Tuesday, July 15, 2014

Data localization is no solution for Korea's security, privacy concerns

The Korea Joongang Daily today has an excellent short article by Bert Verschelde of The European Center for International Political Economy.  He points out that, in the wake of Edward Snowden's NSA revelations, some governments around the world have moved toward regulatory restrictions on data, "such as data localization--the requirement that companies store and process data within the country in which they were collected."  He further notes that "While calls for increased online data security are legitimate and warranted, recent customer information leaks in Korea’s financial sector show that restricting where data is stored is problematic. Storing data within the borders of one country is not only ineffective against foreign surveillance, data security experts say it increases the chance of data breaches and abuse. When data is mandatorily stored within borders, it creates a tempting “honeypot” for criminals to target." Furthermore, the article argues that forced local storage of data can have a harmful effect on the economy enforcing it.
Simulations by his Center show that "...Korea’s economic growth would be severely stifled by an expanded, or economy-wide data localization measure. The impact of data localization across all sectors is estimated to be equivalent to 1.1 percent of Korea’s GDP in 2014. In real terms, this is equivalent to a loss of roughly $13 billion. In addition, investment in Korea would drop by 3.6 percent, causing its economy to pass up roughly $180 million in foreign direct investment."

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