New cyber-security law may thwart foreign businesses, stall growth

Experts are looking askance at Vietnam’s proposed cyber-security law, saying it would create barriers for foreign businesses and hinder GDP growth.

In the latest version of the bill, the Ministry of Public Security proposes that digital behemoths like Facebook and Google be required to store data of Vietnamese users in Vietnam, as also important data collected or generated from activities in the country.

Such provisions will have negative impacts on economic development as cross-border data exchange is limited, the Vietnam Digital Communication Association (VDCA) said in a recent statement to the Defense-Security Committee of the National Assembly.

The regulation will make Vietnam less attractive to foreign businesses, said Nguyen Quang Dong, director of the Institute for Policy Studies and Media Development, under the VDCA. 

It will be very difficult to make digital giants such as Microsoft and Amazon store their customers' data in Vietnam, Dong told VnExpress International.

He said the high security standards that such companies follow will be inimical to typical Vietnamese practices.

Furthermore, “even though the direct costs of enforcing this regulation will be charged to foreign businesses, Vietnamese users will eventually have to pay for storing their data inside the country,” he added.

The localization of users’ data will affect usage of a shared database, which is currently popular among businesses, Tran Thi Kim Phuong, Vietnam Information Security Association’s chief of staff, told the Thanh Nien (Young People) newspaper.

For instance, said Phuong, if a hotel has a customer database for 100 facilities in different countries, when a Vietnamese goes to one such facility outside Vietnam, he will have to submit his information all over again.

The regulation will also create several other difficulties for businesses, she said. 

Apart from making Vietnam less attractive to investors, the proposed law will also have deleterious impacts on the economy.

Vietnam’s GDP will decrease by 1.7 percent, foreign investment will plunge 3.1 percent and $1.5 billion in consumer welfare will be lost should the bill take effect, according to a study by the Asia Cloud Computing Association, an organization which aims to ensure that the interests of the cloud computing community are effectively represented in public policy debates.

As there are more businesses in Vietnam operating and participating in cross-border trade, unnecessary constraints upon cross-border data flows could jeopardize both future opportunities and much of the investment being considered and deployed, according to study published in March by the Brookings Institution, which claims to be dedicated to independent research and policy solutions. 

Many experts are also concerned about the effectiveness of the bill. “Even if a business stores their data in Vietnam, we might not be able to access that information as it is encrypted,” Bui Quang Minh, a director of MVS Information Security Jsc, told Thanh Nien.

The draft law on cyber-security will be discussed on Tuesday at the ongoing National Assembly session. 

Vietnam currently has 64 million people with online access, of which 55 million, or 57 percent of the population, use social media, according to a report published in January by We are Social, a social media marketing and advertising agency.