PUTRAJAYA, Aug 18 — Prime Minister Datuk Seri Anwar Ibrahim today called for vigilance from the government against the “AI Productivity Paradox” in the country’s digital transformation.
He said the paradox refers to situations where large investments in 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 a ‘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” is a stage in the adoption of new technology when early high expectations are not met, leading to disappointment, doubt 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 and integration, information technology and AI challenges, with a focus on outcomes.
He said this in his monthly address to the Prime Minister’s Department staff during an assembly 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.
Anwar said studies by the United Nations University in Tokyo, McKinsey and JP Morgan found that only 3 to 7 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 be misleading.
He mentioned a prominent Islamic organisation in London that used ChatGPT to generate text resembling Quranic 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 to 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 that proved more burdensome, meaning profits multiplied for the privatised companies, especially when the process was not done transparently, as has happened in our country. 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,” Anwar said.
