Hajra Naz
The Asia Internet Coalition (AIC) represents major global digital media companies. They have raised concerns about data localization. They argue it could lower productivity. It might also slow economic growth and reduce jobs.
Projected Impact on Labour Productivity and GDP
According to the AIC’s report, “Data Localization in Pakistan,” implementing the Personal Data Protection Bill—based on its May 2023 draft—could result in a 14.7% decline in labour productivity by 2025. This drop in productivity is estimated to translate into a GDP loss of USD 16.5 billion in the year following enactment. The reduction in productivity and GDP could potentially result in the loss of 3.2 million jobs, driven by firms’ and consumers’ responses to policy changes.
Regulatory Landscape and Data Localization Measures
The report acknowledges that Pakistan’s current policy landscape requires some degree of data localization but suggests that further tightening of these measures may occur. The introduction of the Personal Data Protection Bill would significantly alter the regulatory environment related to data localization. The Commission, established under this Bill, would have broad powers to refuse data transfers based on vague criteria such as “public interest” or “national security.”
Implications for Businesses and Economic Impact
Data localization could impose additional requirements on businesses, especially concerning the differentiation between sensitive and critical data. Firms face challenges related to compliance processes, particularly when sharing data between public and private sectors. These challenges could be exacerbated if local data storage options are limited compared to international providers.
Cybersecurity and Cost Considerations
Cybersecurity concerns arise with data localization, as international cloud providers typically offer more robust services than local providers. Global providers use distributed systems that improve resilience and lower threat susceptibility. Data localization can lead to higher labour and operational costs.
Higher costs could hurt small and medium-sized businesses the most. Data localization might create jobs at first. However, it could also lead to job losses later if the costs become too high.
Sectoral and Strategic Impacts
The impact of data localization measures will vary across different sectors. For instance, the IT/ITES sectors may face strategic and investment challenges, while industries like health provision could see knock-on effects on the quality of life for Pakistani citizens. The overall impact will depend on the government’s enforcement approach, with a lighter touch potentially mitigating adverse economic effects compared to a more stringent enforcement strategy.
Increased Hosting Costs and Cybersecurity Risks
The report highlights that data localization could substantially increase hosting costs. For instance, one IT company estimated a 70% rise in hosting costs, and an e-commerce retailer projected that a locally compliant financial services solution would be approximately ten times more expensive than the current cloud-based solution.
These high costs could disproportionately impact smaller firms. Additionally, centralized data storage might elevate cybersecurity risks by compromising the benefits of decentralized data architectures. Concerns were also raised about disaster recovery and data mirroring challenges under data localization requirements.
