Data sovereignty vs data localisation—these two terms are often used interchangeably, but they have distinct legal and operational implications for businesses.
Hence, as organisations increasingly rely on cloud computing and global data sharing, understanding the differences between these concepts is essential to ensure compliance with Malaysia’s data protection laws.
What is Data Sovereignty?
Data sovereignty is the principle that data is subject to the laws and regulations of the country where it is stored.
In other words, if a business stores its data on servers within Malaysia, that data falls under Malaysian law, regardless of where the company itself is based.
Key Characteristics of Data Sovereignty
- Jurisdictional Control: Governments can enforce legal rights over data stored within their national borders.
- Foreign Compliance Risks: If data is stored in another country, it may be subject to that country’s data access laws, such as the U.S. CLOUD Act, which allows U.S. authorities to access data held by American cloud providers.
- Cloud Provider Considerations: Businesses using global cloud services (e.g., AWS, Microsoft Azure, Google Cloud) must ensure they comply with both local and foreign regulations.
Example of Data Sovereignty in Action
For instance, a Malaysian financial institution using a cloud provider with data centres in Singapore might be legally required to comply with Singaporean data laws.
As a result, this can lead to potential conflicts with Malaysia’s Personal Data Protection Act (PDPA) and other regulatory frameworks.
What is Data Localisation?
Data localisation goes beyond sovereignty by enforcing strict requirements on where data can be physically stored and processed.
Some governments mandate that specific types of data, such as personal or financial information, must not leave national borders.
Key Characteristics of Data Localisation
- Mandatory Local Storage: Data generated in a country must be stored and processed within that country’s borders.
- Regulatory Compliance: Often required by governments to enhance cybersecurity and protect citizens’ personal data.
- Restricted Cross-Border Data Transfers: In some cases, data cannot be transferred to foreign servers, even for processing or backup.
Example of Data Localisation in Action
For example, Russia’s Personal Data Law mandates that all personal data belonging to Russian citizens must be stored within Russia.
Similarly, China’s Cybersecurity Law requires certain industries, such as banking and telecommunications, to keep sensitive data on domestic servers.
Read More: Understanding Data Sovereignty in Malaysian Modern Business
Key Differences in Data Sovereignty vs Data Localisation
While both terms relate to data governance, they differ in critical ways:
| Aspect | Data Sovereignty | Data Localisation |
| Legal Focus | Jurisdictional control over data | Mandates physical storage location |
| Data Movement | Data can be stored abroad but is subject to foreign laws | Data cannot leave national borders |
| Primary Purpose | Ensuring data follows national legal frameworks | Protecting sensitive data from foreign access |
| Business Impact | May require multi-jurisdictional compliance | Often demands domestic data centres, increasing costs |
Why Data Sovereignty and Data Localisation Matter for Businesses
Hence, companies must adopt robust data governance policies with Malaysia’s MyDigital Economy Blueprint and growing cybersecurity threats.
Consequently, failing to comply with sovereignty and localisation laws can result in reputational damage, fines and loss of consumer trust.
1. Regulatory Compliance & Legal Risks
Governments worldwide are tightening their data protection laws. Malaysia’s PDPA 2010, the Cyber Security Act 2024, and potential future amendments could introduce stricter regulations for cross-border data storage.
2. Data Security & Privacy
Moreover, localising data can reduce exposure to foreign government access, cyber-attacks, and data breaches. However, businesses must also implement strong encryption, access controls, and cybersecurity protocols to protect stored data.
3. Impact on Cloud Services
Many companies also rely on global cloud providers for scalability and cost efficiency. However, organisations must ensure their chosen cloud service provider offers data residency options within Malaysia or risk compliance violations.
How Businesses Can Navigate Data Sovereignty & Localisation Challenges
So, companies should adopt best practices for managing their data effectively to stay compliant and competitive.
1. Choose Cloud Providers with Local Data Centres
Firstly, selecting cloud providers with data residency options in Malaysia helps businesses comply with local laws while minimising risks associated with foreign jurisdictions. It’s essential to verify that the provider meets both Malaysian and international data protection standards.
2. Strengthen Data Security Measures
Then, Robust security practices are vital for protecting sensitive data. Implementing end-to-end encryption ensures data confidentiality, while multi-factor authentication (MFA) prevents unauthorised access. Regular security audits also help detect vulnerabilities and strengthen compliance.
3. Stay Updated on Regulatory Changes
Additionally, data laws are evolving, with Malaysia’s PDPA 2010 and the Cybersecurity Act 2024 setting new compliance standards. Businesses must stay informed and work with legal experts to navigate these changes and mitigate risks.
4. Review Contracts and Vendor Compliance
Lastly, ensuring that Service Level Agreements (SLAs) clearly define data governance policies is essential when working with cloud providers. Regularly assessing third-party vendors helps businesses confirm compliance with local regulations.
Read More: Data Sovereignty vs Data Residency: Key Differences to Note
Navigate the Complex Landscape with Aegis Cloud
To conclude, businesses must understand the difference between data sovereignty vs data localisation to avoid regulatory risks. Are you prepared to secure your business’s data while ensuring legal compliance? Consult Aegis Cloud today for our data protection service to safeguard your data sovereignty and localisation needs.
