In need of a boost: Supporting creative industries to improve sector growth

As concerns grow that an over-reliance on resource-related exports could see Indonesia repeat the boom-bust cycle of its past, the country is being encouraged to accelerate moves to diversify its economy away from commodities and towards areas such as the creative industries. Two major fashion events, Jakarta Fashion Week and Indonesia Fashion Week, are helping showcase Indonesia’s creative capacity, although critics say the government is not doing enough to help the capital or the country as a whole fulfil its potential as a centre for creativity. Effective government support is all the more important now, at a time when global demand for natural resources is dipping and as neighbouring rivals are ramping up their creative sectors.

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Indonesia’s consumer and natural resources boom faltered this year, with GDP expanding at an annualised rate of 5.8% in the second quarter, the first time since 2010 that this figure has fallen below 6%. Meanwhile, the growth potential of Indonesia’s creative industries – including music, film, fashion, architecture and interactive gaming – is surging. The sector’s contribution to GDP in 2012 stood at RP524trn ($46.7bn), according to data from the Ministry of Tourism and Creative Economy (MTCE). A report on enhancing the competitiveness of Indonesia’s creative industries by three researchers based at the Bandung Institute of Technology, published in 2012, emphasised the broader benefits of the sector on the economy. "Creative industries have a significant economic contribution to the [Indonesian] economy because they can create a positive business climate, strengthen the image and identity of the country, support the utilisation of renewable resources and have a positive social impact," the report said. As part of government efforts to boost the sector, the MTCE has applied for four cities, Bandung, Pekalongan, Surakarta and Yogyakarta, to be included in the UNESCO "Creative Cities" initiative, which aims to boost the fashion, arts, film, music and architecture industries. “We expect that the designation will help the cities to boost their creative industries, which in turn contributes to our creative economy. This kind of economy creates multiple added-values compared to any other economy,” the minister of tourism and creative economy, Mari Elka Pangestu, told the Jakarta Post. However, some critics have questioned the MTCE’s decision to omit Jakarta from the application. “Why are there not more initiatives and government-backed programmes to promote and highlight the vast palate of creativity that results from the roughly 10m residents of the capital city?" asked the Jakarta Post in an op-ed piece.

Barriers To Growth

Critics say that human resources and entrepreneurs’ access to capital and markets must be improved. One possible way of meeting the industry’s financing needs would be through the introduction of so-called crowd-funding arrangements, similar to those organised through well-known US website In 2012, two indigenous crowd-sourcing websites were launched, and So far both websites have funded a number of successful projects, including book publications and the creation of a handicrafts production workshop. In addition to financing constraints, the music and fashion industry also faces issues over intellectual property rights, with the Indonesian Record Industry Association estimating in April that record companies experience potential losses of RP16bn ($1.4m) a day due to illegal downloads.

At the Popcorn Asia 2013 international pop culture festival, held at the Jakarta Convention Centre in July, artists and observers said they are not getting the support they need from the state, adding that Japan, South Korea, Thailand and Malaysia have government funds and programmes that specifically support the creative industry. Last year, Malaysia’s government launched an RM200m ($62.7m) fund for the creative industry, with officials saying it had "exciting growth potential". This progress in Malaysia highlights the lack of support by the Indonesian government. "[Indonesia has] missed out on the industrial age, with much of our natural resources and industry being controlled by foreign investments. And yet as the resources that run the industrial age are depleted, industrial states such as the US, Japan and Korea are maintaining their global power by developing their creative economies. Those countries see Indonesia as a potential market,” Ivan Chen, chairman of the Indonesian Creative Copyright Association, an organisation that pushes for intellectual property rights, told the Jakarta Globe.

Despite the difficulties faced by the sector, foreign investors are taking notice of Indonesia’s potential. In September, Malaysia’s External Trade Development Corporation led a delegation of 28 Malaysian creative content and multimedia companies to Jakarta, with a spokesman stating that the city was "an attractive market destination [for the creative industries], being the centre for Indonesia’s entertainment and content industry". Such developments underscore the fact that, unless the government introduces incentives and support for the creative industries, foreign investors could come to dominate the creative sector’s momentum, as they have done with the natural resources sector.

Invigorating Industry

If growth barriers are overcome and creative industries receive the boost they need, the tourism sector will be more capable of reaching its potential. The Minister of Tourism and Creative Economy announced in mid-March 2014 that they will aim to attract 9.3 to 9.5m tourists to Indonesia this year, which would account for a 6-8% increase from 2013. Furthermore, it hopes to see 255m tourists travel domestically before the year’s end. Developing creative economies will be a vital step toward ensuring these goals are met this year and set higher in the near future.

In 2011 the government began taking steps to boost Indonesian food exposure abroad, designating culinary arts as one of the country’s fourteen tourism industry subsectors. Taking the lead from countries like Thailand, an incentives programme was designed to encourage businesses to set up restaurants with neighbouring countries and beyond, as a new venture in cultural exchange and creative economy promotion. Serving as culinary ambassadors, restaurant businesses abroad offer a way to boost Indonesia’s reputation as a food tourism destination. Investment in this venture can help Indonesia garner a foothold similar to that which the Thai, Chinese, Japanese and Vietnamese food industries have achieved for their respective tourism sectors. The government is examining Indonesian restaurants established abroad to determine best practices for future businesses. The challenge is choosing from Indonesia’s wide range of traditional meals.

In 2011, CNN gave promotion to Indonesian culinary arts by naming one of its signature dishes, rending, number eleven on its list of the “World’s Most Delicious Foods.” Considering that exploring new cuisines is a high motivator for many foreign travellers, the government’s efforts to make Indonesian food more popular abroad should help boost arrival numbers in coming years.

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The Report: Indonesia 2014

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