A new study was published in 2013 on The Performance of the Creative Industries Sector of Latvia and Preconditions for its Targeted Development.
In 2013, a new programme for creative industry projects was launched with a total budget of 142 857 EUR.
In 2013, the Ministry of Culture co-financed the establishment of the Music Export Foundation of Latvia.
From 2008-2012, the number of creative industry enterprises increased by 35%, although employment in this sector declined.
4.2.3 Cultural/creative industries: policies and programmes
In 2004 – 2005, the Ministry of Culture took a more active position on the development of the culture and creative industries (http://www.km.gov.lv/en/cross_sector/creative.html). In 2005, the Ministry of Culture, in the process of developing the guidelines for cultural policy, recognised that the concept of creative industries is important for Latvia as well as for the work of the Ministry of Culture.
The priority to develop creative industries in Latvia was introduced into the Guidelines for the State Cultural Policy of Latvia for 2006 – 2015, for the first time. The definition of creative industries is set in the study "On Creative Industries of Latvia" (BICEPS, 2007): "Activities based on individual and collective creativity, skills and talents, which by way of generating and utilising intellectual property, are able to increase welfare and create jobs. Creative industries generate, develop, produce, utilize, display, disseminate, and preserve products of economic, cultural and / or recreational value". The CreativeIndustries encompasses the following sectors: Architecture, Design, Cinematography, Performing arts, Visual arts, Music, Publishing, Television, Radio and Interactive Media, Advertising, Computer games and Interactive Software, Cultural Heritage, Cultural Education, Recreation, Entertainment and other cultural activities.
After introducing creative industry issues in the national cultural policy guidelines, the Ministry of Culture encouraged the inclusion of creative industry matters in all key policy planning documents in Latvia, such as the National Development Plan 2007–2013, the National Development Plan 2014-2020, the National Lisbon Programme 2005–2008 and the National Strategic Reference Framework document 2007–2013. The new cultural policy guidelines "Creative Latvia 2014-2020" sets the development of creative and cultural industries as one of four priorities.
On the level of regional cooperation among three Baltic States, collaboration in the field of cultural industries is outlined in several working documents (Programme of Cultural Cooperation between the Ministry of Culture of the Republic of Latvia, the Ministry of Culture of the Republic of Lithuania and the Ministry of Culture of the Republic of Estonia for the years 2012-2014; the Declaration of the Conference of the Culture Ministers of Baltic Sea Countries, 2008).
Studies and trends
There are several significant research papers concerning the culture and creative industries in Latvia: The Economic Contributions of Copyright-based Industries in Latvia (WIPO, Robert G. Picard and Timo E. Toivonen, 2005); Design for Latvia (by Mollerup Designlab A/S, Denmark, 2004); and Creative Industries in Latvia (by the research institute BICEPS of the Economic School of Riga, 2007); Demand and Potential for institutionalising interdisciplinary design, higher education programme in Latvia (Stockholm School of Economics, 2007); Creative Industry Research. Update of Statistics (BICEPS, 2008). The latest study was published in 2013: The Performance of the Creative Industries Sector of Latvia and Preconditions for its Targeted Development (summary in English; report in Latvian). The main conclusions presented in the study are as follows:
- Although the share of creative industries and related industries in the economy of Latvia has not changed significantly over the period from 2008 to 2011, major changes occurred within the creative industries sector itself – a significant increase in the number of enterprises, while there was a significant drop in the number of employees, as well as in the total amount of turnover.
- So far the creative industries are developing more in the capital city Riga; in the rest of the territory of Latvia the development centres of creative industries are not strong enough to promote the sector to the polycentric growth.
- Quality, professionalism and competence, and low prices – these are three competitive advantages most frequently identified among creative industries entrepreneurs.
- IT programmers, IT experts, project managers, designers, marketing experts, architects and wood crafters are those professions for which demand in the next five years could grow in the job market.
- Availability of a skilled and professional workforce is one of the important obstacles for development of the creative industries, which could become more acute in the upcoming five years. This applies particularly to the IT sector experts.
- Software, internet portals, other entertainment and recreational activities and work of artists are those creative industries spheres which show substantial growth in turnover. Consequently, growth takes place mostly in the area of services (especially in IT and internet spheres).
- Architectural services, work of advertising agencies, publishing magazines and periodicals, placing advertisements in the mass media and publishing newspapers are those creative industries spheres that showed the biggest decrease in turnover.
- So far representatives of creative industries have not been active in export markets; most enterprises were focused exclusively on the internal market.
For information on audiovisual media in the Baltic States see the study "Business Models and Value Chains in Audiovisual Media". See also the publications "Facts&Figures" about the film industry in the Baltic countries.
Support for culture and creative industries and main actors
The Ministry of Culture cooperates with the Ministry of the Economy, the Ministry of Science and Education and the Ministry of Finance in providing support to the creative industries. The consultative Design Board was established at the Ministry of Culture (2006). In 2011, a Consultative Council of Creative Industries at the Ministry of Culture has been established and renewed its work in 2014.
There are certain indirect measures for support of the culture and creative industries. A reduced VAT rate (of 12%, while the regular VAT rate is 21%) is applied to the press and publishing of books. VAT is not imposed on theatre and circus performances, concerts and events organised by cultural institutions and other cultural events (see chapter 5.1.5).
As to direct incentives, financial support is available from several sources: The Ministry of Culture allocates subsidies mainly for public art institutions (e.g., theatres and orchestras). The Cultural Capital Foundation (see also chapter 2.1) regularly supports the culture industries such as film, media publishing, book publishing, and music recordings in its project competitions and special target programmes. In 2010, it established a branch for design and architecture. In 2013, a new programme for creative industry projects was launched with a total budget of 100 000 LVL (142 857 EUR). In 2013, the Ministry of Culture co-financed the establishment of the Music Export Foundation of Latvia with 3 000 LVL (4 286 EUR).
In 2006, the Latvian Investment and Development Agency started important state support initiatives in the field of industrial design. It grants support to the sectors of design and audiovisual media, and provides assistance in exporting.
The EU Structural Funds are a significant player in supporting the cultural industries. One example of this support is the creative industries business incubator Creative Andrejsala, in Riga from 2009 to 2014 (LVL 1.67 million or about EUR 2.4 million), as well as the notable modernisation support for all higher education establishments in the arts and culture allocated in 2010 (more than LVL 3.5 million or about EUR 5 million) and many other activities.
Creative industry issues are also being dealt with at policy level in cities and towns. One example is Riga City Council and Swedbank, which have jointly organised the grant programme Take off.During the period 2009-2013, the programme supported 100 business ideas, giving total financing of 700 000 EUR. Riga also actively participates in the international Project "Creative Metropoles", while the city of Rezekne opened the restoration and creative industries services and workshops centre in 2012. Creative industry enterprises are also supported in business incubators in Latvian regions.
The Latvian Centre for Contemporary Art, in collaboration with other partners, has launched (2010) an innovative support programme "Brigade" granting administrative and financial support to creative and financially sustainable proposals for the development of local communities.
Creative quarters are being developed, led by private initiatives, with a little state or municipal support; see publication Riga's Creative Quarters. The Ministry of Culture supports the initiatives of the Tobacco Factory.
The authors of the study The Performance of the Creative Industries Sector of Latvia and Preconditions for its Targeted Development (2013) conclude that the availability of financial support has a significant impact on the development of the creative industries – enterprises that have received financial support more frequently express willingness to increase the number of employees, as well as to expand business, and more often introduce new products. Moreover, the reduction of corporate income tax, adjustment of vocational training programmes to the needs of employers and enhanced cooperation with the educational institutions are part of the state support "kit", which entrepreneurs evaluate as the most effective.
Main challenges for SMEs
Cultural industries are still a rather new concept that is not fully conceived either by the public sector or the commercial sector. Therefore, some cultural industry companies (even if not profit oriented) fail to receive public support earmarked for culture, while others do not match up to the criteria required by the Latvian Investment and Development Agency or the EU Structural Funds. Small and medium sized enterprises operating in the cultural industry sector, and cultural NGOs, face problems in applying to the EU Structural Funds for various reasons: legal status, requested minimum funding level is too high, and limited possibilities to get pre-funding and co-funding.
The study The Performance of the Creative Industries Sector of Latvia and Preconditions for its Targeted Development (2013) identify the main obstacles as:
- entrepreneurs rather often identify low demand as a key obstacle for business development;
- the availability of financial resources can be identified as an unequivocally interpreted obstacle of business – an equally large number of entrepreneurs are influenced by the lack of current assets, as well as the restrictive high tax burden. Consequently, at least partly, growth opportunities for the creative industries are limited due to the lack of access by entrepreneurs to financial resources;
- the lack of employees is the third most frequently mentioned obstacle for development of business; and
- commercialisation of ideas are most often indicated by industry experts and entrepreneurs as a problematic aspect for the development of business. While the creative industries sector has plenty of ideas for creative work, there are not enough skills to commercialise them. Partly, the issue should be associated with the education system, where creativity is separated from the market economy, and it is considered a "thing" for sale.
At the end of 2009, the Parliament endorsed a national macro-economic stabilisation plan proposing an increase in VAT from 18% to 21%; in 2011 VAT was increased to 22%, and in 2013 was reduced to 21%. The reduced VAT rate was increased from 5% to 10% in 2009 and from 10% to 12% in 2011. Initially,books, the press, cinema tickets and the tourism industry could benefit from the reduced VAT rate; however from 2011 the reduced VAT applies only to the press, certain categories of books and accommodation services at tourist lodgings.
The Micro-enterprise Tax Law was introduced in 2010 (see chapter 5.1.5).
In the period from 2008 to 2012, the share of creative industries and related industries in the economy of Latvia was approximately 10% of the total number of enterprises and employees and about 5% of total turnover and exports.
During this period, the number of creative industry enterprises increased by 35%, and related industries by about 7%. A particularly significant increase is observed for 2011 (+17%), which could be largely linked to the introduction of the micro tax.
The total amount of turnover in the creative industries during this period dropped by 18% and in related industries by 16% Exports of creative industries increased by 18%, but the relative indicator of the average export volume per enterprise in the sector dropped by 15%.
During the period from 2008 to 2011 the number of employees in the creative industries dropped by 25% (-12287 employees), and for related industries – 29% (-12394 employees). The fall in the total number of employed in the creative industries was considerably larger than in Latvia as the whole (respectively -25% and 14%). The average number of employees per creative industries enterprise decreased from 9 to 5.
Although the number of creative industries enterprises has increased dramatically, the number of employees over the last four years has greatly diminished and they have narrowed their work (employing less people, working with less turnover). These developments may be partly due to the introduction of the micro tax, which sets the maximum annual turnover of not more than 70 000 LVL and the maximum number of employees – 5 per enterprise. In the next five years this sector is not expected to have a significant increase in the number employed.
Fastest growing sectors of creative industries
During the period from 2008 to 2011 the following trends can be identified:
The most significant increase in turnover: software (+11.1 million LVL or 7%), internet portals (+9.2 million LVL or 67%), other entertainment and recreational activities (+7.6 million LVL or 56%), work of artists (+4.6 million LVL or 30%).
The most significant increase of enterprises: software (+381 entities or 67%), artistic creativity (+244 or 339%), other entertainment and recreation activities (+207 or 73%).
The most significant increase in the number of employees: software (+559 or 10%), internet portals (+234 or 48%).
Significant reduction in turnover: architectural services (-63.0 million. LVL or -63%), work of advertising agencies (-37.4 million LVL or -17%), publishing magazines and periodicals (-16.7 million LVL or -36%), or placing advertisements in mass media (-16.5 million LVL or -37%), publishing newspapers (-15.9 million LVL or -49%).
The main reduction in the number of employed: architectural services (-1873 or -48%), cultural education (-1833 or -40%), work of cultural institutions (-1779 or -35%), other furniture production (-1595 or -27%), work of advertising agencies (-1292 or -27%), publishing magazines and periodicals (-1097 or-40%).
The export volume of the creative industries increased by 18%, while the share of exports as part of total exports in Latvia decreased from 8% to 6%.
Growth of export volume in Latvia as a whole has been 56%, but in creative industries only 18%.
Annual total average turnover of the creative industries is more than 700 million LVL, while the total export volume is only around 70 million LVL (10%).
On average, 88% of the export volume of the creative industries for the past five years (2008-2012) is provided by manufacturing enterprises – their number, turnover and the number of employees in the creative industries as a whole is only 13%-15%.
76% of all creative industry exports is provided by enterprises working in furniture production (61.9 million LVL from total export volume 80.9 million LVL in 2012). The export volume of other spheres does not exceed 5 million LVL a year.
Also, the greatest increase in the volume of exports in the previous five years (2008-2012) was in the furniture manufacturing sector (+14.7 million LVL or +31%); in the rest of the sectors, growth in the volume of exports over the last five years did not exceed 1.5 million LVL.
The survey of entrepreneurs shows that most exports go to neighbouring countries – Estonia (43%) and Lithuania (42%). Relatively often, export destinations are Germany (32%), Russia (29%) and Sweden (24%).
The state agency Latvian National Centre for Culture is responsible for education in the culture industries. The Ministry of Culture supports cultural education institutions (see chapter 8.3). Other institutions providing education programmes for culture industry professionals are: the Baltic Film and Media School at Tallinn University; (see chapter 3.4.4) design and media programmes in Liepāja University; BA School of Business and Finance in collaboration with the Art Academy of Latvia and the Latvian Academy of Culture is implementing a Master's Studies programme (in English) "Creative Industries Management".
Three higher education institutions – the Stockholm School of Economics in Riga, the Baltic Film and Media School in Tallinn, and Aalto University School of Art and Design (TAIK) in Helsinki have joined forces in developing a creative industries' Master's Degree curriculum to bridge the concepts of creativity and entrepreneurial thinking. The aim of the joint MA programme is to introduce students to creative industries as a sector that offers entrepreneurial opportunities, promotes innovation and technological spillovers and fosters economic growth. The programme is going to be implemented by the Baltic Film and Media School in collaboration with the above mentioned institutions as partners.
See also chapter 8.3.
Kapitel publiziert: 08-10-2014