Fake goods hurt state, says new research

The Jakarta Post, Jakarta

The country has lost over Rp 219 billion (some US$24.3 million) in potential tax revenue annually because of counterfeiting, research by the Institute for Economics and Social Research at the University of Indonesia (LPEM-UI) has shown.

"The illegal products are sold at the same prices as the genuine ones. Of the Rp 219 billion, around Rp 202.7 billion is derived from counterfeited local brands, while the remaining Rp 16.6 billion is from imported ones," LPEM-UI researcher Isfandiary Djafar said during the European Union-Indonesia Small Projects Facility (SPF) press conference held last week, as quoted by Antara.

Isfandiary said that for local brands, the distribution of counterfeited tobacco goods had the greatest impact, with a potential loss of up to Rp 70.6 billion.

"As for the foreign brands, fake pharmaceutical products contributed the largest with Rp 5.3 billion," he added.

The research, which was funded by the EU-Indonesia SPF, was only conducted on fake goods that were hard, or nearly impossible, for customers detect.

"The goal of our research was to determine how much loss is suffered by the state and consumers in the distribution of fake goods," he said.

Djafar said 20 companies with considerable market sizes in the country were chosen as samples. The companies represented industries such as tobacco, alcohol, leather, shoes and sandals, pesticides, pharmacy, cosmetics, automotives, electronics, lamps and pumps.

Another study by the LPEM-UI, launched last year, showed that consumers, including affluent ones, play an equally significant role in the sale of counterfeited products.

Measuring customer willingness to buy only genuine electronic and household equipment nationwide, the survey found that only an average of 16.4 percent of respondents were willing to do so.

And the percentage ranges from those with a monthly income of less than Rp 1 million a month (14.59 percent) to ones earning more than Rp 5 million (17.91 percent) monthly.

With most respondents saying that function was their first priority, the percentage of people considering originality in buying the products was at a mere 14.2 percent.

The EU-Indonesia SPF initiative has funded 8 studies by 8 different institutions including the Investment Coordinating Board, with a comparative study on telecommunication investment, and the Gajah Mada University, with a public transportation model.

The Regional Economic Development Institute was helped in conducting a study of the potential of East Java products exports and Siliwangi University with a study on infrastructure support for small and medium enterprises.
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