Domestic politics are threatening Southeast Asia’s digital ambitions. The Davos crowd descended on Hanoi this week and talked up ties that could make the region the next China. In technology, though, the wrong lessons from the People’s Republic are being learned.
Vietnam is the latest country to impose stricter data restrictions, including demands on companies such as Google, Facebook and major banks. They echo rules in China, with which the likes of Apple have complied. The danger is higher prices and impediments to championing an ASEAN Internet powerhouse.
The diverse cluster of countries from Myanmar to Indonesia is the world’s third-largest market by population, at 660 million. It lays claim to 10 unicorns, or Internet companies worth more than $1 billion. Using digital tools to increase integration and trade could add as much $1.1 trillion to GDP by 2025, according to consultancy Bain. That would be quite a lift for a geographic area whose economic output was just under $3 trillion last year.
While Singapore and the Philippines have proven relatively liberal in technology terms, anachronistic instincts elsewhere could make it harder to seize any advantage. Vietnam passed a law in June that forces global technology companies, and potentially some financial institutions, to store “important” user data locally and makes it harder to send it overseas for processing. Indonesia, the region’s largest market and home to ride-hailing app Go-Jek, is reviewing its own requirements. The reasoning is clear: Vietnam wants quick access to information and content for domestic security. Like others, it frets about cybercrime and privacy, too.
Expensive proposition
Physical proximity, however, offers few safety guarantees, and banking data can be more secure if housed in places where there are already servers, engineers and compliance structures. More importantly, country by country oversight gets expensive. For example, the European Centre For International Political Economy in 2014 estimated data localisation in Vietnam could deliver a 1.7% hit to GDP.
Instead of looking north to China for guidance on these matters, turning west would be smarter.
(Clara Ferreira-Marques is a Reuters Breakingviews columnist. The opinions expressed are her own)
