Wednesday, July 20, 2011

Busan e-FM Week 34: Brands, Counterfeiting and Piracy

The english waves come inAbout 'Open Mike in Busan'


A week earlier while I was waiting to go on air at the station, a situation was posed which led me to say “But that would be unethical”. I needed to repeat that last word a number of times. We quickly established that the English word ‘ethical’ may sound hilarious to Koreans. I wasn’t entirely convinced that this was merely a phonetic issue, which resolved me to pick a topic related to ethics for this week’s show.

Whatever I talk about on the radio, above all else I’ve been told that it has to be entertaining, so it’s fair to say I peppered the segment with the word ‘ethical’ on the principle that if it makes people laugh, instant comedy. I’ve also experimented with the word ‘morally’, but I don’t think the audience is quite ready for it yet, although I’m told ‘contract’ is quite an amusing idea here too.

I wish I was able to communicate with the engineer, because perhaps then we could have set up some canned laughter for every time the word ‘ethical’ was used. That would have been great. Anyway, we decided that ‘ethical’ was the ‘word of the day’.


Korea seems to be a country which is particularly obsessed by brands, whether they are real or fake. I’ve always thought it must be something in the Korean psyche – there’s a need to belong to the clan.

The Korean Bag Market

I read in a newspaper that “For Koreans, a designer bag can earn prestige and maybe even a profit.” What that referred to was the fact that in some cases, second-hand prices for these bags are rising above the original purchase price because the price of new bags is rising so quickly.

As a financial trader it reminds me of the stock market – and it does seem that some people in Korea are buying these bags as investments and agonising about waiting to buy them while watching the price move away from them. I think nine times out of ten, when you find yourself in that position, it’s best to let it go. But why do prices keep rising? It seems that from the price differences between Korea and other countries, the brand companies are just raising prices here because they know the market will bear it. They are ripping people off in other words, turning Korea into a bubble-market. [This was especially noticeable when the recent Korea-EU Free Trade Agreement came into effect, and the removal of tariffs were actually accompanied by European designer brand price rises, instead of price cuts]. So Koreans are going overseas to buy these bags instead. [Yes, it’s international designer bag arbitrage!]

The 397 Generation

It’s not as if we don’t have brands in England or the West in general, but there seems to be more trust for them here. I think this is bad economically, because it makes it difficult for new brands to break into the market, and you end up with the chaebol system leading to a lack of choice. Two reasons why this is bad have been in the news recently – large chaebol-built apartment buildings have been accused of poor safety, and then there’s the beer issue. When I got here I kept seeing the same two brands of beer – which largely turns out to be because there are only two major domestic breweries [plus once again, tariffs help]. Korea isn’t a very diverse society but if nothing else you should really have diversity with beer.

Apparently a lot of the brand-worship these days is being blamed on the ‘397 Generation’, who are in their 30s, went to college in the 90s, and were born in the 70s. But from what I see, it seems more like it should be blamed on what I would call the ‘295 Generation’ - 20-somethings with IQs around the 95 mark [logically meaning in England we should probably have a ‘285 Generation’]. Anyway, it certainly isn’t limited to young people, because older people in Korea appear to have an obsession with German cars [specifically, Audis – which mainly men buy – and BMWs, which mainly women buy].

But does this make people happy? In a recent OECD Happiness Survey South Korea ranked 26th out of 34 in the Index, with 36% of South Koreans saying they were satisfied with their life [I don’t know who these people are either because it’s nobody I know here, leading me to wonder how honest the respondents were considering the potential loss-of-face involved in telling the truth]. A lot of it is linked to stress, and a fixation with money [and probably brands by implication]. But I thought a Gallup poll around the same time offered a fascinating insight into Korean life: Koreans aspire to be richer and happier, but apparently they hate rich people.

Faking it

So people harbour a lot of brand aspirations here, and animosity towards those that achieve what they don’t. Perhaps it’s this which leads to the view that if you can’t have it for real, you have to fake it. Making counterfeit items big business in South Korea.

I was surprised when I came here and saw all the counterfeit goods. It’s not as if we don’t have this problem in England as well, but here in Busan they are just out on the street in plain view in districts such as Nampodong. And then up in Seoul you have areas such as Itaewon and Myeong-dong where it’s said that 1-in-10 street vendors are selling counterfeits (and I can’t help thinking that number is probably only that low because a lot of the other vendors are selling food).

But there doesn’t seem to be a great deal of incentive to crack down because it’s good for tourism, with evidence that Japanese and Chinese tourists particularly come to Korea because the quality of fakes here is known to be ‘very high’. And this is the tip of the iceberg, because many more counterfeit items are being sold online.

Does it matter?

Personally I don’t care about bags, and I don’t get paying $1,000 for one. But morally, the business of counterfeiting is unethical [stare into control room]. But then more visible danger is counterfeit drugs; counterfeit goods are a kind of cheat, but counterfeit drugs can kill.

Doing business is an issue – if I were visiting Korea to sign a deal with a company, and saw all the counterfeiting activity going on and that it appeared to be so publicly acceptable, I might think this makes the country and people I’m dealing with in it seem less ethical, like with honouring contracts for example. So I’d wonder, is Korea an ethical or unethical country?

Software Piracy

It also extends to the media industry of course. At PIFF [The ‘Pusan’ International Film Festival], when a message came up saying “No Piracy in Korea”, people laughed. And when I first came to Busan I noticed that while there were shops everywhere, there appeared to be a distinct lack of music, DVD and software stores. Every shop seemed to be running Windows XP Professional though – which is a premium priced version of the Microsoft operating system – and you have to think that the reason is because they’re probably not genuine copies.

I used to be a software developer and I like the ‘open source’ concept but it doesn’t pay the bills. The incentive to build software that would help people in this country isn’t as prevalent as it should be, because there’s no reward if people pirate their software rather than buy. In fact it’s said that piracy in Korea may cost this country around 20,000 IT jobs. [I’ve never been totally convinced by these arguments – it may well cost 20,000 IT sector jobs, but I think the money saved just results in jobs getting shifted elsewhere – admittedly into the service sector which is a dead-end for economic development which Korea shouldn’t want].

The excuse people who pirate always use is that they weren’t going to buy the product anyway, which is undoubtedly true in some cases and undoubtedly false in others. People in Korea don’t seem to care though. I went into a computer store once to ask for a quote on a computer, and was told “we can supply whatever you want – any software... no extra cost.” I actually wanted to buy a genuine copy of Windows – and after overcoming the proprietor’s incredulity he finally laughed and said sheepishly “we don’t have any”.

I think this isn’t isolated because there was a case recently of a large supermarket chain being caught selling pirated software on netbooks, and according to official figures software piracy has reached a five-year high.

You know what really got me about my trip to a computer store? That the proprietor admitted that the one downside of the pirated copies of ‘Windows Vista’ these days is that you can’t update them, which means no security updates and all that implies. But people “don’t really care”. So there’s an ethical issue here but the bigger issue to my mind is security.

Korea’s Digital Pearl Habor

People are taking reckless chances with their online security by running pirated software, because even if you don’t get caught by some downloaded virus, your pirated version of Windows itself may include programs that spy on you, and steal your passwords and bank account details. It’s obviously occurring too because once I was called in to look at a friend’s computer that was ‘running slowly’, and it transpired to be because of the large number of spyware programs infecting the machine.

That’s a practical outcome of these security weaknesses – that to access your bank you have to go through a lot of quite complicated procedures involving digital signatures, and that sounds like it has its advantages on the principle that more security is always good, but it isn’t, because the upshot of the technical environment here is that everyone has to use inherently flawed ActiveX technology and because most people are running pirated versions of Windows which often can’t be updated, everyone designs their websites and security for Internet Explorer 6, which is very insecure.

But where this problem might really manifest itself, is in the field of cyber-warfare, which is already with us, as the attack on Nonghyup Bank earlier this year – which was blamed on North Korea – demonstrates. People often think that if war with the North happens, it’s going to start with thousands of North Korean soldiers rushing over the border, but I think it’s more likely war will begin with a massive cyber attack which, will cripple South Korea. I can see this country very quickly losing its mobile phone networks, Internet, TV, financial, GPS, power and traffic infrastructure. And even if nuclear power plants aren’t connected to the Internet as the authorities in this country claim, the same was true of Iran but foreign intelligence agencies still managed to introduce a devastating virus into that closed system.

North Korea allegedly has 30,000 ‘electronic warfare agents’ or hackers as it is, so it seems optimistic to think they aren’t going to used as part of the initial strike against this country.

So the way I see it, I feat it will be chaos before the first shot is even fired. And that’s the problem. Never mind stealing your bank details, how do you know your pirated copy of Windows doesn’t have a foreign program on it waiting to trigger as part of a cyber attack? You don’t, whether it’s ethical or not, using pirated software might turn out to be a danger to South Korea’s security, whether through war directly or just industrial espionage. Fake bags are not going to bring down society, but the thinking that accepts it, just might.

Busan e-FM
Inside Out Busan

Air date: 2011-06-15 @ ~19:30


Curtis said...

Hi Mike. Great post. As I remember, we had discussed this very issue. I sincerely hope someone, ANYONE, makes Korea dispose of their awfully insecure and often (at least in places I've seen) old systems. As terrible as ActiveX is, modern and updated browsers can still run it, so finding at least one browser that accepts it will mean that Koreans have no reason to not upgrade their systems and purchase a legitimate copy of Windows or MacOS. They can continue to do everything they could before and more with Windows 7. said...

To be fair, the obsession with brands is more of an Asian thing (my Dad had it), and certainly many young people in the UK have it. Especially in London.

Mike said...

Hi Curtis - thanks, yes I invariably end up talking about computer security here :-) I think in future most Koreans are going to dispense with their desktop PCs for their Internet fixes in favour of using their phones, but perhaps it will just lead to spyware becoming common on mobile operating systems!

Mike said...

Hi almostwitty - true enough - it just seems to be taken to an extreme here sometimes. For example, I'm looking for an apartment to buy here and apparently if we don't buy a big brand we can basically forget about it retaining its value over the long term because it will be that most terrible combination of Korean things (1) unbranded, and (2) old.

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