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Opinion

Asia's regulators ignore rising influence of Big Tech at their peril

Market power of Alibaba, Reliance, Tencent and Gojek could outweigh US behemoths

| India
Icons of Chinese online apps are pictured with that of Facebook: supporting concentrated monopolies has become official policy across much of Asia.   © Getty Images

James Crabtree is an associate professor in practice at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is author of "The Billionaire Raj."

The heads of the U.S. big four tech giants escaped their recent Capitol Hill grillings without lasting damage. Whether Apple, Amazon, Google and Facebook will be so lucky in future is less clear, given the likely arrival of President Joe Biden later this year, and near-unanimity among his Democrat colleagues that America's tech giants need to be brought to heel.

Viewed from Asia, the hearing spectacle looked curious, however. Governments here have come to view Big Tech more positively, with China and India in particular racing to nurture dominant national technology champions. The result could leave Asia with a cluster of cyber behemoths with even more entrenched power than their U.S. equivalents -- a profound long term economic development that may turn out to be a mixed blessing at best.

It seems obvious that Big Tech in both the U.S. and Europe is in for a rough ride. Apple, Amazon, Netflix et al. are only growing more valuable as the COVID-19 crisis winds on, pulling out blockbuster earnings and cementing their positions as Wall Street's new darlings.

In their five-hour virtual grilling on July 30, Amazon's Jeff Bezos and Facebook's Mark Zuckerberg stood accused of wielding the kind of dangerous monopoly power that could even require the breakup of their companies. "Concentration of power in any form, especially concentration of economic or political power, is dangerous to a democratic society," as Jerrold Nadler, a Democrat Congressman from New York state, put it.

Yet across much of Asia, supporting such concentrated monopolies has in effect become official policy. China was the pioneer, moving more than a decade ago to incubate national champions to rival those rising in the U.S. Alibaba Group Holding, Bytedance, Huawei Technologies and Tencent Holdings operate under tight social controls. But their growth has been sustained by generous state support, from restrictions on foreign rivals to lax data privacy laws.

Elsewhere Reliance Jio is emerging as an even more vigorous Asian state-backed tech monopoly-in-the-making. Already India's largest telecoms operator, billionaire Mukesh Ambani's venture now has vaulting ambitions to dominate everything from social media to online retail, adding in emerging areas like online learning and health care for good measure.

A Jio store in Kolkata, pictured on July 13: Reliance Jio is emerging as a vigorous Asian state-backed tech monopoly-in-the-making.   © NurPhoto/Getty Images

Ambani's strategy is attracting both admirers and cash, not least some $20 billion in recent investments from Facebook, Google, and a host of blue-chip international private equity groups. But implicit support from the government of Prime Minister Narendra Modi underpins his vision too, including various recent regulations helpful to Indian domestic tech players in general, and Ambani in particular. Although at an earlier stage, it is easy enough to imagine states in Southeast Asia supporting the future growth of companies like Grab and Gojek in the same way.

The bigger point remains: just as Europe and the U.S. are considering chopping their tech giants down to size, Asian governments have decided that supporting similar national champions will accelerate their path to national economic development. Much now depends on whether they are right.

History, at least, is on their side. Much of East Asia's earlier decades of rapid growth were propelled via tight partnerships between business and the state, especially in areas like technologically advanced manufacturing.

China, South Korea, Japan, and Taiwan all in their own way perfected the use of subsidies and protectionism to create a developmentally potent form of crony capitalism, as author Joe Studwell suggests in his book How Asia Works. Nations in Southeast Asia were less successful, failing to create world-class companies and growing reliant instead on foreign multinationals for investment and technological know-how.

It was worries about a repeat of this latter scenario that drove Asia's nationalistic turn in tech policy, initially in China and more recently in India. The results have in many ways been impressive. It is hard to dispute that customers in Shanghai and Mumbai have benefited hugely from Tencent's ubiquitous online payments systems, for instance, or Reliance's ultracheap fourth-generation, or 4G, mobile rates.

Yet all this still raises questions about the long-term position Asian tech may come to hold. China's tech conglomerates have already sprawled into sectors that would leave their U.S. counterparts looking envious, not least financial services. Reliance now has a decent shot of dominating India's retail sector to a greater extent even than Amazon manages in the U.S.

Such dominance is likely to deliver plenty of short-term benefits, while potentially storing up problems for later. One is influence-peddling, in which cozy relations between politicians and tech entrepreneurs eventually end up producing unproductive cronyism rather than innovation. Rising inequality is another, as the U.S. example of Amazon's Jeff Bezos adding $13 billion to his net worth on July 20 alone starkly illustrated.

Perhaps the most important is excess market power, in which tech companies whose products at first bring competition and cheap prices end up as powerful entrenched monopolies, as happened to telecoms giants in other emerging markets like Mexico. Eventually, Asian regulators may decide they want to curb their tech champions, just as Europe and the U.S. are now doing. By then, it could be too late.

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