Leaning forward in his executive leather chair, Chris Kirubi pressed down on a new ballpoint pen and the tip collapsed.

He held it aloft, triumphantly exhibiting evidence of a phenomenon -- cheap knockoffs -- that he said cost Kenyan businesses and the cash-strapped government millions of dollars each year.

Kirubi owns the only East African company that is licensed to produce Bic pens. In theory, his firm, Haco Industries, should dominate the pen market.

But counterfeit Bics made in China and smuggled into Kenya account for 20 percent to 30 percent of pen sales -- an activity that could be "the last nail in the coffin," Kirubi said.

"If it continues, we will close the business," Kirubi said.

Other license-holding businesses in Kenya suffer the same problem. From whiskey to cooking fat to batteries to clothes, the East African nation -- like other developing countries -- is being swamped with counterfeit goods, some made locally, most imported illegally.

Examinations of the negative impact of counterfeit goods often focus on wealthy countries where the products are most often designed and developed. The effects can be even more devastating, however, in poor and developing countries, where profits of any kind are more difficult to come by, smuggling is more easily accomplished and enforcement is weak or nonexistent.

"The problem for developing countries is they do not have the necessary standards and resources to prevent these kind of goods entering their market," said Oduor Ong'wen, executive director of EcoNews Africa, an independent organization that lobbies on behalf of developing countries.

The trade is costing the government up to $16 million a year in lost taxes, while manufacturers are estimated to be losing hundreds of millions of dollars in revenue, the independent Kenya Association of Manufacturers said.

Steve Smith, managing director of Eveready Batteries (Kenya), said 40 percent of the batteries sold in Kenya are counterfeit.

Smith is a member of a manufacturer's committee set up to tackle the problem. "It's not just about revenue, it's a job issue," he said.

Eveready Batteries (Kenya) which is part-owned by the U.S. group Energizer Holdings Inc., employs 350 people. Kirubi's Haco Industries employs 500 people. These are significant numbers in a country where a fifth to a quarter of the working population is jobless.

Around 80 percent of the fake goods in Kenya come from China, according to Kenya Revenue Authority spokesman Kennedy Onyonyi.

While manufacturers in poor and developing countries have issues with many World Trade Organization practices, which they think benefit richer countries, they are generally pleased about China's recent admission into the trade group. The problem of counterfeit goods falls under the WTO's Trade-Related Intellectual Property Rights agreements, by which China now should be required to abide.

"China should join WTO -- it's better to have them inside than outside -- but they have to deal with this," Kirubi said.

Kenya was once one of Africa's star economies and still boasts one of the continent's largest manufacturing sectors. But output declined last year for the first time since Kenya gained independence from Britain in 1963.

The business community blames much of its troubles on high costs, such as rates for power and water, aggravated by alleged mismanagement and corruption under President Daniel arap Moi. The government-run port of Mombasa, East Africa's largest, is notorious for bribery and kickbacks.

"You have some very smart traders who bring in these containers [of counterfeit goods]. Then somehow, it doesn't take much imagination how, it manages to get through the ports and into the shops," said Allan Ngugi, chief executive of the manufacturers' association.

Under pressure from manufacturers, the government set up a committee of government and industry officials to deal with the illegal trade.

"The government is not doing enough to stop it [counterfeit goods]," Kirubi said. "They could shut down all the businesses. They know them."

Onyonyi, at the revenue authority, acknowledged corruption as a "possible" problem and said counterfeit goods could be effectively tackled if business and government work together.

"In the past, they [manufacturers] were not making any headway and were initially relying on the Kenya police and they could not do much," Onyonyi said. "The police also have minimal resources."

Shoppers look at secondhand clothes for sale in Nairobi. The Kenyan government set up a committee with industry to crack down on illegal trade.