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FEATURE STORY

Forum Explores the Critical Roles of the Creative Economy and Innovation Policy

January 4, 2016

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In recent years, Korea’s economy has slowed and the country stands to lose a significant part of its working force due to a rapidly aging population. China, Korea’s biggest trading partner and a far larger economy, also faces its slowest economic growth in decades.

Innovation and creativity will be essential for Korea and China to overcome such challenges. A forum recently held in Seoul, Korea, focused on the actions businesses and governments can take to achieve it. Organized by the World Bank Group’s Leadership, Learning, and Innovation (LLI) unit, the KDI School of Public Policy and Management, and the Chinese Academy of Governance (CAG), the forum featured internationally acclaimed professionals in the field who discussed the evolution and growing significance of the creative sector in both countries. More importantly, it demonstrated that the 21st century increasingly depends on knowledge generation through innovation.

In many countries, the creative economy is defined by a convergence of science and technology with industry as well as the fusion of culture with industry. Dong Soo Kang from KDI noted that in Korea, the creative economy agenda is related to macroeconomic phenomena since the decline in GDP is inevitable due to a shrinking labor force.


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" There are many options available in digital finance, securitization of SME loans, value chain financing, franchising models, social impact bonds and social investing and SME support. The big challenge is in identifying options aligned to a country’s needs. "

Sameer Goyal

World Bank Program Manager of Seoul Center for Financial Innovation

There are, however, good examples of Korean innovation at work. Korea’s gaming industry is a fast growing creative activity catering to demands from urban consumers. Supported by innovation in hardware, software, services and industry policies, it recorded export earnings of $3.2 billion in 2014. The industry, the world’s fourth-largest in revenues, employs a total of 87,000 workers across production, distribution and in arcade rooms.

“The Korean gaming industry is a successful, creative, and urban-centric activity relying on product and service innovations.” said Shahid Yusuf, World Bank expert on the Korean economy. For Yusuf, the country’s advantage lies in urban innovative/creative industries such as multimedia, ‘green’ and cultural, that combine manufacturing and services. The Seoul metro area provides a diverse base of activities and scale economies, with a market hungry for innovation.

As much as the creative economy has been at the center of Korea's transition to an advanced innovation-driven economy, China’s industrial sector has been pushing for innovation in recent years. As it transitions to a knowledge-based economy, China has intensified its pursuit of technological breakthroughs, increasing spending on R&D from 1.39% in 2006 to roughly 2.10% in 2013.

KDI School professor Shun Wang stressed that the heavy capital investment and labor force expansion that fueled China’s rise over the past two decades cannot be sustained indefinitely. “The Internet will not only be a source of much-needed momentum for China in the years ahead, it will also change the very nature of growth.” For him, the next wave of digital developments will have an even deeper impact on China’s economy.

As Korea and China pursue innovation-driven growth, small and medium-sized enterprises (SMEs) will face unique challenges and opportunities to adapt and grow. Sameer Goyal, World Bank Program Manager of Seoul Center for Financial Innovation, introduced several policy recommendations for facilitating innovations with SMEs. "There are many options available in digital finance, securitization of SME loans, value chain financing, franchising models, social impact bonds and social investing and SME support. The big challenge is in identifying options aligned to a country’s needs."

“Innovation policy and creative economy are very critical for sustainable economic growth in the era of global economic slowdown for not only developing countries but also advanced economies,” said Boe Ine Lee, World Bank Sr. Economist and head of the knowledge exchange with KDI and CAG. “Given that there is no one-size-fits-all policy for innovation, building innovative ecosystem for SMEs, fostering STEM skills and continuous support to R&D activities even in basic research are partial answers to the challenges ahead. Government’s consistent long-term vision for implementation is also important to make these happen.”

 

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