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Commentary: Red flags from Facebook data breach for Asean

09 Apr Commentary: Red flags from Facebook data breach for Asean

By Chen Chen Lee and Shangari Kiruppalini
For The Straits Times

Facebook Inc has been dominating the headlines recently.

And for good reasons. The tech giant is facing intense scrutiny for not putting in place the right mechanisms to fully protect the data of its users.

Facebook failed to prevent a third party, Cambridge Analytica, from accessing information on 87 million users. It has seen its valuation drop more than US$75 billion (S$99 billion), its stock price is falling, and chief executive officer Mark Zuckerberg will testify before the US Congress next week.

Beyond this scandal is the looming question of data privacy: How can the illegal harvesting of data be prevented and what should be the role of national governments in regulating this?

Information is power, especially in this digital age, and there are compelling reasons for strong government oversight to prevent data from falling into the wrong hands.

The illegal harvesting of data by Cambridge Analytica may have rigged the outcomes of both the United States presidential election and the United Kingdom’s Brexit referendum, intruding upon a country’s democratic processes.

There is a lesson here for Asean as it pushes for greater digital connectivity in the region, a priority under the Singapore chairmanship this year.

Asean’s ability to leapfrog to become one of the top five digital economies has caught the attention of multiple investors. According to a Google-Temasek Study, Asean is the world’s fastest growing Internet market. Its digital economy is seen to exceed US$200 billion by 2025 with 3.8 million users going online every month.

Asean is also experiencing a demographic dividend. More than half of its population is under 30 and by 2030, it is projected that nearly half a billion of Asean’s population will belong to the middle-income class. With rising affluence, consumption will become a key growth driver for the region and global Internet giants want a share of the pie.

Digital integration is an important piece of Asean’s agenda and investments aimed at maturing the region’s digital ecosystem are welcomed.

Between 2016 and 2017, the region’s Internet firms raised more than US$1.2 billion of capital, up from US$1 billion in 2015. Foreign investors inject capital into the local digital ecosystem, bring cutting-edge technology and infrastructure solutions.

Take the US for example. Amazon recently launched its first Amazon Prime service in Singapore. Investment firm KKR has invested US$65 million in Thailand’s aCommerce – a start-up which helps new brands adopt local online strategies.

China is another player. Didi Chuxing has invested US$2 billion in Grab. Alibaba and Tencent are the largest stakeholders in Lazada and Sea, respectively. In a recent shake-up, Ms Lucy Peng, chairman of Ant Financial, Alibaba’s financial arm, is the newly appointed CEO of Lazada. In Indonesia, Alibaba led a US$1.1 billion investment in Tokopedia; and Go-Jek, the country’s other unicorn, has also raised capital from Tencent.

Global investors are rapidly expanding their digital footprint across South-east Asia, and Asean needs to be wary of possible digital monopolies emerging in the region.

The monopolisation of data, which can influence the behaviour of billions of consumers, can give digital monopolies an unprecedented advantage in shaping Asean’s digital space, which may or may not serve the interests of its citizens.

In the name of national interest and security, Asean leaders may resort to data localisation measures. Data localisation requires the local storage and processing of data. Some regulators believe data is more secure kept within a country’s borders.

This is nothing more than a knee-jerk reaction. Rather, the conversation should be about creating a regulatory structure that allows for innovation and growth with sufficient checks and balances to safeguard personal data.

Although regional leaders have already adopted the Asean Framework on Personal Data Protection, more can and should be done. This framework is non-binding and merely establishes a set of broad principles to strengthen personal data protection in Asean.

Asean is also developing a Framework on E-Commerce which seeks to streamline regional trade rules governing e-commerce, improve digital connectivity for businesses with a focus on smaller enterprises, and improve trade facilitation in the region.

Asean leaders could consider the following: First, working together with global tech giants, Asean leaders should introduce a wide-ranging privacy programme which closely monitors the parties that the tech giants are sharing data with or selling it to.

This includes advertisers and outside application developers. Asean leaders should also look into introducing a neutral third-party professional to frequently audit their privacy programmes.

Governments can also mandate greater transparency through public hearings.

Second, Asean leaders should prioritise digital literacy. Most users are unaware of how their online personal data is being used. More can be done to educate the public on data privacy and the risks associated with sharing personal information online. Information on how citizens can update their privacy settings and limit data access and usage should be made readily available.

The digital space is relatively new and one that thrives on information and innovation. The unique characteristics of the digital economy require policymakers to begin designing entirely new sets of tools and regulations, a problem exacerbated by the sector’s rapid rate of change.

This makes government intervention a delicate affair. Overregulation may stifle the growth potential of said markets, while underregulation may affect consumers in a way that detracts them from using digital platforms.

Asean leaders cannot afford to lose momentum with its integration agenda and need to work more closely with industry players to balance the potential benefits of the digital economy with its risks. If the digitisation of Asean economies is not managed well, it can have negative spillover effects on value chains and the way individuals live and do business.

Lee Chen Chen is director of policy programmes, and Shangari Kiruppalini is policy research analyst (Asean) at the Singapore Institute of International Affairs. This article was originally published in The Straits Times on 7 April 2018.