Definition of cultural and creative industries
In the various planning documents, different and distinct definitions of the cultural and creative industries have been used. The breakdown – culture, cultural industries, and creative industries – is the most common. The Cultural Policy Guidelines 2014 – 2020 Creative Latvia included the following definitions:
Cultural industries – industries that produce and distribute goods and services, which have the cultural value irrespective to the commercial value they may have.
Creative industries are based on individual or collective creativity, skills and talents and, by creating and using intellectual property can bring prosperity and create jobs. They create, develop, and produce products and services that have value in economic development.
In the above mentioned document and in other documents, various sectors are defined as cultural and creative industries (the most often – museums, libraries, archives, cultural monuments, intangible cultural heritage, digital cultural heritage, cultural education, literature and publishing, music, theatre, dance, visual arts, films, architecture and design), however, their definition is not related to any economic activity classification, consequently statistical and economic analysis of these sectors is challenged.
In 2004–2005, the Ministry of Culture took a more active position on the development of the culture and creative industries. 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 of Latvia and the National Strategic Reference Framework document 2007–2013. The cultural policy guidelines Creative Latvia 2014-2020 sets the development of creative and cultural industries as one of four priorities.
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); Architecture in Latvia: Statistical characteristics (Excolo Latvia Ltd, 2014); Methodology To Determine The Design Influence On The Latvian Economy (Excolo Latvia Ltd, 2014); Study on the Breakdown of the Financing Cultural Sectors Provided by the State Culture Capital Foundation (Analitisko petijumu un strategiju laboratorija Ltd, 2014).
The latest in-detail study on creative industries 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.
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. See also chapter 4.1.4.
As to direct incentives from the state budget, financial support is available from several sources:
The State Cultural Capital Foundation regularly supports the culture industries (Literature, Music and Dance, Theatrical arts, Film arts, Visual arts, Cultural Heritage, Traditional Culture, Design and Architecture, Interdisciplinary) in its project competitions and special target programmes.
The Cultural Monuments Research, Conservation and Restoration Programme of the National cultural heritage administration provides support for emergency conservation, restoration of cultural monuments, as well as for research of cultural monuments.
The support of the National Film Centre is granted to promote the development of the film industry of Latvia, which covers the creation of films of Latvia, distribution of films of Latvia and foreign films, the preservation, protection, accessibility and popularisation of film heritage.
The different types of funding for cultural projects are also available in local municipalities – the majority of Latvian municipalities announce annual open calls for projects (they can be either specific for cultural sector, or intersectoral), where it is possible to receive a small amount of financing (most often not more than EUR 1000 ) for cultural activities or events.
A larger amount of support is available in the capital city. One example is the grant programme of Riga City Council (Take off) aiming to support innovative small and medium enterprises. There is also Creative Industry Incubator in Riga (structural unit of the Investment and Development Agency of Latvia).
In the film sector, there are two support schemes for international co-productions. Latvian Co- Financing Fund (support programme for international film productions in operation since 2013) and Riga Film Fund (Riga City Council co-financing programme for international film productions in Riga, in operation since 2010).
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 the 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 is 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.
According to data of the study The Performance of the Creative Industries Sector of Latvia and Preconditions for its Targeted Development (2013) 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 about 5% of total turnover and exports.
During this period, the number of creative industry enterprises increased with 35%, and related industries with 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%.
Unfortunately, more recent data are not available, because regular statistics on cultural and creative industries are not collected.