[Malaysia SME] Southeast Asian countries’ performance in the International IP Index growing

By Geetha K.

Southeast Asia has been attracting an increasing number of foreign direct investments. The emerging markets of Indonesia, Thailand, Malaysia, Philippines, Vietnam and Myanmar have been included in the expansion plans of most multinational corporations. In the 2015 ASEAN Business Outlook Survey, a report published by the US Chamber of Commerce in collaboration with its Southeast Asian counterparts, 58% of the companies surveyed found that the ASEAN markets are growing in importance in terms of the revenue earned over the past two years and 66% of the companies felt it will continue to grow in importance over the next two years.

Importance of ASEAN markets in terms of worldwide revenues, over the past 2 years:

(Source: ASEAN Business Outlook Survey)

Importance of ASEAN markets in terms of worldwide revenues, over the next 2 years:
(Source: ASEAN Business Outlook Survey)

Interestingly, the top reasons provided by the executives on why the level of trade and investment will increase in ASEAN over the next 5 years are diversification of customer base (58%), reasonable production cost (39%), stable government and political systems (29%), availability of trained personnel/efficient manpower (27%) and adequate laws and regulations to encourage foreign investment (24%).

(Source: ASEAN Business Outlook Survey)

Strong legal protection of Intellectual Property (IP) is one of the factors that attract foreign investment especially in knowledge-intensive sectors. Knowing that, let’s observe how Southeast Asian (SEA) countries performed in the recently published 2015 International Intellectual Property Index (“IP Index”) by the Global Intellectual Property Center (GIPC). Did they perform well compared to other global players? If not, is there room for improvement to spur further investments into the SEA countries?

The IP Index assessed the IP environment in 31 jurisdictions, taking into account patent, trademark and copyright protection and limitations thereof, trade secrets, market access, enforcement rate and membership into international IP related treaties. The overall findings are revealed below:

(Source: ASEAN Business Outlook Survey)

Thailand, Vietnam, Indonesia, Brunei, Malaysia and Singapore were six (out of the 10) ASEAN countries that were included in the IP Index. The countries were assessed based on scores given out of 30, with Singapore leading the pack, followed by Malaysia, Brunei, Indonesia, Vietnam and Thailand.

Intellectual Property Index 2015: Singapore

Singapore fared extremely well in the IP Index due to its strict IP legislations in place, adequate and effective enforcement of the IP rights (including action against online piracy and prevention of copyright infringement through web hosting, streaming and linking), and having ratified some international treaties (WIPO Internet Treaties, Singapore Treaty on the Law of Trademarks) and entered into a Free Trade Agreement (FTA) with the US which includes substantial provisions on IP rights.

Intellectual Property Index 2015: Malaysia

Malaysia had an average score in the IP Index and has a lot of room for improvement, especially compared to Singapore! While Malaysia has increased its enforcement activities to curb online piracy and had amended its Copyright Law to include penalties for unlawful web hosting, streaming and linking, there were still high levels of piracy, both physical and online. Accession was made into the WIPO Internet Treaties but not into other international treaties included in the IP Index.

The IP Index score was also attributed to Malaysia’s lack of entry into any FTAs with specific or substantive IP rights provisions. This strikes us as somewhat odd because Malaysia has signed FTAs with Australia, Chile, Japan, India, New Zealand, Pakistan and Turkey, some of which (e.g., Malaysia-Australia, Malaysia-Japan, Malaysia-New Zealand) contain chapters on the provision of IP Rights, leading us to question what exactly is required to fulfill this criteria. On a positive front, Malaysia is currently negotiating three FTAs (including an FTA with the EU), and with the recently concluded Trans-Pacific Partnership (TPP) negotiations, the performance of Malaysia in the IP Index may improve as there are substantial IP provisions in the agreements.

Intellectual Property Index 2015: Brunei

Brunei had a below average score but scored better than its neighbouring countries Indonesia, Vietnam and Thailand, mostly due to increased penalties for copyright infringement, major changes in the IP legislation, establishment of a dedicated IP Office, stronger enforcement activities against physical counterfeiting and, last but not least, its removal from the United States Trade Representative (USTR) Special 301 Report. The USTR report identifies countries which do not provide sufficient IP protection and thus create trade barriers to US companies who wish to trade in that country. Based on the IP Index, although Brunei has stepped up its efforts in IP protection, it still faced high software piracy rates, had slow judicial procedures, possessed limited framework for addressing online piracy and circumvention devices, and was not a contracting party to the relevant international treaties.

Intellectual Property Index 2015: Indonesia

The darling of ASEAN countries – thanks to its population size – Indonesia scored 8.51 out of 30 in the IP Index. What was in its favour was its new Copyright Act which included a notification system giving the government the power to block infringing websites. Sadly, with software piracy levels through the roof (it was highest of all economies included in the IP Index), no stiff penalties for infringement and no FTA with substantial IP provisions, the overall score on the IP Index was low. That Indonesia had an FTA with Japan did not seem to influence the scores in the IP Index.

Intellectual Property Index 2015: Vietnam

Vietnam, a country developing at a very quick pace, performed poorly in the IP Index, with the low scores partially attributed to its narrow interpretation of “invention” (with respect to patents). The IP Office takes the term “invention” to include only products and processes, thereby rejecting inventions not related to either (e.g. second medical use patents). That, together with the substantial delays in the patent prosecution process and lack of deterrents against copyright infringement brought its scores down. It does not help that Vietnam is not a contracting party to any of the treaties covered in the IP Index either. Though with the TPP and with Vietnam negotiating an FTA with the EU, which has substantial IP provisions, the IP Index score may increase next year.

Intellectual Property Index 2015: Thailand

Thailand scored the least among the 31 countries with a 7.1. Commendable effort was noted in the improvement of border enforcement, as additional checkpoints were set at key border crossings. Also, a rudimentary notice and takedown mechanism against Internet Service Providers (ISPs) for online infringement activity was introduced. Unfortunately, the country still has weak protection for well-known marks, sky-high counterfeiting rates, and delayed enforcement procedures. Although Thailand, like Malaysia, also has FTAs with Australia, New Zealand and Japan (among others), this appeared not to bear any weight in the IP Index scores.

Conclusion

Analysing the method in which these six ASEAN countries were assessed and given scores is enlightening. The scoring system is debatable but that goes for all types of indexes. At least the IP Index provides a basic assessment and comparison tool to various governments, companies and the public.

With strong IP legislation and effective enforcement being key factors in the scoring system of the IP Index, it is crucial that these countries understand the importance of ensuring adequate IP rights protection and creating an efficient IP ecosystem.

The effort has to stem from both government level (with stiff penalties incorporated into the legislations for infringement activities) and the people (education of the masses on IP as a type property right). Perhaps with such effort, and with many of these countries eventually negotiating and signing an FTA with the US or the EU, both of which will have substantial IP provisions, the SEA countries will progress in the right direction. It is only a matter of time. In improving the IP ecosystem as well as diversifying its customer base, ensuring production cost is kept reasonable, having a stable government and political system and boosting skilled manpower, ASEAN will be able to attract even more foreign direct investments and thus enjoy greater economic growth.

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Communications at KASS International Sdn Bhd

KASS International is an established Intellectual Property Firm which offers a one-stop solution for IP matters in Malaysia, South East Asia, and worldwide.