As if in tandem with the economic crisis, vendors have been dishing out huge discounts for these pirated versions, some starting as low as $1.50. Pirated software and bootleg movies usually cost around $3.
All this despite the Malaysian government's continuing clampdown on copyright infringement and Microsoft's controversial new product activation feature -- a key part of the software giant's crackdown on piracy.
"Piracy is a tough nut to crack in Malaysia.... The root of the problem is, and always will be, corruption," said one industry watcher, who asked not to be named. He cited instances of a vendor, despite being raided several times, being back on the street in a matter of days.
But one Microsoft executive blamed the situation on technology and not low-tech greed.
"The problem is that the pirates have just as much technology as [we do]," said Butt Wai Choon, Microsoft Malaysia managing director, in an interview on Monday.
"With the use of digital technology, [pirates] can copy our content despite [Microsoft] incorporating the latest anti-piracy features in our products," he said.
Butt said Microsoft was aware of peddlars selling illegal copies of Windows XP (final release) at two regular haunts -- Imbi Plaza and Low Yat Plaza -- in downtown Kuala Lumpur.
On 20 August Microsoft managed to obtain a court order against Imbi Plaza, forbidding any store or operator in the premises from selling unlicensed Microsoft products, Butt said.
But a week later, most vendors had resumed trade. "Win XP has been selling like hot cakes," one vendor said in an interview.
In Singapore, pirated versions of Windows XP retail for about $6, although Ben Tan, Microsoft's product manager for Singapore, claimed that these copies were not final products.
Users of pirated versions risk exposing their PCs to viruses, missing functionalities and other serious problems, Tan said.
When confronted, the Malaysian vendor insisted that his wares were the real deal. "I have money-back guarantee," he claimed. "I'll give you a full refund if it's a beta version."
As reported in May, illegal copies of Microsoft's Office XP suite have been selling briskly at less than $3 in Kuala Lumpur. The pirated software is readily available at night markets around the city as well as in open-air food stalls and walkways in suburbs.
Roland Chan, Business Software Alliance (BSA) regional marketing manager for Asia Pacific, said he was disappointed that the public had chosen to ignore pleas against the use of pirated software.
Chan said the greatest threat facing the BSA is end-user piracy, especially among corporations. "This is where companies buy just a handful of licensed software and then illegally copy them for the rest of the computers in the organisation," he said.
The BSA works closely with government enforcement officials in tackling software piracy.
Last year, about 300 companies in Malaysia were subject to court action after being found guilty of such practices. A BSA report in May indicated that Malaysia had a 66 percent software piracy rate in 2000, down 5 percent from the previous year.
When contacted yesterday, an official with the Domestic Trade and Consumer Affairs -- the government body charged with stamping out piracy -- said he was aware of the illegal Windows XP copies.
"We will crack down on these operations," he said, declining to provide further details.
Windows XP is expected to officially hit stores in Asia by the end of October.
CNET Malaysia's Adrian Oh contributed to this report.
Why pirate a virus magnet?
52 000 Windows virii should be enough for the most virus savy.