Digital data restrictions can reduce IT service exports by up to 44%: RAPID study

Digital data restrictions, as proposed in the drafts of Data Protection Act 2022 and Cloud Computing Policy 2021, can reduce IT-based service exports by up to 44%, says the local think tank Research and Policy Integration for Development (RAPID).

"Imposing restrictions on cross-border data flow…will also have a negative impact on GDP growth and foreign direct investment," RAPID Chairman Mohammad Abdur Razzaque said while presenting a study report at a webinar on Wednesday.

Currently, Bangladesh has no strict restrictions on cross-border data flow, Abdur Razzaque said, adding that some minor limitations came with the ride-sharing service guidelines issued in 2017.

In the recently drafted rules and regulations, the government proposed data localisation and restrictions. "Any policy in favour of data localisation and its restrictiveness needs a comprehensive cost-benefit analysis," he added.

Data localisation or restriction means processing and storing user data, such as payments and consumer choices of products, within the border of a country, where the data originates, the RAPID study explains.

Although data restrictions are believed to have some advantages, for example, it can secure netizen data and ensure privacy and sovereignty, RAPID argued that data localisation would not be the best option for Bangladesh now.

Data restriction needs cost-intensive infrastructure, while technical challenges there can result in limited innovation, it added.

"Usually governments fear that once data is stored outside, they won't be able to access it if needed," says the study, which was conducted to assess the impacts of restrictions on cross-border data flows on digital exports and GDP growth.

Dhaka University Development Studies Professor M Abu Eusuf, India-based think-tank CUTS Executive Director Bipul Chatterjee, and General Economics Division Member Secretary Md Kawser Ahmed, among others, were also present at the webinar.

They also agreed that the government should conduct a comprehensive analysis of the benefits and possible impacts of data flow restrictions.

"We should go ahead with a moderate approach. The government can keep the [digital] data flow free as usual for the next five to six years," Kawser Ahmed said.

RAPID says Bangladesh is currently ranked 52nd in the Global Data Privacy Ranking, which is better than countries such as India, Vietnam and Singapore.

Citing a McKinsey report, the RAPID study noted that the free flow of data was estimated to have contributed $2.8 trillion to the world economy in 2014. This figure is expected to stretch to about $11 trillion by 2025.

Analysing the Bangladesh Bureau of Statistics and UNCTAD statistics, the report shows that in 2021 Bangladesh's IT and ITES exports were estimated to reach $2 billion – with an annual average growth rate of 15% over the last 15 years.

The exports are expected to grow to $5 billion by 2025. The information technology and IT-enabled service sectors also account for over 30% of net foreign direct investment in Bangladesh, the RAPID report noted.