HANOI - U.S. tech companies have warned Vietnam's government that a draft law to tighten rules on data protection and limit data transfers abroad would hamper social media platforms and data centre operators from growing their businesses in the country.

The Southeast Asian nation with a population of 100 million is one of the world's largest markets for Facebook and other online platforms, and is aiming to exponentially increase its data centre industry with foreign investment in coming years.

The draft law "will make it challenging for tech companies, social media platforms and data centre operators to reach the customers that rely on them daily," said Jason Oxman, who chairs the Information Technology Industry Council (ITI), a trade association representing big tech companies including Meta, Google and data centres operator Equinix.

The draft law, being discussed in parliament, is also designed to ease authorities' access to information and was urged by the ministry of public security, Vietnamese and foreign officials said.

The ministry of public security and the information ministry did not respond to attempts to contact them via email and phone.

Vietnam's parliament is discussing the law in its current month-long session and is scheduled to pass it on Nov. 30 "if eligible", according to its programme, which is subject to changes.

Existing Vietnamese regulations already limit cross-border transfers of data under some circumstances, but they are rarely enforced.

It is unclear how the new law, if adopted, would impact foreign investment in the country. Reuters reported in August Google was considering setting up a large data centre in southern Vietnam before the draft law was presented in parliament.

Research firm BMI had said Vietnam could become a major regional player in the data centres industry as limits on foreign ownership are set to end next year.

'UNDUE EXPANSION OF GOVERNMENT ACCESS'

Among the provisions of the draft law is prior authorisation for the transfer overseas of "core data" and "important data", which are currently vaguely defined.

"That will hinder foreign business operations," Oxman told Reuters.

Tech companies and other firms favour cross-border data flows to cut costs and improve services, but multiple jurisdictions, including the European Union and China, have limited those transfers, saying that allows them to better protect privacy and sensitive information.

Under the draft law, companies will have to share data with Vietnam's ruling Communist Party and state organisations in multiple, vaguely defined cases including for "fulfilling a specific task in the public interest."

The U.S. tech industry has raised concerns with Vietnamese authorities over "the undue expansion of government access to data," Oxman said.

The new law "would cause significant compliance challenges for most private sector companies," said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi, noting talks were underway to persuade authorities to "reconsider the rushed legislative process" for the law.