How do you stop the sale of counterfeits when buyers do not seem to care? Delores Johnson / The National
How do you stop the sale of counterfeits when buyers do not seem to care? Delores Johnson / The National

Fakes come at a high price



One of the intractable aspects of the trade in counterfeit luxury goods is that even when buyers are alerted to the fake provenance of designer handbags, many will continue with the purchase. The authorities are cracking down on the trade as reported in The National's business section today, but a long-term solution is needed.

The sale of counterfeit goods not only denies companies the rewards of their meticulously developed brands but is also exploited by organised crime and possibly terrorists, too. Clearly, buying counterfeit goods is far from the victimless crime that some people claim when justifying their purchases.

There are different aspects of this insidious trade. Fake car parts and medicines, for example, are manufactured without any of the oversight mandatory for the genuine product and pose an obvious danger. The foolishness of anyone knowingly buying them is obvious, yet the trade thrives. This week, the police raided an Ajman company and found more than 120,000 fake Isuzu, Honda and Toyota car parts. However, luxury designer goods pose an entirely different challenge. Given that their primary attribute is fashion rather than function, the difference between a genuine Louis Vuitton handbag and a well-made fake can be negligible. This is the sector where buyers knowingly purchase counterfeit in the belief that they will get the cachet of the real thing at a fraction of the price.

As we report, the public’s complicity in buying fakes means the police have to enforce the law thoroughly, as demonstrated by the series of raids in Dubai’s Karama district and in Ajman. Designer goods manufacturers are also protecting their brands more actively. But is that enough? Counterfeit luxury items are a sophisticated business and the best fakes can be very good quality. Might that be part of the solution? That the manufacturers of these top-end fakes simply produce no-brand bags, which consumers could buy cheaply and, guilt free, cutting organised crime out of the loop? The question is would we buy no-brand lookalikes of up-market labels?

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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
COMPANY PROFILE
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Based: Dubai
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Sector: Sustainability
Total funding: Self funded
Number of employees: 4
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How to get there: Emirates currently flies from Dubai to Orlando five times a week.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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