In the era deemed ‘multi-polar’ we are seeing a dramatic rise of the rest. In these developing nations, one reason why such advancement is taking place is due to the boom in technological advancements in emerging market economies.

The interconnectedness from farmer to manufacturer has been widely praised, including in this blog. But in the marketplaces of the BRIC economies, growing players on the geopolitical chessboard where such communication was already in contemporary society, the question remains – are these advancements legal? 

There seems to be a pattern emerging in their emerging markets of the BRIC; that of a culture of counterfeiting.

In China, technological advances have allowed hundreds of small Chinese companies, some with as few as 10 employees, to churn out what are known here as ‘shanzhai‘, or black market, cellphones, often for as little as $20 a piece.

And just as Chinese companies are trying to break stigma and move up the value chain of manufacturing, from producing toys and garments to making computers and electric cars, so too are counterfeiters. After years of making fake luxury bags and cheap DVDs, they are capturing market share from the world’s biggest mobile phone makers.

Shanzhai phones have only been around a few years, yet they already account for more than 20 percent of sales in China, which is the world’s biggest mobile phone market, according to the research firm Gartner.

They are also being illegally exported to Russia, India, the Middle East, Europe, and even the United States. “The shanzhai phone market is expanding crazily,” says Wang Jiping, a senior analyst at IDC, which tracks technology trends. “They copy Apple, Nokia, whatever they like, and they respond to the market swiftly.”

Global brands are pressing the Chinese government to crack down on their proliferation, and are warning consumers about potential health hazards, like cheap batteries that can explode. Nokia, the world’s biggest cellphone maker, says it is working with Beijing to fight counterfeiting. Motorola says much the same. Apple Inc. declined to comment.

China has done little to stop the proliferation of fake mobile phones, which are even advertised on late-night television infomercials with pitches like “one-fifth the price, but the same function and look,” or patriotic appeals like “Buy shanzhai to show your love of our country.”

In India, The Indian film industry, popularly known as Bollywood, makes more films than Hollywood yet its revenue is only 2% of what is earned by Hollywood. The US-India Business Council (USIBC) had last year teamed up with the Federation of Indian Chambers of Commerce and Industry (Ficci) in a Bollywood-Hollywood initiative to conduct a study on the rampant counterfeiting and piracy in an attempt to add more muscle to fight piracy. So far, the counterfeiters have adapted to the increased pressure following the study and their success is still thriving throughout the emerging economy.

Authentication and brand protection solutions provider Authentix on April 21, 2009, announced setting up its wholly-owned subsidiary in India.

The Indian subsidiary, headed by Mr Atul Gupta as the Country Manager and Managing Director, will focus on industries like FMCG, pharmaceuticals, tea, tobacco and food and beverages among others, the company said in a statement.

“The setting up of the subsidiary will boost the anti- counterfeiting drive in India. We will focus on industries that are most susceptible to losses from the counterfeiting of their products such as FMCG, pharmaceuticals … apart from state and nation al government utilities such as transport departments and public sector undertakings,” Mr Gupta said.

Piracy and counterfeiting have proved to be a menace of such proportions that the very existence of the industry is at stake. Increased enforcement with meaningful deterrent penalties and swift justice is a way out. “A more robust legal ecosystem” is required, according to the study as the battle against piracy is now being increasingly fought on a new frontier, the internet. The government has also come to realize that a strong legal frame work coupled with an effective implementation structure will help the country have a strong system of intellectual property protection (IPR). IPR enforcement is also necessary to strengthen the investment climate and attract and retain innovative companies, the pillars of economic growth.

Russia is ripe with counterfeiting gangs, according to Mischa Glenny’s book ‘McMafia: A Journey through the Global Criminal Underworld’, and crossing them is a costly and dangerous affair. According to police sources, the business is entirely in the hands of well-organized crime rings. Counterfeit medicines, and indeed counterfeit currencies are some of the strongest markets for Russia’s counterfeiters.

The ruble is reportedly the currency of choice. In this sense the ruble’s victory over the US dollar looks indisputable – swindlers prefer to replicate national currency notes.

The financial crisis caused Russians to feverishly buy up foreign currencies, and it is precisely at this sort of moments that counterfeiters grow remarkably adaptable, injecting huge amounts of forgeries into the market. Police operatives warn that “underground mints are now working at full capacity.“

According to the chief of the Interior Ministry’s economic security department, Denis Sugrobov, the operation to expose and quash the crime ring began back last year. Police traced the routes by which the forged notes were being circulated to their sources in Dagestan, Ingushetia, Chechnya and the Rostov Region. The bulk of forgeries is printed there, first and foremost in Dagestan and Ingushetia. One of the reasons is the militants entrenched there need cash to purchase firearms, explosives and equipment.

In all, over 15,000 counterfeiting-related crimes have been exposed since the beginning of the year, seven percent more than in the same period last year. Russian rubles and securities have begun to be forged far more often. Over 93 percent of all criminal cases opened over this type of offences concerned attempts to forge banknotes issued by the Central Bank of Russia. The extravagant amount of 130 million forged rubles was identified inside bank vaults.

The science doyen of the Globalization Problems Institute, Mikhail Delyagin, is quoted by the daily Novyie Izvestia as saying the counterfeiters like the ruble so much because the equipment had been made before the crisis. ”The notes that are being printed today are made with the use of equipment acquired before the crisis. In those days the printing of rubles was far more profitable, than of dollar or euro notes, because the ruble was firming then, and the European and American currencies, losing in value“.

In Brazil, the internet is a major resource for counterfeit profiteering. Earlier this month, hackers hijacked a major Brazilian ISP this month in a sophisticated attack that silently served up malicious software and phishing scams to more than a million customers.

Globo.com said the attackers also took aim at Bradesco, one of Brazil’s largest financial institutions. NET Virtua customers who tried to visit Bradesco.com.br during the four hours the DNS records were hijacked were redirected to a counterfeit version of the site designed to steal customer credentials, the story notes.

With regard to counterfeit products,  Paraguay‘s tri-border with Brazil and Argentina is a notorious smuggling point for arms, drugs and indeed, counterfeit goods.

Domestic security clearly needs to clamp down on counterfeiting. Abstaining away from accepting paid advertisements for shanzhai phones in China is one idea, but the economic risks that counterfeiters bring to their respective nations are bigger than cell phones and medicine. They discourage foreign investment through the perceived lack of control the respective nation has on an underground boom economy that threatens to dilute productivity and success in their emerging market.

Counterfeiters are a hinderance in a time when economic recovery will be seen competitively in the actions of geopolitical leaders. A more conglomerated effort either within a state or through international cooperation is therefore necessary to draw attention to and indeed curb this micro-economic crisis.