US tech companies warn that Vietnam's planned law will hamper data centers, social media

Written by Francesco Guaracio and Phuong Nguyen

HANOI – US technology companies have warned the Vietnamese government that a bill to tighten data protection rules and limit data transfers abroad will hinder the growth of social media platforms and data center operators in the country.

The Southeast Asian country of 100 million people is one of the world's biggest markets for Facebook and other online platforms, and is aiming to dramatically expand its data center industry with foreign investment in the coming years.

Jason Oxman, president of the Information Technology Industry Council (ITI), an industry group that represents major companies, said the bill would “increase the costs that tech companies, social media platforms, and data center operators rely on every day. “It's going to be difficult to reach those customers.” technology companies such as Meta, Google, and data center operator Equinix;

The bill, which is being debated in parliament, also aims to make it easier for authorities to access information, and was requested by the Ministry of Public Security, according to Vietnamese and foreign officials.

The Ministry of Public Security and the Ministry of Information did not respond to attempts to contact them by email and phone.

Vietnam's parliament is debating the law during its current one-month session and is expected to pass it on November 30 “if qualified,” according to its program, although its content is subject to change.

Existing regulations in Vietnam already restrict cross-border data transfers in some circumstances, but they are rarely enforced.

It is unclear how the new law, if adopted, will affect foreign investment in the country. Reuters reported in August that Google was considering setting up a large data center in southern Vietnam before a bill was submitted to Congress.

Research firm BMI said Vietnam could become a major regional player in the data center industry as investment restrictions for foreign companies end next year.

“Unreasonable expansion of government access”

The bill's provisions include prior approval for overseas transfers of “core data'' and “important data,'' but the definition is vague at this point.

“That would disrupt the operations of our overseas operations,” Oxman told Reuters.

Tech companies and others favor cross-border data flows to reduce costs and improve services, but several jurisdictions, including the European Union and China, believe that doing so better protects privacy and sensitive information. We are restricting the transfer of such data because we believe it can be strengthened.

Under the bill, companies would be required to share data with Vietnam's ruling Communist Party and state institutions in a number of vaguely defined cases, including “fulfilling specific tasks in the public interest.”

Oxman said the U.S. tech industry has expressed concerns to Vietnamese authorities about the “unwarranted expansion of the government's access to data.”

Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, said the new law “will pose significant compliance challenges for most private companies” and called for a “reexamination of the rushed legislative process” for the law. He noted that talks are underway to persuade authorities.

(Reporting by Francesco Guaracio and Huong Nguyen; Editing by Jamie Freed)