Economic and Social Impacts of Counterfeiting and Piracy in Turkey (2011)

Counterfeiting and piracy has increased substantially over the last two decades. Counterfeit and pirated products can be found in almost every country in the world, and are an ever increasing challenge to policymakers and legitimate businesses.

In Turkey, counterfeiting and piracy has been recognised as a particularly serious problem. For example, analysis of seizures of counterfeit products at EU borders found that Turkey was one of the top five countries of origin for infringing products, and was the lead country of origin for some product categories, notably foodstuffs. And, as with many other countries, Turkey has seen a rapid increase in digital piracy over the past decade.

A key challenge in ensuring that the appropriate resources and priority is given to combating counterfeiting and piracy is developing good information on the magnitude of counterfeiting and piracy and the scale of its economic and social impacts. Frontier has worked extensively with BASCAP to develop estimates of both the value and impact of counterfeiting and piracy globally and on an individual economy basis. Our analysis has built on the work of the OECD, which identified a number of different categories of impact of counterfeiting and piracy.

BASCAP commissioned Frontier Economics to analyse both the magnitude of counterfeiting and piracy in Turkey alongside the impact that such counterfeiting and piracy has on government and consumers.

Impact on government receipts and employment in Turkey

The production and consumption of counterfeit and pirated goods does not just harm businesses. It has direct social costs; by diverting consumer spending from the legitimate regulated economy, counterfeiting and piracy reduces government tax revenues and increases welfare spending, destroys legitimate jobs and exposes consumers to dangerous and unregulated products. We also examined these impacts in this study.

With respect to lost tax revenues and higher spending, we examined the impact of counterfeiting in detail on a number of sectors of the economy and extrapolated the findings for the sectors to provide an indicative estimate of the economy-wide impacts of counterfeiting and piracy. At an economy level, the results of the analysis show that counterfeiting and piracy:

• Results in direct losses to the government of $2.4 billion; and
  
• Results in the destruction of 135,000 jobs, with over 60,000 people estimated to be unable to find re-employment.

Wider economic impacts

The analysis also considered the potential costs arising from consumers being exposed to such dangerous unregulated products. Unfortunately, every year a number of consumers die as a result of their consumption of counterfeit products. Particular causes for concern relate to fake drugs and counterfeit alcohol and food and beverage products. Using data on the value of life and the value of disability free life, we find that the potential costs to consumers in Turkey in terms of death and injury could be as much as $340 million per year, not including the costs of the health services required to care for those requiring treatment following exposure to unsafe counterfeit products.

Finally, drawing on work commissioned by Yassed, we find that even small improvements in IPR protection could lead to substantial increases in FDI with positive knock on effects on exports, employment and national income.