The European Union (EU) is accelerating efforts to regulate and oversee artificial intelligence (AI). However, the primary legislation known as the "EU AI Act" is currently facing stagnation and resistance from the industrial sector.
For businesses in ASEAN, this issue is not distant or confined to Brussels alone. Because this law has "extraterritorial reach," similar to the previously enacted General Data Protection Regulation (GDPR), exporters across Asia—including smart electronics, automotive parts, medical diagnostic devices, and AI-driven services—will soon need to comply with Europe's stringent regulations.
The law will begin enforcement in 2025 and will be implemented progressively until full completion in 2027. It includes severe penalties, potentially imposing fines up to 7% of a company's global revenue if violations occur. Thus, the critical matter for ASEAN businesses is not whether these regulations will impact them, but how quickly each company can elevate compliance to become a competitive advantage.
The core of the EU AI Act presents two seemingly conflicting goals: the EU aims to lead global AI regulation while simultaneously preserving its competitiveness in the global innovation arena.
A recent survey by Penta, which polled over 1,500 senior policymakers in the EU and the United States, found that more than 46% of EU officials rank AI as one of the top three regulatory priorities.
This situation has caused significant concern among industry leaders. Over 40 CEOs from leading European companies, including giants such as ASML and Siemens, have jointly called for a"two-year delay in the law’s enforcement."They warned that redundant provisions and excessive obligations could become obstacles to innovation, a crucial factor Europe relies on to maintain global competitiveness.
Currently, "competitiveness" has become the highest political priority in Brussels. Although calls for simplifying regulations have persisted for years, the rapid advancement of AI technology has heightened pressure and risks. Consequently, the EU AI Act, once hailed as a major global regulatory framework, now risks being outpaced by technology itself.
For Asian businesses, this tension generates uncertainty. However, within this crisis lie opportunities. Companies that proactively adapt—through AI audits, embedding ethics into system design, and demonstrating transparency—can distinguish themselves and build strengths in markets where "trust" is increasingly a key factor in decision-making.
Although the AI Act sets rules at the EU level, its enforcement will be shaped by the priorities of individual member states. For example, our analysis of public data shows that policymakers in Germany and Italy often link AI technology to sustainability agendas in industry and the environment, whereas French policymakers prioritize skills development and academic integrity.
Therefore, it is clear to ASEAN exporters that although the EU legislates collectively as a bloc, enforcement reflects the political sensitivities unique to each country. Companies trading with Europe must prepare for scrutiny that extends beyond technical compliance to include AI systems' interactions with ethical and social values within diverse national contexts.
Meanwhile, ASEAN countries themselves are moving in alignment, having developedthe "ASEAN AI Guide"andthe "ASEAN Responsible AI Roadmap"as voluntary guidelines emphasizing rigor in fairness and transparency principles. Individual governments are experimenting with tailored measures suited to their domestic contexts and needs.
At the national level, Indonesia is piloting a "Regulatory Sandbox"—a controlled innovation testing environment—in health and financial technology (Fintech) sectors. Malaysia aims to become a major global player in AI technology, while Singapore has launched the"AI Verify toolkit"to help organizations test their systems against fairness and transparency standards.
However, regulatory capabilities remain uneven. Large companies are better equipped to build infrastructure supporting compliance frameworks, whereas micro, small, and medium-sized enterprises (MSMEs)—the backbone of the ASEAN economy—often lack funding and expert personnel to align their operations with emerging global AI standards.
For organizations seeking to operate in Europe, voluntary codes are no longer sufficient. Establishing transparency, auditability, and human oversight as concrete, deeply embedded operational practices will determine which companies can sustainably grow and succeed in the future.
Certainly, the EU is not the only influential player in AI regulation. The United States maintains a sectoral regulatory model prioritizing innovation.
In Asia, China has enacted legally binding regulations covering generative AI, algorithmic transparency, and content labeling. Similarly, South Korea’s "Master AI Law," effective in 2026, will focus on regulating high-impact AI systems in healthcare, finance, and education.
ASEAN stands at a crossroads amid these differing regulatory approaches. Companies aligning with European standards not only secure access to the EU market but also build resilience against China’s stringent rules and meet the innovation-driven expectations of the US. In practice, EU compliance is becoming the "global baseline."
Moreover, the Organisation for Economic Co-operation and Development (OECD) and UNICEF have jointly released guidelines protecting children's development amid widespread AI adoption. ASEAN exporters should prepare for such scrutiny, especially for products related to health, education, or digital experiences of children and youth—issues of critical importance.
These matters are vital because ethical debates can no longer be separated from political dimensions. For instance, France has pushed for EU-wide mandatory age verification systems, while Ireland emphasizes child protection. These developments reflect AI regulations advancing into increasingly sensitive areas, making avoidance impossible.
Although AI adoption is accelerating rapidly across ASEAN, readiness varies widely by sector. Many companies remain in early stages of data strategy development without internationally standardized governance structures. While this gap poses risks, it also offers a significant opportunity for organizations that accelerate adaptation to become market leaders.
Exporters in automotive and electronics can leverage compliance audits aligned with EU requirements to build trust with European partners. Healthcare and technology firms can highlight transparency and fairness as key selling points in international contracts. Financial service providers can enhance investor confidence by aligning risk management frameworks with EU expectations.
While governments across Asia respond swiftly, private sector initiatives are crucial. Companies investing in compliance today will set tomorrow’s business benchmarks.
The EU continues to enforce the law, offering simplified procedures for small businesses. However, these eased reporting requirements should not be misconstrued as exemptions or waivers but rather as invitations for businesses to engage proactively in shaping the future and turning compliance into a competitive differentiator.
For ASEAN businesses, the foremost clear practice is to "speak the same language as policymakers," since regulators expect AI to fulfill broad social and economic goals, not just maximize profits. Companies presenting initiatives aligned with "sustainable development" will gain superior credibility.
Additionally, businesses must "take the lead in safety and ethics," beginning upstream by developing secure, reliable data-sharing platforms, building seamless interoperability, embedding auditability into system design, and investing in education and transparency through training, workshops, and pilot projects to demonstrate commitment to sustainable AI integration.
Companies acting now will gain opportunities to form superior partnerships and access open markets more smoothly. In the new AI-driven economy, "trust" is not merely a virtue but a highly valuable strategic asset.
ASEAN businesses can no longer regard the EU AI Act as a distant regulation. Its extraterritorial reach will reshape global supply chains, investment flows, and consumer expectations.
The winners in this arena will be those who embrace compliance as a chance to lead and build a reputation for safety, ethics, and transparency recognized beyond borders.
The EU has already extended its invitation. Now it is up to ASEAN businesses to respond—doing so will not only ensure regulatory adherence but also demonstrate their capacity to compete sustainably on the global stage.
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