Asean firms can’t afford to ignore EU’s AI Act

THE European Union (EU) is racing to regulate artificial intelligence (AI) but its flagship law, the EU AI Act, faces delays and industry resistance. Enforcement begins in 2025, phasing in until 2027, with penalties up to 7 per cent of global turnover for prohibited practices, similar to General Data Protection Regulation’s extraterritorial reach. For Asean businesses, this is not just a distant European story, but rather a development where speedy compliance could turn into a source of competitiveness.

Competitiveness or control?

At the Act’s core lie two near-contradictory goals: Europe wants to lead the world in AI regulation, while maintaining its position in the global innovation race. Penta’s recent survey of 1,500 senior policymakers across the EU and the US reveals that over 46 per cent of EU officials rank AI among their top three regulatory priorities.

Industry leaders are uneasy. Over 40 chief executives from Europe’s largest companies, including ASML and Siemens, have urged a two-year “clock stop” on enforcement, warning that overlapping rules and heavy obligations could stifle the very innovation that Europe needs to remain competitive globally.

Competitiveness has become the defining political priority in Brussels. The Act, once seen as a pioneering framework, now risks being overtaken by rapid technological change.

For Asean businesses, this tension brings both uncertainty and opportunity. Firms that adapt early by auditing AI systems, embedding ethics into AI design and demonstrating transparency will stand out in markets where trust is increasingly the currency of choice.

Global standards, local interpretations

The Act sets rules at EU level, but national priorities shape implementation. For example, Penta’s analysis of open-source materials indicates that policymakers in Germany and Italy link AI to sustainability in industrial and green agendas, while French policymakers focus on skills and academic integrity.

Asean exporters must expect scrutiny not just on technical compliance but also on how their systems align with diverse ethical and social priorities of individual governments. The bloc itself is moving in a similar direction, with the Asean AI Guide and the Asean Responsible AI Roadmap offering voluntary guidance on principles of fairness and transparency, while national governments are piloting measures tailored to local needs.

From Indonesia’s testing of regulatory sandboxes to Singapore’s AI Verify toolkit for organisations to test their systems for fairness and transparency benchmarks, the region’s governments are looking to streamline the overall process on a national level.

Furthermore, the US continues to favour a sectoral, innovation-first model, while China has introduced binding rules for generative AI, algorithmic transparency and content labelling. Asean sits at the crossroads of these competing approaches. Firms aligning with Europe’s standards will not only access the EU market but also build resilience to navigate China’s stricter regime and the US’ innovation-driven expectations. In effect, EU compliance could become the global baseline.

Larger firms are better positioned to build compliance frameworks, while micro, small and medium enterprises – the backbone of Asean economies – often lack the funding and talent to meet emerging and disparate international standards.

For those targeting European business, voluntary codes are no longer sufficient. Transparency, auditability and human oversight must now be embedded; these will determine who thrives in the future. Firms investing in compliance today could set tomorrow’s benchmarks.

Trust as a strategic asset

The EU is pressing ahead with implementation, offering some simplifications for smaller firms. However, reduced reporting requirements should not be seen as a reprieve. Rather, it is an invitation for businesses to step up, shape the debate, and turn compliance into a differentiator.

For Asean firms, the playbook is clear:

Speak the language of policymakers. Regulators want AI to serve broad social and economic goals, not just profit maximisation. Firms that frame projects in terms of sustainable development will win at credibility.

Lead on safety and ethics. This means developing secure and trusted data-sharing platforms, ensuring interoperability, and building auditability into system design.

Invest in education and transparency. Training, workshops and pilot programmes remain the most effective ways to demonstrate commitment to successful AI integration.

Asean firms cannot treat the EU AI Act as a distant regulation. Its extraterritorial reach means it will reshape global supply chains, investment flows and customer expectations. The winners will be those who seize compliance as a chance to lead, building reputations for safety, ethics and transparency that transcend borders.

The EU has issued the invitation; it is now up to Asean firms to accept.

The writer is senior director at Penta Group