The Government of India in June 2020 blocked 59 apps, developed and owned by Chinese companies. A GOI press release stated these apps were a risk to sovereignty and integrity of the country. Subsequent decisions in September and November 2020 expanded the list of banned Chinese apps in India to 220.
The government order had closely followed the Galwan skirmish and the ban is now seen as a clear signal that India will use access to its domestic market as an ingredient of its foreign and defence policy. However, it also brings into focus a critical issue—data.
Cliched as it may sound, data does and will continue to dominate our economies and societies and the need to protect and safeguard this data can never be understated.
Apps today are capable of collecting data even when they are not being used. Copious amounts of data are collected from our devices by apps that don’t need that amount or kind of information.
The privacy issues around collection of data have now the led to an Apple-practiced paradigm—Ask app not to track. Apple now pro-actively discloses data tracking done by apps to users and offers them ‘opt-in’. Here is an example of a US tech behemoth calling a stop to mass-scale accumulation of customer data before regulation steps in.
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The Chinese themselves protect their domestic market by putting severe restrictions on how much foreign-owned tech companies can operate in China and what kind of data can be collected by them. The Wall Street Journal in August reported that Chinese regulators are considering a ban on Chinese tech companies, which hold large amount of consumer data, from going public in the US markets.
The lack of transparency vis-à-vis practices and ownership of Chinese tech companies is leading to countries clamping down on their activities. The US banning Huawei from participating in the 5G network rollout in US is an apt example of the clampdown.
Challenges Big Tech Companies Pose
In the Indian context we need to ask, how confident are we that Chinese-owned apps will comply with our data protection and privacy laws? How confident are we that we will be able to monitor the end use of data that Chinese apps collect from their Indian users? What safeguards are we putting in place to prevent unlawful storage and dissemination of our consumer data by companies owned by governments and countries that are inimical to India?
The second-order effect of the app ban is the fillip it has given to the Indian tech ecosystem. Indian-origin apps are yet to see the kind of success that Chinese apps enjoyed, but their endeavours need to be seen in the broader context of how the data wars in India unfold.
We have already lost the battle of search and social media to American companies. To let another set of foreign companies use their dominance to prevent local champions from emerging, is an aspect that has not been seriously debated.
One cannot compare foreign tech companies to brick-and-mortar companies and call any attempt to prevent their domination as protectionism. Unlike a Hindustan Unilever or Maruti Suzuki, these tech companies do not invest large sums of capital or create large-scale employment opportunities in India. They do, however, benefit from network scalability and the winner-takes-it-all nature of the internet-based market place. Their size has a bearing on government’s ability to enforce law of the land, be it data storage or privacy. One only has to see the recent episode with Twitter on compliances to get a glimpse of challenges these new-age tech companies pose.
How to Tame the Chinese Threat
Having taken the call on restricting market access to Chinese tech companies, it is now imperative that the government should watch out for them trying to return to India through the back door. There are now news reports that a number of Chinese apps like Shein, Tik Tok and PUBG are looking at entering the Indian market via companies that act as fronts for Chinese companies. Shopee, an app supposedly based in Singapore but controlled indirectly by Chinese entities, has already laid out plans to launch in India.
A good way to deal with the challenge of Chinese companies using complex layering of ownership of the apps would be to take a leaf out of the financial services industry—and the Ultimate Beneficiary Ownership. Any company looking at making an investment in the Indian capital markets or opening an account with a bank in India has to declare its ultimate beneficiary ownership. The onus of getting these details is on the financial intermediary. Bank, securities broker or the mutual fund as the case may be.
A similar approach can be followed when it comes to apps that are available on Android and IOS platforms. Government can stipulate that Google and Apple, on a periodic basis, furnish details of ultimate beneficiary ownerships of companies that provide apps on their platforms. Any failure to do so or any incorrect information provided should lead to Google and Apple failing in compliance of local laws and facing the repercussions.
The government has now set the template for using our economy as a tool for furthering our defence and foreign policy. It should now build on that paradigm comprehensively by expanding the scope of what constitutes our economy and build capacity to implement the paradigm holistically.
Maneesh Taneja writes regularly on current affairs and policy matters. The views expressed in this article are those of the author and do not represent the stand of this publication.
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