The Orange Economy

How to promote Creative Entrepreneurship in the Caribbean?

By Dr. Keith Nurse, World Trade Organization Chair at the University of West Indies

 

Caribbean economies have a narrow and declining industrial base and an expanding debt overhang in part due to deteriorating export competitiveness. As such there is an increasing view among Caribbean governments and regional agencies that the creative industries can be an engine for economic growth and a mechanism for diversifying economies and improving global competitiveness. On account of this there is a greater need to understand the trajectory of the creative or orange economy and to identify the ways that small economies can benefit from the wider synergistic effects of the creative economy and move up global value chains. As such the aim of this paper is to assess how the small developing states of the Caribbean can maximize on the potential of the creative or orange economy by fostering policy innovation, generating new business models and promoting creative entrepreneurship.

The creative sector is generally understood to encompass the creative arts and the creative industries. However, the impact of the sector has widened over time to generate what is described as the creative economy. The creative economy is a critical aspect of these trends given that creative content accounts for a significant share of e-commerce and the content on the Internet. What is observed is that the creative sector plays a vital role in differentiating and enhancing the value proposition in multiple sectors (e.g. manufacturing, tourism, telecoms) that are increasingly reliant on the use of creative content and creative experiences to generate growth in global markets. The creative sector is a major growth pole in the digital economy as exemplified by the shift towards a post-industrial economy where personal, recreational, and audiovisual services have expanded as a share of the expenses of the average household and as a share of the economy. The growth of the digital creative sector is accounted for by rapid technoeconomic change in products, distribution and marketing (e.g., e-books, iPods, iTunes, Amazon, Google, NetFlix, Spotify), the increasing commercialization of intellectual property in the digital world (e.g., digital rights management), the growth of social networking (e.g. Facebook, YouTube, Twitter, Instagram, Snapchat) and through the synergies forged by value enhancing activities (e.g. cultural tourism, intellectual property, destination branding, nation branding) and the convergence of content, media and telecoms (e.g. the Internet, mobile and ecommerce).

The technological transformations in the creative industries sector have been complimented by the emergence of a trade policy framework and regime for the harmonization and internationalization of copyright regulations (WTO-TRIPs; WIPO copyright & digital treaties); the liberalization of cultural industries under WTO-GATS; and, the protection and promotion of cultural diversity (e.g. UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions). From a global value chain perspective the creative industries in most developing countries operates with a large number of creators operating in an eco-system with a high level of fragmentation and competition. There are very few large firms and little or no foreign firms in the production end of the value-chain as primary investors. The larger foreign firms along with those operating in the Diaspora are secondary investors in manufacturing, marketing, distribution and copyright administration, which are the more lucrative elements of the value chain. Generally, it can be argued that the sector is poorly served in terms of trade facilitation and access to finance. Facilitating access to finance is key elements of the enterprise development process and for firms to tap into export markets.

The industry faces numerous barriers to local and global market participation, including

lack of production facilities, poor market organization, inadequate rules and regulations, limited understanding of global markets, the problem of language, and lack of bargaining power and commercial relationships. Hence, for example, in the burgeoning audiovisual sector the majority of local filmmakers and producers are isolated and left to operate in marginal economic areas such as micro and informal enterprises. Their problems are magnified by the lack of access to networks that can help them compete in the global film business. The key recommendations to address these challenges are:

• Improved access to finance should be twinned with access to market and access to digital platforms.
• Facilitate innovative financial instruments to attract and sustain investments.
• Harmonize and update incentives and trade regimes.
• Strengthen export, distribution & institutional capabilities and linkages.
• Facilitate end-to-end business and trade support.
• Generate economic and market intelligence.

Maximizing on the opportunities of the digital market is one of the key areas of greatest potential as well as tapping into traditional (e.g. live tours and festivals) and non-traditional markets for creative goods and services. The overarching argument is that the enhanced integration of the creative industries from developing countries in global value chains requires a shift in the industrial paradigm and business practice from the low value-added, stand-alone creative firm, cultural practitioner or artist operating in isolation to a context where there are higher levels of collaboration, coordination and organization. For example, there is a clear opportunity for the aggregation of content to take advantage of the expanding digital trade in online, streaming and subscription services.

A key element of the intervention framework that can be promoted relates to the creation of enabling institutions to facilitate the growth and industrial upgrading of the sector. It is also important to promote cross-sectoral linkages as the creative industries have multiple markets and sources of income, many of which intersect with ICTs, manufacturing and tourism. The key lesson is that most of institutions targeting the creative sector operate in silos and have limited linkages with wider market penetration initiatives. As such there tends to be an absence of end-to-end business and trade support. This suggests that the solution is more than access to market. From this perspective there is a critical role for upscaling the creative industries once integrated support mechanisms are employed. The following diagram describes a trade and financing governance framework that is demand-driven and entrepreneurial in focus. It allows for start-ups, clusters, incubators, accelerators right through to market entry programmes that are linked to innovative financing mechanisms (e.g. crowdfunding, angel investing, debt and equity financing, trade financing and intellectual property value capture) and a wide array of policy support measures such as diaspora engagement, destination branding, trade and export facilitation, investment policy and human resource development. The objective is to make creative entrepreneurs and their works more visible and accessible to the wider markets, potential clients/sponsors/investors and policy makers.

This also requires involving the establishment of proactive mechanisms such as funding for start-ups, innovation labs, market incubators, cluster development and market development programmes. These mechanisms can play an important role in the development of entrepreneurial skills among industry participants, encourage experimentation with new ideas, techniques and media, and facilitate capacity development particularly among young entrepreneurs who can overcome their creative or intellectual isolation through networking, mentorship and peer-to-peer-coaching. From a trade facilitation standpoint business support organizations play a critical role in minimizing some of the risk associated with the creative sector by offering a range of trade and financing services that could include market development grants, export assistance grants, business competitions as well as reimbursable grants. In conclusion, the expansive range of trade and industrial policy issues affecting creative industries highlights the need for a strategic export-oriented policy framework.

 

Download the pdf article: Orange Economy webinar (003) Orange Economy webinar

 

Dr. Keith Nurse is a Senior Fellow, Sir Arthur Lewis Institute and World Trade Organization Chair at the University of West Indies. This blog stems from his presentation at The Orange Economy Webinar, Wednesday, August 30, 2017 organized by Creative Nassau, in collaboration with The Central Bank of The Bahamas and the Inter-American Development Bank.