US Tech Firms Warn Vietnam Over Draft Law To Hamper Data Centers

U.S. tech companies warned government of Vietnam over its draft law to tighten rules on data protection as well as limit overseas data transfers, stating that the move would restrict data center operators and social media firms to grow their businesses in the country.

According to Reuters, Vietnam has a population of approximately 100 million and is considered as among the largest market in the world for online platforms like Facebook. The nation aims to expand its data center industry with more foreign investments in years.

Jason Oxman, chair of the Information Technology Industry Council, which is a trade association that represents huge data center operators like Meta, Google and Equinix, said that the draft law "will make it challenging for tech companies, social media platforms and data center operators to reach the customers that rely on them daily."

Vietnamese and foreign officials stated that the draft law is already being discussed in parliament. It was also encouraged by the ministry of public security and was designed to ease the manner by which authorities access information.

The parliament of the Southeast Asian country is currently discussing the draft law in its month-long session. If found eligible in accordance to its program, the law is slated to be passed on Nov. 30. In the interim, it is still subject to change.

The existing regulation in Vietnam imposes limitations on cross-border transfers of data in certain circumstances. However, these limitations are not enforced all the time, U.S. News reports.

A determination on the impact of the new law on foreign investment cannot be made yet.

Prior to the draft law being proposed in parliament, Google, in August, bared plans of setting up a large data center to be located in southern Vietnam.

BMI, a research firm said that Vietnam could be a major player in the data center industry as the cap on foreign ownership will end next year, opening for more foreign investments.

One provision of the Vietnamese draft law is that there would be a need for prior authorization for the overseas transfer of core and important data. These provisions, however, are still vaguely defined.

Oxman stated that these will be hindering foreign business operations. He also noted how the U.S. tech industry is conveying concerns with authorities in Vietnam over the "the undue expansion of government access to data."

The draft law requires companies to share data with the ruling Communist Party in Vietnam, as well as with state organizations. The rationale is for "fulfilling a specific task in the public interest."

The new law "would cause significant compliance challenges for most private sector companies," said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, noting talks were underway to persuade authorities to "reconsider the rushed legislative process" for the law, Reuters reported.