APEC members are strengthening cooperation on cybersecurity capacity. According to the ITU’s Global Cybersecurity Index 2024, five Southeast Asian APEC countries (Singapore, Indonesia, Malaysia, Thailand, Vietnam) achieved the top-tier “role model” status for their commitments across legal, technical, and organizational cyber measures. Many others – including the US, South Korea, Japan, and Australia – also lead in global cyber readiness. Joint initiatives contribute to this success: members share threat intelligence, conduct cyber drills, and develop common standards for critical infrastructure protection. For instance, APEC’s Security and Prosperity Steering Group has promoted cybersecurity awareness campaigns and best practices across the region. Furthermore, public-private partnerships (PPPs) in cybersecurity are proliferating. Governments offer incentives, grants, and R&D support for cybersecurity innovation, while industry provides expertise and technical solutions. In economies from the US to Malaysia, multi-stakeholder alliances address everything from 5G network security to fintech cyber risks. This inclusive approach aligns with recommendations that secure solutions, international cooperation, and compliance with global norms are needed to enhance cyber competitiveness in the digital economy.

Notably, AI technologies themselves are being deployed to enhance network security – e.g., AI-driven threat detection systems and automated incident response – creating a virtuous cycle where AI adoption improves the resiliency of the digital ecosystem. As APEC economies integrate these technologies, they contribute expertise to global cyber defense. Military and defense collaborations also feature the United States, for example, leading in cyber operations and attaining a perfect score in international cyber cooperation indices, reflecting its contributions to global network security efforts. Meanwhile, Japan has announced plans to double its cybersecurity talent pool by 2030, and economies like Korea emphasize cybersecurity education to strengthen PPPs. In sum, APEC’s approach to network security is one of collective vigilance, leveraging shared standards, data flow agreements, and AI-enhanced defenses as part of a broader sustainable cooperation agenda. Secure cross-border data flow, underpinned by trust, is recognized as a public good enabling all other digital economy initiatives to flourish.

Strategic AI Adoption: Competitive Intelligence and Regional Unity

AI has emerged as a key strategic asset for APEC economies, boosting individual competitive advantage and knitting the region closer together. Governments and businesses increasingly use AI for competitive intelligence accounting for most AI patents and cutting-edge research globally. Still, other APEC players like Japan, Canada, and Korea are also investing heavily to secure their niche leadership (e.g., Japan in robotics, Korea in semiconductor AI chips, etc.).China and the United States exemplify this race – together accounting for the majority of AI patents and cutting-edge research globally – but other APEC players like Japan, Canada, and Korea are also investing heavily to secure their niche leadership (e.g. Japan in robotics, Korea in semiconductor AI chips, etc.).China and the United States exemplify this race, accounting for most AI patents and cutting-edge research globally. Still, other APEC players like Japan, Canada, and Korea are investing heavily to secure their niche leadership (e.g., Japan in robotics, Korea in semiconductor AI chips, etc.). The global AI industry is projected to reach $422.4 billion by 2028, reflecting immense opportunities ahead. APEC economies are determined to capture a substantial share of this value by aligning national strategies with the AI revolution. Indeed, eight APEC members are among the top 20 countries in IMD’s 2023 World Digital Competitiveness Ranking, underlining their strong future readiness for AI-powered growth.

Crucially, APEC’s ethos of cooperation tempers this competition with efforts at regional unity. Member economies recognize that working together on AI can amplify benefits and mitigate risks. A landmark example is the ROK-Japan-China Trilateral Summit in 2024, where the three Northeast Asian powers finalized an AI cooperation framework. This agreement focuses on joint research, talent exchanges, and standards alignment in AI, cybersecurity, and green technology, showcasing how even erstwhile rivals can find common ground in tech collaboration. The summit’s joint declaration highlighted that strong partnerships in AI innovation can drive sustainable development, cultural exchange, and regional peace in line with SDG 17 (Partnerships for the Goals). Such multilateral AI initiatives are growing: APEC held an AI Dialogue series sharing best practices on governance and ethics, and included AI cooperation in new Digital Economy Partnership Agreements. APEC economies are collectively shaping an inclusive and innovation-friendly AI ecosystem by embedding AI into trade agreements and diplomatic forums. This unity is also pragmatic – common technical standards and regulatory harmonization (for instance, around AI ethics or data interoperability) will prevent fragmentation and allow companies to scale solutions across the 21 economies. Dr. Byung Goo Kang noted at a recent APEC meeting that international collaboration on AI standardization builds trust in AI systems while reducing regulatory complexity for businesses. When APEC members coordinate in this way, AI becomes a tool for continuous improvement through unity, rather than a zero-sum race.

Competitive intelligence and regional cohesion go hand in hand: A country that adopts AI in government and industry gains insight and efficiency at home and becomes a more valuable partner in regional data-sharing and problem-solving. For example, one economy's AI-empowered public health system can contribute to early warnings for cross-border pandemics. Likewise, AI-driven supply chain optimization in one country can lower costs for trading partners. These synergies illustrate why APEC is championing collaborative AI adoption – it multiplies the strategic gains and underpins a more integrated, resilient Asia-Pacific community. In 2025, APEC’s chair (Korea) has explicitly prioritized “AI Cooperation” as a key deliverable, signaling that collective strategic focus on AI will continue to deepen regional unity.

A visualization from a recent analysis highlighting Asia’s lead in AI innovation. China now accounts for nearly three-quarters of global AI patent filings, far outpacing other countries. The U.S. and other APEC members are responding with increased R&D investment and alliances, driving a competitive yet collaborative AI landscape.

AI for Sustainable Growth: Fostering Resilience and Environmental Stewardship

Beyond economics and security, APEC nations increasingly leverage AI to advance sustainable development goals and long-term resilience. Digital sustainability encompasses ensuring the benefits of the digital economy are inclusive and enduring – which means closing digital divides, upskilling workers for an AI-driven future, and using technology to address societal and environmental challenges. Many APEC economies are already using AI in public services to make growth more inclusive – for instance, deploying AI chatbots for e-government services in remote areas, or AI translation tools to bridge language gaps. To prevent an AI-fueled digital divide, members are investing in education and reskilling: in Indonesia, 92% of knowledge workers were reported to use generative AI in their jobs, and companies now prioritize hiring candidates with AI skills. This trend has prompted governments across APEC to emphasize STEM education, digital literacy, and AI training programs to build a future-ready workforce that can weather economic disruptions. Such measures boost economic resilience by enabling workers and SMEs to adapt to technological shifts rather than be displaced by them.

AI is also a powerful enabler of environmental sustainability in the region. APEC’s diverse economies face common climate threats – from Pacific typhoons to wildfires and rising sea levels – spurring interest in AI-driven climate solutions. In September 2022, the APEC Climate Symposium gathered experts to explore how AI can enhance climate change adaptation. It showcased case studies where AI improves weather prediction, disaster monitoring via satellites, and biodiversity conservation. These applications allow earlier warnings for extreme weather, more efficient resource use, and better protection of ecosystems, thereby strengthening community resilience. Similarly, AI helps optimize energy consumption and integrate renewables: smart grids in economies like Australia and Canada use AI to balance loads and reduce emissions. At the same time, predictive maintenance algorithms make infrastructure more sustainable. Green technology cooperation is now part of high-level agendas – the 2024 China-Japan-Korea summit launched a Green Technology Initiative alongside the AI framework, aiming to develop AI solutions for energy efficiency and carbon reduction jointly. Such regional collaboration amplifies impact, as innovations can be shared and scaled across countries with similar sustainability goals.

Moreover, AI contributes to economic resilience by making supply chains and financial systems more robust. For example, AI can analyze vast supply chain data to identify vulnerabilities (as seen during COVID-19 disruptions) and suggest diversifications, helping APEC’s trading economies withstand shocks. In finance, AI-driven fraud detection and risk modeling strengthen stability in banking systems against cyber-attacks or market volatility. An IMF study noted that the pandemic-era acceleration of digital adoption actually helped shield productivity in some economies – a testament to how digital readiness translates into economic resilience. Building on this, APEC’s sustainability and inclusion agenda (part of its Putrajaya Vision 2040) explicitly ties digital advancement to sustainable growth. Members are aligning AI initiatives with the UN Sustainable Development Goals (SDGs): from AI-powered precision agriculture that reduces food waste (addressing SDG 2 Zero Hunger) to smart city programs that cut pollution and improve quality of life (SDG 11 Sustainable Cities).

In the bigger picture, AI is becoming a linchpin for APEC’s vision of a future that is digitally advanced yet sustainable and equitable. By collectively investing in AI for public good, APEC economies aim to ensure that technological progress does not come at the cost of social or environmental well-being. On the contrary, AI is seen as a tool to balance growth with sustainability – whether through smarter resource management, improved disaster resilience, or new green industries driving jobs. As noted in a recent academic analysis, AI can be utilized for peacebuilding, economic recovery, and environmental conservation, making societies more stable, prosperous, and equitableharness. This encapsulates APEC’s holistic approach: leveraging the strategic power of AI not just to compete, but to cooperate for a sustainable future. Each innovative algorithm or partnership launched in the region – be it an AI climate network, a cybersecurity pact, or an inclusive digital skills program – contributes to a more resilient Asia-Pacific community where prosperity and sustainability reinforce one another.