That's one of the biggest things that lawmakers here couldn't seem to understand - tech companies have high mobility across borders. Even if a law has no teeth, why would Microsoft store data in Australia when the next country over can still serve data for the region? It just creates too much risk, from a privacy and PR standpoint. Startups will be more adverse to founding in Australia as well. It just creates a blac…
For example, Apple has begun storing Russian user data in Russia in compliance with Russian data storage laws (https://venturebeat.com/2019/02/01/apple-will-reportedly-sto...), and Google is still working on its censored search engine in China.
Of course, if nobody else does this, this means you may have older software on your systems or less priority in development roadmaps or whatever as your country is an edge case, and you can probably say goodbye to market leadership and have to coast on your existing advantages. However, if everybody begins to cartelize the Internet, you may not lose as much in comparison to everybody else, since you will no longer be the edge case but the common case, and it will be a bad time to start a company or store data anywhere you go at any time. Companies will simply have to live with the geopolitical reality. In this sense, the Internet devolves into a suboptimal Nash equilibrium, where everybody has data localization laws and nobody will want to loosen up because storing your citizen's information on servers in another country will leave your citizens vulnerable. If this happens, the large homogeneous markets with a single language, government, and economy (U.S/China) may have an advantage.
This is sad, and I hope they reverse this law. An open Internet is good for economic and societal dynamism (and as a civilization is tautological to organized chaos, slowing that down weakens said civilization), and I wouldn't know how to work backwards to where the Internet should be. In the meantime, maybe this will lift some open source, decentralized communications means past some threshold of viability.