Innovating to prosper in the APEC region
Last November Indonesia created a new ministry to focus on developing its creative economy. Recently, its head, Mari Pangestu, went shopping at Brightspot, a pop-up market that allows young Indonesian fashion designers to showcase their unique brands.Of course, fashion isn’t the only creative industry the fast-growing APEC economy has to exploit. Music, food, film and handicrafts are all industries Pangestu is looking to develop through training and financial support.Further fostering regional innovative integration will narrow the growing gap among APEC member economies and will support improvements in [their] local scientific and technological capabilities
Many APEC members are also looking to boost their creative economies to enhance trade and development, which also drives up regional competition.
“To improve the role of APEC in the future, Indonesia stresses the importance of economic cooperation among members and the improvement of their industrial capacities,” said Pangestu, Indonesia’s Minister of Tourism and Creative Economy.
Pangestu wants to boost the creative industry’s contribution to Indonesia’s gross domestic product from 7 to 11 percent over the next decade, roughly equal to what agriculture currently contributes to the commodities-driven economy.
That means promoting innovation, one of two “next generation” trade and investment issues, highlighted by APEC leaders in their 2011 declaration in Honolulu. The other involves supporting small and medium sized enterprises and facilitating global supply chains.
Broadly defined as the process of introducing new ideas, methods or products to the world, innovation is key to APEC’s mission of expanding trade and further integrating member economies in 2012 – hence the theme “Integrate to Grow, Innovate to Prosper.”
It is also paramount to “ensuring robust economic growth of APEC communities, and is essential to improving supply chain performance, enhancing green growth, and addressing trade barriers for SMEs,” said Dr. Robert Lai, chair of APEC’s Small and Medium Enterprises Working Group, which works to encourage the development of SMEs and build their capacity to engage in international trade.
Economies across the Asia-Pacific have recognized the benefits, with many already launching policies to support creativity and the development of intellectual capital.
Thailand, one of the region’s rising inventive industrial hubs, aims to increase the creative industry’s contribution to its gross domestic product from 12 percent in 2008 to 20 percent by the end of 2012.
According to a 2009 joint study by Thailand’s Fiscal Policy Research Institute and the Kenan Institute Asia, the rise of the creative economy is a key element of an economy’s progress toward development.1
Indeed, support for innovation can help drive up the value of exports and improve trade and investment, all of which create jobs and foster greater economic prosperity in member economies.
“It’s something we’re all trying to work on, because we believe our next phase of development and growth has got to support creativity,” Singapore’s Law Minister K Shanmugam told local media at the launch of an event in support of intellectual property protection in mid-January.2
Providing effective protection for intellectual property is one way of fostering innovation, since it encourages innovators, including small and medium sized businesses, to invest in research and development and promote cutting-edge technologies and services throughout APEC, said Nadya Lubentsova, a member of APEC’s Economic Committee and a consultant in Russia’s Ministry of Economic Development.
As host of APEC in 2012, Russia plans to create a common system of innovation indicators by evaluating the strengths and weaknesses of domestic innovation polices across APEC member economies, she said. This will allow Russia to better determine the benefits of such policy measures and lay out best practices for member economies to follow.
For instance, encouraging researchers and laboratories to cooperate through joint research and development will help expedite innovations that can address common economic challenges facing all APEC economies.
“Further fostering regional innovative integration will narrow the growing gap among APEC member economies and will support improvements in [their] local scientific and technological capabilities,” said Ms. Lubentsova.
Promoting entrepreneurship and helping link SMEs to venture capital also advances innovation, since small, homegrown businesses are usually the ones that push forth new ideas, said Dr. Lai, who is also the Director General of the Small and Medium Enterprise Administration of the Ministry of Economic Affairs in Chinese Taipei.
In April 2010 Chinese Taipei announced regulations governing intellectual property protection and intangible assets to encourage businesses to invest in research and development.
In addition to needing a legal framework that protects creative work, innovation also requires better access to cheap capital, training, tax incentives, physical infrastructure and government-led market promotion for it to spread across sectors such as manufacturing, service work, and agriculture – thereby enhancing economies’ competitiveness.
Some APEC Leaders have noted that competition creates the demand for innovation.
“It is competition that prompts private businesses to seek better technical solutions and to regularly introduce new products,” Russian Prime Minister Vladimir Putin wrote in a recent editorial published in the Vedomosti newspaper.3 “The manufacturers of industrial and technological goods must be clearly aware that the days of competing in a single national market have gone. From now on, there will be no comfortable niches. For hi-tech products there will only be one market – a global one.”
Each economy still has its own unique creative industries to exploit – hence the Indonesian Ministry of Tourism and Creative Economy’s focus on cultural heritage – but the global economy now requires an outward-looking, collaborative approach.
That means SMEs have to shift to producing high value-added goods and enhance their ICT application capability, said Dr. Lai. For example, the agricultural sector needs to adopt new technologies and apply modern corporate management that makes traditional practices more efficient, thereby contributing to food security – a priority for APEC in 2012.
Fostering innovative growth will require APEC to promote technological progress among APEC economies through networking, and provide opportunities for cooperation on R&D, he continued.
It will also involve efforts to address discriminatory economic policies and infrastructure gaps that create barriers to foreign investment in high-technology sectors.
Some economies are already making inroads. In Korea APEC has established an SME Innovation Center focused on consulting and access to finance to help familiarize small businesses with new technology and push for policy changes.
Creating incubators and providing grants for research and development are also key to assisting SME development, said Dr. Lai, who notes that in Chinese Taipei, where, SMEs account for almost 98 percent of all enterprises, government assistance helped in the implementation of nearly 4,000 innovative R&D projects (including its Small Business Innovation Research) over the past decade.
The opportunities for increased trade through innovation are enormous. At present SMEs in the APEC region account for around 90 percent of all businesses and employ as much as 60 percent of the work force. In many APEC economies, SMEs in high-technology sectors account for nearly half of the jobs created. These are among the reasons APEC is focusing on innovative growth to achieve further prosperity.
1. Kenan Institute Asia and Fiscal Policy Institute, “Economic Contributions of Thailand’s Creative Industries,” December 2009.
2. Monica Kotwani, “Healthy IP environment contributes to creative economy,” Channel News Asia; January 12, 2012.
3. http://premier.gov.ru/eng/events/news/17888/#restore