Skip to main content

Written by InvestGlass on .

Economic Impacts of Data Sovereignty in Asia in 2024: What You Need to Know

In 2024, data sovereignty will reshape Asia’s economy. Countries are imposing stricter data regulations, leading to higher compliance costs and new operational norms for businesses. This article delves into the economic impacts of data sovereignty in Asia in 2024, highlighting regulatory changes, sector-specific challenges, and the trade-offs between data security and innovation.

Data sovereignty refers to the concept that data is subject to the laws and governance structures within the nation it is collected. This principle is becoming increasingly significant as nations strive to protect their digital infrastructure from external threats and assert control over their data. The Asia-Pacific region, with its diverse economies and rapid technological advancements, is at the forefront of this movement. Governments are revamping their policies to ensure that data generated within their borders remains under their jurisdiction, leading to a cascade of economic implications. According to a recent IDC report, the economic and regulatory importance of data sovereignty in Asia is expected to intensify in 2024, as governments prioritize digital self-determination and compliance with evolving data protection laws.

The push for data sovereignty is not just a matter of national security but also an economic strategy. By controlling data flows, countries can foster local industries, encourage domestic innovation, and create a competitive edge in the global market. However, this shift also brings challenges, such as increased costs for businesses to comply with varying local regulations and the need for significant investments in local data infrastructure. The key drivers behind this trend include geopolitical disruptions, an evolving regulatory landscape, rising cyber threats, and the increasing demand from governments for cloud sovereignty and compliance with data protection laws.

This article will explore these dynamics, providing insights into how businesses can navigate the evolving landscape of data sovereignty in Asia. From understanding the regulatory changes to addressing sector-specific challenges, we will examine the trade-offs between ensuring data security and fostering innovation. For further expert analysis on government strategies and the economic impacts of data sovereignty, readers can refer to government insights IDC Asia. By the end of this article, readers will have a comprehensive understanding of the economic impacts of data sovereignty in Asia for 2024 and beyond.

Key Takeaways

  • Governments in the Asia-Pacific region are increasingly adopting digital sovereignty principles to protect national digital infrastructure from escalating cyber threats and geopolitical events, resulting in changes to technology investment priorities and regulatory frameworks. Establishing the right framework is crucial for the success of these digital sovereignty initiatives.
  • Sovereign cloud solutions, designed to meet precise data security and regulatory requirements, are becoming essential to ensure data residency and compliance, with significant adoption planned among government agencies and highly regulated sectors by 2025. These solutions must be framework specific, tailored to each country’s unique regulatory and operational needs.
  • Businesses face challenges such as high implementation costs and a shortage of skilled professionals in integrating sovereign clouds but must maintain a delicate balance between regulatory compliance, innovation, and open digital borders to thrive in the evolving landscape of data sovereignty.

Economic Impacts of Data Sovereignty in Asia in 2024: What You Need to Know

Global geopolitical events and a notable rise in cyberattacks targeting national digital infrastructure are driving the push for digital sovereignty in the Asia-Pacific region. This trend is reshaping how governments prioritize their technology investments and regulatory frameworks. For example, 79% of government agencies plan to change or review their technology strategies and operations in response to recent economic and geopolitical events.

Sovereign clouds, designed to meet the strict data security and regulatory requirements of specific countries or regions, have become essential in this transition. These clouds ensure data residency within specified geographic boundaries, securing sensitive data and complying with local regulations. The move towards sovereign clouds is not just about compliance but also about protecting against increasingly sophisticated and targeted cyber threats.

From a government perspective, digital sovereignty is multi-layered and strategic, encompassing several dimensions that are critical for national interests. Addressing digital sovereignty in the Asia-Pacific region involves more than just data sovereignty. It includes the six attributes of digital sovereignty:

  • Data
  • Technical
  • Operational
  • Assurance
  • Supply chain
  • Geopolitical aspects

IDC defines digital sovereignty as a framework that incorporates these six attributes, highlighting its strategic importance for government agencies in managing technology investments, data, and geopolitical considerations.

This comprehensive approach ensures a nation’s capacity for digital self-determination, contributing to a thriving digital economy. Different governments have viewed digital sovereignty in their strategic planning and policy formulation, shaping how they address national security, digital economy development, and regulatory priorities.

Introduction

The economic impacts of data sovereignty in Asia for 2024 influence multiple sectors, including technology and regulations. Governments are aiming for digital sovereignty to protect their economies and national interests from cyber threats and geopolitical issues. Increasingly, governments’ digital aspirations are shaping their approach to data sovereignty, aligning national goals with broader ambitions for innovation and self-sufficiency.

Skill development is crucial for this transition. Both governments and businesses are investing in training and infrastructure to create digital sovereignty and address data sovereignty challenges. Managers need to balance regulatory compliance with innovation to succeed in this new environment.

This blog post will explore how global information flows are changing due to these shifts. It will cover the reasons behind digital sovereignty, its economic effects on businesses, and the technological changes required for compliance, including the need for organizations to update their technology strategy to align with new data sovereignty requirements. Readers will gain insights to navigate the evolving data sovereignty landscape in Asia.

Rise of Data Sovereignty in Asia Pacific

Increasing cyberattacks and global events have led to the growth of data sovereignty in the Asia-Pacific region. Asia-Pacific governments are leading the push for digital sovereignty, seeing it as a way to protect their national digital infrastructure from external threats.

Digital sovereignty involves more than just data. It encompasses six key areas:

  • Data
  • Technical
  • Operational
  • Assurance
  • Supply chain
  • Geopolitical aspects

This approach helps nations control and protect their digital assets, supporting a strong digital economy.

Sovereign cloud solutions, a form of cloud sovereignty, are crucial in this effort. These clouds meet strict data security and regulatory demands, ensuring data stays within specific geographic boundaries. By early 2023, 17% of government agencies in the Asia-Pacific region used sovereign clouds, with 30% planning to adopt them by 2025.

Early adopters in government, healthcare, and utilities—sectors with high regulatory and compliance needs—are piloting sovereign cloud solutions to address data residency laws and future-proof against regulatory changes.

Governments in the region are adjusting their technology investments and regulations to support digital sovereignty. Technology providers are hyper focused on meeting regional compliance and data sovereignty requirements. They are investing in data centers and forming partnerships to improve their digital capabilities. This helps create an environment where digital sovereignty can grow while keeping digital borders open for data sharing.

Economic Implications for Businesses

Data sovereignty presents both challenges and opportunities for businesses. The main issues are high costs and a shortage of skilled workers. Approximately 40% of organizations are concerned about the high expenses and the lack of expertise required to implement sovereign clouds. Data sovereignty is increasingly influencing business investment decisions in technology and infrastructure, as organizations seek to align with national security and regulatory requirements.

To manage data sovereignty, businesses need to collaborate across different departments, such as:

  • IT security
  • Legal
  • Procurement
  • Risk management

Balancing compliance with innovation is essential. Companies must adhere to local laws without hindering their ability to innovate.

Global companies in the Asia-Pacific region are re-evaluating their cloud strategies due to sovereign clouds, as digital sovereignty helps shape technology investment priorities in the region. In Australia, 64% of organizations are considering these strategies, which is higher than the global average of 52%.

Public sector organizations are also impacted. Nearly 48% of such organizations in the Asia-Pacific region plan to adopt sovereign clouds within the next year, highlighting the growing importance of localized cloud solutions. Many are turning to a digital sovereign solution to meet compliance and security needs.

Impact on Technology Providers

As technology providers adapt to the growing demand for data sovereignty, they face significant challenges. Cloud service providers are expanding their cloud services and setting up data centers in various regions worldwide to meet data sovereignty requirements. Leading companies like AWS, Azure, and GCP are spearheading this effort by creating local data centers to comply with regional regulations.

Some strategies that these major providers use to meet data sovereignty requirements include:

  • Partnering with local companies to establish joint ventures or shared facilities
  • Combining technological expertise with adherence to local regulations
  • Supporting data encryption
  • Ensuring backup strategies comply with regional data storage laws

A senior manager typically oversees compliance and regional operations, ensuring that all strategies align with both corporate objectives and local legal requirements.

The complexities of hybrid-cloud strategies present another challenge for technology providers. Each deployment must comply with local legal restrictions, requiring companies to carefully consider where data is stored and the applicable laws. This demands a strong understanding of regional regulations and a flexible approach to technology adaptation.

A public sector research lead plays a crucial role in guiding technology providers’ strategies for digital sovereignty, especially by shaping investment decisions and supporting the development of frameworks that address regional and geopolitical challenges.

Government Motivations and Policies

Governments are advocating for digital sovereignty to safeguard national security and economic interests. The increase in cyberattacks on national digital infrastructure is a significant driver for this shift. Governments’ motivations include responding to strategic priorities and geopolitical factors, which influence their adoption of digital sovereignty and sovereign cloud solutions. To counter these threats, governments are revising their technology investments and regulations.

According to an IDC report, 79% of government agencies plan to review their technology strategies in response to recent economic and geopolitical events. This proactive approach, supported by government insights into technology investment and policy changes, aims to build resilient digital economies capable of withstanding external pressures.

Skill development is also crucial. Governments are investing in training to address digital sovereignty challenges. AP government agencies play a key role in implementing digital sovereignty initiatives, adjusting their policies and infrastructure to achieve digital self-determination while balancing national security with cross-border data sharing to support innovation and trade.

Many agencies are now focusing their technology investments on digital sovereignty. They are establishing strong regulatory frameworks and forming partnerships to enhance their digital capabilities. According to government agencies interviewed in IDC research, these strategies are central to fostering the growth of digital sovereignty.

Case Studies of Sovereign Cloud Solutions

By 2025, around 40% of government agencies in the Asia-Pacific region will be using sovereign cloud solutions. These solutions enhance security and efficiency, particularly in sectors such as government, healthcare, and utilities. However, implementing sovereign cloud solutions often means involving compromises between security, compliance, and operational efficiency.

As of early 2023, 17% of government agencies in the region were already utilizing sovereign clouds, with an additional 30% planning to adopt them by 2025. These clouds ensure that sensitive data remains within national borders, thereby complying with local laws and enhancing data security, while addressing the many layers of digital sovereignty such as data management, technical infrastructure, and operational procedures.

Businesses in highly regulated sectors like healthcare and finance also rely on sovereign clouds to meet stringent data residency requirements. These solutions help them adhere to regulations while maintaining control over their data.

These case studies highlight the growing importance of sovereign clouds for achieving digital sovereignty and ensuring data security. Furthermore, sovereign cloud adoption supports the development of self-sustainable economies in the region by fostering digital independence and resilience.

Challenges and Opportunities in Cross-Border Data Sharing

Cross-border data sharing is vital for industries such as clinical studies, which require data from various regions, and for tracking Sustainable Development Goals (SDGs). However, it encounters significant challenges. Disruptions in cross-border data flows can have far-reaching effects on the global economy, especially in interconnected sectors like finance, supply chain, and healthcare.

One major issue is the differing regulations within a country due to digital silos among regulators. This results in legal transparency problems because of complex regulatory requirements. For example, in South America, data centre infrastructure faces unique vulnerabilities due to severe droughts, flooding, and resource constraints, which are compounded by regulatory risks. Frequent changes in these requirements increase costs for companies involved in cross-border data sharing.

The unclear definition of cross-border transfers and personal data makes compliance difficult for businesses. Different legal systems for transferring personal information create problems for global software and product development. Balancing national interests with the need for open digital borders is key to a strong digital economy.

In the Asia-Pacific region, digital sovereignty means balancing technology adaptation, skill development, and cross-border data sharing while considering national security, innovation, and trade. Achieving this balance is crucial for a thriving digital ecosystem. Though it often involves compromises, it is essential for maintaining a secure and prosperous digital landscape.

Role of InvestGlass in Navigating Data Sovereignty

InvestGlass, a Swiss cloud-based platform, assists companies in managing the complexities of data sovereignty. It offers a range of features to ensure compliance and enhance efficiency:

  • Sales automation tools: These tools streamline the sales process, enabling businesses to manage and track their sales activities effectively.
  • CRM solution: A customizable CRM that can be tailored to specific business needs, allowing companies to better manage their customer relationships and data.
  • Digital onboarding tools: These tools collect data through digital forms, simplifying the process for new clients and ensuring efficient and compliant data collection.
  • Targeted surveys: These surveys help businesses gather valuable insights from their customers, improving their understanding of customer needs and preferences.

A key feature of InvestGlass is its emphasis on data security and compliance. The platform hosts data on Swiss servers located in Geneva, with an option for on-premise hosting for large companies. This ensures that all data is securely stored within Switzerland, providing a compliant environment for businesses that prioritize geopolitical independence.

InvestGlass also includes various marketing tools that use artificial intelligence to provide deeper insights into prospects and customers. The platform helps manage sales pipelines, organize leads and deals, and automate workflows with an open API. These features make InvestGlass a valuable tool for businesses aiming to streamline their operations while ensuring compliance with data sovereignty requirements.

Future Trends and Predictions

Looking forward, several trends are set to shape the future of data sovereignty in Asia. Decentralized data storage is expected to gain popularity, offering individuals greater control over their personal information. This approach enhances security and privacy, aligning with the objectives of digital sovereignty. According to insights IDC Asia Pacific, future trends in data sovereignty will be driven by evolving regulatory landscapes and technological advancements.

Privacy-enhancing technologies, such as secure multi-party computation and federated learning, are anticipated to expand. As noted by IDC Asia Pacific, these technologies enable artificial intelligence to operate with data without compromising privacy, ensuring sensitive information remains protected. Additionally, ethical AI practices, including bias detection and responsible data collection, are likely to become standard.

While a global data privacy framework may not emerge, regional regulations will likely influence one another, establishing basic standards for data protection. These trends will guide technology investments and regulatory changes, contributing to the development of a robust digital economy in the Asia-Pacific region. Digital sovereignty requires ongoing adaptation to regulatory and technological changes to ensure long-term resilience and compliance.

Summary

In summary, the push for data sovereignty in the Asia-Pacific region is driven by geopolitical events and cyber threats. IDC revealed key trends and strategies in digital sovereignty for the Asia-Pacific region, highlighting the many layers and complexities involved. Governments are reshaping their technology investment priorities and regulatory frameworks to ensure digital sovereignty. This shift has significant economic implications for businesses and technology providers, requiring them to adapt to new compliance standards.

As the landscape continues to evolve, businesses must navigate the challenges and opportunities presented by data sovereignty. With the support of platforms like InvestGlass, organizations can achieve compliance and streamline their operations. The future of data sovereignty in Asia promises to be dynamic and transformative, fostering a secure and prosperous digital economy.

10 FAQs on Cloud Sovereignty Risk & DORA

1. What is cloud sovereignty risk?

Answer: Cloud sovereignty risk arises when sensitive business or client data is stored or processed in jurisdictions with conflicting laws or regulations. This can lead to non-compliance with European rules like GDPR or DORA.

InvestGlass solution: InvestGlass offers a Swiss-hosted, sovereign cloud — ensuring data remains under European jurisdiction and aligned with regulatory requirements.

2. How does DORA relate to sovereignty risk?

Answer: DORA requires financial entities to safeguard operational resilience, especially in IT and third-party services. Relying on non-EU or multi-jurisdictional cloud providers increases sovereignty risks.

InvestGlass solution: Our platform runs on a fully European infrastructure with strong compliance controls, helping firms meet DORA requirements without depending on hyperscalers outside the EU.

3. Why is sovereignty risk critical for financial institutions?

Answer: Non-compliance with sovereignty rules can result in fines, reputational damage, and loss of client trust. Regulators are increasingly focused on where data resides and who controls it.

InvestGlass solution: By choosing InvestGlass, institutions guarantee that data residency and access rights remain compliant with Swiss and EU regulatory standards.

4. What risks come with non-sovereign cloud providers?

Answer: Risks include forced data disclosure under foreign laws (e.g., US CLOUD Act), vendor lock-in, and exposure to sanctions or political decisions outside the EU.

InvestGlass solution: InvestGlass is vendor-neutral and built on a sovereign cloud, protecting clients from extraterritorial access and political interference.

5. How does InvestGlass help with DORA compliance?

Answer: DORA requires monitoring third-party ICT risks and ensuring continuity of service.

InvestGlass solution: With audit trails, automation workflows, and built-in monitoring, InvestGlass supports documentation, oversight, and resilience in line with DORA obligations.

6. Can sovereignty risk affect client trust?

Answer: Absolutely. Clients expect their sensitive financial data to be secure and compliant. Sovereignty breaches can erode trust and cause client attrition.

InvestGlass solution: The white-label client portal shows transparency and control, reassuring clients their data remains safe in a regulated jurisdiction.

7. What role does data localization play in reducing sovereignty risk?

Answer: Data localization ensures information is stored and processed within compliant borders, minimizing exposure to foreign jurisdictional risks.

InvestGlass solution: InvestGlass offers Swiss-hosted data centers with localized backups, ensuring compliance with both GDPR and DORA.

8. How does vendor dependency increase sovereignty risk?

Answer: Heavy reliance on global hyperscalers creates concentration risk and limited control over service terms.

InvestGlass solution: InvestGlass’s modular and API-first design reduces lock-in and allows institutions to integrate sovereign infrastructure flexibly.

9. How does InvestGlass address operational resilience under DORA?

Answer: Operational resilience requires institutions to prepare for ICT disruptions.

InvestGlass solution: With business continuity planning, automated workflows, and monitoring dashboards, InvestGlass enables firms to quickly adapt and recover from disruptions.

10. Why is a sovereign-first approach the future?

Answer: With increasing regulatory pressure, organizations must ensure cloud services align with European digital sovereignty principles.

InvestGlass solution: By adopting a European sovereign-first platform, firms future-proof compliance and protect client trust against evolving sovereignty and resilience risks.