Inside Vietnam's booming knockoff trade - Asia Specific podcast, BBC World Service

The counterfeit industry is huge. Those fake products make up 2-3% of total global trade each year, and Asian countries play a major role in both producing and distributing them. But Duc, one of them, Vietnam, is finally clamping down on them. That's right, Mariko. Fake luxury goods existed for many years, but the government started a crackdown. after the US threatened to impose crippling tariffs if they don't shut it down. But there is clearly demand for those fake products.

So we're asking, why do so many people buy counterfeit goods? I'm Mariko in Singapore and this is Asia Specific from the BBC World Service. Twice a week, we bring you Asia Specific stories. unpacked by those who know them best. Well, I have two journalists who've looked into this issue, Duc Ha is from the BBC World Service. Welcome to Asia Specific, Duc. Thank you for having me.

I also have Lindsey Tramuta, who is a freelance journalist based in Paris. Welcome, Lindsey. Thanks so much for having me. And you've recently written an article looking. at this counterfeit industry for Bloomberg, haven't you? So if you can maybe start off by painting the picture, how big these fake luxury goods markets are globally. So at the time of reporting, the OECD was painting this. at USD467 billion dollars worldwide,

which really represents about 2.3-2.5% of total world trade. Asia has become a primary source when it comes to manufacturing. and distributing counterfeit goods. Southeast Asia is unfortunately a major hub for distribution. and even localized assembly across the region. I was also reading how China and Hong Kong account for. over 70% of the value of global counterfeit goods that have been seized.

But as you said, Lindsey, some Southeast Asian countries. have become major hubs for distribution. And Duc, we're focusing today on Vietnam. because it's been singled out by the United States for, I guess, failing to address this issue this year. But before we dive in, can you also paint the picture. how common those fake products are in Vietnam? So there's no official number about the scale of this market in Vietnam, as they are informal and a shadow economy.

But the past two months I've seen a lot of seizes. I've seen a lot of sellers being arrested. or under prosecution, which I've never seen before. And they estimate the seized products to be worth tens of millions of dollars. If I had to describe, I would say. you can easily find luxury fake goods in every corner of Vietnam. Back in the day when I was in university, I used fake Nikes to go to school.

and I survived my hometown winter by using a North Face knockoff. This way, my parents wouldn't be paying half their salary to buy me the real one. So consumers in Vietnam, they don't really mind buying fake goods. I would say so, but sometimes they they don't really know. they are buying the fake one. How does it work though? Because I was reading how China is. kind of the major manufacturer when it comes to those fake goods.

So does Vietnam also produce them. or do they just distribute "Made in China" fake products? So the answer is both. When it comes to fashion, I would say they import a wide variety of brands. And then the local manufacturer will label the brand name on those product. Label as in Chanel or Louis Vuitton? Yeah, sure.

Because they do it to fool customs. Because the goods that they import, there's no logo on it. Then when they come to Vietnam, they start labelling them Gucci, Dior and Louis Vuitton. But when it comes to perfume and medicine, I think the Vietnamese start doing that from scratch. So they're producing them as well? Yeah, we're talking about products like shampoo or perfume.

Okay. But I mean, I don't want to assume how old you are, but you're talking about when you're a university student. So if those fake products have been around for quite some time, why this aggressive clampdown now by the Vietnamese government? Can you just explain the political reason behind that? So months ago, the U.S. started their investigations in Vietnam, and since last year, I think.

the government has tried to diversify the export market beyond the US, but it cannot be done anytime soon. So the Vietnamese export products still depend on the US market. and obviously the the authorities don't want more tariff on our products. because it's still one of the main drivers of the Vietnamese economy. Also for many years, Vietnam is famous. for being the place where we assemble the final product,

but now they want to be more involved in the supply chain. for high technology product. By cracking down on these things, the government wants to prove to the world. that we are a trusted partner. It's super hard though, Duc, right? It's super hard for. governments to actually find the strategies to curb this problem. I mean, the EU is facing a similar challenge.

And, you know, you can look at it from border control, you can look at it from the actual manufacturing of the products. that need to have certain digital IDs and ways to make the product. lifespan very transparent, but even those can be doctored. So, you know, how confident do you think. the government really is or even the consumer is that. cracking down will lead to curbing the problem?

And I guess, I mean, would you say, Lindsey, that the market has developed because, you know, I remember. fake luxury products being around when I was a teenager, but have they kind of improved to a point. that even the fake ones almost look really real? That to an. ordinary consumer's eyes, you can't really tell the difference. Yeah, absolutely. They're being made much better, more convincingly. They're really easy to dupe.

Even the keenest eye people who are used to consuming luxury goods, sometimes they're even made from the same leather tanneries. They use hardware from the same vendors as the originals. and these are called superfakes. And that means. that they are copies that are nearly indistinguishable from the originals. And that can be quite compelling for a consumer who finds. that the luxury market has partaken in something called 'greedflation', which is essentially, willingly.

skyrocketing their products over the last, I would say seven years. Because if people will buy it, they will keep raising the prices. But the quality most consumers say has diminished. Tell us more about how those superfakes are being spotted. because you spoke to some people who actually do those, can I call it authentication?

Yeah, absolutely. Yeah. I mean, so some of it involves a really deep history of fashion and luxury. So they're both pairing, a deep reservoir of knowledge around these products, how they're made, what collections they're from with certain tools. So they're identifying, you know, with a fine tooth comb, every detail of a bag, if it goes through physical authentication. But most of these companies now have AI detectors,

but none of these things are foolproof. I mean, that's, that's the main issue here is. that because they're getting so convincing, there can be minor defects that are almost imperceptible, and so how are you going to thwart this? It also relates to when products are coming in. So when the products come in from whether it's Asia, whether it's Turkey, onto mainland Europe, as a specific example, it's about how much border control there is. Action needs to involve so many different layers, both policy,

both product manufacturing, and also. how these things are being inspected when they come into the border. Duc, you were saying earlier how some people. in Vietnam may not be aware that they're buying fake products, but it's become kind of a hub where not just locals, but also tourists go to buy those fake luxury goods. So what kind of proportion are we talking about? Is it actually becoming a tourist attraction? And if so, what kind of percentage are we talking about here?

Yeah, I don't have the exact number right here. But I would say yes in the big city, like Ho Chi Minh and Hanoi and right at the center of the cities, many tourists go there to buy fake Louis Vuitton. and it's been the the main source of income for those vendors over there. So how do those vendors feel about this latest clampdown. You know, their livelihoods could be affected, even though, you know, maybe they're aware that selling fake products isn't okay.

The fear is real. And right now they're they're trying to cope with it by signaling each other. Let's say there's someone standing outside the market and. he starts observing if there are any officers coming closer. If there is, he starts signaling the vendors inside. So now the suppliers, they try to dodge the regulation. by changing the brand name a little bit, like from Adidas. to Adada or like from Hoka to Hakko,

but that way they can say, "Hey, we're not producing counterfeits.". "We are producing our own brand.". Yeah, I don't think that holds up in intellectual property court. I think the the owners of those companies. are probably going after them anyway. Would you say, Lindsey, you talked about. how the prices of real luxury products have gone up so much. that a lot of consumers can't afford it. Would you say that they are increasingly more comfortable buying fake products,

knowing that they're actually fake, even in Europe? Yeah, I mean, I think I've seen more social media backlash from consumers. in the U.S. who feel a kind of pride by buying dupes and. showing off that it's really close. So let's just go ahead anyway. And I think it's really an issue of being aggrieved, you know, that's the way people feel when they look. at how the luxury industry has continued to raise their prices,

but the quality has not followed. And one figure I found showed that from, from 2019, the prices of luxury goods jumped 54%, and that's from HSBC Holdings, a report that they put together, with some handbags in particular jumping double the price. And this is really contributed to a culture. where consumers aren't as concerned with it being fake. But it really is a problem because of.

how these industries function for their health. And what's interesting is I had spoken to a representative from a luxury, French trade organization that is trying to protect the luxury industry. and they work together with different companies to. work on digital ID products, but also sort of education. And I think it's important to look at this as a, as an awareness campaign of, okay, you're not just buying something. that's convincing, you're buying something that is potentially toxic,

bad for your health and also supports an extremely dangerous industry. How is it toxic, though? Can you elaborate on that? So, the luxury handbag companies or luxury goods. are working with very specific materials and very specific conditions. But when you have counterfeiters, they're going to cut corners wherever they can. So they might be using glues that are toxic. or tanning methods that expose the end consumer.

to different unhealthy products. The other thing that people need to understand is that it supports. often organized crime. So whether that's drug trafficking, human trafficking, child labor, all of this is. behind the scenes of a lot of these counterfeit operations. And so you're not just buying a bag, you're buying. into something that allows these companies.

or these counterfeiting organizations to really thrive. in all their other activities. Duc, I'm just curious how the Vietnamese government is tackling this now, given this latest warning from the United States. You talked about raids and, busts of market stores earlier. Are there anything new that the government. and the police are doing at the moment? If you look at the media outlets, it's very easy to find articles.

of a lot of sellers being arrested, some under prosecution, some are in jails already, which I've never seen before, even though they've been doing that for many years. On the one hand, I think it's kind of performative. They want to show the U.S.,"Hey, we are doing the real thing.". "We are tackling on it." And the second I think they want. to show an example for the other sellers, "Hey, this could be the the results if you continue to sell fake products.".

But yeah, personally, I think that's not enough. They should do more, other than just cracking down, maybe by educating, maybe by communication. Or they need to take a page from the European Union and come up. with a multi-pronged attack and also try to. ensure that there are these digital IDs on all the products.

Lindsey, can you just explain that you said digital ID? Can you explain how that works? Yeah. So the European Union introduced legislation requiring. all new textiles, electronics and furniture actually. to contain these digital product passports, which are essentially IDs. And so some of the companies have already started to. replace their old authenticity cards. for example, with with these digital IDs. Do you think that's something that maybe Vietnam is considering aside from those,

you know, as you called it, kind of performative raids, would they consider doing something like. the digital ID that Lindsey was just talking about? I haven't heard of it, but I think the government is also trying, as you might know, the leader right now is. betting the economic growth on the private sector, especially the SME. So by cracking down on the fake product market, they create more room for their local brands to thrive.

So, for example, now the Vietnamese consumer can pay the same amount of money. for a better shoe with more functions rather than just for the brand name. Duc, we were talking earlier. about how the Vietnamese government has started this aggressive clampdown. after many years of trying to tackle this issue, because of this growing pressure from the United States, where do you think this counterfeit market will go in Vietnam? Do you think this kind of clampdown will continue regardless of the US pressure?

Will the will the fake market shrink in your view? Or maybe not? To some extent, I say yes. They will still continue cracking down on counterfeit sellers. I think there's two reasons. The first one, they're trying to formalise the informal economy. So they really have to push their GDP growth. And the second one, as I mentioned, they're betting on the private sector for economic growth.

So by cracking down on their shadow economy, they create more room. for the local brand to try and compete against the. against the other international brands. I guess the battle to tackle those fake products continues. Thank you so much for joining me, Lindsey and Duc. Thank you so much. Thank you so much for having me. You've been watching Asia Specific from the BBC World Service. with me, Mariko Oi, in Singapore. If you have any questions or comments on what we covered in this episode.

or any other stories from the region, please leave us a comment below. You can also get in touch with us on email asiaspecific@bbc.co.uk. And you know the drill, click like and subscribe so you never miss an episode. See you next time.