Last summer the International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy issued a report on counterfeiting in Vietnam. The report not only reviewed the current counterfeiting schemes in Vietnam but offered recommendations for improving protection of rights of creators, inventors and owners. This blog post will review some of the report’s findings as an attempt to educate readers as to Vietnam’s current counterfeiting problems and the importance of intellectual property protections.
Vietnam is an attractive place for manufacturing as global trade wars create obstacles in existing supply chains. Vietnam offers a geographically close alternative to China, the primary global manufacturer, and cheaper labor. It also has an increasingly industrialized economy with a view to production over agriculture. In effect, Vietnam is a prime target for foreign manufacturing. This growth has grown in tandem with Vietnam’s enforcement of intellectual property rights (IPR).
While Vietnam may have recognized a certain importance to IPR, there remains a lack as brand awareness falls behind regional values. For example, in 2015 Vietnam’s top brands represented only $5.5 billion while Malaysia’s Petronas alone is valued at $9.4 billion. Vietnam ranks six of seven amongst listed countries in ASEAN for brand worth. This situation is caused primarily by failure to recognize and enforce IPR.
“A broad range of counterfeit products continue to be sold in the Vietnamese market, including garments, accessories (e.g., sunglasses, handbags, etc.), food products, wines and spirits, cosmetics, pharmaceutical products, computer software, vehicle spare parts, engine lubricants, electro-mechanical products and consumer electronics.”
This situation is exacerbated by an increasing value of local brands, which has seen an equal increase in counterfeit activities. In addition, Vietnam has long borders with several ASEAN countries and China. The latter being the world’s largest counterfeiter. There are many cross-border issues that contribute to the illegal import and export of counterfeit goods. In addition, Vietnam relies on administrative penalties to enforce IPR rather than civil or criminal laws.
While Vietnam has a relatively good legal framework in place, as a result of WTO accession and the concomitant agreements entered to do so, enforcement remains an issue. Vietnam ranks 43 out of 45 countries on a US Chamber of Commerce ranking of physical counterfeiting and sufficiency of IPR protections. The International Property Rights Index, an international ranking, listed Vietnam as 76 of 125 globally.
In 2015, 78% of all software installed on computers in Vietnam was pirated, the second highest piracy rate in ASEAN, only falling behind Indonesia, while Singapore has a 30% piracy rate. Pirate websites in Vietnam receive 29 times more visitors than legitimate content providers. A recent police raid in Ho Chi Minh City uncovered a production facility capable of making 15,000 CD/DVDs a day.
Twenty-three point two percent of cigarettes consumed in Vietnam are illicit causing an estimated revenue loss to the country of over $200 million. The two leading illicit brands were found to contain excessive toxic chemicals and nicotine levels above those outlined by government regulation. Vietnam may be used by organized crime internationally as a manufacturing place for illicit tobacco products.
Counterfeiting also affects books and journals, pharmaceuticals, and consumer goods. For example, 47% of condoms sold on the Vietnamese market are of “poor quality,” thus increasing not only pregnancy risks, but risks of infection by STDs and HIV, and this is particularly problematic as many of these condoms are sold as counterfeits under well known international brand names.
Pesticides are a prime area for counterfeiters. With Vietnam being a major exporter of agricultural products, fake pesticides can threaten international recognition and allowances of Vietnam’s exports as safe and sanitary, agricultural productivity, and farmer safety.
It is estimated that 60% of all wine imported into Vietnam bears fake stamps, while an investigation discovered that brandy sold at Lao Bao border stores was 98% fake. “Violators substitute poor-quality alcohol into used bottles of wine to trick consumers, or fake the bottle, cork, labelling and even certification stamps to sell the products.”
Cosmetics counterfeits are widespread. One estimate puts the total at 50% of all cosmetics in Vietnam as counterfeits of well-known brands. Often these goods are imported from China as spare parts or components and then labeled with “Made in Vietnam” stamps and materials.
While this situation has improved in recent years, the current maximum fine remains at VND 500 million, around $20,000. Most incidents of counterfeiting are handled with administrative fines, a minimum fee with little threat to counterfeiters who then return to their illegal activities. If Vietnam wishes to improve its brand value, increase economic proportion of private enterprise, and attract foreign investment, then it must address the failures of its IPR protection regime.
You can access the full report here: