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Info Service on WTO and Trade Issues (Sept21/03) Washington DC, 2 Sep (D. Ravi Kanth) – Ministers from India, Indonesia, and Sri Lanka on 1 September shared their respective policy experiences on their proposed digital transformation policies at a virtual meeting organized by the United Nations Conference on Trade and Development (UNCTAD), against the backdrop of the widening digital divide as well as unbridgeable gaps in access to digital technologies. The lack of access to digital technologies as well as the widening digital divide seem to have worsened during the current COVID-19 pandemic. It has revealed that developing countries are not only suffering gravely from inequitable access to life-saving COVID-19 technologies but also from access to digital technologies. The pandemic “has laid bare the problems of digital divide both between and within countries,” said South Africa’s trade envoy Ambassador Xolelwa Mlumbi-Peter at the WTO’s General Council meeting on 27 July. She said “technology is critical for achieving all the SDGs, but to fully harness its potential, rapid action is needed to close the digital divide and promote inclusion.” Moreover, the plurilateral Joint Statement Initiative (JSI) on electronic commerce at the World Trade Organization, which appears to be inconsistent with the key provisions of the Marrakesh Agreement, could permanently create a structural divide that would make it almost impossible for developing countries to catch-up in the foreseeable future, said several analysts, who asked not to be quoted. The draft JSI text on e-commerce includes seemingly anti-developmental provisions such as on cross-border data flows; removal of restrictions on the source code; a permanent moratorium on customs duties on electronic transmissions; and on market access and telecommunication issues among others. Earlier, UNCTAD’s senior economist Ms Rashmi Banga, in a 31-page report, laid out the case “as to how the ongoing JSI negotiations to frame new digital rules adversely impact developing countries that are currently suffering from an unbridgeable digital divide.” (See SUNS #9288 dated 18 February 2021). The WTO director-general Ms Ngozi Okonjo-Iweala, like her predecessor Roberto Azevedo, has strongly and consistently supported the JSI on electronic commerce in her statements made since 1 March, despite its negative impact on developing countries, said people following her statements made at various meetings. UNCTAD MEETING HIGHLIGHTS IMPORTANCE OF DATA PROTECTION POLICIES It is against this backdrop that the UNCTAD Unit on Economic Cooperation and Integration among Developing Countries (ECIDC) organized a high-level policy dialogue on “South-South Sharing of Policy Experiences for Digital Transformation” on 1 September 2021. “Ministers from India, Indonesia and Sri Lanka from the responsible Ministries shared the policies which have been put in place and those which are being designed for the digital transformation of their countries, particularly with respect to data infrastructure and digital innovations,” said people familiar with the discussions. While all the three countries are working hard to build their digital infrastructure including ICT and broadband infrastructure to increase access and affordability of the internet, one common thread in their policies appears to be “protection of their data” through their data protection laws which are at different stages of finalization in the three countries. The Indian Minister of State in the Ministry of Electronics and Information Technology, Mr Rajeev Chandrasekhar, highlighted that in India, the highest court of the country has recognized the right to privacy as a fundamental right of citizens and accordingly India has drafted its national data protection laws. The Personal Data Protection Bill is currently before the parliament and when passed will bring about a comprehensive overhaul of India’s current data protection regime. Sri Lanka’s Minister of State for Digital Technology & Enterprise Development, Mr. Namal Rajapaksa, emphasized that Sri Lanka is in the process of finalizing its Data Protection Act along with the setting-up of a data protection agency under the Office of the President. In a similar vein, Mrs Amelia Adininggar, Deputy Minister of National Development Planning in Indonesia, shared that Indonesia is finalizing its Personal Data Protection Law, which is before its parliament. All three Ministers highlighted the importance of data centres and their efforts to build these centres in their countries by attracting foreign and domestic investment, said people familiar with the discussions. Policies with respect to data protection and data centres in these countries indicate the high importance attached by these countries to the issue of data localization, said an analyst, who asked not to be quoted. It is interesting to note that India and Sri Lanka have not joined the JSI on e-commerce, while Indonesia, though a member of the JSI group, has raised numerous concerns within that group’s discussions. The JSI negotiations on framing digital rules, according to some studies, can severely erode the much-needed policy and regulatory space of the developing countries in designing their policies around protecting, storing and processing data for digital transformation. The digital rules which are being negotiated aim at: (1) mandatory legal frameworks for electronic transactions; (2) free flow of cross-border data; (3) removal of restrictions on data localization, and on source code disclosure; (4) a permanent moratorium on customs duties on electronic transmissions; (5) mandatory membership of the Information Technology Agreement (ITA) and ITA expansion; and (6) mandatory commitments on national treatment and market access in Modes 1, 2 and 3 of the General Agreement on Trade in Services (GATS) in the identified services in GATS schedules. Mode 1 of the GATS refers to cross-border trade in services, Mode 2 refers to consumption of services abroad, Mode 3 refers to commercial presence and Mode 4 refers to the movement of short-term services providers. The discussions in the UNCTAD webinar highlighted that many developing countries are learning from the developed countries, such as the European Union, and are protecting their data, said another analyst, who preferred not to be quoted. The EU’s General Data Protection Regulation (GDPR) has inspired the data protection policies of some of these countries. For example, the new Personal Data Protection Law of Indonesia is expected to apply to all sectors, bringing forward comprehensive provisions on personal data protection, both electronically and non-electronically. The Sri Lankan Minister pointed out that in his country adequate protection is being sought for data in the new draft bill (Act to Provide for the Regulation of Processing of Personal Data, 2021), which is awaiting final approval. Similarly, the draft Personal Data Protection (PDP) Bill of India includes requirements for notice and prior consent for the use of individual data, limitations on the purposes for which data can be processed by companies, and restrictions to ensure that only data necessary for providing a service to the individual in question is collected. In addition, the Indian bill includes data localization requirements and the appointment of data protection officers within organizations. This draft bill further proposes creating a Data Protection Authority of India that will be responsible for protecting the interests of data principals, preventing misuse of personal data and ensuring compliance with the new law. India has experienced a surge in the number of data centres, which is partly due to the Government’s policy of providing “infrastructure status” to the data centres, bringing it on par with industries such as railways, roadways and power. The new status eases the process of availing of long-term credits from domestic and international lenders. This has also attracted investments in data centres from tech giants like Google, CtrlS, Digital Reality and Amazon Web Services. LEVYING DIGITAL TAXES Both India and Indonesia are now levying digital taxes. The Indian government has moved an amendment in the Finance Bill 2021, imposing a 2 per cent digital service tax on trade and services by non-resident e-commerce operators with a turnover of over Rs 2 crore. The Indian Minister pointed out that India is not unique in terms of levying these digital taxes as many other developed as well as developing countries are doing the same, said people familiar with the development. Indonesia began collecting a 10% value-added tax (VAT) since mid-2020 on digital products and services from internet-based firms. Indonesia’s Directorate General of Taxes (DGT) has revealed that USD 114 million (1.65 trillion rupiah) were recouped in the first half of 2021 as a result of the VAT rules that apply to the cross-border supply of digital services. It has been argued that such taxes and levies provide a level playing field to domestic producers in developing countries who pay various taxes and therefore lose out on their competitive advantage vis-a-vis foreign sellers operating via electronic platforms. At the UNCTAD webinar, the Ministers also emphasized the importance of putting in place a comprehensive national digital policy which is well-coordinated at national and sub-national levels and aims at inclusive digital transformation. In this context, India shared its policies with respect to its national initiatives like “Digital India”. Indonesia highlighted its national development plan covering five years (2020-2024) for its digital transformation while Sri Lanka highlighted its three-pillar national digital transformation strategy including digital skills, connectivity and accessibility for its inclusive digital transformation.
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