Day: March 30, 2019

For techies and phone geeks, Digital Cambodia 2019 was the place to be.

More than a dozen high school students clustered at the booth for Cellcard, Cambodia’s leading mobile operator. Under the booth’s 5G sign, they played video games on their phones.

Hak Kimheng, a ninth grade student in Phnom Penh, said his mom bought him a Samsung smartphone a few months ago, when he moved to the capital city from nearby Kandal province to live with his uncle while attending school. Like moms everywhere, she thought the smartphone would help her stay in touch with her son.

But smartphones being smartphones and kids being kids, Hak Kimheng, 16, has used it to set up an account on Facebook, Cambodia’s favorite social media platform. He’s also downloaded Khmer Academy, a tutoring app filled with math, physics and chemistry lessons.

And for one hour a day, Hak Kimheng watches soccer on the YouTube app he downloaded. While it’s better than nothing, the internet connection is “slow … and the video image is not clear,” he said.  “I want it to be faster. … It’ll be good to have 5G.”

Not far from the Cellcard booth, Cambodian government officials, ASEAN telecom and IT ministers, businesspeople, telecom and tech company representatives gathered for the opening ceremonies of Digital Cambodia 2019. The event, which ran from March 15 to March 17, attracted more than 100 speakers from throughout Southeast Asia, high level officials, businesspeople, researchers and telecom company representatives.

The discussions focused on 5G, which, with speeds as much as 100 times faster than 4G, will mean better soccer viewing for Hak Kimheng and faster connections for all users. But 5G will also be central to a world of smart cities filled with smart homes and offices replete with devices connected to the “internet of things” [[ https://www.zdnet.com/article/what-is-the-internet-of-things-everything-you-need-to-know-about-the-iot-right-now/ ]] humming along amid torrents of personal, business and official data.

‘A milestone year’

David Li, CEO of Cambodian operations for the Chinese company, Huawei, which is facing challenges over security from the U.S., spoke first, promising to “help Cambodia obtain better digital technology to improve social productivity and national economy.”

Government ministers, one from finance and economy and one from posts and telecommunication, listened as Li continued, pointing out that Huawei Technologies Cambodia launched in 1999. “We have been operating 2G, 3G, 4G, and now we’re heading toward 5G,” he said.

“Currently we are the only industry vendor that can provide the intertwined 5G system. I believe this year 2019 will be a milestone year for 5G in Cambodia,” Li said.

While this next generation of mobile networks will take years to roll out, the U.S. and China are in a race over whose technology will set the standards for 5G networks, something which will have immediate commercial value and carry longer term strategic implications for developing the dominant platform for 6G.

Citing concern that Huawei is, like all Chinese companies, linked to the Beijing government, the U.S. has been urging allies not to let Huawei build their 5G networks. But in countries like Thailand, which is Cambodia’s neighbor and a U.S. ally, Huawei is building and testing a 5G network because authorities said its low cost trumped U.S. pressure.

Huawei has long maintained it doesn’t provide back doors for the Chinese government, pointing out the lack of evidence to support the allegations, according to Bloomberg.

William Carter, deputy director of the Technology Policy Program at the Center for Strategic and International Studies (CSIS) said earlier this month that any country doing business with Huawei on 5G will have to deal with the risk of Chinese influence.

“And the question will be to what extent is that concern enough to overcome the price advantage and the service advantages and the integrated financing advantages doing business with Huawei,” he said.

Rich market

As more private businesses and government services move toward cashless payment and online data access, Cambodia is emerging as a rich market for 5G telecoms. Approximately 13.6 million people, or 82 percent of Cambodians, use the internet, and about 7 million use Facebook, the number of mobile subscriptions is around 19.5 million by January 2019, or 120 percent penetration, according to the Ministry of Posts.

Sok Puthyvuth, secretary of state at the posts and telecommunication told VOA Khmer that Cambodia is eager for 5G, urging private companies, including mobile operators and internet companies, “to make 5G available across the country.”

Thomas Hundt, CEO of Smart Axiata, one of Cambodia’s mobile telecommunications operators, told VOA Khmer only that the company is preparing for a 5G rollout, because users’ data consumption is overwhelming the 4.5G network. “We see an immediate need to come out with the next evolution of technology … at some point this year.”

Cellcard CEO Ian Watson, said the company is targeting a commercial launch of 5G services in the second quarter of 2019.

Tram IvTek, Cambodia’s minister of Posts and Telecommunications said at the opening ceremony of Digital Cambodia that the government “is strongly committed to connecting the country and to ensure the benefits of ICT (information and communications technology) reach the remotest corners as well as the most vulnerable communities” by 2020.

Aun Pornmoniroth, minister of economy and finance in a March 12 workshop on Cambodia’s digital economy, suggested it will take “five to 10 years or more to set up a complete digital economy and turn Cambodia’s economy into a technological leader.”

Meas Po, undersecretary of state at Ministry of Post, said the government has yet to decide which company it will partner with for building the 5G infrastructure but it has not ruled out Huawei or other Chinese companies. “In our country, we have our protective system, in other countries, they have theirs. We don’t allow anyone to just freely hack our data.”

Protecting privacy

Smart Axiata’s Hundt said his company wanted to a partner that would “guarantee to us that the equipment is solid and sound [and] our users’ data is safeguarded and the network is fully secured from cyber-security perspectives.”

Nguon Somaly, who earned a master’s degree in law and technology at Tallinn University of Technology in Estonia, has written extensively on data privacy in Cambodia. She contends Cambodian social media users don’t have the data privacy concerns of users in the U.S. and Europe.

“Cambodian youths don’t really care about privacy [on social media], but people in [the] EU are concerned about their data privacy,” said Somaly, referring to the European Union’s General Data Protection Regulation (GDPR) which restricts how personal data is collected and handled.

“That is money and it can be analyzed and generate income,” Somaly said. “China is not a free country and privacy is not their priority. Their priority is to generate business opportunities and income.”

Xu Ning, a reporter with VOA’s Mandarin Service, contributed to this report from Washington, D.C.

 
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For decades, it was virtually unknown outside a small circle of investors, corporate lawyers and government officials. 

But in recent years, the small interagency body known as the Committee for Investment in the United States has grown in prominence, propelled by a U.S. desire to use it as an instrument of national security and foreign policy. 

This week, the panel made headlines after it reportedly directed Chinese gaming company Beijing Kunlun Tech to divest itself of Grindr, a popular gay dating app, because of concern the user data it collects could be used to blackmail military and intelligence personnel. 

Operating out of the Treasury Department, the nine-member CFIUS (pronounced Cy-fius) reviews foreign investments in U.S. businesses to determine whether they pose a national security threat.  

Notification was voluntary

Until last year, notifying the panel about such investments was voluntary, something Kunlun and California-based Grindr took advantage of when they closed a deal in 2016.  

But given growing U.S. concern about Chinese companies with ties to Beijing buying businesses in sensitive U.S. industries, the committee’s rare intervention to undo the deal was hardly a surprise, said Harry Broadman, a former CFIUS member.   

“I think anyone who was surprised by the decision really didn’t understand the legislative history, legislative landscape and the politics” of CFIUS, said Broadman, who is now a partner and chair of the emerging markets practice at consulting firm Berkley Research Group. 

The action by CFIUS is the latest in a series aimed at Chinese companies investing in the U.S. tech sector and comes as the Trump administration wages a global campaign against  telecom giant Huawei Technologies and remains locked in a trade dispute with Beijing. The U.S. says the state-linked company could gain access to critical telecom infrastructure and is urging allies to bar it from participating in their new 5G networks.   

While the administration has yet to formulate a policy on Huawei, the world’s largest supplier of telecom equipment, the latest CFIUS action underscores how the U.S. is increasingly turning to the body to restrict Chinese investments across a broad swath of U.S. technology companies.  

“CFIUS is one of the few tools that the government has that can be used on a case-by-case basis to try to untangle [a] web of dependencies and solve potential national security issues, and the government has become increasingly willing to use that tool more aggressively,” said Joshua Gruenspecht, an attorney at Wilson Sonsini Goodrich & Rosati in Washington, who represents companies before the committee. 

CFIUS’s history has long been intertwined with politics and periodic public backlash against foreign investment in the U.S.  

OPEC investments

In 1975 it was congressional concern over the Organization of the Petroleum Exporting Countries (OPEC) investments in U.S. stocks and bonds that led President Gerald Ford to set up the committee through an executive order. It was tasked with monitoring the impact of foreign investment in the United States but had little other authority.  

In the years that followed, backlash against foreign acquisitions of certain U.S. firms led Congress to beef up the agency.  

In 1988, spurred in part by a Japanese attempt to buy a U.S. semiconductor firm, Congress enshrined CFIUS in law, granting the president the authority to block mergers and acquisitions that threatened national security.  

In 2007, outrage over CFIUS’s decision to approve the sale of management operations of six key U.S. ports to a Dubai port operator led Congress to pass new legislation, broadening the definition of national security and requiring greater scrutiny by CFIUS of certain types of foreign direct investment, according to the Congressional Research Service.  

But by far the biggest change to how CFIUS reviews and approves foreign transactions came last summer when Congress passed the Foreign Investment Risk Review Modernization Act of 2018. 

Slated to be fully implemented in 2020, the new law vastly expanded CFIUS’s jurisdiction and authority, requiring foreign companies that take even a non-controlling stake in a sensitive U.S. business to get the committee’s clearance.  

While the new law did not mention China by name, concern about Chinese investments and national security dominated the debate that led to its enactment. 

“There is no mistake that both the congressional intent and the executive intent has a clear eye on the role of China in the transactions,” Broadman said. 

Threats to ‘technological superiority’

Under interim rules issued by the Treasury Department last fall, investments in U.S. businesses that develop and manufacture “critical technologies” in one or more of 27 designated industries are now subject to review by CFIUS. Most of the covered technologies are already subject to U.S. export controls. The designated industries are sectors where foreign investment “threatens to undermine U.S. technological superiority that is critical to U.S. national security,” according to the Treasury Department. They range from semiconductor machinery to aircraft manufacturing.  

The new regulations mean that foreign companies seeking to invest in any of these technologies and industries must notify CFIUS at least 45 days prior to closing a deal. CFIUS will then have 30 days to clear the deal, propose a conditional approval or reject it outright. If parties to a transaction do not withdraw in response to CFIUS’s concerns, the president will be given 15 days to block it.   

To date, U.S. presidents have blocked five deals — four of them involving Chinese companies. One was blocked by the late President George H.W. Bush in 1990, two by former President Barack Obama in 2012 and 2016, and two by President Donald Trump. 

The number is deceptively small. A far greater number of deals are simply withdrawn by parties after they don’t get timely clearance or CFIUS opens a formal investigation. According to the Treasury Department, of the 942 notices of transactions filed with CFIUS between 2009 and 2016, 107 were withdrawn during the review or after an investigation.  

In recent years, CFIUS has reviewed between 200 and 250 cases per year, according to Gruenspecht. But the number is likely to exceed 2,000 a year under the new CFIUS regime, he added.  

The tighter scrutiny has raised questions about whether the new law strikes the right balance between encouraging foreign investment and protecting national security.  

“I think the short answer is it’s too early to tell,” Gruenspecht said. However, he added, if the new law “becomes a recipe for taking foreign investment off the table for whole realms of new emerging technology, that crosses a lot of boundaries.” 

Concern in Europe

The U.S. is not the only country toughening screening measures for foreign investment. In December, the European Union proposed a new regulation for members to adopt “CFIUS-like” foreign investment review processes. 

Gruenspecht said that while foreign investors are not  “thrilled” about the additional CFIUS scrutiny, “a lot of Western nations are also saying, actually, ‘We totally understand the rational behind CFIUS and we’re looking to implement our own internal versions of CFIUS ourselves.’ ”
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