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Research Paper Abstracts
Over the years, economic growth and FDI inflows into Kenya have been very low and volatile. The Kenyan government has adopted various policies for attracting more investment. Among these policies include targeted financial concessions like tax concessions, cash grants and specific subsidies; focused improvement in infrastructure and skill parameter and creation of a base to meet the demands and expectations of foreign investors; improving the general business climate of the country by changing the administrative barriers and creating state agencies to help investors. This state of affairs has led to the stagnation of the manufacturing sector which is largely dominated by foreign firms. This could be attributed to high levels of counterfeiting which discourages foreign investors from doing businesses in the country and also limits economic growth.
The objective of this study was to examine the relationship between counterfeiting and economic growth and Foreign Direct Investment in Kenya. Using data between 1975 and 2010 and Vector Autoregression (VAR) model, the study generated impulse functions and variance decomposition graphs.
The findings show that a positive shock to GDP growth rate from counterfeiting in Kenya decreases GDP growth rate on impact, then it increases in the 2nd year before decreasing in the third year. This downward trend continues up to the 4th year when the trend starts taking a horizontal path. The impact of a positive shock on the levels of counterfeiting on economic growth will clear after about 6 years. This finding is in line with expectations that an increase in the level of counterfeiting will reduce economic growth. The government therefore needs to worry about the rising levels of counterfeiting.
The response of FDI inflows to changes in counterfeiting in Kenya is not significantly different from zero. A positive shock to the levels of counterfeiting decreases FDI inflows on impact. This finding is in line with expectation that an increase in the level of counterfeiting will lead to a reduction of FDI inflows. After the second year, there is an increase in FDI inflows which again decreases in the 3rd year before taking a horizontal path. The impact of a positive shock on the levels of counterfeiting on FDI inflows will clear after about 4 years.
The impulse response shows that counterfeiting in Kenya has no instant impact on a positive shock to the Kenyan population. This shows that an increase in population has no instant impact on the level of counterfeiting. However, a positive shock in the Kenyan population causes a slight increase in the level of counterfeiting between the 1st and the 2nd year before tracing back its initial path. With the Kenyan population representing the market for the counterfeit goods, these findings show that production and importation of these goods does not necessarily depend on the population. Counterfeiters will continue producing and importing irrespective of the market size.
Variance decomposition graphs show that other than own shocks, changes in the levels of counterfeiting account for the largest variations in GDP followed by changes in FDI inflows. The least contribution comes from changes in the Kenyan population. Also, other than own shocks, changes in the levels of counterfeiting account for the largest variations in FDI inflows followed by changes in GDP. The least contribution comes from changes in the Kenyan population. These findings conclude that counterfeiting negatively affects economic growth and FDI inflows while the market size has a positive but minimal effect on the level of counterfeiting in Kenya.
Below are the policy recommendations arising from this study;
•The finding that an increase in the level of counterfeiting will reduce economic growth means that the government needs to worry about the rising levels of counterfeiting putting in mind that this impact of a positive shock on the levels of counterfeiting on economic growth will clear after about 6 years. This is a long period of time for an economy to suffer the effects of a menace like counterfeiting.
•The finding that an increase in the level of counterfeiting will reduce FDI inflows and that the effects of a positive shock in the level of counterfeiting on FDI inflows will clear after about 4 years means that the economy will suffer the effects of not having foreign investment for all this time. The government therefore needs to counter the menace of counterfeiting for the productivity of the economy.
•The finding that the level of counterfeiting accounts for the largest deviations in both FDI inflows and economic growth means that the government, manufacturers and consumers need to put a lot of effort in the fight against counterfeiting to curb this menace.
•The finding that counterfeiters will continue manufacturing and importing irrespective of the population changes means any economy can suffer by this menace and counterfeiting should be eliminated by all means.
A counterfeit is an imitation, usually one that is made with the intent of fraudulently passing it off as genuine. Product counterfeiting and trade in counterfeit products, labels and packaging involve imitation of genuine products that are marketed under brand names. Counterfeit auto parts are imitations of the original parts which replicated and marked in order to represent them as original parts thereby causing the weary buyer to purchase the same believing to be originals.
As the automobile industry has grown, a big share of the cake has been grabbed by counterfeit spare part dealers. As the number of cars on Kenyan roads balloons, spare parts business has increasingly become lucrative ranging from authorized dealers to quacks and vehicle parts. Dealers have sprouted like milk and bread shops in various towns and estates of the country (Nation.co.ke June, 2011).
Today, the influx of counterfeit automobile spare parts in the Kenyan local automobile industry has reached an all time high, with motorists often being victim to dubious traders who sell them contrabands under the guise that the spare parts are indeed genuine. Car manufacturers in Kenya are increasingly showing their concern for the counterfeit invasion. Subaru Kenya has launched a campaign to sensitise motorists on the benefits of genuine spare parts. (Nation.co.ke June, 2011).
A survey carried out by Toyota Kenya in June 2011 indicated that eight out of ten (10) vehicles in the country have at least one fake spare part. The survey was carried out at the firms dealerships spread across the country, on vehicles brought in for service within the company. This has eaten into its market share and putting motorists at risk in the country. Motor dealers in Kenya lost 65 percent of their market share to counterfeits in 2006, up from 50 percent in 2005. In addition, over 80 percent of Toyota parts in Kenya were found to be counterfeit. (Nation.co.ke June, 2011).
Kenya Association of Manufacturer’s (KAM) did a Position Paper on Counterfeits and found out that Counterfeit trade is costing the business community and government billions of Shillings annually in profits and revenue respectively. According to KAM, the current estimates indicate that over Ksh 50 billion is lost annually by the business community to the counterfeiting menace. At the same time, the government loses Ksh 19 billion annually in terms of taxes as a result of lost opportunities for the business community” (KAM, 2007).
The Business Action to Stop Counterfeiting and Piracy (BASCAP, 2007), did a global survey on counterfeiting and piracy where an evaluation was conducted to the corporate perception of the degree to which countries protect or fail to protect the Intellectual Property Rights from threat of piracy and counterfeiting.
The Organization for Economic Co-operation and Development (OECD), conducted a research on the Economic Impact of Counterfeiting and Piracy globally. The survey provided a comprehensive overview of the menace that counterfeiting has impacted on a wide range of industries globally (OECD, 1998).
Counterfeiting in automobile parts therefore has caused adverse economic harm, defrauds to consumers, unfair competition to legitimate business and has posed a danger to public health and safety hence the concern on the study of counterfeited spare parts. Bogus spark plugs and other engine parts have merely caused aggravating failures and breakdowns, poorly constructed brake and suspension parts have resulted in many deaths.
A survey therefore was done in order to establish the dangers/risks of using counterfeit spare parts,the extend of spare parts usage, the reasons of buying counterfeit spare parts, the most counterfeited spare part, and the challenges faced in fighting the counterfeit of spare parts in the automobile industry in Kenya.
The study employed a descriptive survey design which deals with the what, how, and who of a phenomenon. The study specifically tried to establish the dangers and the risks associated to counterfeit spare parts which lead to an in-depth understanding of why customers buy counterfeit products.
The study targeted the consumers of spare parts in Kenya but more specifically to the population of Nairobi due to unlimited time and finance.
Data was collected by means of a questionnaire, with open-ended and close ended questions. The questionnaires were administered to the respondents through drop and pick method and data was organized, coded, and analyzed using stata and the results presented in terms of pie charts, graphs, tables, percentages and short descriptions.
From the research, it was found that people who have previously bought counterfeit goods believe that they are as good as genuine products – no doubt they buy the counterfeits repeatedly.
From the findings, people buy these fake products because they don't care if they're real, while some just bought them because it's all they can afford as they are very cheap and come in different colours, sizes and styles. From the findings, some customers allude that they buy counterfeit spares as it lasts long enough to be good alternative to the original one. Consumers show no remorse for their illegal activity of buying fake products, but blame their own lack of resources for their behaviour, and feel no recourse associated with their actions.
Regularly, most of those with low level of education are prone to buying a counterfeit spare part than to those with higher education. But from the findings, those who cannot differentiate the genuine from the counterfeit product is higher in those people with diplomas and degree levels of education than those with none and is recommended that further research be conducted to establish the reasons behind such behavior.
Conclusion and Recommendations.
The problem of bogus automotive parts has not gone away. Armed with advanced technology and cheap labor, counterfeiters are still taking a big bite out of the aftermarket pie. The right balance lies in using parts that repair the problem properly, keeping the repair cost as reasonable as possible while leaving a margin of profit.
Ultimately, the cost of counterfeiting affects every shop owner whether directly or indirectly. Because of the adverse effects to the entire nations, aggressive campaigns are prudent in the media to educate consumers on their rights & obligations with regard to quality of products & dangers of counterfeits. This can be done through workshops, seminars/institutions. Additionally, a regular stakeholder engagement to share ideas about the counterfeit menace is essential.
The increasing global trade of counterfeiting is finding its way into the agrichemical industry. This increment not only affects a country’s economic growth but also human health, food safety and the environment. The trade of counterfeit pesticides provides a worrying trend, posing great threats to man’s survival that depends on agriculture.
This baseline study intends to highlight the negative effects counterfeit pesticides have on the environment and to human health and safety. It also determines the most common method(s) used when counterfeiting pesticides, possible solutions and strategies that can be adopted to fight this vice.
The key findings indicate that counterfeit pesticides do actually have dire consequences to the environment, food security and to human health. Thus more needs to be done to close legislative loopholes. It is also imperative for corporations and their countermeasure policy makers to take a firm stand on producers and distributors of counterfeit pesticides.
This research is about the effects of counterfeiting on profitability of the manufacturing sector in Kenya. The study seeks to determine how the profits of the manufacturing sector have been affected by counterfeiting. It also aims to identify the sources of these counterfeit products and how counterfeiting has affected the sales in this sector as well as to determine any extra costs incurred and also possibly identify the strategies that can be pursued to combat counterfeiting.
The raw data was analyzed using STATA software and among the key findings were that, counterfeiting has indeed increased over the years and as such has lead to increased cost of production for manufacturers. Many of them are spending a lot of resources (financial or otherwise) in combating counterfeiting. The counterfeit products have also taken over the market share of the legitimate products leading to loss of brand name. Counterfeiting as affected the manufacturing sector seriously in terms of cutting down their revenues. It was also interesting to find out that a lot of counterfeiting is also done within the country and manufacturers have this intelligence.
Counterfeiting has been on a high increase all over the world. It is a vice that has found an environment to thrive among the African countries where there exists weak intellectual property enforcement regimes. The loss due to counterfeiting has been enormous especially to the manufacturing sectors in Africa. These companies have emerged and grown despite the challenges imposed by counterfeiting.
The purpose of this research was to analyze the factors that influence consumers to engage in counterfeit purchases. The findings from this research are expected to inform policy makers about consumer attitudes in regard to counterfeiting and to identify possible strategies that can be used to combat counterfeiting. A cross sectional survey research design was used. Questionnaires were given to a target group of 200 respondents from Nairobi County. The sampling method used was stratified random sampling.
The major contribution of this research paper is to show that that the consumer’s choice to engage in counterfeit purchasing is highly influenced by certain factors. These factors include the price of the product, unavailability of the genuine, reference groups and perceived risk. It brings out the link between counterfeiting and the various factors identified. The main practical implication of this paper is to inform policy makers and the government of Kenya about the main predictor variables of consumer’s attitudes towards counterfeiting. As such awareness campaigns can be geared towards bringing out the perceived risk about counterfeiting since this approach is likely to catch the attention of the consumers.