There was a time when bad entities consisted of bad people, and we had Alibaba getting rid of 40 of those bad entities in the famous Persian tale of “Alibaba and the 40 thieves”. For the millennials it may come as a surprise to know that Alibaba in the olden days was not a Chinese digital behemoth, but a character from the Persian tale, where Alibaba discovered how to open a treasure trove using the magic words ‘Open Sesame’, or in the Indian version of tale, Khul Ja Sim Sim.
In the modern version of the old Persian tale, we again see Alibaba with over 40 bad entities, but in a different role. Alibaba itself has become one of those 40 bad entities, or 43 as is the current case.
So, what is happening? Why is Alibaba (or its group company Aliexpress) banned by the Indian government, along with 43 other apps? And why are the Chinese upset?
The key driving issue behind the ban is clearly national security, and the continued distrust of Chinese apps that are leeching out data from millions of phone users in the country. No wonder, the government used section 69A of the IT Act citing a threat to national security. This section empowers the Central Government to order that access to certain websites and computer resources) be blocked in the interest of the defense of the country, its sovereignty and integrity, the security of the State, friendly relations with foreign States, public order or for preventing incitement to the commission of an offence. The first ban on Chinese apps came in effect in July this year, right after the unprovoked Chinese military aggression in the Galwan valley. Subsequently, 117 more Chinese apps were banned in September.
As is well known, Chinese strategy involves using all other means for achieving its military objective, and that includes militarizing water, microbes, debt to nations, telecom infrastructure and also digital, and more specifically, apps. Apps are one of the cheapest mechanisms of compromising a modern nation where most citizens and most businesses are highly dependent on a digital infrastructure and they repose their data and their businesses in such an infrastructure. A widely installed malicious app from a belligerent adversarial nation can allow the military of that nation to play havoc in India. This is what the banning of the Chinese apps tries to prevent.
I had predicted in my article in July, right after the first ban on the Chinese apps was imposed, that the Chinese apps will be surely coming back in three ways, i.e. by (a) changing their names and reappearing, (b) changing the registered country of their company and reappearing and (c) a combination of the above two strategies. And indeed, that has what is playing out.
We saw the banned Kwai resurfacing as Snack video, with the employees also being the same, and their LinkedIn profiles merely showing them to have changed companies. We also saw some of the companies changing their country of incorporation to third countries such as Singapore. We are seeing companies such as ByteDance, the operators of the app TikTok, trying various ways to reappear in the Indian app stores. We also saw some new companies that were aggressively trying to control the logistics sector, a very sensitive sector in the Indian economy, using predatory pricing.
The issue with logistics, if controlled by a company from adversarial nation, is that if our military is engaged in a heavy tactical situation at the border, it is a very real possibility that the apps that control our logistics, such as the banned Lalamove, can actually be used to sabotage our logistics sector. The concerns are very similar to the global concerns related to Chinese equipment being used in telecom, wherein the Chinese government can use them to compromise the telecom network, which is critical to the proper functioning of any modern economy.
It was under these very worrisome developments that a fortnight ago, the Ministry of Electronics and Information Technology took the step of banning an additional 43 Chinese apps in India.
In the process of doing so, the Government has inadvertently replicated a very important strategy of the Chinese government – that is to stop more mature foreign players to operate in the digital space, thereby providing market space to domestic companies, thereby providing an opportunity for local digital startups to strengthen and become world class. It is the same process by which Baidu, Tencent, ByteDance and other Chinese digital companies became global behemoths and are now going out to dominate the world.
But did the ban really help the Indian app ecosystem? Did it contribute to a stronger Atmanirbhar Bharat? Absolutely yes. We see Moj from Sharechat aggressively picking up market share in India as soon as TikTok vacated the space. Even much smaller short video app firms like Chingari have also been able to grow much faster. We have seen the Indian in-city logistics aggregator start-up, Porter, quickly fill up the space where Lalamove had vacated. This has contributed to their valuations going up dramatically in a short time, leading to direct wealth creation in the country.
This is not just a collateral benefit of applying section 69A of the IT Act, but a reciprocal step. We see China creating Himalayan roadblocks for Indian firms that provide value added services and not just raw materials, from being able to enter and operate in China. Indian IT and pharmaceutical firms that are world beaters, barely find a toehold in China. Why then should India open up its market for Chinese products? Trade cannot be one-sided, and this is where the recent banning of the 43 Chinese apps fit in very well from a larger policy perspective.
(Dr Jaijit Bhattacharya is President of Centre for Digital Economy Policy Research. Views are personal, and do not necessarily reflect those of Outlook Magazine)
