The (in)convenient marriage between unicorns and governments in Southeast Asia

• Governments in Southeast Asia should be wary that technology giants are replacing them
• Should establish a technology industry regulator that is cross-cutting industries

Large technology companies around the world are solidifying their economic and cultural hegemony through expansion.

Southeast Asia’s unicorns are no different. Grab and Gojek continue building their empire through their super app, following in the footsteps of China’s WeChat and AliPay. Governments in Southeast Asia are reacting by flocking towards partnerships with the region’s technology giants in unprecedented ways creating a risky overdependence on technology companies.

Governments in Southeast Asia should implement adequate regulation to ensure technology companies are subjected to proper oversight and that safeguards are in place to protect citizen privacy and government data. Any calls for “technology for good” must be approached with caution, especially due to the growing social, cultural and economic influence that unicorns have.

In light of COVID-19, big technology companies in Southeast Asia are adapting to support governments' efforts in the region. Grab and Gojek in Singapore are working together with the government on a process for contact tracing to help locate patients based on customer’s travel history. And Gojek in Indonesia has teamed up with telemedicine app Halodoc to launch online consultations service and provide access to COVID-19 rapid tests via drive-through stations for people with COVID-19 symptoms. These efforts are important towards combating the pandemic but similarly underscores the dependency governments in Southeast Asia have on big technology companies in the region.

Super Apps are the new monopolies

Competition between the two super apps has intensified as they race to increase services and broaden their geographic presence. From transport and food to payment and insurance, Grab lists 10 services on their website while Gojek lists 20 services across six verticals.

As consumers purchase more goods and services through these super apps, standalone businesses that struggle to compete will shut down, allowing unicorns to raise prices. Grab, for example, acquired Uber’s Southeast Asia operations in 2018, resulting in complaints on social media against the ride-hailing giant.

In response to the deal, Singapore’s Competition & Consumer Commission hit Uber and Grab with combined fines of US$9.5 million but no efforts were made to unwind the deal even though following the deal, Grab raised prices between 10%-15% with its market share growing to 80%. The Philippine Competition Commission similarly hit Uber and Grab with combined fines of under US$300,000.

To put this into perspective, Grab was valued at US$10 billion in 2018, making these fines negligible. The European Union (EU) in comparison fined Google US$1.7 billion for breaking its antitrust rules that denied others the possibility to compete on merits.

Institutions in Southeast Asia are still in its teething stage and could learn from global examples to strengthen its institutions and regulations.

This need takes on added urgency in light of a possible Grab-Gojek tie-up in Indonesia as their investors pressure for profitability rather than growth. Technology companies’ growth through consolidation creates monopoly-like behaviour leaving consumers and regulators worse-off. Consumers have fewer choices while too much regulation can deter investments. In the 12 months leading up to 2019, Grab says it contributed US$5.8 billion to Southeast Asia’s economy.

Gojek estimates that their contribution to the Indonesian economy alone reaches Rp55 trillion (US$3.55 billion). In short, economies and societies rely on large technology companies which bolsters their influence on governments and regulations. This is worrying for three reasons – they could become too big to regulate, they could collapse (with the associated fallout), and that they could one day stop playing by government’s rules.

Enhance data protection and privacy

The Jakarta government signed partnerships with eight Southeast Asian technology giants in 2019 to accelerate the capital’s smart city project.

It is the only widely known partnership in the region between a city government and technology companies. Though these partnerships will help modernize Indonesia, overdependence could result in governments being subjected to unfair terms with technology companies and pose issues around data security and ownership.

As it stands, not much clarity has been given on who will own the data that will be collected from this public sector initiative. As data is the new oil in the 21st century, governments need to make every effort to secure data collected and ensure that public data is not used for private gain.

As added element of intrigue here was when Nadiem Makarim, Gojek’s founder and former CEO was appointed Minister of Education and Culture in October 2019. The Indonesian government should be wary of conflicts of interest and take measures to ensure effective oversight. Otherwise, the fear is that the regulated will become the regulator. (bridging words to smoothen the next point made)

That said, not all hope is lost as some governments in the region – Malaysia, Philippines, Thailand and Singapore – have at the very least set out data protection laws to protect citizen data. But more needs to be done with regards to data privacy as data protection does not necessarily encompass privacy.

Establish an over-arching technology regulator

To help governments in Southeast Asia deal with anti-competitive behaviour and data protection and privacy concerns, governments should establish a technology industry regulator that is cross-cutting industries. This will help governments have clear oversight, provide clear rules of engagement and establish accountability.

A technology regulator could have three overarching goals to safeguard citizens and governments interests – promote responsible innovation, develop parameters for data privacy, and propose policy initiatives that are favourable for both the public and private sector. A technology regulator could also develop comprehensive strategies that are relevant for all industries, such as cybersecurity.

Many governments in Southeast Asia deal with technology regulation on a case-by-case basis. For example, Thailand and Singapore have established specific fintech regulations. The reality is that technology is rarely isolated by industry. For example, blockchain can be used in the financial, logistic and public sector, while artificial intelligence can be used in the retail, transport, and the energy sector. So, an over-arching technology regulator is imperative to ensure continued collaboration between governments and technology companies.

Encourage successful partnerships with regulation

Governments in Southeast Asia should encourage innovation and create a favourable environment for investment. By strengthening anti-competitive laws and enhancing data protection and privacy regulation, technology companies will reduce the cost of innovation as a standards-based regulation defines acceptable and unacceptable behaviour.

These laws should not be stifling, rather, they should be clear and prescriptive. Establishing an overarching technology regulator will achieve these synergies and collaboration as they will have a holistic and cross-industry perspective of trends, challenges and players, enabling effective responsiveness. The risk of inadequate and piecemeal regulation is that governments and its citizens will become irrelevant and beholden to unicorns’ demands.

So, governments should encourage public-private partnerships while ensuring that overdependence on technology companies are mitigated by putting citizens’ rights at the forefront.

Nabila Hassan is an MPA candidate with a focus on technology and digital government at the School of International and Public Affairs (SIPA) at Columbia University.