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Intellectual Property Rights: Key to Sustainability in Indonesia

31 October 2022

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By Michelle Chandra Kasih, Research Associate: Indonesians are increasingly aware of the need to develop in a more sustainable manner. In October 2022, the Jakarta High Court rejected the government’s appeal of a citizen lawsuit that found President Joko Widodo negligent in failing to tackle Jakarta’s notorious air pollution. Report after report indicates the rapidly growing problem of plastic waste, including marine plastic debris.  Whilst the puzzle of how to build a sustainable future has many pieces, one crucial element is often overlooked: intellectual property (IP) rights.

Transformative and collaborative inventions to drive sustainability in carbon-intensive sectors need to be prioritised. Whilst technology can hasten the transition towards a more sustainable and circular economy, sharing of technology and knowledge, combined with adequate funding, is needed. IP can help.

Eppinger et. al in 2021 consider IP rights as essential to enable innovation and diffusion of sustainable technologies, improve collaboration, and foster prosperity in developing countries. Patented technologies are publicly disclosed, ensuring access to technical knowledge of inventions. IP rights grant their owners security against unauthorised use, providing them a source of revenue from exclusive rights. Exclusive rights allow owners to prohibit others from using and benefiting from their inventions. But as technology transfer depends on the willingness of owners to share licences and knowledge, lower-income countries have difficulty adopting sustainable technology.

With its low numbers of patent registrations and high-technological exports, Indonesia depends on technology transfer from higher-income countries. World Bank data show that in 2016–2020, the average number of patent applications was 899,900 in high-income countries and 38,740 in lower-middle-income countries. Similarly, high-tech exports as a share of total manufacturing exports by high-income countries was 21% and by lower-middle income countries about 10% in the same period. Indonesia scores 1,800 and 8% on average for patent applications and high-tech exports respectively, lower than its lower-middle-income neighbours.

Some international agreements recognise the technology challenge faced by lower-income countries. Article 7 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) obligates protection and enforcement of IP rights to contribute and promote mutual technological innovation, transfer, and dissemination. Articles 66.2 and 67 of TRIPS mandate high-income countries to encourage mutually agreed technology transfer, including technical and financial cooperation from their enterprises or institutions, to lower-income countries. Sustainable technology transfer is an essential pillar of the United Nations Framework Convention on Climate Change (UNFCCC). Article 4.5 mandates all developed countries to take practical steps to promote, facilitate, and finance the transfer of or access to environmentally sound technologies to developing countries. Helping lower-income countries obtain sustainable technologies has been a binding commitment of developed countries. But reaching a mutual agreement in technology transfer could be costly and time consuming.

Article 109 of the Indonesian Patent Law allows government patents for products that are of urgent public interest, related to diseases, agriculture resiliency, and natural disasters. Government patent does not reduce the rights of patent owners to exercise their exclusive rights and receive reasonable fees as compensation from the government. The Indonesian Omnibus Law requires patent owners to produce and process their technology in Indonesia to ensure technology and knowledge transfer and absorption of labour. However, the provision has been deemed controversial by the World Trade Organization.

Indonesia could ramp up its efforts to encourage an innovative environment whilst ensuring opportunities to acquire sustainable technology. Several initiatives can be started with regulation improvement, financial support, digital infrastructure, and research and development (R&D).

The UNFCCC says that artificial intelligence (AI) and digital technology could reduce global carbon dioxide emissions by 10%–20% by 2030. As many sustainable technologies will be increasingly driven by AI, clearer regulations or guidelines will be needed to protect the IP of inventions made using AI technology. The government may find ways to incentivise inventors for their efforts, such as easing registration fees and procedures.

The IP Office’s online registration system can be developed to provide green IP databases and inventories that can connect inventors or IP owners with those who seek sustainable solutions. Through valid databases and networks, the system can bring in key players to invent and diffuse sustainable technology. Strengthening the partnership with the World Intellectual Property Organization (WIPO) through WIPO Green can expedite sustainable technology transfer.

Accelerating sustainable technological invention and transfer requires synergy between institutions. Maskus et. al in 2005 found that inventors and IP owners tend to enter licensing contracts with sectors with high innovation and R&D rates. However, World Bank data in 2020 show that Indonesia’s ratio of R&D expenditure to total GDP is lower (0.28%) than that of neighbouring countries, including Malaysia, the Philippines, Thailand, and Viet Nam. Indonesia’s R&D should be strengthened, not only to encourage technology transfer but also to centralise new knowledge and inventions.

It is time to recognise that Indonesia’s economic resilience will depend on sustainable and inclusive growth, and understanding the role of IP rights in a sustainable and circular economy is essential. In the end, acknowledging limitations of IP rights and expanding the role of R&D, financing, infrastructure, and political will help spur sustainable inventions.

This opinion piece was written by ERIA's Research Associate at the Economic Research Institute for ASEAN and East Asia, Michelle Chandra Kasih. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.

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