How Data Localization Drives Economic Growth and Employment

by | Jan 19, 2021

Data has is now one of the world’s most valuable resources because of the increasing digital transformation of international industries. Consumer data could be thought of as the new oil driving the Fourth Industrial Revolution. Data gives enormous economic power to those companies that collect and control it, and a huge advantage when they compete in the global marketplace.

How Data Localization Drives Economic Growth and Employment 1

It’s the age of the internet, and never before has data been as important as it is today. Businesses that are operating globally are collecting worldwide consumer data. However, the big question is how to use all of this data in the most effective way through data localization. 

The Economic Impact of Data Localization

Data localization has become one of the drivers of economic growth and employment, especially for underdeveloped countries. This post will attempt to understand how data localization works and how it can contribute to a country’s economic well-being. The following are some positive effects of data localization:

1. Increased Demand for Translators

Localization involves adapting a website to the language preferences of the citizens of a particular country. For example, if an American company is trying to gain a foothold in France, it has to have a French version of its website available for its French consumers.

While digital translation services are indeed gathering momentum, they still don’t produce translations on the level of a human translator. As a result, data localization provides employment opportunities for professional translators. This directly affects their livelihood and, hence, the country’s economic condition.

2. Job Prospects for Architects and Engineers

Data localization requires companies to set up data centers across countries, and these centers often have to be built from scratch. This gives numerous talented engineers and architects opportunities to showcase their architectural and engineering talents.

Again, the increase in work opportunities has a positive economic impact on the country. 

3. Demand for IT Professionals

The work needed to operate and maintain a data center is immense and complex, requiring the employment of skilled IT professionals. For example, when a Canadian company establishes its data centers in an Asian country, it gives the latter country’s IT professionals employment opportunities at a much higher pay scale than what that country is capable of offering.

This demand for talented IT professionals who earn a high pay rate directly impacts the country’s economic growth. 

4. Data-Driven Real-World Impact

Data localization also opens numerous doors for an international company’s real-world ventures. For example, an insurance company from the US will only collect information from Indian consumers if it has its offices there. This directly benefits India’s economy in a positive way.

Having offices in another country results in hundreds and thousands of job opportunities for the people of that country, directly contributing to economic growth and development.

The Negative Impact of Data Localization Laws 

Data localization laws vary from country to country, but they tend to place restrictions on both trade and innovation. The economic costs of these laws fall on businesses of all sizes that benefit from the availability to conduct global commerce via the internet. Even when sensitive data is targeted (e.g., health or financial information), data privacy regulations can deter competition, limit innovative solutions, and have unintended consequences on broader commerce.

Conclusion

While data localization certainly presents numerous opportunities for countries, particularly for the economically backward ones, there are multiple challenges as well because of data localization regulations. Therefore, it remains to be seen how data localization plays out in the future, especially as the IoT landscape changes internationally.

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