Software piracy in Malta last year wiped out an estimated $2 million (Lm697,000) from the legitimate IT industry, according to the Business Software Alliance global piracy study.
However, the financial losses to IT piracy was down by around half when compared to 2002, the study by the software industry watchdog has shown.
BSA has estimated that nearly half of Malta's IT software - 46 per cent - was pirated.
The study was drawn up by IDC, the industry's leading global market research and forecasting firm.
As the global PC software market grows from $50 billion to more than $70 billion over the next five years, IDC predicts that the retail value of pirated software will grow to more than $40 billion.
More than half the countries surveyed had a piracy rate above 60 per cent. The countries that dabble most in piracy are China and Vietnam (both 92 per cent), while the US (22 per cent) and New Zealand (23 per cent) have the lowest rates.
The study showed that for every two dollars' worth of software purchased legitimately, one dollar's worth was obtained illegally. The piracy rate - the number of pirated software units divided by the total number of units put into use - was 36 per cent in 2003.
Piracy rates in Malta have been going down gradually since 1995 when the rate stood at 77 per cent. However, due to the ever-increasing penetration of IT, the financial losses are still substantial.
The rate of piracy in Malta is down by one per cent compared to 2002 when lost revenue last year reached Lm1.4 million, up from Lm969,000 in 2001.
The BSA explained that software piracy has several negative economic consequences. Local software industries have been crippled by competition with high-quality pirated software from abroad.
In an April 2003 economic impact study conducted for BSA, IDC had concluded that lowering piracy by 10 percentage points over four years would add more than one million jobs and $400 billion in economic growth worldwide.
But there are forces acting to increase piracy. By the end of last year, there were 700 million internet users and by the end of 2007 there will be more than a billion!
Labour's spokesman for IT Leo Brincat said the study had shown that piracy rates in Malta were still worrying.
Mr Brincat said Malta ranked in ninth place in piracy among the 25 EU member states. "Apart from giving our country a bad name, the figures relating to Malta are high and unacceptable in this day and age," he said.
The EU and the government have introduced tougher measures, most notably the Copyright Act of 2000, to curb copyright and trademark abuse.
Penalties for the violation of copyright include fines up to Lm5,000 and imprisonment up to one year.