Tech companies with a sizeable presence in international markets will get caught in the cross-fire when countries clash over trade and border issues
TIKTOK is banned." I messaged my nephew in India. "Is it banned everywhere? Or just in India?" His question was remarkably prescient.
When the Chinese and Indian army clashed on the icy borders of the Himalayas, the Indian government trained its guns on Chinese apps like TikTok. My nephew is part of the cult following that TikTok enjoys, and yet governments are becoming uneasy with the app. TikTok is just one of the apps wielding enough influence to make governments uncomfortable.
This is not the first time that companies have been on a collision course with governments. For a 100 years, India's many princely states ceded control to the British East India Company, which was not just synonymous with state. It was the state. What started as sporadic skirmishes grew into contractual agreements, revenue control and military dominance. The company's expansion cleared the way for the British government to eventually take over the colonial reins of India.
This precedence cannot be ignored when tech companies are becoming a powerful force. If Amazon were a country it would rank 43rd in terms of GDP, and almost comparable to that of Pakistan. Facebook's monthly active users equals the combined population of the two most populous countries, India and China.
China's crown jewel, Huawei is facing a push back from many governments. But it is not all that simple. One cannot just simply snap ties. After the British government expressed its intent to ban Huawei, taking the cue from the US Government, the Chinese government has repeatedly issued stern warnings. While the Chinese government has Huawei's back, the latter is menacingly waving its existing maintenance contracts for the gear already installed in British telecom companies. Behind all the public posturing, talks are still on. Huawei is a pill that governments are finding hard to swallow or spit out.
Similarly, the Indian government has banned WeChat whose parent company Tencent has invested in at least 15 Indian startups. As the US government considers banning TikTok, it is already facing the wokeness of Gen Z who built a large community and income sources through the video sharing app. Yet, the United States is protesting against the European Union's anti-trust investigations against American crown jewels Apple and Google. These ties are far too complex, and the concerns are far too contentious.
China can hardly take a moral high ground on matters of level playing fields, which it has denied to the likes of Facebook. But China is not alone. The stakes are always high when it comes to large tech companies. When the US government does a rationing of H1B visas - the low-cost instruments for Indian tech services companies in the US, the Indian government promptly opens its diplomatic channels.
The blurred line between Huawei and the Chinese government is a known secret. But the main anxiety is data sovereignty. Engineers who have reverse engineered TikTok, claim that it is actually a data collection service, thinly veiled as a social network. But that is largely true for many popular apps. Amazon studies my reading habit on the Kindle, including the portions I highlight or copy. It can infer changes in my state of mind, likes and attitude from my reading. Each time I ask Alexa to switch on my bedroom lights, Amazon is taking notes. Every app worth its salt is asking for access to every nook and cranny of my smartphone.
Data sovereignty concerns have now forced TikTok to distance itself from Beijing by declaring that it would not comply with any data request by the Chinese government. It has also announced its intention to build a local datacenter in India. This is a clear sign of things to come.
Tech companies with a sizeable presence in international markets will get caught in the cross-fire when countries clash over trade and border issues. Investors will consider geopolitical ramifications when investing in apps. Local data centres will become foundational for maintaining data sovereignty.
Regulators must demand information on customer data collected by foreign apps to take preemptive actions if required. The British East India company demonstrated how a company can impinge on the sovereignty of countries and exploit their wealth. History should not be tempted to repeat itself.
- The article first appeared in Khaleej Times
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