April 28, 2004
The Asahi Shimbun

False wall hides Malaysia's hidden trove
of counterfeits

By TSUYOSHI NOJIMA, The Asahi Shimbun

JOHORE BAHRU, Malaysia-Malaysia is a safe haven for counterfeiters, where black-market versions of everything from Viagra to passports can be had for next to nothing.
International authorities say Chinese gangs are behind the illegal production and sale of counterfeits. The Malaysian government is taking flak for failing to crack down on the trade and not enacting laws to protect global intellectual property rights.
The country is known as one of the world's largest producers of counterfeit items. Production is concentrated in the southern city of Johore Bahru, where at the Holiday Plaza, a commercial complex in the suburbs, dozens of music and computer software stores are situated.
As I wandered the area in late February, it looked as though most of the shops were closed.
A young man approached and said in Chinese: "Want illegal copies?"
I nodded, and the man raised the shutters of a shop and invited me in.
On the shelves were government-approved genuine items. But when the young man pressed on a shelf, it was "open sesame": A hidden door opened to reveal a room full of counterfeit copies.
In one section were illegal DVDs of "Lord of the Rings: Return of the King," "Last Samurai" and other recent blockbusters. In another section were CDs of the latest releases by Asian singers, including J-Pop queen Ayumi Hamasaki.
The DVDs cost 7 ringgit (about 196 yen) each, CDs were 5 ringgit (140 yen). The computer software boxes contained pirated copies of Microsoft Windows.
A shop employee said the store added the hidden room late last year after Malaysian authorities began cracking down on counterfeits.
"Local police are no problem because they have been bribed, but lately, the federal police are investigating," the worker said. The counterfeits came from a factory in Kuala Lumpur, he added.
A Chinese man, referred to as "the boss," owns several factories and shops selling illegal copies. He explained to me how the distribution system works.
First, he pays off the manufacturers of legal copies of DVDs and CDs, buying large volumes of illegal copies from them to flood the market. The counterfeits end up outnumbering the legal copies.
"We simply buy a cardboard box full of counterfeits for about 1,000-2,000 ringgit and sell them through our network of stores. It's just business," the Chinese man said. Same quality, one-tenth of the price
The quality of the illegal DVDs and CDs are usually just as good as the original, yet they are priced at only one-tenth the legitimate tag. Consumers choose the cheapest ones.
To end this vicious cycle, the Business Software Alliance, a U.S. organization that lobbies for copyrights of software makers, the Motion Picture Association of America (MPAA) and the European Union have in recent years asked Malaysia to toughen its anti-piracy measures. But change is slow.
While shoppers love cheap counterfeit products, no one laughs when it comes to counterfeit credit cards. A growing number of people are falling victim to credit card identity theft, receiving bills for purchases they did not make.
To forge fake credit cards, data encrypted on authentic cards is collected by IC chips called "skimmers" surreptitiously attached to shop credit-card reading devices.
Counterfeit card makers pay off store and hotel employees to allow them to secretly install skimmers on card readers at their workplace.
After skimming off large amounts of credit card information, the counterfeiters write the data onto raw, or clean, cards. Then they go shopping.
But even if a purchase is made with a fake card, all is not lost. When the bogus purchase appears on the original card owner's bill, he or she doesn't have to pay if the card company is notified in time. But it wastes everyone's time to verify charges and cancel or reissue credit cards.
The worldwide incidence of credit card theft has soared in Malaysia and other Southeast Asian nations, according to the card center at the United Overseas Bank, a Chinese bank based in Singapore.
Some credit card companies that routinely shoulder the costs of identity theft are now advising card holders not to use their cards in Southeast Asia.
Authorities suspect the Chinese mafia is behind Malaysia's counterfeiting rings. As if to support the allegations, many people recently arrested in connection with counterfeits have been Chinese.
"Chinese gangsters in Hong Kong and Taiwan have used their funds and technology to ally with Chinese mafia in this country," says a senior official of the Malaysian police force. "The counterfeit credit cards and pirated CDs and DVDs are then distributed through Chinese networks."
It takes advanced manufacturing and data-processing technology to produce high-quality counterfeits. But that is no problem for Malaysia. The nation, which boasts an advanced automobile and electronics manufacturing sector, has ample factories and workers that will produce imitations.
With former Prime Minister Mahathir Mohamad's insistence on maintaining independence, Malaysia has refused to sign international treaties. The nation has failed to ratify many international pacts aimed at protecting intellectual property rights, including the Patent Cooperation Treaty, which mandates the international application of patents, the Madrid protocol on registered marks, the Trademark Law Treaty and the World Intellectual Property Organization Copyright Treaty.
Many Malaysian companies make copies under names nearly identical to well-known global brands. One line of electrical appliances is called "Pensonic," similar to the Matsushita Electric Industrial Co. brand Panasonic. There are nutritional drinks that look just like the Yakult yogurt drinks in Japan.
In ongoing free-trade negotiations between the two nations, Japan is demanding that Malaysia toughen measures against counterfeit products. The Malaysian government, meanwhile, wants to improve the country's reputation.
Muhyiddin Yassin, minister of agriculture, said the huge number of counterfeits have placed the nation's credibility at risk. He indicated the government is strengthening its anti-counterfeiting measures.
But there is little response from consumers, who prefer cheaper prices every time.

Parent site: "Focus on Malaysia"