FACEBOOK AND GOOGLE FORCED TO PICK PRIVACY OR GROWTH

The new cybersecurity law, in Vietnam, could force Alphabet Inc.'s Google and Facebook Inc. to choose between access to one of Asia's fastest-growing digital economies and protecting their user's privacy.

The law, which will go into effect from January 1, 2019, after the National Assembly passed it this month, requires foreign internet companies to store data within the country and to open local offices. If requested, they will be required to hand over to the government all the data of the users suspected of anti-state activity, including spreading news that may impede Hanoi or hurt the economy.

This law is an effort to safeguard domestic users, globally, and their information as well as opens up access to the data that governments say they need to combat threats, what China refers to as its cyber-sovereignty. It also reflects a growing wariness about the influence of the internet and social media giants that handle and parse information on and for billions around the world.

"If they comply with this law, they violate their own terms of service to protect the privacy of their users," said Tim Bajarin, president of Creative Strategies Inc. "Officials could also censor content at will given the way the law is written."

The move that Vietnam is making is to assert greater control over what its people do online. It creates an online dilemma for tech companies that rely on countries wary of social media for growth. Apple Inc. has also agreed to build a data centre and blocked a swath of apps in China to comply with local laws. Indonesia has threatened to bar social-media providers unless they comply with stringent demands to filter content deemed obscene.

Vietnam's youthful growing middle-class is a lure for all the digital companies. The country has averaged economic growth of 6.3% between 2015 and 2017 and multiplied its per capita income six-fold from 2000, according to the data collected by the government.

However, the new law can now dent the nation's growing numbers in the digital economy by increasing startup costs and trigger an exodus of entrepreneurs to other markets, said Eddie Thai, a Ho Chi Minh City-based partner with 500 Startups, which started a $10 million fund in Vietnam two years ago.

Vietnam does not block websites like Facebook or Twitter as China does. But the government has stepped up arrests of activists since 2016. Last year officials said that they were deploying a 10,000-member cyber-warfare unit to combat what the government sees as a growing threat of "wrongful views". Facebook and Google have declined to comment on whether they will comply with the new law.

Hoang Phuoc Thuan, who is the director of the Vietnamese Ministry of Public Security's Cybersecurity Department, has told media that neither companies had objected to the legislation.

"The devil is in the details," said Jeff Paine, managing director of the Asia Internet Coalition, which represents companies such as Facebook, Google and Apple. "How does it get implemented? We will continue to engage with the government."

Companies in Silicon Valley comply with the law, but this could indirectly be complicit in the government's crackdown on activists, said Phil Robertson, Asia deputy director for Human Rights Watch.

For now, it is unclear what the government will do if the foreign internet companies refuse to obey. Government officials, who aggressively seek foreign investment and support a robust digital economy, have indicated they won't block services. The government has, however, previously pressured Vietnamese companies to suspend advertising on YouTube and other sites showing anti-government videos.