Philippines use of pirated software rises, BSA says

Despite efforts of the government and the Business Software Alliance (BSA) to combat piracy, use of unlicensed software among local organizations remains rampant.

According to BSA’s eighth annual study, the rate of piracy in the country went up by 5 per cent, from 63 per cent in 2001 to 68 per cent last year, indicating that more than half of all business software installed in 2002 were unlicensed rather than being bought from official sources. Meanwhile, losses due to the purchase of unlicensed software in Philippines in 2002 grew by 53.23 per cent to reach US$37.78 million from US$6 million in 2001.

The BSA study on software piracy estimates the use of unlicensed software in 85 countries by comparing the amount of legal software supplied to a country with the anticipated local demand for software. The difference between the two figures represents the number of unlicensed applications, and multiplying that figure by the average price of business applications gives the estimated dollar loss.

Although the piracy rate has increased over the previous year, long-term figures show that the rate has decreased considerably, according to Ronald Chua, chairman of the Philippine committee of BSA. “The Philippines is one country that has realized the benefit of reducing software piracy,” said Chua. He explained that in 1994, the country’s piracy level was 94 per cent. Since then, he said the country has made good progress and has succeeded in reducing piracy rates to 68 per cent in 2002.

According to a recent study conducted by the International Data Corp. (IDC), the Philippines’ IT sector contributed 55 billion pesos (US$1.03 billion) to the economy, created 27,169 jobs, and contributed 3.9 billion pesos in tax revenues for the government in 2002. The IDC study also indicated that cutting piracy rate in the Philippines by 10 points over a four-year period between 2002 and 2006 could add 19.3 pesos billion to its economy, create 2,000 high-wage jobs, and generate 1 billion pesos in new tax revenues.

“However, the increase in piracy rate last year clearly shows that software piracy remains a serious problem in the Philippines as retail revenue losses to the industry rose to two billion pesos. We urge the corporate sector to be active in joining the fight against piracy,” said Chua.

The rate of piracy in Asia grew from 54 per cent in 2001 to 55 per cent in 2002, BSA said. Boosted by the growing overall demand for software in the region, losses in the Asia-Pacific now account for an all-time high of $5.5 billion or 43 per cent of total financial losses due to unlicensed software worldwide, according to BSA figures.

The Philippines was among six countries in the Asia-Pacific that experienced growing rates of illegal use of software from 2001. The other five were Australia (up from 27 per cent in 2001 to 32 per cent in 2002), Hong Kong (53 per cent to 56 per cent), Indonesia (88 per cent to 89 per cent), South Korea (48 per cent to 50 per cent) and Vietnam (94 per cent to 95 per cent).

Although China’s piracy rate remains steady at 92 per cent, it accounted, for the first time, for the largest dollar loss of $2.4 billion in the region as well as worldwide.

“BSA is very concerned that the average software piracy rate in the Asia-Pacific is rising, in contrast to every other region except for Eastern Europe,” stated Jeffrey Hardee, BSA vice president and regional director for Asia-Pacific. “The enormous losses in the region due to software piracy are particularly troubling. If Asia-Pacific countries are to realize the economic benefits software generates in an economy, software piracy levels must be brought down.”

The unlicensed software use rate in the Asia-Pacific fell steadily from 1994 (68 per cent) to 1999 (47 per cent per cent), but showed consecutive increases in 2000 (51 per cent) to 2002 (55 per cent), BSA said.

Asia-Pacific is home to countries which recorded some of the highest unlicensed software use rates in the world last year, according to BSA estimates. These include Vietnam, which has the highest piracy rate in the world (95 per cent), China (92 per cent), Indonesia (89 per cent) and Pakistan (80 per cent).

A sharp decline in unlicensed use rate was seen in Taiwan (53 per cent down to 43 per cent), while New Zealand retained the region’s lowest unlicensed use rate of 24 per cent, down from 26 per cent in 2001, according to BSA figures.

The major source of losses are companies that copy software for use throughout their organization beyond the number of licenses they have purchased, BSA said.

According to Hardee, a worldwide study conducted by the IDC, and released in April, measured the economic benefits derived from lowering the rate of software piracy rate and the results were staggering. He said the IDC study showed that just a 10-point drop in piracy over four years in the Asia-Pacific would add 1.1 million new jobs, $170 billion in additional economic growth and more than $15 billion in tax revenues.

“Asia-Pacific’s IT sector could double in size in just four years – growing from $175 billion to $330 billion,” added Hardee.

Meanwhile, the global piracy rate for commercial software has decreased to 39 per cent from a high of 49 per cent in 1994, when the group began its surveys. But the fight is far from over. “We’ve been successful at some levels in reducing piracy in the organizational, end-user environment,” said Bob Kruger, vice president of enforcement at the BSA. “But we still struggle in other areas, as in the exploding amount of piracy on the Internet.”

Two out of every five software programs installed and used today in workplace computers are pirated, allowing people to use them without paying the companies that created and sell the software, Kruger said. That results in some $13 billion in annual losses for software companies, he said.

The biggest problem has always been in the workplace, he said, when a company buys one copy of an application and installs it on multiple computers, violating its licensing agreement. Much of the decrease in piracy since 1994 has been due to intensified education efforts, new technologies used by software makers to protect their products from unauthorized use and better anti-piracy laws, according to the BSA.

There is, however, some good news. Every country, except Zimbabwe, has reduced its rate of piracy since 1994, according to the study. The U.S. piracy rate hit an all-time low of 23 per cent, currently the lowest piracy rate in the world.

Robert Holleyman, BSA president and CEO, said in a statement that fighting Internet software piracy is the next critical step for software makers. “In the future, if the industry is to continue its success in reducing the problem further, then clearly, more robust education and advocacy initiatives will be required,” he said.

The BSA study looks at piracy rates of business software applications in 85 countries. Worldwide dollar losses due to piracy rose from $10.97 billion in 2001 to $13.08 billion in 2002, a 19 per cent increase attributed to generally higher software prices, which offset the lower piracy rates and smaller software shipments, according to the group.

BSA is a consortium of software vendors including Adobe Systems Inc., Apple Computer Corp., Autodesk Inc., Bentley Systems Inc., Macromedia Inc., Microsoft Corp. and Symantec Corp. International Planning and Research Corp. carried out the study on behalf of BSA. The BSA study evaluated sales data and market information for six major world regions and examined 26 business software applications.