Business, IT groups nix plans for data localization

MANILA, Philippines — Foreign chambers and IT industry groups have expressed concern over potential policies for the implementation of restrictive data localization, a move seen to negatively impact on the information technology and business process management (IT-BPM) sector.

The groups, consisting of the Joint Foreign Chambers of the Philippines, US-ASEAN Business Council, IT & Business Process Association of the Philippines, Asia Cloud Computing Association and Asia Internet Coalition, instead want the Philippine government to maintain open and enabling policies on data governance and champion the free flow of data in the region.

In a recent virtual policy discussion, government representatives and sectoral experts highlighted the importance of an enabling environment for cross-border data flow to enhance digital trade and competitiveness of data-driven industries in the Philippines.

The current environment that encourages this free flow of data in the country and out into the region and globally has benefitted the country as it has promoted the explosive growth of the  IT-BPM industry which in 2022 generated revenues of $32.5 billion and boasts of providing jobs to 1.57 million full-time employees.

Princess Ascalon, IBM Philippines’ government and regulatory affairs executive, said the local IT-BPM sector is expected to generate up to 1.7 million jobs and over $35.9 billion in revenue this year.

Emerging global trends, however, suggest an increase in the implementation of more restrictive data localization measures.

“Looking at the evolution [of data localization], half of these measures came into force after 2015 but there has also been a boom in terms of new data localization measures being imposed. About two-thirds of these are most restrictive,” said Janos Ferencz, trade policy analyst at the Organization for Economic Cooperation and Development (OECD).

A survey conducted by the OECD on the impact of data localization measures on sectors like aviation, cloud computing and cross-border e-payments found that restrictions in the flow and storage of data have led to a significant increase in data management costs; regulatory fragmentation; and cybersecurity risks resulting from the inability to share data on threats or system vulnerability.

“Any obstacle or barrier to the flow of information – including data localization measures – could substantially inhibit the benefits we extract from (being part) of this globalized environment. Data localization measures should not be something that inhibits innovation,” Ferencz said.

Ascalon said that imposing restrictions on cross-border data flows could affect major operations in the IT-BPM industry, such as increasing the cost of services and pose risks for cybersecurity and disaster recovery and redundancy.

“The IT-BPM industry is going to be more heavily-reliant on data as it continues to grow. We hope to have the Philippine government and industry’s support to keep our policies open and conducive to the growth of this sector,” she added.

Marie Sherylyn Aquia, assistant director at the Bureau of International Trade Relations of the Department of Trade and Industry, said the agency’s position is to support cross-border data flows.

To this end, the coalition of business groups emphasized the importance of a transparent and consultative approach between the Philippine government and industry stakeholders to ensure that relevant policy considerations and frameworks are consistent with international standards, various trade agreements and strengthening digital thrust to facilitate cross border access, usage, and exchange of data.

“The ability to use, share, and access data across borders is vital for innovation and economic growth and to leverage technologies, such as the internet of things and artificial intelligence,” Naoto Kanehira, World Bank senior digital development specialist, said.

Public policies in the Philippines have been generally supportive of maintaining no barriers to the flow of data in the private sector. Requirements on data localization – or measures pertaining to the location for storage and processing of data – have been limited only to some residency restrictions on above-sensitive and top-secret government data under the Cloud First Policy.