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Lack of intellectual property laws aid internet business
By: Hussain Kubba (Bulletin Economics Editor)
Published date: 7/7/2003
"My small twenty-station internet café will cost around $20,000," said Mohammed El-Kasrah, a 30-year-old engineer who has been making his living for the last five years since graduation from Baghdad University dabbling with information technology services. The blueprints of the café had to be revised several times, El-Kasrah explained, so as not to exceed the tight finances which have been provided by many persons connected to his family. The locally assembled PCs, each with a 2 gigahertz Pentium IV processor, cost $400 each.
"We cannot afford better quality brand names from abroad," he said, adding that buying locally assembled hardware would save him around $3,000 in the licensing cost of the operating system software that runs the computers. The cost of other programs that the computers will eventually run could add up to $10,000, but El-Kasrah, like everyone else, is hardly bothered about buying licensed software.
The computer business in Baghdad escaped almost unscathed from 14 years of sanctions. Along the right hand side of the one kilometer-long Sinaa Street, there are tens of small shops where assembled computers and computer components of all varieties can be bought. Many of these goods originate from the United Arab Emirates and were smuggled into the country before "liberation." The same duty free goods now enter the county legally. Fierce competition has forced dealers to levy only a very small profit margin, invariably not exceeding 5 percent and very often well below.
Several shops in the computer market in Sinaa Street specialize in the distribution of pirated software. For $1 a CD, literally any up-to-date software can be bought, including Microsoft operating systems such as Windows 98, 2000, NT and XB. Oracle database software releases 8 and 9, including Developer 6, are also $1. Pirated software libraries are imported en masse from abroad, including the Far East and replicated here. Expensive IT books are replicated using ordinary photocopy machines. QUE series books can be found from as little as $10 a book. Genuine versions could sell abroad for $100 or more.
This piracy, which costs international software firms many millions of dollars annually in lost revenue, was nurtured under the eye of the previous regime without any regard to its ethical, legal and economic implications. It has matured into a culture that considers all software a free public good available to all.
Voices of dissent, primarily from local software developers, were silenced during the 1990s. State regulation of the IT sector was the realm of the National Center for Computers, an organ of the Ministry of Planning and later the Ministry of Higher Education. Local software companies were crippled by the free-for-all piracy culture. Being robbed of their hard work, they vehemently demanded legislation for Intellectual Property Rights. Officials of the NCC, however, took a view that Iraq was better off without such legislation. Indeed, part of their argument made sense. International software firms such as Microsoft and Oracle boycotted Iraq anyway and hence there was no point in affording them any protection.
This helped create a culture that made no distinction between local and foreign software and gave piracy unqualified legitimacy. Desperate local software developers who sought to safeguard their rights through roundabout legal arrangements failed because the courts of Iraq never gave them sympathetic hearings. A case in point is a property rights dispute between a local software house and a private Iraqi bank that still awaits final verdict after seven years of prolonged hearings.
Meanwhile, El-Kasbah is hoping to recover the capital cost of his internet business in less then a year. His prediction is based on an expectation to sell internet services at $2 an hour. The current rate varies from just under $2 to $3 per hour, depending on location of the café. Some centers offer telephone communications in addition to internet. These are the bigger places with relatively bigger investment. The Iraqi Kurds, experienced in this field from 12 years of a break away from the controls of the Saddam Regime, are early entrants of this market.
The demand for internet services is considerable. Iraqi businessmen use the internet primarily for email services while American soldiers use it to communicate with their loved ones at home. In Baghdad alone, there are now half a dozen fully functional cafes, and many more are under construction.
Published date: 7/7/2003
Author: Hussain Kubba (Bulletin Economics Editor)
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