Colombia’s efforts to harness the prospects of its emerging Orange Economy
08 Apr 2019
Defined by the UN as “the interface between economy, culture, technology and social aspects”, the term “creative economy” can seem rather abstract at first appearance. However, it is globally one of the most dynamic industries, more than doubling its value between 2002 and 2015 to reach $509bn, according to the UN Conference on Trade and Development. For a country bidding to diversify, ease dependency on commodities, innovate and add value to its economy, it seemed like a natural niche for Colombia.
Adopting the concept of a creative economy, the term Orange Economy was coined by Colombian President Iván Duque Márquez during his time at the Inter-American Development Bank, in a 2013 report co-authored with his current advisor, Felipe Buitrago. According to President Duque, Colombia’s orange economy is worth 3.5% of Colombia’s GDP, but he said this should be doubled within a decade. With such an ambitious target at the start of a four-year administration, actors across the public-private spectrum are being urged to put together a comprehensive development plan.
In a bid to enhance the dialogue on the matter, Oxford Business Group organised a closed-door roundtable in Bogotá, creating an intimate environment in which stakeholders across the board could discuss the best way forward for the sector.
How the Orange Economy has progressed so far
The journey of Colombia’s Orange Economy started in 2017 with the passing of Law No. 1834, known as the Orange Economy Law, which proposed to consolidate public sector efforts into a single promotion policy. It led to the creation of the National Council of the Orange Economy, headed by the Ministry of Culture.
The council has adopted a “seven i” approach, centring its policies on: information, institutions, infrastructure, integration, inclusion, inspiration and industry. Scale will also be important. Although it will primarily be managed from the federal level, there will also be full coordination with the competiveness agencies of the country’s 32 regions, known as departamentos, and those of the country’s 16 largest cities.
The actions carried out in 2019 have primarily been related to governance and policy articulation between state entities to ensure fluid and coordinated development of government policies, and there is still much to do in this regard. However, it is expected that these plans will evolve throughout the year and will be accompanied by more comprehensive action from the council during the second half of 2019.
Updating intellectual property rights to protect innovation
If Colombia is to become a global reference and a regional leader in this field, it needs to boost its intellectual property (IP) rights framework. Colombia currently ranks just 61st out of 125 countries in the Property Rights Alliance’s International IP Rights Index, and eighth regionally, which means that efforts must be made in the protection of IP patents and copyrights.
There are existing structures that look to foster innovation and boost IP in the country. These include institutional support for entrepreneurs through excellence centres, which assist in the promotion and sponsorship of innovation technologies and investors, patent rolls and a national strategy for the protection of creators.
Incentivising growth in creative endeavours
Financial incentives are a notable example of how countries or regions have been able to directly encourage inward investment in creative industries and foster internal growth. For instance, due mainly to tax breaks, the UK’s film industry grew by 72.4% from 2013 to 2017. Similarly, in Canada the provincial government of Quebec implemented tax breaks for the video game industry, which subsequently saw a 42% increase in the number of video game companies from 2015 to 2017.
Colombia’s industry could follow similar lines if it implements strategic tax incentives for creative companies, and it already has its own examples of great success in this regard. After the Cinema Law was created in 2003 the value of investment in the film sector in Colombia grew from $171,000 to $9.2m. Extending these benefits to the TV industry through the Audio-visual Law would make the segment considerably more attractive and risk-free for stakeholders, especially given the high likelihood of financial failures in the segment both in Colombia and around the world.
The three key subsectors of the Orange Economy
In order to organise the best way for fiscal incentives to be implemented, Colombia’s strategy to promote the Orange Economy will focus on three main areas:
• Arts and Heritage: This comprises visual arts, performing arts, tourism and cultural heritage and education. The segment is characterised by a high rate of informality with a presence both inside and outside large cities.
• Cultural Industries: This refers to the editorial, music and audio-visual segments. Colombia has already attracted some big names here, with a Netflix series, two HBO series and one Amazon series being made in the country.
• Functional Creations: This includes digital media, design and advertising. This subsector is the most structured, with the presence of large Colombian and international companies.
Financing start-ups and innovation
An essential element across the board is the role of financing. Aside from the examples of tax incentives, which we hope to see soon, credit in Colombia remains expensive and difficult to access, especially in comparison with countries like Brazil or Mexico.
It is especially difficult for entrepreneurs in the Orange Economy to gain access to finance, though efforts are under way to change this. In addition, venture capital firms have flocked to Colombia, making it the second-largest recipient of start-up investment in Latin America after Brazil.
iNNpulsa, the national government’s entrepreneurship and innovation entity, has implemented the iNNpulsa Naranja initiative. The strategy aims to provide COP5bn ($1.58m) to entrepreneurs through a series of policies including technical support and advice under the Aldea Naranja programme, loans for early stage companies, access to a crowdfunding platform, investment of non-reimbursable resources and more.
Moving forward, it will be important for entrepreneurs and financiers to enter into dialogue about how to open access. Stakeholders in the Orange Economy should better communicate their needs to lenders, who can then develop products and models that are more tailored to their requirements.
Demand for supportive infrastructure
In order to accelerate the development of innovative ventures, one of the most important forms of infrastructure has been the creation of a physical innovation ecosystem, often in the form of clusters. These generate favourable spaces that foster innovation, allowing for knowledge sharing and the creation of synergies between larger and smaller firms. From the Y Combinator in the US, to Station F in France, these ecosystems show that technical support and visibility can be just as useful as financial aid.
In Colombia this model has been successfully adopted in Medellín’s Ruta. The non-profit entity is a joint venture between the City Hall, the telecoms company Tigo UNE and the state-owned public utilities company EPN. Aiming to have innovation be the city’s primary economic driver by 2021, its objective is to “facilitate the economic evolution of the city towards businesses intensive in science, technology and innovation”.
As a result, Medellín was chosen to be an affiliate centre for the Fourth Industrial Revolution Network, the first Spanish-speaking city to do so. This could be considered international recognition for its advances in the field of innovation.
Clusters aside, soft infrastructure is also worth a mention, as one of Colombia’s greatest assets is its human capital. This should be nurtured and leveraged through public education institutions and private companies in order to produce a virtuous cycle of innovation in all areas of the Orange Economy.
In conclusion, if better structurally and institutionally linked with the significantly improving Colombian economy, the Orange Economy may move from being an interesting niche to a powerful economic driver. In addition to boosting sophistication, creation and innovation in the economy, it may act as an element of soft power for Colombia to leverage around the region and beyond. What is necessary in the coming months is visibility in policy from the government, dialogue with the private sector and a concerted effort to ensure the necessary conditions are in place to allow all stakeholders to go forth and innovate.
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