' Vietnam Forces Facebook & Google to Pick Privacy or Growth By John Boudreau -- source: Bloomberg/

Vietnam Forces Facebook and Google to Pick Privacy or Growth

By John Boudreau

June 27, 2018, 3:00 PM PDT Updated on June 28, 2018, 1:24 AM PDT

2019 law will require data localization and government access

That measure could hurt Vietnam’s growing digital economy

Vietnam’s new cybersecurity law could force Alphabet Inc.’s Google and Facebook Inc. to choose between access to one of Asia’s fastest-growing digital economies and protecting their users’ privacy.

The law, which goes into effect Jan. 1 after the National Assembly passed it this month, requires foreign internet companies to store data within the country and open local offices. If requested, they’ll also be required to hand over to the government the data of users suspected of anti-state activity — including spreading news that may impede Hanoi or hurt the economy.

The law mirrors efforts globally to safeguard domestic users’ information and open up access to data that governments say they need to combat threats — what China refers to as its cyber-sovereignty. It also reflects a growing wariness about the influence of internet and social media giants that handle and parse information on and for billions around the world.

“If they comply with this law, they violate their own terms of service to protect the privacy of their users,” said Tim Bajarin, president of Creative Strategies Inc. “Officials could also censor content at will given the way the law is written.”

Vietnam’s move to assert greater control over what its people do online underscores the dilemma for tech companies that rely on countries wary of social media for growth. Apple Inc. agreed to build a data center and blocked a swath of apps in China to comply with local laws. Indonesia has threatened to bar social-media providers unless they comply with stringent demands to filter content deemed obscene.

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Vietnam’s youthful growing middle-class is a lure for digital companies. The country has averaged economic growth of 6.3 percent between 2005 and 2017 and multiplied its per capita income six-fold from 2000, according to government data. But the new law could now dent the nation’s growing digital economy by increasing startup costs and trigger an exodus of entrepreneurs to other markets, said Eddie Thai, a Ho Chi Minh City-based partner with 500 Startups, which started a $10 million fund in Vietnam two years ago.

Unlike China, Vietnam doesn’t block websites such as Facebook and Twitter. But the government has stepped uparrests of activists since 2016. Last year, officials announced they were deploying a 10,000-member cyber-warfare unit to combat what the government sees as a growing threat of “wrongful views.” President Tran Dai Quang, a former head of the public security ministry, says the regulations are needed to maintain social order and prevent “plots of hostile and reactionary forces,” according to a post on the government’s website.

Facebook and Google declined to comment on whether they will comply with the law. But Hoang Phuoc Thuan, director of the Vietnamese Ministry of Public Security’s Cybersecurity Department, told local media neither company had objected to the legislation.

“The devil is in the details,” said Jeff Paine, managing director of the Asia Internet Coalition, which represents companies such as Facebook, Google and Apple. “How does it get implemented? We will continue to engage with the government.”

Silicon Valley companies that comply with the law however could indirectly be complicit in the government’s crackdown on activists, said Phil Robertson, Asia deputy director for Human Rights Watch. The organization says there are more than 120 activists imprisoned in Vietnam. Furthermore, setting up offices in Vietnam “will open them up to so much liability risk related to their own employees,” he said.

The risk to U.S. internet companies viewed as assisting in crackdowns on government critics was highlighted in 2007, when former Yahoo! Inc. Chief Executive Officer Jerry Yang apologized to the mother of a Chinese dissident during a U.S. Congressional hearing. They have an obligation “to push back against” Vietnam’s law, U.S. Representative Chris Smith, a New Jersey Republican who has held hearings on Vietnam, said in a statement.

It’s unclear what the government will do if the foreign internet companies refuse to obey. Government officials, who aggressively seek foreign investment and support a robust digital economy, have indicated they won’t block services, said Vu Tu Thanh, senior Vietnam representative of the U.S.-Asean Business Council, whose members include Google and Facebook. The government, though, has previously pressured Vietnamese companies to suspend advertising on YouTube and other sites showing anti-government videos.

Mary Tarnowka, the U.S. Consul General in Ho Chi Minh City, has criticized the new law, saying its passage “further narrows freedom of expression online, imposing burdensome restrictions on U.S. and other foreign firms.”

— With assistance by Xuan Quynh Nguyen, and Nguyen Dieu Tu Uyen

Theo Bloomberg

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