Cross-Border Data and the Digital Economy

During a virtual policy debate on August 16, the Joint Foreign Chambers of the Philippines, the US-Asean Business Council, the IT and Business Process Association of the Philippines, the Asia Cloud Computing Association, and the US Chamber of Commerce Internet Alliance in support of the Philippine government Reportedly, it maintains open and enforceable principles on data governance to promote the free flow of data in the region.

During my opening remarks, I highlighted the Philippines’ key role in championing cross-border data flows amid negotiations on the Indo-Pacific Economic Framework for Prosperity and the ASEAN Digital Economic Framework Agreement (DEFA).

Trade and Investment Secretary Alfredo E. Pascual, along with other ASEAN Economic Ministers (AEM), endorsed the study and framework for negotiating DEBA during the 55th AEM meeting in Semarang, Indonesia on August 19. ASEAN is set to launch negotiations on an agreement to accelerate trade growth, improve interoperability and increase the participation of micro, small and medium enterprises in the digital economy across the region. Progressive rules in Defa, including digital commerce, cross-border e-commerce, cyber security, digital IT and digital payments, are expected to double the projected size of Asia’s digital economy to $2 trillion by 2030.

As President Marcos highlighted in his State of the Nation Address in July 2023, the digital economy contributed 9.4 percent ($35 billion) to the Philippines’ 2022 GDP. As one of the regional leaders for cross-border data flows, the Philippines is poised to become a net winner at DEFA, with access to a bigger piece of the $2 trillion ASEAN digital economy pie.

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On its current trajectory, the Philippines is on its way to becoming a digital economic heavyweight in the region. However, any change from the current open and enabling policy regime, through regulation imposing data localization requirements, could alter this trajectory significantly.

Data can be freely used, shared and accessed across borders to drive innovation and economic growth, and to leverage technologies such as the Internet of Things and artificial intelligence. A study by the OECD on the impact of data localization measures in sectors such as aviation, cloud computing and cross-border e-payments found that restrictions on the flow and storage of data led to a significant increase in data management costs; Cybersecurity risks due to regulatory fragmentation, and the inability to share data about threats or computer vulnerabilities. Also, imposing restrictions on cross-border data flows could increase the cost of services and pose risks to cyber security, disaster recovery, and layoffs in the IT and business process management sector – which are of critical importance to the Philippine economy.

Apart from some residency restrictions on highly sensitive and confidential government data under the Cloud First policy, there are currently no broad data localization mandates in place in the Philippines. If any proposed data localization or data residency mandate is put forward, it would be in direct conflict with the Philippines’ trade obligations and the government’s policy approach of allowing data to flow across borders.

Such mandates fundamentally hinder the growth of the digital economy because they prevent companies from offering cross-border services, accessing cutting-edge digital technologies and solutions, and keeping costs low; Prevent citizens from benefiting from cross-border services and solutions and do not improve security or data protection outcomes. Data localization and data residency mandates result in higher costs, less choice, less innovation and less secure digital services for businesses and citizens.

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Therefore, it is imperative that the government takes a deliberate, transparent and consultative approach to this issue, considering the many stakeholders that will be affected and the negative effects it could have on the country’s digital economy ambitions. Open and enabling government support for principles of data governance and free data flow will allow the Philippines to lead the way and take full advantage of the opportunity presented by adopting emerging digital technologies and agreements such as Defa. Country and Region.

Ebb Hinchliffe is the Executive Director of the American Chamber of Commerce of the Philippines.

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