Notes

Planning for a renaissance

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CULTURE and creativity are vital ingredients of all aspects of human endeavour. Culture relates and unites, gives us joy, meaning in life and enlivens our cities. Together with creativity, it adds value to our products, our services, our environment, and to the quality of our lives. Hand in hand, they activate our economy, create jobs and give depth and breath to our public policies.

Indeed, in the wake of globalization and a knowledge-based economy, culture and creativity are increasingly seen as an engine for growth and civic pride. This is particularly true of Hong Kong, as the opening of mainland China to world trade and the advent of digitized communication has put us in a new ball game.

The greatest trend that has affected the business world in the past 20 years is globalization, characterized by the free flow of capital, technology and labour to achieve the best arrangement of profits. Two further breakthroughs have accelerated the globalization process. First, the opening of big countries such as China to world trade, subsequently extending the ground for global investment. Second, digitalized communication and the internet which has made geographical distance virtually irrelevant. For instance, a business can now have its accounting team operating in mainland China, its computer programmers working in Australia and its marketing office in Hong Kong.

For an advanced economy like Hong Kong to keep thriving, we must adopt strategies that could preserve the most value-added part of the business at home and attract the money earned overseas back to the homeland. We could consider letting go of the middle part of the production and manufacturing process, but have to safeguard the beginning and the end of the business process in our homeland.

To enable Hong Kong to become a creative economy we need innovation in technology, creativity in cultural content and in management. The government will have to promote innovation and creativity on the one hand, and help the business sector to bring home the profits earned elsewhere on the other. Another strategy is to upgrade the quality of life of the city, such as good public order, healthy environment, rule of law, an attractive arts and culture environment, a multicultural workforce, and a leisurely and international ambience in order to attract investors to deposit their wealth, to draw in creative talents as residents and to bring in the tourist to spend there.

For cities to survive, innovation and quality of life must be kept in pace with their competitors. In Hong Kong, the Home Affairs Bureau is responsible for promoting creative industries to facilitate innovation, as also arts, heritage conservation and sports policy for the quality of life.

Creative industries generally refer to businesses which use creativity in culture and arts as a means to add value, and rely on a good system of intellectual property rights to protect their income. Examples include design, publishing, music, software development, fashion, trading of art products and antiques, TV and film production, cartoon production and so on.

Creative industries appeal to the desire, the inspiration and spectacular experience of consumers. Creative products are driven by desire and not by physical need. They are the things we want, not necessarily the things we need. And ‘desire’ can be cultivated. It is deeply rooted in the culture of the particular society, is value dependent, and can be influenced, such as through the media and marketing strategy. Creative products are increasingly seen as the next area of growth.

With our open society, free-flow of talents, information and capital, and good law enforcement record in intellectual property rights, the infrastructure supports the further growth of creative industries in Hong Kong. With 40 million cultural consumers, our neighbouring Pearl River Delta region is a considerable new market for our creative products as well as a cost-effective production base with ample supply of supporting manpower in artistic work. The question is how to tap these resources. In other words, we need to be clear on the role of the government in order to better facilitate our exploration of the cultural market in the mainland.

Government is adopting strategies and taking action to encourage and facilitate this process of change. Earnest efforts have been made to ensure good public order, healthy environment, rule of law, a free economy with a level playing field, the protection of intellectual property rights and a creative workforce. Policies and measures have been put in place or are in the pipeline to build up an attractive arts and culture environment, to provide a leisurely and international ambience, and to encourage greater cultural diversity. Government will continue to provide a macro environment that is conducive to the development of creative industries, and will work hand in hand with concerned parties to build platforms which will enable our creative industries to scale new heights. Through efforts by all sectors of the community, we believe Hong Kong will further enhance its attraction as a city for people to invest their wealth, and to draw in more creative talents to live here and bring in more tourists to spend money.

As a government in a free economy, the SAR government’s role in the promotion of creative industries is similar to its role in other business fields. That is, our role lies mainly in improving the business environment and encouraging investment. So let me briefly list out the things we are planning to do and see how the business community can come in.

Basic Research: The creative people will be brought together, information about individual trades will be gathered, their problems will be studied precisely to see how the government can help.

Field Mapping: Basic business mapping for the trade in general will be conducted.

Overseas Promotion: The products of creative industries will be promoted by running expos, exhibition houses and awards.

Investment Platform: Creative people and investors will be helped to come together so that they can react in an open platform.

Venture Capital: Business sector will be met to explain the concept of creative industries and encouraged to consider whether venture capital can be provided to certain trades.

Investments from Outside: Overseas trade tours can include the promotion of Hong Kong’s creative industries.

Clustering Effect: The present environment will be examined to see if vacant factory buildings can be offered for creative workshops on a competitive basis. We hope this will create a clustering effect to establish a critical mass for a certain creative trade, as well as for creative people to hop around different media to make a living and gather experience.

Upgrade Training: The training resources will be pooled together to see if we need to upgrade or reorganize our artistic training.

What is more, creativity drives not only economic growth; it is also the engine that propels human civilization to a new stage of development. The humanistic aspect of a creative economy is the realization of a creative nation, a creative society, and a creative civilization. It could be an awakening of modern humanity, or, as some people put it, another Renaissance.

Patrick Ho

 

Craftmarks

I remember a cartoon which showed a T-shirt factory in China. The first set of T-shirts was bound for a famous U.S. discount retailer, the second for a well-known brand with the appropriate logo embroidered on the left hand side of the chest. Both T-shirts cost about $0.85 to make; the first was to sell for about $5 while one with the logo was to retail at $40.

Having worked in the crafts sector for the past 15 years in India, I was struck by the point that the cartoonist was making. The power of the brand to convince a potential buyer to spend a large amount of money on a product with such a low production value and made on such a vast scale, was a reminder of our failure to create value for our products.

In the retailing of craft and other creative industries in India, the customer is often acutely aware of the cost of production and will not pay more than a certain amount. This was generally the pattern till the advent of the ‘fashion designer label’ from the early ’90s, at which point certain designers could command a premium if they branded the craft product under their name.

With the removal of duties, tariffs and quotas in the post WTO period, the ability to effectively compete in global markets and in our domestic market will become critical to the survival of the crafts sector. The difference between the work of craft based creative industries in India and the example of the T-shirt factory that I’ve used is that what we produce has an intrinsic value. As a customer, if you were given two garments – a T-shirt with no logo and a hand embroidered kurta – and asked to assess their value you would probably have to look at the workmanship and then make a decision. Okay, now we introduce the logo and suddenly another element has entered your decision-making parameters. You recall the celebrity and the advertising and the lifestyle and all the other messages that have been skilfully promoted in that logo and the decision becomes that much harder. Which is the product with value? You look again at the two, notice a loose thread on one of the embroidery patterns of the kurta and pick the T-shirt.

This is the central dilemma that the creative industries will face in an open trade world. Yes, there will always be a small group that has lived with and recognizes the intrinsic value that comes from a finely crafted product but the large majority of customers do not have a measure of valuing the product. If a well-known designer picks a certain craft product and promotes it under the umbrella of his/her logo, then for the period that it is there the product will have value with the larger non-specialist customer. Only to fade into oblivion once it is no longer in the collection.

While educating the customer to the intrinsic value of craft will take time and a great deal of funds, there is a shorter way of creating value and sustainability without the craft being the preserve of any brand and that is by trademarking.

What differentiated the two identical T-shirts was the funds invested by the branded T-shirt in building its brand. The actual cost of the second T-shirt was not $0.85 – that was merely its production cost; the actual cost should be calculated by dividing all marketing initiatives by the number of T-shirts sold. The celebrity endorsements, PR budgets, advertising and other expenses would probably add at least 300-400% to the manufacturing cost. So now the cost is $0.85 + $2.55 = $3.40. The rest goes into paying for the location of the store and the services and profit.

For mass market branding to work, the manufacturing cost must be very low (and the customer must at no point be aware that he is buying something that has no intrinsic value). We can counter this by investing in trademarks and putting funds into the promotion, not of individual brands but craftmarks. The same celebrity endorsements and advertising budgets can be used to promote the craft and any one who uses the craftmark gets the benefit of the customer recognition and then can charge a price which more accurately reflects the intrinsic value of the product.

State support is vital for this to happen as the craft-mark is a common good and requires both an agency to implement the standards and marketing funds to create the campaigns to build awareness with the public.

Italy might not have craftmarks but it does have extensive food marks – parma ham, parmigian cheese, balsamic vinegar and so on. The best example of such a mark is champagne – it’s a well protected national asset of France. India can have a hundred such assets, each a certifying trademark for a particular craft. With these in place we should welcome globalization as an opportunity to send our product with its due respect to customers around the world.

William Bissell

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