PM Anwar Cautions Against ‘AI Productivity Paradox’ In Digital Transformation

PUTRAJAYA, Aug 18 (Bernama) -- Prime Minister Datuk Seri Anwar Ibrahim today called on government machinery to remain vigilant against the “AI Productivity Paradox” in the implementation of the country’s digital transformation agenda.

He said the paradox refers to situations where large investments in artificial intelligence (AI) and digitalisation may not necessarily translate into higher productivity.

“I hope this matter is given special attention by the Digital Ministry, the Communications Ministry and department heads.

“We don’t want to fall into what is called ‘trough of disillusionment’ due to assumptions made on massive allocations for digital transformation and AI programmes, which will reach tens of billions of ringgit over the next five years,” he said.

The “trough of disillusionment” refers to a stage in the adoption cycle of new technology when early high expectations are not met, leading to disappointment, doubts and declining confidence before the technology matures.

Anwar, who is also Finance Minister, urged the Digital Ministry and Communications Ministry to look into data governance as well as integration, IT and AI challenges with a focus on outcomes.

He said this when delivering his address at the Prime Minister’s Monthly Assembly with staff of the Prime Minister’s Department (JPM) here today.

Also present were Deputy Prime Minister Datuk Seri Fadillah Yusof, Minister in the Prime Minister’s Department (Law and Institutional Reform) Datuk Seri Azalina Othman Said, Chief Secretary to the Government Tan Sri Shamsul Azri Abu Bakar and Public Service Department director-general Tan Sri Wan Ahmad Dahlan Abdul Aziz.

The Prime Minister said studies by the United Nations University in Tokyo, McKinsey and JP Morgan found that only three to seven per cent of AI adoption led to real gains in productivity or workers’ income.

He said this was worrying as the government’s digital transformation and AI programmes were meant to boost output and productivity, but the “AI Productivity Paradox” shows that higher productivity and returns are not always guaranteed.

“I ask the Chief Secretary to the Government and department heads to review this matter and provide an initial response within two weeks to a month. We must avoid the issues faced by major global corporations.

“The productivity paradox is spending billions on AI to boost productivity, transparency, reduce bureaucracy and curb corruption, but the results still fall short,” he added.

Meanwhile, Anwar stressed that AI technologies such as ChatGPT cannot be regarded as an absolute source, especially in religious matters, as they could mislead the public.

He mentioned a prominent Islamic organisation in London that used ChatGPT to generate text resembling Quranic verses, but these were not genuine verses.

“Whatever it is, there must be verification. Quranic verses must be identified with their surah, while hadith must be traced to the narrator. That is our training in ensuring authenticity. Many consider ChatGPT a reliable source alongside Sahih Bukhari and Muslim. This is dangerous,” he said.

Anwar said that while digital transformation is a pillar of change and the government is introducing AI for the people, building its own AI institutions and mobilising agencies to master the technology, the risks of the “AI Productivity Paradox” must still be considered.

Citing management expert Peter Drucker, Anwar said efficient government management is often better than privatisation in several aspects.

“There have been many privatisation cases which proved more burdensome, meaning profits multiplied for the privatised companies, especially when the process was not done transparently, as happened in our country before. Companies made billions and were later handed back to the government, such as PLUS Highways and Indah Water Konsortium.

“That is why governance and tender transparency are crucial. Privatisation does not always improve productivity or efficiency. The golden rule is still good governance,” he said.

-- BERNAMA