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Kyrgyzstan Review, 10 years ago

[25.06.23] Kyrgyzstan Makes Progress On Piracy, But May Be Overmatched

As much as 90 percent of Kyrgyzstanis' audio and video entertainment comes from illegal copies of imported goods, made in basement studios around the country. Falsification of brand-names like Sony, Panasonic, Columbia and others has become widespread and profitable, but signs indicate that Kyrgyzstan authorities have gotten better at combating the practice.
High-tech forgeries became common in Kyrgyzstan as early as 1993, when fake CDs, audio and video cassettes rushed into the country from Russia to the north and China to the east. In recent months, the government has shown both that it has learned to block such passage and that it has given pirates clues on how to escape serious consequences. Agents at the Severnaya railway customs post foiled four attempts to import counterfeit CDs in 2002, stopping what experts say would have been a windfall of 90 thousand soms ($2,150) in each case. In each case, the parties involved paid fines and went free, leaving their goods to be destroyed.
Punishments were light, say experts, because each illegal load did not exceed 100,000 soms ($2,500) and thus did not qualify as contraband. Nonetheless, the interceptions may have served to deter further piracy. Customs officers say that counterfeiters have shown prudence in the face of Kyrgyzstan's copyright laws, which reflect its membership in the World Intellectual Property Organization, and have decided that it is safer and cheaper to import goods legally. Legal imports involve a 20 percent tax at the border, though, and evidence suggests that few pirates have willingly incurred that cost.
There are simply more people involved in the illegal copying and sale of CDs, tapes, DVDs and hard drives than the government can catch in a short time. During the last three years, agents' "catch" of counterfeit production in Bishkek shops consisted of roughly 16,000 items selling for an aggregate of 2.35 million soms, or around $54,800. Experts believe that this figure barely scratches the surface. Without a "big fish" to catch, authorities are hard-pressed to get credible information about how many units pirates manufacture, how many they sell, and how to quantify the damage they cause to creators and distributors of content.
Signs suggest that authorities have begun trying to make examples of the pirates they do manage to nab. Militia officials, according to people knowledgeable about the affair, discovered an underground production center in Bishkek. The center's manager, a Kazakhstani citizen, reportedly planned to flood the Kyrgyz market with about 15,000 CDs. Now the matter is reportedly under investigation, and the pirate could face a penalty of 5,000 soms or up to five years in prison.
Another trend that could hurt counterfeiters may hurt the government more severely. Traditionally, consumers have chosen pirated CDs and tapes in order to save money. As a rule, non-licensed cassettes and CDs are drastically cheaper than legal ones, sometimes selling at half the price. Recent anecdotal evidence, though, suggests that legitimate vendors are slashing prices on tapes and CDs, sometimes as low as the fifty cents the cheapest pirated CD can fetch. Major distributors and manufacturers of intellectual property cannot last long with such weak promises of profit, and many are reportedly ready to quit Kyrgyzstan rather than wait for the government to snuff out piracy.
A strong legislative base should enable Kyrgyzstan to curtail piracy in a relatively short time. But the crime is shadowy enough to confound much bigger states. Russia, passing a set of copyright-protection laws in October 2002, disclosed that half of all the videocassettes and nine of ten DVDs sold in the country came from illegitimate copying. The Russian Press Ministry told Interfax that most copying occurred within the country, with counterfeiters making copies for as little as fifteen rubles (49 cents) and selling them for between four and fifty times their production costs. Russia, like Kyrgyzstan, struggles to bring intellectual property cases to trial. In its reform package, the government moved to regulate sales of CDs and tapes, banning them in open markets and stalls.
Some analysts suggest that economic rather than legal strategies can effectively undermine counterfeiters. Local reports suggest that Kyrgyzstan's pirates distinguish themselves with good quality and design. One school of thought would like to give these people incentive to work legally. Kubatbek Baibolov, a retired colonel who chairs parliament's committee on criminal legislation, has suggested that the government could become an economic player in the sale of patents and copyrights. For example, he has suggested that the state could exempt entrepreneurs from customs duties for imported equipment, or introduce tax privileges for the production of high-tech products.
This proposal raises a much larger problem, however. Throughout Kyrgyzstan's economy, producers are working outside the tax system rather than live within it. Consensus holds that the country cannot prevent flouting of existing tax law. In April, the upper house of parliament approved real estate tax, which could prompt more rather than less concealment of revenue among private businesses. If the law moves more manufacturers, service firms and shops into the shadow economy, the spread of audio and video piracy will look minor by comparison.
By Ivan Trubnikov,
Eurasianet, June 25, 2003

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