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Indonesia's Business Software Alliance (BSA) recently reported that the country's software industry is seeing increased losses in income every year due to piracy.

Indonesia’s Business Software Alliance (BSA) recently reported that the country’s software industry is seeing increased losses in income every year due to piracy.

BSA estimates that the industry suffered a total loss of $550 million in 2008, up 33 percent from the loss of $441 million in 2007. It also projects that the figure will rise to around $600 million in 2009.

According to the BSA website, software piracy, also called as copyright infringement of software, “is the unauthorized copying or distribution of copyrighted software”, where illegal software is copied, downloaded, shared, sold, or installed into personal or work computers. “If you make more copies of the software than the license permits, you are pirating,” the BSA website states.

Since the 1990’s, the introduction and improvement of peer to peer file sharing technologies combined with easier access to faster Internet connections and copying technologies (i.e. writable CD’s, DVD’s, etc.)  has made it a lot easier for the average computer user to copy and distribute pirated software.

Software companies have tried many measures to combat software piracy. The typical measure involves a special four to 24-digit random serial number that customers use to obtain an activation code for the software. This activation code then enables the companies’ automatic mechanism  to authorize the customer for full use of the software.

Yet despite such advanced mechanisms, software piracy remains a serious problem. Because of the nature of the industry, knowledgeable individuals can easily come up of a way to crack such mechanisms. As the Indonesian BSA representative, Donny Sheyoputra said, “The fight against piracy is a never-ending battle. If we develop new technologies to prevent piracy, the pirates will always find a new way to crack it.”

Indonesia has one of the highest rates of software piracy. In 2004, the country was ranked third out of 100 countries in terms of pirated product usage, with a rate of 87 percent. It has since been able to lower the rate of pirated product usage in the following years. It ranked fifth in 2005 and then eighth in 2006 with a rate of 85 percent. In 2007, the rate declined further to 84 percent, placing the country in twelfth.

The declines can be attributed to a serious crack down by the Indonesian government on pirated software. In 2003, the government enacted new copyright legislation, which calls for a jail term of up to seven years and fines of up to $600,000 to distributors, sellers and buyers of pirated goods. In 2005, the government made a deal with Microsoft where it would pay them $1 for each government computer running pirated Microsoft software. More recently, the BSA, in cooperation with the National Police Headquarter, raided and caught an architecture consultant company in South Jakarta that had been using pirated copies of building design software. Authorities, looking to catch offenders,are focusing more on companies rather than on individuals because they argue that it is easier to track down piracy committed by companies.

Despite the aforementioned declining trend of the usage of pirated software and the Indonesian governments’ efforts to stop software piracy, the country’s software industry continues to suffer financial losses. In 2006, financial losses by software vendors were at $350 million. This figure steadily rose to $411 million in 2007 and, as mentioned above, to an estimated $550 million in 2008. These financial losses cut into the software companies’ profits, which could have been spent on hiring more young software developers and helping the local software industry grow and become more competitive in the international arena.

Financial losses suffered by Indonesia’s software industry also negatively affect the country’s economic performance. The BSA argues that Indonesia could have gained an extra tax income of around 10 percent of the total income lost. Moreover, a 2008 report by the International Data Corporation (IDC) shows that a 10 percent decrease in piracy by 2011 would create 2,200 new jobs, generate $1.8 billion in economic development and gain $88 million more in tax revenues.

The fight against software piracy and its negative effects on the Indonesian software industry and economy continue despite the authorities’ effort to stop it. Proponents of anti-piracy efforts argue that the ultimate solution is to educate consumers about software piracy. “The best thing we can do is to educate the public to have a bit of respect when it comes to intellectual rights,” Sheyoputra said.

Source: www.AsiaEcon.org

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Source: www.asiaecon.org |

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