Fakes Ahoy!

Asking a Chinese company to manufacture a product, or outsource a component from China could mean one thing: asking for trouble.

In the age of globalisation, almost every consumer product is assembled from parts and components supplied by vendors from a number of countries. Manufacturers have largely become assemblers or product integrators.

As China provides the cheapest manufacturing solution to companies worldwide, it has become the world's largest factory.

When a Dubai-based perfume manufacturer asked a Chinese factory to outsource the production of perfume bottles for his future consignments, he did not know what he was getting into.

"I simply ordered him to manufacture the colourful bottles in which we pour expensive oriental perfumes and sell to our customers," said the perfumer at an exhibition at the Dubai World Trade Centre.

"He gave me a good price, more than half the then current price. He promised to deliver exactly the same and well in time, which was what I was looking for at a trade fair.

Revelation

"As per the contract, he began to deliver goods on time and I continued to pay him."

However, a few months later, the same bottle was made available to his competitors.

"My competitor was selling his perfumes in the same bottle, that gave the impression that the products were the same. After a brief inquiry, we found that the supplier was the same Chinese trader. This is what they do to you," he said.

Although this model of outsourcing appears to be somehow convenient to most multinational companies, it comes with a large risk: Piracy.

In reality, it boils down to only one thing: Production of fakes.

That's what is happening to global brandowners. Global brands are losing billions of dollars in revenue as someone in a Chinese factory decides to channel those to the grey market.

Dubai's traders are also not an exception.

"China continues to be a haven for counterfeiters and pirates. According to one copyright industry association, the piracy rate remains one of the highest in the world, more than 90 per cent, and US companies lose over $1 billion in legitimate business each year to piracy," according to the US Embassy in China.

"On average, 20 per cent of all consumer products in the Chinese market are counterfeit. If a product sells, it is likely to be illegally duplicated. US companies are not alone, as pirates and counterfeiters target both foreign and domestic companies."

The fact that a fake Rolex is sold at 10 ringgit in Kuala Lumpur or 50 baht in Bangkok is not new. What is new is that one can now buy it for Dh10 to Dh15 in selected locations in the UAE.

Threat

The influx of fakes and counterfeits are a growing threat to global trade. The threat originates mostly from China and some Southeast Asian countries like Malaysia.

In 2005, between 85-93 per cent of music CDs, business software, entertainment software, and movie DVDs in China were pirated.

"Those levels weren't significantly higher - and couldn't be much higher - in 2002, when China joined the WTO," US legislator Sander Levin was quoted in a recent report as saying.

Piracy had cost the US entertainment industries $2.6 billion in 2005 alone.

Globally, countries and regulators are trying to contain this threat. The GCC market happens to be the latest casualty.

As the region's economies gradually integrate, the penetration of fakes is creating a major problem.

Saudi Arabian officials have now openly began blaming some of the UAE's emirates for not doing enough to combat piracy, resulting in a spat.

The influx of fakes could really pose a threat to the region's businesses which have largely remained clean.

However, nothing is cheap in life. As the saying goes, even cheaper products comes with a price!

Have your say
Do you know anyone who buys or sells fake goods? Have you ever bought pirated items? Why? What do you think is a major influence in the rising number of pirated items being smuggled into the region?