Study: Less piracy means economic gains

Asian countries, particularly emerging economies, will benefit from a 10 percent cut in software piracy rates by 2011, BSA report finds.
Written by Lynn Tan @ Redhat, Contributor

Asian economies would stand to gain significantly if the rate of PC software piracy is cut by 10 percentage points by 2011, a new study reveals.

Commissioned by the Business Software Alliance (BSA) and conducted by research house IDC, the study released Tuesday said the reduction would add highly-skilled jobs to the labor force, support the creation of new companies, lower business risks, and fund government services without a tax increase.

Some 435,000 new jobs, over US$40 billion in economic growth, and more than US$5 billion in tax revenues above current projections, could be generated in the region, the research projected.

The BSA added that slashing software piracy would bring about a "multiplier effect", noting that for every US$1 spent on legitimate packaged software, an additional US$1.25 is spent on related services from local vendors such as installing the software, training personnel and providing maintenance services.

"A strong IT sector can serve as a major contributor to domestic labor productivity and national economic growth," Marcel Warmerdam, IDC's research director of IT Markets said in a statement. "And, because most of the benefits from a reduction in software piracy accrue to locally-based software services and channel firms, most of the benefits stay within a country."

Jeffrey Hardee, BSA Asia-Pacific's vice president and regional director, noted in a statement that of an estimated US$21 billion worth of software used in new computers in the Asia-Pacific region in 2006, approximately US$11.6 billion was deemed to have been pirated.

"This study clearly shows the huge economic benefits that economies would derive from a 10-point drop in PC software piracy [rates] over the course of the next four years," Hardee added.

A global association that aims to represent the interests of top software developers, the BSA has members worldwide including Adobe, Microsoft, Ansoft Taiwan and SAP.

Emerging economies to benefit more
The BSA also noted that emerging economies with high piracy rates, such as China, Russia and India, are expected to experience even greater positive impacts from the reduction of PC software piracy.

For example, a 10-percentage point reduction in China's 82 percent PC software piracy rate could make the country's IT workforce the largest in the world within four years, surpassing the number of IT workers in the United States, the BSA said. The software industry body noted that the number of IT jobs in China would grow by an additional 355,000 beyond those already projected, bringing the total number of IT jobs in China to approximately 3.5 million by 2011.

The BSA added that the reduction could also increase IT spending growth in China from 10.3 percent per year, to 13.7 percent per year between 2008 and 2011.

Similarly, a 10-point cut in Russia's 80 percent PC software piracy rate could help make the country's IT sector larger than India's within four years, and as such, put China among the top three fastest-growing IT markets in the world, the BSA said.

It added that the Russian IT sector would see annual growth in expenditure rise from 14.6 percent to 18.2 percent, between 2008 and 2011, and valued at US$33.9 billion by 2011.

"The IDC data offer convincing evidence that countries with moderate and high piracy rates stand to gain the most from reducing piracy, in terms of creating stronger local IT sectors, and stronger economies and societies overall," Hardee said.

In 2007, Asian economies spent over US$231 billion on IT goods and services including computers, peripherals, network equipment, packaged software and IT services, the BSA said. It noted that the investment supported more than 348,000 IT companies with 5.5 million IT industry employees, and generated US$167 billion in IT-related taxes.

According to Hardee, 42 economies were included in this study, collectively representing 91 percent of the global IT sector. Of these markets, 11 were Asian economies which IT sector represents 94 percent of the region's total IT sector size, he said. "The lessons to be learnt here are clear and simple... When economies take steps to reduce software piracy, everyone benefits," he added.

According to the BSA, governments can take the following steps to reduce software piracy:

  • Update national copyright laws to implement World Intellectual Property Organization (WIPO) obligations;
  • Create strong enforcement mechanisms, as required by the World Trade Organization (WTO), including tough anti-piracy laws;
  • Dedicate significant government resources to the problem, including national IP enforcement units, cross-border cooperation and more training for local officers;
  • Improve public education and awareness; and
  • Lead by example by requiring the public sector to use only legitimate software.

Lynn Tan is a freelance IT writer based in Singapore.

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