#14 - JRL 7015
South China Morning Post
January 13, 2003
The Russian economy is thriving on piracy
Despite laws to combat the illegal half of all goods sold in the country are fake
Fred Weir in Moscow
Moscow's Gorbushka market is a sprawling bazaar where Russia's post-communist compromise with capitalism is fully on display. That is, you can buy just about anything if you do not mind dealing with pirated goods.
There are some amazing bargains. Copies of Microsoft's Windows XP sell for the price of a newspaper. An MP3 disk with everything the Beatles ever recorded, or just about anything else you want in music, is only US$ 3 (HK$ 23). A crisp video knock-off of the new Lord of the Rings movie goes for US$ 5. "This is the only way Russians can get this stuff," said Oleg, a software vendor. "What Russian can afford to pay US$ 200 for a copy of Windows? And why should they? If the Americans want to stop us from copying these things, we'll go back to communism."
Post-Soviet Russia has found unexpected ways to use its vast army of under -employed skilled workers and the factory floorspace of the near-bankrupt military-industrial complexes. It is fast becoming one of the world's havens for techno-buccaneers, who are flooding Russia - and global markets - with quick and cheap illicit copies of the newest computer programs, most popular music and latest movies.
Experts say at least 50 per cent of all products sold in Russia are either counterfeit or contraband. Even goods such as vodka, footwear, furniture, pharmaceuticals, engine lubricant, cosmetics, candies and coffee are routinely faked and sold everywhere.
Under Western pressure, Russia has gradually introduced tough anti-pirate legislation. Russian authorities say a new trademark law, which came into force on January 1, will enable them to crack down on the estimated US$ 20 -billion-a-year theft of intellectual property by the country's energetic bootleggers and black marketeers.
Prime Minister Mikhail Kasyanov, who heads the effort to stamp out piracy, has described the country's marketplace as a "jungle" for brand owners. He warned that the problem was a key obstacle to Russia's hopes of joining the World Trade Organisation.
"How can we ask foreign investors to put their money into a country where phoney goods are sold, along with chewing gum, across every shop counter?" he said.
Experts say that after China, Russia's market is the second-most saturated in the world with counterfeit goods.
Alexander Sheremekh, the vice-president of the Coalition for Protection of Intellectual Property, said: "Basically, everything is fake, you can hardly find a product that isn't."
Sometimes illicit goods are bad quality, even dangerous. About 40,000 Russians die each year from alcohol poisoning, often after imbibing fake vodka.
But most counterfeits are quite acceptable and hard to tell from the real article.
Even as Russia brings into place laws to combat piracy, it is not clear whether they will be taken seriously.
Law enforcement officers complain that they are underfunded and ill-equipped to take on the pirates, who often have high-level friends and protection from crime syndicates.
Nadezhda Naizina, the director of Gostorginspektsia, the government's brand protection agency, said: "Our inspectors in the field face constant threats to life and limb. It's a thankless and almost impossible job."
Experts say key sections of Russia's rust-belt economy have reinvented themselves with the help of piracy.
Yevgeny Myasin, of the Ministry of Trade and Economic Development, said: "So many of our enterprises found themselves facing hard times. They discovered they could set up little operations for off-the-books production that would be very profitable. That's why so much of our economy remains in the shadows."
Anton Zladkis, head of the detective agency Falsification Checkers, said he was hired by a well-known Italian furniture maker to trace cheap counterfeits of its products in Russia.
Mr Zladkis found the factory in a small central Russian town.
"Everyone was involved, including the mayor and police chief," he said. "It was the only source of employment in the area and wages were good. They told me, Don't try to stop this. You'll ruin us'."