July Issue 2005

The net’s out and there you were trying to download that naughty Paris Hilton tape? Excited about Meera’s Nazar? It might be banned in Pakistan, and you’re afraid it might not be out in the market? Or maybe you want to watch the latest Star Wars movie, but can’t wait for its official release?

No problem, go down to your local store and shop till you drop, courtesy your friendly neighbourhood pirate.

Called the “new China,” Pakistan is among the fastest growing piracy markets in the world, chalking up a huge percentage of the global piracy business.

The statistics are startling. An Interpol report suggests that the global narcotics trade is estimated at over 300 billion dollars annually, while the global annual piracy and counterfeit trade notches up 450 billion dollars. According to the US patent office, this accounts for over seven per cent of all world trade. In particular optical media and music piracy is one of the major concerns. And Pakistan is one of the top five countries involved in this trade.

Losses to US companies stand at an estimated 2.7 billion dollars. It is estimated that the scale of optical media and disc piracy is doubled every 18 months and Pakistan has emerged as one of the largest exporters of pirated optical and media discs worldwide, which indicates that an international smuggling syndicate is in operation.

On May 3, 2005, in the single biggest anti-piracy operation on record in Pakistan, the FIA simultaneously raided and sealed six optical media factories with large-scale manufacturing capability, instantly bringing a halt to the source of one of Pakistan’s largest underground economies. Over a 100,000 CDs and DVDs were recovered from each unit and 11 people were arrested.

The move came in typical eleventh-hour fashion as Pakistan faces the threat of several trade sanctions, including the revocation of its GSP (Generalised System of Preferences) privileges, an incentive that lowers tariffs on imported goods and reduces duty charges on specified products. On April 16, less then two weeks before the United States Trade Relations (USTR)’S GSP committee was scheduled to meet and revaluate Pakistan’s trade privileges in light of its inability to curb International Property Rights (IPR) crime, the FIA was forwarded a specific directive by the Prime Minister’s office, which brought the Copyright Act into the FIA’s ambit and also ordered the immediate closure of all existing factories producing pirated CDs, cassettes and DVDs.

This came in the wake of talks on the finalisation of the Bilateral Investment Treaty (BIT), which deadlocked early this year when the US asked Pakistan to pay damages to US companies in cases of infringement of intellectual property rights and proposed the unilateral cancellation of licenses. According to the BIT draft, if the government fails to immediately compensate affected US firms, the World Bank will pay the compensation and consider the amount as a loan given to Pakistan. This figure runs into hundreds of millions of dollars. The Motion Picture Association of America (MPAA) alone estimated losses of over 80 million dollars from piracy in Pakistan in 2003 alone.

Senior US and Pakistani officials met again in London in February this year in the first official round of negotiations over BIT. The Pakistani delegation was headed by Jehangir Bashir, secretary of the Board of Investment. The delegation was critical of the proposals put forward in the projected draft of the treaty and found many points of contention, refusing outright to include IPR protection in the agreement. On the other hand, the US representatives stated their need for Pakistan to protect current US investments worth 15 billion dollars.

The Pakistani response was less then compliant, as officials declined protection to existing investments by US companies, saying Pakistan would only protect and provide guarantees to investments that came in after the signing of the treaty.

Though government believes this agreement will open the gates to a new era of foreign investment, the Pakistani delegation said that it would only accept US demands if a big company like Microsoft came into Pakistan and started production immediately. Meanwhile, the US response was, as has always been, ‘Clean up your act and we’ll come.’ A representative of a major international organisation on being asked if direct investment was a good incentive to clean up piracy, told Newsline, “Investment will only come when your government wakes up to the situation. Big business is waiting around the corner. Besides, Pakistan is in no position to make conditional deals.” When former secretary of state, Colin Powell and under-secretary Larson were in town, to finalise the three-billion dollar aid package promised at Camp David, they were assured that intellectual property protection was on the agenda. “The investment could double five to 10 times over time if there are strong IPR laws that are strictly enforced,” said Larson. William Lash, the US under-secretary of commerce, did not mince any words either and clearly spelt out that trade sanctions would be imposed when he met commerce ministry officials in August last year.

However, piracy is, by no means, a new phenomenon in Pakistan. Pakistan has been on the US “special 301″ watch-list since 1989 for failing to protect IPR. In 2004 the USTR “special 301″ announcement once again declared Pakistan to be the fourth largest source of counterfeit products and pirated goods. There has been an undoubted reluctance to deal with the problem for many reasons, including lack of political will and corruption, but mainly because, on the whole, piracy is not seen as a problem. Piracy is a divisive issue in developing countries like Pakistan. It is argued that in a newly emerging free-market economy like Pakistan, piracy plays an important role in providing the population access to products and services, which it would otherwise be deprived of. Piracy plays a major role in social mobilisation as far as free access to knowledge is concerned, while copyright protection, in developing countries, causes serious problems for students, libraries and educational institutions. “Clamping down on piracy of popular consumer goods like digital products, clothing and music in a country like Pakistan seems almost like an apartheid of sorts,” says Shahbaz Khan, a college student.

Then, of course, there are other more cerebral questions: Is there a copyright on knowledge? Is music a tangible commodity? Should the sharing of information be subject to money? For many, global IPR means putting a dollar sign on everything on this planet. The attitude in Pakistan is overwhelmingly in favour of piracy. From a liberal point of view, IPR is considered to be an instrument of globalisation, a stamp on ideas, a way to keep developing societies suppressed and away from new ideas and prospects. A treaty like BIT which Pakistan has now signed with the US, it is argued, leaves the country open to the deepest forms of penetration by transnational corporations and big business.

The UN Conference on Trade and Development (UNCTAD) describes bilateral investment agreements as “the most important protection of international foreign investment.” They are creating more rights and powers for foreign investors and corporations to move in and become more powerful. Big businesses want governments like Pakistan to give them and their investments no less favourable or protective treatment than small-scale domestic investors and their investments. Through international agreements like this one, they seek binding, enforceable rights (but no responsibilities), and an end to government regulation of investment. BIT and free and regional trade agreements (FTAs, RTAs), actually allow developed countries to influence the domestic political economy of developing countries and advance the interests of their own corporations.

Hungry for the carrot of investment being dangled by the US and the EU, Pakistan is among dozens of countries who have signed on to the BIT, hoping for instant gratification. From the US point of view, they are extracting maximum concessions from weak developing countries by taking the route of bilateral agreements to try and bypass WTO regulations, where they will not be able to oppose the US because of their bilateral obligations. It is also very clear that geo-political and strategic interests are more important than economic ones, especially in certain regions where BIT has been signed. Pakistan was lured in by promises of multi-billion dollar investments, as well as the hope of increased free market access, which seems unlikely. In particular, Pakistan pushed for opening up textile exports to the US. However, in the face of internal US lobbies this is unlikely to happen. Secondly, the Pakistan government wanted to see the travel advisory issued by the US government lifted under this agreement. That has not materialised either. In light of all this, essentially, Pakistan doesn’t stand to gain much by signing BIT.

However, this is not why the government has failed to crack down on piracy for so many years. Most observers realise the existence of a parallel economy in Pakistan and the integral role that it plays in the overall financial system. The underground piracy economy is estimated at billions of rupees, providing employment to thousands of people. So no one is complaining. No one except the corporations and Uncle Sam. The consumers certainly aren’t.

According to a Nielsen survey in 2002, 19 million Pakistanis viewed pirated VCDs and DVDs every month through pirated cable channels alone. There is a prominent social attitude that doesn’t consider piracy to be a crime at all. This mindset exists most evidently in the government and judiciary, borne out by the fact that no single prison sentence has been handed down in an IPR case in the history of the courts. The law in Pakistan concerning copyright has been in place for many years now and has been amended six times to date. Piracy is a bailable offence and carries a maximum prison sentence. The problem is, however, that discretion is left to the magistrate and there is no minimum punishment. Implementation of the copyright act has always posed a problem. Corruption and bribery also play a huge role in keeping the status-quo running. And why not? It is, after, all a victimless crime. Everyone is happy.

However, piracy has ravaged the local creative industry and caused the taxpayer billions of dollars in losses. Considering the massive losses, there has been a strange kind of apathy from the government. They have not commissioned any comprehensive report to ascertain all-round liability and losses to the exchequer. Newsline contacted the Sindh Bureau of Statistics and the CBR to obtain any statistical data in their possession and were told there simply isn’t any. The closest estimate reveals that no less then 35 billion rupees are lost annually to the national exchequer, not acknowledging the massive tax revenue which would be generated if major corporations were to have a stake in the market.

In 1994, EMI Pakistan lost its battle to piracy and was forced to close shop. “If EMI had been around today, the entire landscape of music and perfoming arts would have been unrecognisable,” says Tanseer, the lead singer of the rock band Karavan. Today, there are many more talented musicians and singers breaking into the mainstream, but financial prospects are even bleaker than 10 years ago. There is no bonafide record label in Pakistan today. Artists receive no royalties from TV or radio channels and not a single penny is earned from record sales. Artists are forced to deal with semi-legit groups like Sadaf Stereo, allegedly a front for one of the biggest pirate operations in Pakistan and, if they are lucky, they might see some one-time only money. There has been some kind of consensus reached between pirates and local artists though, where the former have agreed not to pirate the latter’s music for the sake of the “national good.”

In any case there is no shortage of things to pirate. Corporations have taken over music because music can sell anything and corporations realise that. Most popular artists have signed on for corporate ad campaigns, earning most of their money by performing and signing corporate sponsorship deals.

In its early stages corporate participation did undoubtedly help pop. Bands like Vital Signs and Awaz won lucrative contracts. Back then, the market was willing to swallow anything, but now the detrimental effects of this have surfaced. Corporate culture has virtually destroyed musical integrity in Pakistan’s pop industry even before it has begun, creating a bubblegum and market-driven culture in place of what should have been an organic, creative process, unhindered by monetary concerns. The result: musical standards have sunk to banal levels and hypocrisy, greed and the lack of authenticity rule the waves.

Multi-billion-rupee brands like Tulsi have taken the decline a step further, independently producing over a dozen meretricious music videos sung by playback artists, and have hijacked a channel to stream its videos 24/7. World Call now has around 10 channels unofficial screening western and mostly Indian films, 24 hours a day. What’s more is that they have managed to attract corporate sponsors for each one of their pirate channels. “Allowing piracy of Indian films was considered a smart act of political sabotage. Anything that hurt India was considered kosher,” says Ameed Riaz, the former owner of EMI Pakistan.

Bollywood is also one of the leading complainants. Pakistan is the biggest market for Indian films outside India. Although the screening and exhibition of Indian films is officially banned in Pakistan, pre-released DVDs, VCDs, CDs and tapes of all the latest titles are available virtually at the same time as they are officially released. Cable piracy of Indian films is rampant. It is estimated that there are just over 10 million TV sets in Pakistan, of which three million have cable connections, a figure which is rapidly growing. Most of these cable operators illegally air Indian TV channels like Zee TV, B4U and a host of others, while there are half a dozen channels devoted to screening the latest films.

PEMRA was expected to curb copyright violations and cable piracy by regulating content and issuing licenses on the basis of a strict agreement, but it seems now that this organisation is almost redundant. In Karachi alone, there are over 200 cable operators almost all airing pirated content with impunity.

Piracy has almost single-handedly destroyed cinema in Pakistan. The decline has been gradual and proportionate. Legal distribution and licensing cannot work in a market overrun with piracy. In less then two decades, Pakistan’s cinema-going audience has been obliterated. The easy availability of pre-release films on DVDs and cable piracy has taken its toll on cinema. Making a film is not financially feasible anymore. Thirty years ago there were more than 150 cinemas in Karachi alone, doing lucrative business. Today, in spite of the market having trebled, there are less then 35 cinemas still operating in a city of 17 million people. “Most of the cinema-owners still in operation are only too willing to sell,” says Zulfiqar Ramzi, owner of the now defunct Star cinema. “It is a tragedy, we could have achieved so much,” he says.

Many cinemas have made a desperate attempt at survival by featuring full-length pornographic features. “We keep complaining about the quality of Pakistani films but where will ‘alternative’ filmmakers find the financing if the mainstream itself has no money?” says Hasan Zaidi, a filmmaker and journalist

Book piracy is also rampant. Print piracy is one of the most sophisticated rackets in the counterfeit business. According to Ameena Sayyid, president of the Oxford University Press (OUP), any book that sells over 300 copies is sure to be pirated. The legitimate turnover of the book industry in Pakistan is estimated at 400 million US dollars by OUP, which claims that it is losing more than 50 per cent of its business to piracy.

OUP is the only major publishing house operating in Pakistan. The academic market has been almost completely taken over by piracy. English elementary school textbooks and materials are in high demand, given the sheer numbers of middle-class families sending their children to “English-medium” schools. Piracy at the university level is even worse, with levels soaring to 95 per cent. Medical titles and engineering books, for instance, are shoddily re-printed, usually in one colour, showing smudged diagrams and often with pages missing and paragraphs blurred. Most importantly, local talent has been hard hit. The paucity of innovative contemporary literature in Urdu and other regional languages is largely due to the fact that no writer in Pakistan is free to write exclusively. “Artists have all but given up because they know they won’t be compensated for their creative efforts,” says Sayyid.

Software is almost entirely pirated giving birth to a new phenomenon — Internet café piracy. A few years ago, the worldwide web beckoned and thousands of Internet cafés sprouted across the country. None of these establishments have franchises. Software piracy is also seen in the corporate infrastructure in Pakistan, as several high-profile companies operate on pirated software. There is also the huge problem of console-based piracy. Video games, for which there is a huge local market, are all pirated without exception. Despite massive concessions of up to 90 per cent offered to students on the legitimate purchase of software, piracy still prevails.

All in all, the phenomenon of piracy is too deep-rooted and widespread to be quelled in one go. Organisations like Microsoft and the IFPI, who see Pakistan as a “hugely lucrative market,” have talked about extending the “grace period,” in which time Pakistan must cleanse itself of piracy and aim to become the “new Dubai.” There will be a definite boost to foreign investment in the local industry, especially with regard to music, which is beginning to break the mould. There is already talk of EMI coming back, and even the arrival of the ever entrepreneurial Virgin — two of the biggest record labels in the world — depending on Pakistan’s behavior in the coming months. The steps taken so far are limited, but effective. It remains to be seen whether political will, vested interests or social attitudes will decide the fate of piracy in Pakistan.