Indonesia is a haven for counterfeit products, going far beyond pirated DVDs and phony branded tee shirts. While one can easily find counterfeit products in almost all Asian countries, the sheer size of the market means Indonesia is losing a lot from this practice. To address the problem, the Indonesia Anti-Counterfeiting Society (MIAP) has been a leading voice working to combat counterfeiting and piracy in Indonesia.
Counterfeiting is a growing industry in Indonesia. A study conducted by MIAP and the University of Indonesia projected loss of sales to counterfeit goods in 2014 at Rp 65.1 trillion, up 50 percent from a similar study in 2010.
“It shows that the trend [of counterfeiting] is increasing,” said Widyaretna Buenastuti, the chairwoman of MIAP.
MIAP was established in 2003 with a focus on a wide range of goods from high-end products to machinery, software to food and beverages, medicine and vehicle parts.
The size of the counterfeit goods market in Indonesia is huge: 3.8 percent in pharmaceuticals, 8.5 percent in food and beverages, 12.6 percent in cosmetics, 33.5 percent in software, 37.2 percent in leather goods, 38.9 percent in apparel and 49.4 percent in printer ink, according to data published by MIAP.
However, an industry source told AmCham Indonesia that the real amount of fake software in the market is more than 70 percent.
Profits from counterfeit medicine may reach 10 percent of the total pharmacy market, according to the International Pharmaceutical Manufacturers Group (IPMG). Fake products can also be found in the agriculture sector where the Rp 650 billion pesticide market attracts fake manufacturers.
“Companies facing this issue feel some of their products are no longer trusted by farmers, who come to believe they bought pesticides with no quality,” said Alghienka Defosandi of Dow Indonesia.
Rethinking the dangers
While some consumers may think it is fun to get fake products at a cheap price, the impact of counterfeiting should not be underestimated. Counterfeit and pirated products have wide-reaching repercussions for government, society and the business sector. According to a study done by the Organization for Economic Co-operation and Development (OECD), counterfeiting and piracy are a burden for rights holders and consumers, resulting in adverse socio-economic impacts.
While rights holders lose royalties, brand value, reputation, investment costs and sales, government loses tax revenue and faces higher levels of corruption. Consumers, meanwhile, may face health and safety risks by consuming dangerous or ineffective counterfeit medicine and tainted food and beverages.
Above all, Indonesia also faces stifled innovation and growth, increased criminality and reduced employment, with fewer foreign companies willing to invest due to fears of violations of intellectual property rights (IPR).
Indonesia’s Music Industry Association, for example, says that record companies may lose as much as Rp 16 billion a day from rampant illegal music downloads. The Indonesian Film Producers Association (APROFI) says that the piracy of just one film may amount to a loss of approximately Rp 4.3 billion. The National Food and Drugs Monitoring Association (BPOM) says it destroyed fraudulent and illegal medicine worth Rp 2.9 billion in 2015 alone, a mere fraction of the total in circulation.
Fighting the tide
Combating counterfeiting is not an easy task, especially in a society that thinks buying fake products is just fine. Quoting the same MIAP study, Widyaretna said that between 2010 and 2014, consumers’ willingness to buy counterfeit software products decreased by just 0.6 percent, while there was an increased demand for the pharmaceutical and apparel sectors.
Understanding the challenge, MIAP has been putting together a number of strategies in collaboration with the respective authorities. It has established relationships with many government agencies, such as the Directorate General of Intellectual Property Rights, Ministry of Trade and Jakarta City Council.
“We asked the Indonesia Ulema Council to include IP rights in a fatwa, stating that counterfeit goods are haram,” said Widyaretna.
Other activities include the “Clean Mall Award,” a join action with the Indonesian Mall Management Association and the University Award for Copyrights. “It is very important to share knowledge about the danger of buying fake products,” she added.
Widyaretna said she has learned a lot about the health risks of fake products as a result of her work “Even a pair of fake Oakley glasses may harm your eyes,” she said.
To ramp up its advocacy work, MIAP also held a Public Services Advertisement competition.
Additional partners
Other organizations have been taking action as well. The Creative Economy Agency (Bekraf) has set new targets to increase Indonesia’s creative economy, and has also upped the ante in eradicating IPR violations through the establishment of a strategy dubbed “3Si” – creation, protection, and commercialization. It created the Music and Film Piracy Task Force in coordination with industry associations, content creators and the police.
Triawan Munaf, head of Bekraf, has also spoken of an alert system in cooperation with Telkom Indonesia and the Ministry of Communications and Information (Kominfo) to monitor various music and film content Web sites. The system, which warns illegal downloaders rather than closing sites, is still in the trial process, and no release date has been given by Bekraf.
BPOM, in response to counterfeit medicine, has conducted nationwide inspections, finding many counterfeit goods come from India and China and include cosmetics and traditional medicine. Consumption of fake medicine may result in allergies, therapy failure, and drug resistance that could be fatal.
More than 50 percent of fraudulent medicines are being sold on the Internet, resulting in BPOM’s cooperation with Kominfo in closing down sites selling illegal medicine. More than 10,000 sites were blocked in 2014.
Widyaretna is clear on how counterfeiting can eventually be defeated. “I believe industry, the government and the public need to work together.”
