Piracy, Technology and Economic Development: The Indonesian Case

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It’s a perverse paradox that technological advances and economic development–something that all developing countries strive for in order to raise productivity and the welfare of their citizens–‎come with a heavy price tag. In some cases, it is economic despoliation; in others it is growing corruption and highly unequal distribution of wealth; in still others it is the exploitation of technology by bad actors for undesirable ends. We are all aware of the blessings of technology, from medicine to manufacturing to communications–and have been told that nothing should be allowed to slow down this progress. In the area of communications, the Internet has become the bearer of many good things–and some not so good things—such as invasion of personal privacy and content-theft (piracy).

We are rapidly finding out that along with all the positive things that the Internet can do or enable (such as e-commerce, distance education, tele-health‎, empowerment of small farmers and small business through access to information, all the advantages of social media, and more), there is a dark side to the Web, just as there is a dark side to human nature. Hate, national security threats, invasion of privacy, child porn, stalking, and facilitation of illegal business models based on counterfeiting and piracy are some prime examples of the dark side. Just as we have laws and regulations in the offline world to deal with these issues, so too do we need to ensure an appropriate regulatory framework in the online world. To some extent we have that or are moving to put it in place, despite constant pushback from cyber-libertarians like the Electonic Frontier Foundation and its acolytes in the US and abroad, but there is always a lag that can be exploited.

It is a truism that technology almost always outpaces regulation, and legislators and regulators are usually running to catch up, trying to fill yesterday’s potholes while keeping an eye on the road ahead. ‎This is true in the US and other economically and technologically advanced countries, (the recent hearings on Facebook’s privacy policies are a good example) but is especially true in developing countries where regulation and the legal framework are more often honoured in the breach than in the observance.

China is often cited as an example of a country where a “wild west” environment has prevailed, with either no regulations or lax enforcement in many areas, from environmental pollution to building standards‎ to labour conditions, food safety and intellectual property. We know that this is rapidly changing as China moves up the economic ladder and becomes both more aware and more capable of dealing with these issues, through political will and alternate economic policies that punish rather than reward regulatory violations. From being a haven for IP theft, whether through patent and trademark infringement or wide-scale copyright piracy, I would say that China is turning the corner and is now firmly in the “IP creating” camp, with a concomitant framework to respect and protect intellectual property, although this is still enforced unevenly. China is not perfect, nor has it got it all right. There is still fairly widespread IP infringement in China (no country is exempt from this) and some Chinese IP policies (such as forced licencing of technology and reverse-engineering) are troublesome. However, by and large China has moved a long way up the IP scale in the past 15-20 years.

What about other, still-developing countries? There are many examples but I am going to focus on Indonesia, because it is the fourth largest country on the planet in terms of population, a developing economic powerhouse, a moderate and tolerant majority-Islamic country with developing democratic institutions. It is also a country with a rich and deep cultural tradition, as anyone who has visited Indonesia can attest.

Now if you have been to Indonesia recently, as I have, you will initially be flummoxed by the seemingly enormous amounts of rupiah that everything costs. To put it in perspective, one US dollar brings you just over 14,000 rupiah; $100 dollars therefore is 1,405,000 rupiah. Thus when I say that the Indonesian film industry lost Rp 1.5 Trillion to content and DVD piracy in 2017 in just four Indonesian cities, your eyes might glaze over until I convert that to USD ($107 million), as reported in the Jakarta Globe. (The news article says the losses amount to US$107 billion, but they have slipped a zero). The University of Indonesia’s Institute for Economics and Social Research estimated that if their study was extended to Indonesia’s 30 major cities, losses could top 5 trillion rupiah. Pirated DVDs and pre-loaded thumb drives are still the illegal devices of choice, especially for less affluent young people, reflecting the state of economic development of the country. However as broadband access becomes more ubiquitous, streaming piracy is becoming a major challenge. This rampant piracy is a major obstacle for the Indonesian film and television industry, including writers, actors, distributors and all others in the industry ecosystem.

To come back to my theme of the mixed blessings of technological change, as technology evolves piracy and the techniques of pirate operators change along with it. In fact, pirate operators are often on the cutting edge of change. Thus music piracy in South East Asia has gone from pirated cassette tapes to CDs to DVDs, to downloading and now to streaming. Audio-visual piracy has moved, as it did in the West, from VHS to CVD (compact video discs, a format invented by the pirates) to DVD and now to online streaming through a variety of “Kodi boxes” widely found on the market. (For more on Kodi boxes and their impact on global content markets, see my earlier blog here).

The “Coalition Against Piracy” (CAP) formed by members of CASBAA (formally the Cable and Satellite Broadcasting Association of Asia) reports that pre-loaded “Kodi” and “Android” boxes are widely available in a number of malls in Jakarta. Often these boxes come with free apps that access infringing content or with pre-paid infringing subscription services (the services charge customers but make no payments to content producers or copyright owners). Online markets are also widespread with many of the pre-loaded boxes being sourced from China. (There is China again, not quite so interested in preventing the export of IP-infringing technology as it is in protecting IP in its domestic market).

These boxes, although designed to facilitate illicit activity, still have to be paid for legally, a transaction facilitated by well-known payment processers such as Mastercard and Visa, plus local equivalents. And the boxes, ordered through the Internet after word searches for “fully-loaded boxes” are delivered by DHL, EMS and locally licensed delivery services. Needless to say, there is widespread advertising online for these boxes, revenues that are willingly accepted by internet intermediaries (Facebook, Google) and online sellers (Amazon). Thus legitimate channels of commerce are exploited by the pirates to advertise, collect revenue and deliver devices that have been deliberately configured to evade Indonesian (and other countries’) laws against piracy. This is an ongoing problem in many parts of the world—and not just the “developing world”.

Indonesian film makers and cultural stakeholders are mounting a campaign, with the assistance of the CAP and other players such as the MPAA, to bring about a more active and robust government response. One option that has proven effective in other jurisdictions, including in Indonesia’s near neighbour Australia, is the blocking of infringing streaming sites, or “site blocking”. Needless to say, it is complicated to establish the legal authority to undertake this action in Indonesia, not to mention mustering the necessary political will. The ministry responsible for telecomm regulation, which in theory has the authority to require that Indonesian ISPs block content-infringing sites, is the Ministry of Communications and Informatics, known locally as KOMINFO. Indonesian and foreign content stakeholders are working closely with KOMINFO to raise awareness of the problem and to discuss solutions, such as refining legislation.

There are some grounds for optimism. As the Jakarta Globe reports, the Indonesian government has recently ordered ISPs to block websites focussed on gambling, advocacy of terrorism and “pornography”, and the state-owned ISP Telkom has developed a web-crawling system to identify such sites using key words. (Not surprisingly, the Indonesian definition of “pornography” is broader than it would be in the West reflecting that country’s social norms).

As Indonesia moves into an era where widespread broadband will become available for the benefit of all or most of its citizens, it needs to be aware of the negative elements that will come along with these benefits. There are some advantages to not being the first kid on the block to get the new toy, and Indonesia (and other developing countries) can benefit from the experience of others. This experience suggests that it is important to put in place a regulatory regime at an early stage in order to use technology to control the downsides of ubiquitous cheap internet access before online piracy gets completely out of control. Ensuring that wide-scale online access facilitates rather than destroys the dissemination of local culture and local productions is an important part of this process. For Indonesia’s sake, I hope they get it right.

© Hugh Stephens 2018. All Rights Reserved.

 

2 thoughts on “Piracy, Technology and Economic Development: The Indonesian Case”

  1. The Indonesian government needs to get its priorities (and targets) straight. They currently block Vimeo.com, which is an ethical company that does not host copyright infringing content, pornography, or other undesirable content. Meanwhile, all manner of abuses (as described in your excellent piece) are tolerated or ignored. Symptoms of corruption are there. Disrespect for the rights of creatives. And, I’m guessing, a desire to suppress forums where political dissent might be expressed. Meanwhile, the burning of forests goes on.

    Like

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