Bangkok, 29 November 2010

Dr. Porametee Vimolsiri, Chairman of the High Level Session

Excellencies

Distinguished Speakers, Guests and Participants

Ladies and Gentlemen,

Swadee Krap/Good afternoon!

It is a great honour and pleasure for me to be here today. At the outset, let me convey to all of you the warmest greetings and best wishes of H.E. Dr. Surin Pitsuwan, the Secretary-General of ASEAN, for a successful forum. I also wish to congratulate the Ministry of Commerce, Royal Government of Thailand, for hosting this important event and for taking the lead on the subject of creative economy in ASEAN.

Given the theme of this forum and this session, my remarks will inquire “What, Why and How Creative Economy”. First, what is the state of play of Creative Economy especially at the regional level now? Second, why is there a need for change to embrace Creative Economy? Third, how do we move from where we are now to building a more Creative Economy as an integral part of the ASEAN Economic Community by the year 2015? Few will have all the answers to these weighty and complex issues and, likewise, my remarks will probably raise more questions than answers.

Ladies and Gentlemen,

What is the Current State of Play?

First, what is the current state of play? Allow me to repeat the obvious: the world economy has become much more dynamic, inter-dependent, competitive and complex over the past three decades. Intellectual creativity and innovation, both incremental and disruptive in nature, have contributed to this development trend. These intellectual driving forces have also continued to expand far and wide the frontier of world knowledge with new and innovative products, and services almost being churned out continuously.

Evidently, therefore, creativity and innovation have increasingly pushed and pulled economic productivity and comparative advantage of nations and communities. In the process, they have significantly accelerated not just the creation of gainful employment but the reduction of mass poverty. Social connectivity and economic inter-linkages have also proliferated, often in real time, among economies and communities in this age of globalisation.

Information and communications technology products (or ICT products), for instance, are now accessible to all population strata and age groups. Their global exports have expanded, on average, faster than any other merchandise categories since the successful commercial production of the microprocessor on a silicon chip in 1971 (Intel 4004 series). Interestingly, ICT products earned US$ 1,561 billion or about 10 per cent of world exports in 2008. This is higher than the shares of such other top exports as automobiles, oil, mineral and agro-based products.

Furthermore, the ICT revolution has greatly facilitated as well as induced further creativity and innovation which, in turn, have left a deep imprint on almost every field of human endeavour. Transformative changes in industrial organisation, for instance, include the flatter (horizontal) decentralisation and greater (vertical) dispersion of production through the multiplication of regional and global supply networks, which is also a key characteristic of the ASEAN Economic Community that we are building by the year 2015. There is then the “commoditisation” of manufactures which ranges from labour-intensive goods (e.g., textiles, clothing, toys and footwear) to such high-tech products as consumer and office electronics, and automotive and aircraft components.

In the creative arts, perhaps all of us here have been familiar with the novels or the movie series on Harry Potter and Lord of the Ring. The almost universal appeal of these works has been translated, often with the help of information technology, into great multi-media successes on a global scale. There are numerous other stellar examples, which fit well into the theme “Local Move, Global Success” through creativity and innovation. Among these are the Bollywood movie industry in India or Korean television serial industry; the musical industries and the traditional cultural heritage in many other countries and regions; and the literary masterpieces of Nobel Laureates and other writers from across the globe.

Ladies and Gentlemen,

Why there is a Need for Change?

But why there is the need for change? The reason is obvious. The rising tide of intellectual creativity and innovation has up-lifted socio-economic development in both large and small economies across the globe. Industrialisation for the export market, for instance, has resulted in almost full employment, albeit of workers with limited skills, within ASEAN and in many other developing counties. It has also contributed to higher rates of work-force participation, especially of female workers.

In particular, the share of Asian developing economies in global exports of ICT products was 26 per cent in 1990. Strikingly, it jumped to 51.5 per cent in 2008. These figures include, even more strikingly, China’s shares of 1 per cent and 24.5 per cent between these two years. Currently, ICT products have also become by far the most important component of ASEAN exports. They provided US$ 247 billion (or 15.8 per cent of total global exports) for Singapore, Malaysia, Thailand and Philippines in 2008 compared to US$ 32.8 billion (or 10.9 per cent of total global exports) in 1990. However, it is also clear that such development uplift is not sufficiently even or broadly distributed.

As Greek writer Euripides observed: “Judge a tree from its fruit, not from its leaves.” This is reflective of the situation in East Asia. Developing countries in East and Southeast Asia are where global electronics products and, for that matter, other manufacture goods are made. But they are not necessarily where much commercial value is created or added locally. Typically in export processing, China and most ASEAN Member States are involved at the lower stages of the value chain. These entail correspondingly limited research, creativity, innovation and hence the addition or the creation of value.

Locally, the levels of value added are in the range of 1 to 11 per cent for the assembly and testing of most ICT products – ranging from TV sets, video disk players, computers to the Walkmans and iPods. Meanwhile, the large bulk of value addition accrues to owners of intellectual property rights such as patents, brands and marks, and copyrights. For the production and marketing of many ICT and biotechnology parts and products, the licensing fees and royalties for such proprietary rights account for 30-35 per cent of their retail prices or factory receipts.

Sustained development and globalisation necessarily requires an on-going modernisation of domestic production structures and upgrading of domestic human resources. Creativity and innovation have become relevant and pressing in this context. As many economies and communities have already found out in the commoditisation process, there is almost always another source or another location in the world which can offer even lower labour and resource costs, and even less restrictive standards to foot-loose industries for off-shoring purposes.

Development and globalisation is not a race to the bottom, but an upward movement on

the value chain is again almost impossible to sustain just by “using ideas, instead of creating ideas”. Indeed, government and business leaders across the world have long recognised that the best way to move forward is to move upward on the value chain. This was most clearly reflected in World Economic Forum Annual Meeting in Davos, Switzerland, in January 2006. The main theme of this meeting of top-level minds in the world was “The Creative Imperative”.

The driving forces of intellectual creativity and innovation must be harnessed and maximised over time. This is not just to attain higher orbits of future competitiveness, employment generation, and living standards by economies and communities. Creativity and innovation are equally essential as an ingredient to fuel the collective achievement of more inclusive, equitable and sustainable development through globalisation.

But the question in everyone’s mind is “so how do we move from here to there?”

Ladies and Gentlemen,

From Here to There

As Danish philosopher Soren Kierkegaard puts it, “life is lived forward but it must be understood backward”. The renewed focus on economic upgrading has led to notable achievements in many parts of the Third World. In this connection, invention patents are widely used as a universal indicator of a country’s multi-faceted capabilities in support of creativity and innovation and their commercialisation. Invention patents issued by the United States Patent and Trademark Office (or USPTO), likewise, are often taken as the overall benchmark of global reach.

Let me share with you some interesting facts about ASEAN inventors and patents. ASEAN inventors had received only 576 USPTO invention patents in the previous three decades of 1963 to 1994. However, they filed and were granted 1,240 USPTO patents during the period 2008 to 2009 alone with Singapore accounting for 835 patents (or 67 per cent of the regional total), and Malaysia 310 patents (or 25 per cent of the total). Notably, ICT-related microelectronics constituted about 60-70 per cent of the USPTO patents issued to inventors from these two countries.

Looking over to our neighbouring economies in East Asia, however, the Republic of Korea and Chinese Taipei are now the fourth and fifth most inventive economies respectively (behind the United States, Japan and Germany) in the world in terms of USPTO invention patents. The former gained 16,310 USPTO invention patents during 2008 to 2009, compared to just 85 patents for the period 1963 to 1980. Chinese Taipei obtained 12,981 USPTO invention patents during the period 2008 to 2009, compared to 236 patents for entire period of 1963 to 1980. Also notably, ICT-related microelectronics accounted for almost 70 per cent of USPTO invention patents in the Korean case, and just below 60 per cent in the case of Chinese Taipei.

Such an outstanding structural transformation owes much to the vigorous intellectual creativity and innovation in Chinese Taipei and the Republic of Korea. In turn, these intellectual forces have underpinned the global successes of companies from these two economies. Chinese Taipei has remained the world’s number one complete-package chip design and manufacture, and supplier of desktop and laptop computers plus a variety of computer accessories. Through creative and innovative organisation, small and medium enterprises remain dominant subcontractors in the computer industry.

Looking at South Korea, global sales of Samsung Electronics Corporation have overtaken that of Sony Corporation, the inventor of consumer electronics itself. Samsung sales revenue reached US$ 119.3 billion in 2009 compared to US$ 79.4 billion for Sony, which was higher than the gross domestic product of many developing countries. Equally notable, Samsung is now the second most inventive company in the world, (behind International Business Machines Corporation) with 7,094 USPTO invention patents in the period 2008 to 2009, compared to 3,117 for Sony and 1,516 for Matsushita Electric Industrial Company.

By and large, therefore, a long road still awaits the ASEAN economies in their efforts to restructure and achieve “Local Move, Global Success” through creativity and innovation. What, then, are some of the policy parameters for consideration in this regard?

The first parameter that comes to my mind is long-term investment in research and development (R&D). Such investment is notably below the OECD average of about 2.3 percent of GDP in most parts of ASEAN, except Singapore.

But R&D is not a silver bullet and there are few convenient short cuts. Instructively, Andrew S. Grove, former CEO of Intel Corporation points out to the need for an ecosystem of synergistic policies, infrastructure and services within and outside the firm itself. As CEO from 1987 to 2005, he helped transform the company from a million-dollar small enterprise to a dominant, multi-billion dollar global giant. According to Grove, such an ecosystem is essential in fostering and underpinning on-going creativity and innovation, and their scaling up for commercialisation, at least on three crucial aspects.

The first aspect is the propagation and internalisation of an increasingly sophisticated and expanding base of knowledge, technology, skills, and business savvy and entrepreneurship. The second is the continuous incubation of closer public-private sector partnerships and supplier-customer interactions. Scaling up an idea or a research result for the market is a complex, expensive and highly risky process, requiring significant multi-dimensional support during the gestation period. The third aspect is the maintenance of lead-time or first-mover advantage. This is to serve as a defence against the unrelenting competition from innovative and/or lower-cost substitutes as well as to prepare for the successive waves of commercialised creativity and innovation to sustain market dominance.

I would add a fourth aspect to the ecosystem, which is to facilitate the formation of strategic alliances between the domestic or regional entities in commerce, R&D, and education and their cross-border or non-ASEAN counterparts. Such alliances are increasingly essential for leveraged efficiencies and lowering risk. They have in fact multiplied significantly in a world economy largely based on new knowledge and driven by innovation. Schumpeter’s “creative destruction” has thus become a race without an end.

Conclusion

In closing, allow me to look briefly at the other side of the coin in developing a Creative Economy. Firstly, creativity and innovation, as intellectual property assets, may be expensive and time consuming to register, maintain, and enforce. Owners of such assets and rights must also be their own “policemen”. The adversarial system in the enforcement of intellectual property rights compounds further the difficulties and costs of the process.

Secondly, as indicated in the preamble to the TRIPS Agreement (or Trade-Related Aspects of Intellectual Property Rights) at the WTO itself, intellectual property rights are “private rights”. But all forms of proprietary ownership are, in varying degrees, restrictive to open trade, business competition, competitive innovation, and public access. A culture of healthy business rivalries and competition is essential in this context. It ensures at least that a legal monopoly (such as a patent and copyright) does not equate to an economic monopoly (e.g., tying and bundling of products, refusal to license a technology or to deal with competitor

s, and predatory pricing).

Thirdly, the “development dimensions” of creativity and innovation have been well appreciated in ASEAN. For the first time, they were explicitly incorporated and given priority attention in the ASEAN Intellectual Property Right Action Plan 2004-2010. This plan was approved for regional implementation by ASEAN Leaders at their Summit in November 2004.

By and large, ASEAN cooperation has led to more harmonised and simplified frameworks and regulations which are in line with best international standards on the creation, management and protection of intellectual property rights. These frameworks and regulations are supplemented, at one level, by the formation of regional and extra-regional networks, for example, in enforcement and business development services.

At the human resource development level, there is a strong focus on human and institutional capacity building. Some 7,000 ASEAN professionals took part in training programs carried out during the period 2004 to 2010. All these actions and initiatives in ASEAN cooperation are both facilitative and reassuring to creators, inventors, investors and entrepreneurs of both large and small businesses.

But clearly, much remains to be done to bring actual performance closer to the rich potential for “GlobaLOCALisation” driven by creativity and steered by innovation in ASEAN. However, I believe there are reasons for cautious optimism in this regard. This is because of the solid track record in development achieved by the ASEAN economies, especially our tiger economies and ASEAN integration, despite the many difficulties and crises the region had to overcome in the past four decades.

Going forward, the establishment of a competitive Single Market and Production Base under the ASEAN Economic Community by 2015 and the Master Plan on ASEAN Connectivity recently adopted by ASEAN will certainly help in the development of a high value- added Creative Economy. As such, I will add another two words in between the theme of this forum to say “Local Move, Regional Connect, Global Success as the way to go for the ASEAN Member States. On that brighter note, I wish to conclude my remarks.

Thank you very much for your kind attention.