Indonesia's Creative Economy and Heritage Products

Indonesia's rich cultural heritage is reflected in the long history of crafts, arts and entertainment and provides a valuable foundation for the creative industries. The country's creative economy has a large number of small businesses, although there are, for example, large media conglomerates. The owners of micro, small and medium enterprises (UMKM) are gradually realizing that the business potential of fashion, music, handicrafts, furniture, and even traditional herbal medicine is far beyond their borders and even national borders. 

Long popular with foreign tourists, Indonesian handicrafts and batik products can fetch a significant premium when sold overseas, where new and exotic qualities are more valued. However, to fully realize their export potential, producers need to maintain sufficient quantity with consistent quality. Many need to upgrade their workshops, streamline production and greatly improve their marketing. And many should be happy to have the support of foreign investors and buyers.

A clear definition of the term creative economy does not exist; most descriptions leave a lot of overlap with other industries, for example IT, pharmacy or sports. The United Nations Creative Economy Report applies the term to "activities involving creativity and/or cultural innovation." Indonesia applies a very broad definition, based on a creative economy that employs around 12 million people. Specifically, the creative economy includes the following 15 economic activities: advertising, architecture, arts and antiques, crafts and furniture, design, fashion, film and photography, interactive games, music, performing arts, publishing, software, radio and television, research and development, and – somewhat unusually – culinary culture.

Innovation catalyst

The culinary industry is the largest creative industry output, followed by fashion and crafts. As for exports, fashion accounts for nearly two-thirds of shipments, followed by crafts. The United States, Japan and Germany are the main export destinations for Indonesian fashion goods.

The creative economy is a healthy balancer for Indonesia's extractive industry cycle, which tends to drag all stakeholders through the ups and downs of global commodity markets. Thus, the creative economy is important for job creation and for inspiring entrepreneurship among the country's relatively young population. Aware of the economic potential that remains to be unlocked in the creative capacities of several hundred ethnic groups, the government supports this segment in various ways. This includes the organization of trade shows across the country and abroad to showcase local companies and their products and services. Industry clusters aim to increase vertical and horizontal integration and hence the competitiveness of various industries, including fashion, crafts and software, although their formation has so far not progressed far beyond the planning stage. So-called cultural parks in various provinces provide spaces to celebrate cultural heritage from local dances and indigenous arts to traditional crafts and to explore their economic potential.

Tourism drives culinary, handicraft and arts businesses

In an effort to boost sales of handicrafts and other indigenous products with the help of foreign visitors. When tourists enter the country, they are more likely to spend money on handicrafts and art and enjoy local cuisine, music and dance performances, theater and films. The idea behind this approach is to generate synergies between Indonesia's mature international tourism industry and the creative economy, which still has a long way to go in terms of internationalization.

The recent growth of tourism is a boon to Indonesia's creative economy, especially for the culinary and indigenous craft businesses. Foreign visitors increased as well as domestic tourist arrivals. The central government together with the provincial governments aim to increase tourism across the archipelago to reduce the sector's dependence on Bali and Jakarta.

The potential of Indonesia's creative economy, and indeed the government's efforts to foster it, goes far beyond products and services that are rooted directly in cultural heritage. In particular, this extends to new media, information technology, and the growing knowledge-based economy. Indonesians have become loyal users of social media platforms such as Facebook, Twitter and others. The launch of high-speed broadband, increasing internationalization, and increasing educational standards provided the basis for software creation and IT projects.

About 140 km from Jakarta, Bandung wants to present itself as a technology center and start-up hub. Indonesia's third largest city, which has a reputation as a vibrant cultural and creative hub, has handed over 800 hectares of land to Technopolis, the answer to Indonesia's hopes for Silicon Valley. Currently seeking investment in the project. Closely linked to the growth of conventional and digital media is the booming advertising and entertainment industry. The country's large and young workforce is a valuable resource for both industries, while advertising agencies are also benefiting from rapidly increasing consumer spending. However, the film and music industries still have to put up with intellectual property rights that are not well enforced.

Indonesian fashion unites tradition and modernity

While Indonesia's IT sector is still in its infancy, the fashion industry has direct investment opportunities (See Indonesian Textile and Apparel Industry). The government in collaboration with retailers has taken steps to increase domestic and export sales of MSMEs in the fashion industry through standardization and financial support for the purchase of machinery and raw materials. The Ministry of Industry's efforts to explore the use of native natural resources, such as hemp, silk, banana or pineapple fibres, can provide a unique quality product through which local designers can build a distinctively Indonesian brand for the global market. Regular fashion shows also boost the image of Indonesian products at home and abroad.

Following a concerted effort by the government and the public to revive the status of batik in Indonesian fashion, local designers are happy to experiment with traditional Indonesian fabrics on clothes, bags and other fashion articles. Some observers lament the fact that the recent revival of batik through the “Batik Friday” campaign and the public procurement of batik uniforms for public sector workers have led to unhelpful commercialization and encouraged automatic printing of batik patterns on a mass scale at the expense of traditional traditions. the art of making batik. However, the government is trying to maintain the original batik market through the definition of national standards and the label of authenticity, the "batik brand".

Homemade crafts, furniture and medicines

Similar to the fashion industry, handicrafts and furniture are blessed with the availability of natural resources in the country, especially wood and rattan. The Ministry of Tourism and Creative Economy supports marketing efforts and promotes exports in many sub-industry through exhibitions, publications, websites, and standardization.

Somewhat surprising, perhaps the traditional herbal medicine known locally as herbal medicine, is also considered a creative industry in Indonesia because of the application of research and development. It benefits from the incredible biodiversity in a country that is perhaps home to the largest number of medicinal plant species in the world. Jamu has been practiced for centuries in Indonesia and remains popular today, despite the increasing availability of modern medicine.

Enabling exports on a significant scale will require tremendous effort in standardization and quality control to build trust with foreign patients, achieve compliance, and receive approvals. Since the ascribed effectiveness of many herbal products is based on personal experience and perception, much research is needed to scientifically establish the safety and efficacy of their drugs. In addition, local herbal medicine producers, most of which are still family-owned businesses, have failed to build effective brands that can be translated across borders. Packaging remains a key area where foreign knowledge can make a huge impact in building premium brand products that cater to high-end markets domestically and internationally. However, leading manufacturers have started exporting to certain countries and are eyeing China as a prospective market.

Private investment and facilitation required

The government is also providing assistance to its creative economy by directing state-owned banks to provide credit loans to small businesses and entrepreneurs and is considering a special financing scheme together with the central bank to increase funding.

Despite these efforts, it is clear that almost every sub-sector of Indonesia's creative economy can go further in developing its full potential with additional financing assistance, which domestic commercial banks are often reluctant to provide. This opens up opportunities for investment and comprehensive export partnerships, where foreign importers will consult and facilitate Indonesian businesses to go global. Joint ventures and other forms of cooperation also come to mind. Now that Indonesia's IT industry has developed as expected by the government, venture capital will also be needed.

Share :