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Big Tech's challenges for Asean

Big Tech's challenges for Asean

Source: Straits Times
Date Published: 14 Mar 2019
Author: Chen Chen Lee and Erin Low

The regional grouping must act fast to tackle issues of data governance and anti-competitive behaviour.

For Big Tech, the year 2018 marks the beginning of "techlash", as it is forced to confront a public awakened to and repulsed by its multiple failures in protecting user privacy, providing value for customers and upholding democratic values.

Faced with reports on shocking data breaches, anti-competitive practices and the damaging effects of fake news, lawmakers too have put Big Tech firms under closer scrutiny in an effort to hold them accountable for unscrupulous or negligent behaviour.

On Jan 21, France used the European Union's newly minted General Data Protection Regulation to fine Google €50 million (S$76.6 million) for not fully disclosing to users how it collects and uses their personal information, and for failing to obtain their consent to show them personalised ads.

In China, the murders of two young women riding with Didi Chuxing, a leading Chinese ride-hailing group, led Beijing to tighten regulations for Internet companies.

These developments have implications for Asean. As it looks to the digital economy as an engine of growth, Asean must avoid blind optimism in tech companies.

It should also consider how to lay the foundations of trust involving consumers, companies and government in order for the digital ecosystem to thrive.

Because data is the currency of the digital economy, Asean needs to build uniform and robust regulatory frameworks that provide clarity for tech firms on how they should handle user data and transparency for customers on how their data is being used.

Clarity and consistency of rules are necessary for any system to be trusted.

Specifically, there are two broad data-related issues Asean must focus its attention on before they become unmanageable: irresponsible data collecting and sharing, as well as anti-competitive actions from tech titans.

DATA PROTECTION

Consumer-facing tech companies such as Google and Facebook have come under fire for harvesting huge quantities of personal data, aggregating them and selling them to third parties for use in targeted advertising.

While some may argue that in exchange for their data, users benefit immensely from tech companies' products and services, the crux of the matter is that companies end up extracting a lot more value from their customers than customers do from their services. Moreover, users are often unaware of how their data is being used, let alone the extent to which businesses profit.

A 2019 survey by Ipsos and the World Economic Forum showed that one-third of citizens across 26 countries know little or nothing about how their personal data is being used by companies and governments.

To tackle this issue, Asean needs to create strong data privacy frameworks that apply across all 10 member states.

At present, Asean suffers from a patchwork of data privacy laws. Some are stronger than others while a few members, such as Brunei and Myanmar, lack any at all.

Without adequate laws to hold companies responsible, consumers are left increasingly vulnerable to data breaches and exploitation of their stolen particulars.

Massive data theft is already happening and will only get worse if nothing is done as cross-border digital trade and services accelerate across South-east Asia.

Last year, a security researcher found that the personal information of 46,000 customers with Thai mobile operator True Corp was publicly available on Amazon Web Services.

In response, True Corp defended its security measures, and accused the researcher of hacking its customers' data.

In 2017, Malaysia investigated an attempt by hackers to sell the personal information of 46.2 million mobile customers online, a massive data breach that may have affected nearly all of Malaysia's citizens.

To rectify the shortcomings, Asean must work on two levels.

At the intra-regional level, Asean must come to a consensus on the concepts underpinning data protection. For instance, Asean states have different stances towards the liberalisation of cross-border data exchanges.

Countries such as Indonesia and Vietnam have passed data localisation laws that require companies to store processed information within the geographic boundaries of the country.

While data localisation laws are meant to safeguard sensitive personal information, critics view them as protectionist measures that raise business costs for foreign companies.

Asean, however, has recently proposed a cross-border data flow mechanism, which can facilitate data sharing among participating member states - a step towards creating certainty for businesses, and eliminating unnecessary restrictions on data flows.

At the national level, each Asean state should develop comprehensive data privacy laws while remaining in consultation with one another.

These should hold companies accountable for irresponsible personal data collection, and mandate how they are to handle data breaches.

Once these baseline laws are in place, lawmakers in each Asean country can then go on to draft laws requiring companies to seek customers' explicit and informed consent before collecting and processing their personal information.

ANTI-COMPETITIVE BEHAVIOUR

The second issue that Asean regulators should address has to do with anti-competitive behaviour by Big Tech firms able to leverage their collection of massive amounts of consumers' data.

In the United States and China, Big Tech became big through network effects, meaning that the value of their products or services increases as more customers use them.

For example, the more people use Google Search, the more data is created, leading to better algorithms that help inform more accurate results.

Network effects help to entrench tech platforms as the go-to interface between buyers and sellers of products and services.

They gain as more and more people use their services to shop, travel and make payments.

They also solidify their market dominance by monetising their services, manipulating customer behaviour through data analytics, and profiting off user data.

In China, the rise of Alibaba and Tencent can be credited to the massive data sets they have access to from their entire ecosystem of services.

As super apps, Alibaba and Tencent consolidate diverse features such as online retail, mobile payments and digital entertainment, capturing their consumer base through horizontal and vertical market integration.

Coupled with aggressive buyouts of rival firms, as well as acquisitions of tech companies abroad, these two Chinese giants have dominated markets not only within China, but also in the wider region.

In the Asean context, anti-competitive practices may become an issue with the rise of the super app.

Emerging markets within South-east Asia are primed for super apps because their consumers tend to be unbanked, mobile-first Internet users.

Home-grown Grab and Indonesian Gojek, which both started as ride-hailing apps, have ambitions of becoming South-east Asia's super app.

While customers may find the integrated services of super apps valuable and convenient, they ultimately lose out if the company engages in anti-competitive behaviour that drives up prices and imposes high barriers of entry to rival businesses.

Last year, Grab was fined by the Competition and Consumer Commission of Singapore for acquiring Uber's South-east Asia operations, because the competition watchdog deemed that the merger would result in higher prices for ride-hailing customers.

It is imperative to begin a conversation now on how to build a trustworthy digital ecosystem while Asean's digital economy is still nascent. Once advanced tech such as the Internet of Things and 5G networks are introduced to our shores, exponentially larger volumes of data will be generated and companies will have free rein to cash in on them.

That said, in regulating the digital economy, Asean lawmakers should strive to balance the interests of government, business and consumers, not putting one party above the other.

As this year's Asean chair, Thailand has prioritised Industry 4.0, with cultivating digital talent and digitising small businesses part of its agenda.

It provides a timely opportunity to begin the conversation on data governance, tackling the big questions about tech and ethics, and establishing the principles for trust in consultation with consumers and industry.

It is only with a firm foundation that Asean will fully reap the benefits of the digital economy.


It is imperative to begin a conversation now on how to build a trustworthy digital ecosystem while Asean's digital economy is still nascent. Once advanced tech such as the Internet of Things and 5G networks are introduced to our shores, exponentially larger volumes of data will be generated and companies will have free rein to cash in on them.

• Chen Chen Lee is director of policy programmes, and Erin Low is policy research analyst (Asean), at the Singapore Institute of International Affairs.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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