Author: Tham Siew Yean
Published: 21 July 2026
ISEAS Perspective 2026/52
In the current global environment, innovation-led growth is not optional for Southeast Asia. It represents a structural necessity driven by diminishing returns from traditional export-led industrialisation, increasing geopolitical and economic fragmentation, and the rise of digital and knowledge-based economies.
Evidence from the Asia Productivity Organisation shows that productivity growth has slowed across Southeast Asian economies, and much of the region remains in mid-stream assembly activities, with limited domestic value capture. Rising wages continue to erode competitiveness in labour-intensive segments. Without innovation, these economies are unable to transition into higher value-added activities such as design, R&D, and advanced services.
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