Creative Economy is The Future of Indonesia
In 2001, popularized by economist Jim O’Neill, the world began to talk about the BRIC countries (Brazil, Russia, India and China) as potential powerhouses of the world economy. A decade later, Jim O’Neill introduced MINT countries (Mexico, Indonesia, Nigeria & Turkey) which has been identified as one of the world’s most exciting and fast-growing emerging economies. In 2012, Indonesia ranked sixteenth largest economy in the world with 45 million members of consuming class, 53% of the population in cities producing 74% of GDP, and about 55 million skilled workers in Indonesian economy. McKinsey & Co have predicted that, by 2030, Indonesia will be the seventh largest economy in the world with 135 million members of consuming class, 71% of population in cities producing 86% of GDP, and about 113 million skilled workers that needed. Indonesia is comprised over 17,000 islands and hundreds of different ethnicities, cultural heritage diversity alongside a huge domestic market (240 million). In other words, there are exciting opportunities for the creative economy to be one of many sectors which able to sustain the whole national economy.
The concept of creative economy is an economic concept in a new economic era which intensifies information and creativity by relying on the ideas and the knowledge stock of Human Resources (HR) as the main production factor in their economic activities (Sutarman 2017). Creative economy growth is dependent on new ideas that invented. This concept refills the shifts of economic era from agricultural economy to industrial-based economy (manufacture) then knowledge economy to creative economy. In contrast to other sectors that are heavily dependent on the exploitation of natural resources, the power of the creative economy is more based on the superiority of human resources. Artwork, architecture, books, technological innovations, and animations, derive from creative ideas of human thought. In a nutshell, each of economic era adopted its own asset, creative economy adopts a person’s intelectuality and creativity as its main assets, and the existence of the creative industries that became its embodiment.
Indonesia’s creative industries show a strong growth started from 2010 until this time being with consistently recording positive growth to the country’s GDP. It started from 528 trillion IDR in 2010 then increased to 784 trillion IDR in 2014. Then keep increasing from 852 trillion IDR in 2015 to 922 trillion IDR in 2016. Then posted a strong growth in 2017 by contributing 990.4 trillion IDR which accounted for 7.44% of Indonesia’s GDP. This has proved that creative economy has a huge potential to growth.
The growth of creative industries sector is in the same line with the growth of Indonesia’s e-commerce industry, which has grown about 60–80% every year and expected to be a major economic growth in Indonesia. Total amount of national e-commerce transaction has reached 25 billion USD and expected to be 30 billion USD by 2020.
According to Central Bureau of Statistics (BPS) which revealed that leisure (recreation and lifestyle) spending, has continued to grow from 5.5% in the first quarter of 2017 to 6.25% in the second quarter of the same year. Meanwhile, goods spending including basic needs such as clothing and other physical goods during the same period has declined from 5% in the first quarter of 2017 to 4.75% in the second quarter of the same year. This means, there are some considerable changes in lifestyle, especially in the millennium generation which prefer to consume pleasure than goods. In this case, social media plays an important role in this changing lifestyle related trend. More Indonesian people are now showing a preference for spending their income on creative industries product to the social media such as tourism destination, a unique handicraft, useful mobile apps, cozy new restaurant and many more. This has proved positive for each sectors of creative industries.
Unfortunately, Indonesia’s creative industry still faces hard challenges due to financial problems. Given that most of the players in the sector are small and medium businesses (SMEs) with limited capital. Based on data from Bekraf and BPS in 2017, around 92.37% of creative industry players in Indonesia are self-funded and have not received any outside funding such as through bank loans. As 53.49% of these businesses are not established as limited liability companies and 88.95% of their products have not obtained intellectual property rights, such small-scale companies are not desirable financing candidates. Product development and marketing strategies cost are other obstacles that interfering the growth of Indonesia’s creative industry. As a result, about 97.36% of its players still only market their products locally. Commercial banks concerns are the mainly problem to Indonesia’s creative economy sector especially about the low loan disbursement problem. For that, the ability of creative industry players to offer an appropriate funding scheme in order to improve banks confidence in lending to businesses engaged in the creative economy is absolutely necessary.
Dealing with that, through Presidential Regulation №6 of 2015, President Joko Widodo established a new non-ministerial institution called the Badan Ekonomi Kreatif (Bekraf). This institution is responsible for the development of creative economy in Indonesia. Bekraf is in charge of assisting the president in formulating, defining, coordinating and synchronizing policies in the creative economy. During 2016, Bekraf helped 2,600 entrepreneurs by facilitate bank loans with total amount to 4.2 trillion IDR and investments to 1,092 entrepreneurs with total amount to 96.75 billion IDR from non-banking institutions. The majority of the loans were extended to the culinary, fashion, and digital sectors.
The creative industry in Indonesia is highly diverse and comprised into 16 subsectors: apps and game development; architecture; interior design; fashion; product design; visual communication design; movies, animation, and video; photography; crafts; culinary arts; music; publishing; advertising; performing arts; fine art; television and radio. All the 16 subsectors are expected to become the new mainstay of the national economy. In terms of contribution to gross domestic product (GDP), increased exports, and employment.
In order to boost the growth of creative economy, the overhaul of regulations it’s necessary to do by the government. Dealing with that, Bekraf has engaged global research agencies such as Intel, Nielson and PwC to study Indonesia’s local creative industry and identify key areas for improvement, including current regulations. Moreover, in order to facilitate investment, Bekraf recently introduced a framework for Investment Readiness Levels (IRL) for handicrafts, fashion, apps and game development, in addition to the culinary subsectors. IRL will serve as a benchmark to assess investment readiness as well as to anticipate a bloody market competition. IRL can also use by investors as a reference to investing their money in the creative industry.
Furthermore, the government, with or without Bekraf, must continue to provide assistance for generating a creative environment through revitalizing facilities and infrastructure including communication and information technology that used for creative development, exhibitions and business incubator centres. By 2018, Bekraf predicts that the growth in Indonesia’s creative sector will reach 6.25% and employ 16.70 million workers. Indonesia’s culinary sector is still leading, followed by fashion, handicrafts, apps & game development, movies, and music.
In conclusion, Indonesia’s creative industries hold great potential. It is also helped by huge government initiatives to build strong foundations for the sector. Creative economy is use as a leading component of economic growth, employment and general innovation in advanced countries. Boosting the productivity of key sectors especially creative economy would be a useful of the national economic strategy to 2030.
Dealing with that, Indonesian entrepreneurs must focus on producing innovation and problem solving with creativity in order to make the country better than before by creative economy. Thus, creative economy is opportunities to leapfrog into exciting and fast-growing emerging economy country. Furthermore, Indonesia’s creative economy sector is expected to continue its upward trend and will become one of the country’s pillar which able to sustain national economy.
Sources
Hidayat. (2017). Creative industry in supporting economy growth in Indonesia: Perspective of regional innovation. Creative Industry, 2.
McKinsey & Company. (2012). Unsleashing Indonesia’s Potential. Archipelago Economy, 5–6.
Singgih, V. P. (2017, March 15). The Jakarta Post . Retrieved from Indonesia expects jump in creative economy by 2019: http://www.thejakartapost.com/news/2017/03/15/indonesia-expects-jump-in-creative-economy-by-2019.html
Sutarman. (2017 ). Creative Economy As Supporting National Development. Creative Economy, 2–3.
Tim Bekraf dan BPS. (2017). Data Statistik dan Hasil Survei Ekonomi Kreatif. Kerjasama Badan Ekonomi Kreatif dan Badan Pusat Statistik.
UNESCO. (2016). Creative economy: Indonesia’s wager. Retrieved from UNESCO: https://en.unesco.org/creativity/news/creative-economy-indonesias-wager
