Support needed for Indonesia's fast-growing creative sector: economist

INDONESIA'S creative economy has seen annual growth of about 9 per cent since 2015, but still needs support in areas such as financial advisory, financing mechanisms, and legal protection, said UOB economist Enrico Tanuwidjaja in a June 25 research note.

In 2019, Indonesia's creative sector is expected to contribute 1,200 trillion rupiah to gross domestic product (GDP). In 2025, this is expected to rise to 2,000 trillion rupiah or about 13 per cent of GDP, with close to 24 million workers employed.

Under BEKRAF (Indonesian Creative Economy Body), a statutory body set up in 2015, the creative economy includes 16 sub-sectors ranging from architecture to performing arts. The biggest sub-sectors are culinary, fashion, and crafts, which together accounted for 74.8 per cent of the sector's GDP contribution in 2016.

However, the fastest-growing sectors are instead television and radio; film, animation and video; and performing arts, with growth rates of close to or above 10 per cent in 2016. Also seeing growth of over 8 per cent were the sub-sectors of visual design, and applications and game development.

If Indonesia manages to monetise its creative economy, the sector -- with its low import content and high value-add -- could add around 0.5 to 0.6 percentage points to overall GDP growth over the medium term, estimated Mr Tanuwidjaja.

There is also room to increase creative exports, which form an estimated 5 per cent of the sector's overall value. Increasing creative exports would help Indonesia lessen the perennial issue of its current account deficit, and would bring higher quality growth as well as more forex stability.

Yet more fundamentals need to be in place. In the sector, 92 per cent of businesses rely on their own funds, 53 per cent are not legal entities, and 89 per cent have no intellectual property protection

Looking at South Korea's success in developing its own creative economy, Mr Tanuwidjaja extracts three strategies that Indonesia could pursue: close collaboration among related ministries; encouraging private sector involvement, for instance by setting up a joint task force that involves venture companies; and the enforcement of intellectual property rights.