Regulating for a Digital Economy: Understanding the Importance of Cross-border Data Flows in Asia

 

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Overview

The Fourth Industrial Revolution is underpinned by unprecedented increases in connectivity and global data flows, characterized by digitization into a digital ecosystem.

Cross-border data access, usage and exchanges are essential across all sectors in the digital age, whether directly or indirectly, taking advantage of global-scale data infrastructure such as cloud computing. This has thus allowed individuals, startups and small businesses to participate in global markets.

The key benefits of the digitization of economies, international trade and increase in connectivity is the transformation and enabling of markets-improving efficiency and productivity while reducing transaction costs and barriers to market entry. Global data flows are also transforming the nature of international trade, with goods and services being sold directly to customers, plugging into global value chains.

Regulating for a Digital Economy: Understanding the Importance of Cross-Border Data Flows in Asia first takes a look at the economic gains of cross-border data flows, and describes the forms of data flow restrictions by governments and the costs of such restrictions. Following which, a typology of data localization is created to explore the various motivations and objectives behind the restrictions, and recommendations are provided. The paper then highlights the impact of cross-border data flows on various data-intensive sectors of five economies in Asia, namely India, Indonesia, Japan, the Philippines and Vietnam.

Data localization in almost all cases was found to be a suboptimal means for achieving the objectives that data localization is enacted for, and might incur negative, unintended impacts on other policy and regulatory goals. Alternatives to data localization approaches are provided in the paper.

Regulating for a Digital Economy: Understanding the Importance of Cross-Border Data Flows in Asia is written by Joshua P. Meltzer, senior fellow in the Global Economy and Development program at Brookings Institution, and Peter Lovelock, Director of TRPC.

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