Economic Update
The internet and communications technology (ICT) industry in Indonesia is projected to grow quickly but issues of protecting intellectual property rights have so far hampered its potential.

In May, the international non-governmental anti-piracy organisation Business Software Alliance (BSA) released its latest global report on software piracy. The annual report places Indonesia as the third worst offender in the Asia Pacific region, scored a piracy rate of 85%, just behind other regional offenders Vietnam (88%) and Pakistan (86%). The BSA is an international association of software developers.

Indonesia’s piracy rate has decreased only slightly since 2003 when it stood at 88%. However, estimated losses from piracy have risen considerably to $350m in 2006 compared to $158m in 2003.

Rama Tiwari, chair of the BSA Indonesia Committee, said, “Despite the high piracy rate, the decrease is a good sign that tells us that our campaign is starting to bear fruit. We are very optimistic that the sustained efforts by the government will ultimately result in lower piracy rates.”

The BSA report stated that between 2000 and 2004, Indonesia witnessed the fastest ICT growth in the region, adding $714m a year to the economy and creating more than 4600 new jobs in the sector.

“Decreasing Indonesia’s piracy rate to 77% would add $3.4bn to the economy, create 3000 more new jobs, and increase local industry revenues by more than $1.5bn. These benefits would, in turn, generate an additional $153m for its tax coffers,” said the report. Robert Holleyman, BSA’s president and CEO, said, “When countries take steps to reduce software piracy, just about everyone stands to benefit. Workers have new jobs, consumers have more choices, entrepreneurs are free to market their creativity, and governments benefit from increased tax revenues.”

The BSA has a hotline for people to report suspected cases of piracy. In May, tip-offs received through the hotline led to a police raid on two Singaporean shipping companies in Batam. One server and 145 personal computers were seized while the police detained three managers for questioning. “This proves that not only small firms and poor people use counterfeited software, but also multinational companies,” BSA director for the Asia Pacific region, Jeffrey J. Hardee told media.

This is one of several such workplace raids carried out in recent months. Reproduction of computer programmes for commercial purposes carries a maximum jail term of five years and/or a maximum fine of $57,100.

“These raids underline the importance that Indonesia and many other economies across Asia place on protecting intellectual property and enforcing software copyright protection,” said Tarun Sawney, BSA’s director of anti-piracy, Asia. “Software piracy has a harmful effect on economies, compromising the growth of the software industry and stifling innovation and progress of local IT industries. Authorities in countries like Singapore and Indonesia are doing the right thing in taking swift action against companies that flout the law,” said Sawney.

In its list of recommendations for 2007, the International Intellectual Property Alliance noted that despite some “significant criminal convictions”, Indonesia’s piracy rate remains about the same. The report stated, “The government should seek more significant convictions (and public announcements of such) as part of an overall campaign to eradicate this form of piracy.”

Last month, the office of US trade representative Susan Schwab released a statement announcing that the US and Indonesia had agreed to set up working groups to develop “specific initiatives” on intellectual property rights and other areas.

In November 2006, the US formally recognised progress when it downgrade the country from its “priority” watch list to its regular list of countries to watch for piracy. “By improving its level of intellectual property protection, Indonesia has also improved its attractiveness as a foreign investment destination,” US trade representative assistant Barbara Weisel said.