HANOI (BLOOMBERG) - Vietnam's National Assembly has passed a cyber security law requiring companies such as Alphabet Inc's Google and Facebook Inc to store all data of Vietnam-based users in the country and open local offices.
The measure has drawn rare dissent from some lawmakers and government leaders as well as local tech groups, who sent a petition to the legislature that warned it would hurt the economy.
Demonstrators on Sunday (June 10) protested nationwide against the Bill, saying it would limit free speech.
"The cyber security law is a big backward step for Vietnam," Le Dang Doanh, a Hanoi-based economist and former government adviser said of the Bill, which was passed by 87 per cent of lawmakers on Tuesday (June 12).
"It will restrict people's freedom of speech and it will deter foreign investors as it will seriously hurt the business environment in Vietnam."
Taking effect on Jan 1, the law will give the authorities wide discretion to determine when expression must be censored as "illegal" because some provisions will make it easier for the government to identify and prosecute people for online activities, he said.
Vietnam's benchmark VN Index dropped for the first time in nine trading days, falling 2.8 per cent as of 11.31am in Ho Chi Minh City.
The US Embassy in Hanoi last week issued a statement that said the law "may present serious obstacles to Vietnam's cyber security and digital innovation future, and may not be consistent with Vietnam's international trade commitments. The United States and Canada urge Vietnam to delay the vote on the draft law to ensure it aligns with international standards."
"Vietnam has done a lot to become more open to businesses and trying to draw more foreign investment, and now with this cyber law, it will seriously hurt that effort," Doanh said.
Unlike China, Vietnam does not block websites such as Facebook, Google and Twitter.
Police have, however, stepped up crackdowns on bloggers and Facebook critics since 2016 with jail sentences.
The government has deployed 10,000 members of a military cyber warfare unit to combat what it sees as a growing threat of "wrongful views" proliferating on the Internet.
The government has also pressured Vietnamese companies to suspend advertising on YouTube and other sites showing anti-government videos.
Facebook last year removed 159 accounts at Vietnam's behest, while YouTube took down 4,500 videos, or 90 per cent of what the government requested, according to VietnamNet news.
Vietnam's youthful population - almost 60 per cent are under 35 - has made the country a leader globally in terms of penetration of social networks, according to EMarketer Inc.