Cities, Vol. 22, No. 2, p.

109–122, 2005
Ó 2005 Elsevier Ltd.
doi:10.1016/j.cities.2005.01.001 All rights reserved.
Printed in Great Britain
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Creative industries in East Asiaq

Shahid Yusuf *, Kaoru Nabeshima
Development Economics Research Group, The World Bank, 1818 H Street, NW, Washington, DC 20433,
USA

Available online 5 March 2005

Throughout East Asia, the growth process and its sources are changing in a number of impor-
tant respects, especially for middle and higher income economies. Growth will increasingly
come from the strength of innovative activities in these economies instead of factor accumu-
lation as in the past. Recent research suggests that such innovative activities, especially in pro-
ducer services and the creative industries, are concentrated in high-tech clusters in globally
linked cities. The development of such cities is influenced by ongoing structural changes
and initiatives by governments and firms. This paper explores these issues and suggests how
policies and institutions can induce and furnish an urban environment that supports innovative
activities that in turn lead to rapid growth.
Ó 2005 Elsevier Ltd. All rights reserved.

Keywords: East Asia, creative industries, economic development, urban economy

Across East Asia,1 the growth process and its
sources are changing in a number of important re-
spects. For the middle and higher income econo-
mies, innovation capability rather than resource
inputs will determine a significantly higher share
of their overall growth. Recent research (Yusuf
and Evenett, 2002; Yusuf et al., 2003) suggests that
innovative activity is concentrated in high-tech
clusters within larger, globally linked dynamic cit-
ies. Thus, the future performance of East Asia is
likely to rest on the innovation systems in selected
urban centers. Such development will be influenced
by a number of ongoing structural changes in East
Asia and will be guided by a range of initiatives ta-
ken by governments and by firms. This paper seeks
to elucidate these changes and initiatives. It is di-
vided into four parts. Part I briefly sketches the
trends that will provide the context for urban-cen-
tered growth led by innovation. Part II summarizes
the findings from recent research on growth that
q
The findings, interpretations, and conclusions expressed in this
study are entirely those of the authors and should not be attributed
in any manner to the World Bank, to its affiliated organizations, or
to members of its Board of Executive Directors or the countries
they represent.
*
Corresponding author. Fax: +1-202-522-1150; e-mail: syusuf@
worldbank.org.
1 2
East Asia in this paper refers to China, Hong Kong, Indonesia,
Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, and
Thailand.
underscores the role of productivity, urban ser-
vices, and skills. Part III examines the contribution
that elements of the urban milieu can make to
growth, such as the efficiency of urban services,
the degree of competition and the supply of skilled
and creative workers. Part IV concludes by indicat-
ing how policies and institutions can induce and
furnish an urban environment that supports rapid
growth.
Unfolding trends
A number of trends crystallized during the second
half of the twentieth century and are likely to per-
sist well into the twenty-first. First, with the rural
sector accounting for an ever-smaller share of
GDP, the drivers of growth are mainly urban activ-
ities.2 Even in low income countries such as Indo-
nesia and Vietnam, industry is supplanting
agriculture as the principal determinant of growth
performance. Second, the urban sector is now
dominated by service activities that together ac-
count for three quarters or more of urban GDP
in most countries. In the core areas of mega-cities,
services are virtually the only employers, with
Close to 40% of the employment in the US is concentrated in the
most densely urbanized 1.5% of the countryÕs land area (Scott and
Storper, 2003).

109
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima

manufacturing having moved to suburbs and edge The empirics of structural change
cities. Third, the fastest expanding component of
In East Asia, as in the rest of the world, the trend
this urban services sector is composed of a number
is towards greater urbanization and the next few
of business services and creative industries with
decades are likely to see an intensification of this
high value added. In the former category, we in-
trend. The urban sector accounted for 39% of
clude marketing, financial, legal, and accounting
the population in 2001. It ranges from 22% in
services. The latter category comprises the more
Thailand to 82% in Korea.4 Projections by the
IT-intensive activities such as design, publishing,
UN suggest that urbanization rates will climb to
multimedia, software development, video enter-
more than 50% by 2025 for the region as a whole,
tainment and movie making. Fourth, a steady de-
and to 47% in China.5
cline in transport costs and a continuing shift in
The movement of people from the rural areas to
the mix of products consumed—towards lighter
urban centers is mirrored in the composition of
items of higher value—is beginning to negate the
GDP in the region. All the economies in East Asia
desirability of dispersing urban centers and of
have experienced a reduction in agricultureÕs con-
locating urban centers close to natural resources.
tribution to GDP over the 1980–2001 periods.
These trends in both the level and significance of
The declining contribution of agriculture is paral-
transport costs, together with widespread automo-
leled by an increase in the contribution from ser-
bility, could lead to a greater concentration of
vices, except for China, Indonesia, and Thailand,
the population in a few, geographically favored
where the reduction in share of agriculture is offset
and polycenteric urban areas.3 Fifth, in the high-in-
mainly by an increase in the share of industry,
come countries and to an increasing extent in the
especially manufacturing activities. This tendency
middle-income ones as well, up to one third of
is most visible in the high-income economies of
GDP growth derives from rising total factor pro-
East Asia. For instance, in Hong Kong, 85% of
ductivity. These gains in productivity are the result,
the GDP is derived from services, up from 67.5%
by and large, of product, process and functional
in 1980, with half of the GDP being generated
innovations allied with improvements in the man-
by producer services alone (Tao and Wong,
agement of firms in the effective assimilation of
2002). Moreover, Hong Kong and also Singapore
IT, and in allocative efficiency across the entire
have emerged as net exporters of services as of
economy. Financial sector development, indepen-
2001 (Hong Kong General Chamber of Commerce,
dently and through its impact on export industries,
2003). The bulk of economic activity has also grav-
together with increased competition arising in no
itated towards the services sector in Japan, Korea,
small part from much greater openness to trade,
and Taiwan. Furthermore, firms in manufacturing
have contributed to these advances (Beck, 2002;
sectors undertake a range of service functions for
Greenaway et al., 2002; Lawrence and Weinstein,
their own internal purposes, although these are
2001; Levine, 1997). Sixth, the pace of innovation
not classified as services officially (Daniels and
is directly associated with the supply of skilled
Bryson, 2002). This is taken to extremes by the
workers, a rising proportion of whom work for
highly integrated state-owned enterprises in China,
the creative industries; the scale and quality of uni-
many of which even supply schooling, hospital, and
versity infrastructure; investment in research
bakery services to their employees. However, even
(Lederman and Maloney, 2003); and the focused
in the US, it is estimated that up to three quarters
acquisition of innovative capability in selected
of all workers in the manufacturing sector engage
areas. Seventh, and finally, urban centered growth
in service activities (Wirtz et al., 2002).
is powerfully facilitated by a liberal yet effective
A decomposition of GDP growth into its sectoral
regulatory framework that promotes competition,
components reveals the rising importance of the
combined with institutions that protect economic
growth of service sectors for overall economic
rights.
growth. Manufacturing was the motor of growth
These seven characteristics of growth in the early
through the 1980s in East Asia but this began chang-
twenty-first century, together with the projected
ing from the early 1990s, when services displaced
urban concentration of people, demand a fresh
manufacturing not only in Japan but also in Korea,
approach to development in the East Asian region,
Singapore, and Taiwan. Furthermore, it was the per-
one that interweaves the key elements of the growth
formance of the services sector that averted a
process with a dynamic urban context.

3 4
Glaeser and Kohlhase (2003) observe that in the US the average Needless to say, urbanization rates in Hong Kong and Singapore
cost of moving one tonne by a mile fell from 18.5 cents (in 2001 are both 100%.
5
dollars) in 1890 to 2.3 cents in 2002. Reflecting this decline, the Half of the population of ChinaÕs coastal provinces from
share of the transport sector, not including air travel, dropped from Shandong down to Guangdong, already lives in urban areas
9% of GDP to a little over 2%. (Solinger, 1999).

110
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
Table 1 Employment in high-tech industries in 1997

High-tech industry jobs (000) Ratios of high-tech Creativity Index ranking

manufacturing to high-tech services
employment

Chicago 347.1 0.53 16

Washington, DC 321.6 0.08 9
San Jose 289.1 2.37 1a
Boston 281.5 0.62 3
New York 250.3 0.08 10
Philadelphia 222.5 0.44 19
Dallas 197.9 0.66 11
Seattle 174.9 1.86 5
Minneapolis-St. Paul 162.6 0.85 11
Houston 162.5 0.35 7

Updated from http://www.creativeclass.org accessed March 22, 2004.

Notes: High-tech industries are defined as industries with more than 9% of scientists and engineers in the workforce as a share of total
employment. The US average was 3% in 1997. The Creativity Index is constructed from four equally weighted factors. These are: (1) share
of creative class in the workforce; (2) patents per capita; (3) Tech Pole Index from Milken Institutes; (4) tolerance for social diversity index.
Source: Markusen et al. (2001) and Florida (2002).
a
Includes San Francisco.

decline in MalaysiaÕs GDP in 2001.6 In fact, among The contribution of creative industries to
the economies of East Asia, only China still derives growth and urban development
most of its economic growth from industrial expan-
The core metropolitan areas in East Asia have been
sion, although it must be remembered that industry
transformed in the past two decades. Most manufac-
includes a larger than normal component of
turing activities have migrated to the suburbs or to
services.7
medium sized cities much as they have done in higher
From these trends—rural–urban migration, the
income countries. What remains behind are high-tech
burgeoning share of services in economic activity,
manufacturing industries closely associated with
and the rising importance of service sector growth
R&D—for example consumer electronics and auto-
for overall growth—it is apparent that policymakers
mobile production in the greater Tokyo area—or
need to encourage the service industries and provide
producers of design intensive items such as fashion
incentives that would help raise productivity and
garments, jewelry, and watches. The central urban
nurture high value-adding activities. Moreover, a
districts now are dominated by services and creative
dynamic services industry can contribute to and en-
industries. In middle income countries, services of
hance the performance of manufacturing sub-sectors
all kinds and in particular, producer services such as
in the economy. Indeed, Markusen et al. (2001) find
finance, legal, and marketing, are providing the
that IT-related services are more evenly distributed
growth impetus and inducing the expansion of retail
across different cities in the United States than
and recreational activities, as well as of personal ser-
high-tech jobs, in part because IT-related services
vices. However, East Asian economies that are mov-
are assisting all types of firms adapt new technolo-
ing into the upper-middle income range and seeking
gies, to increase the competitiveness of the existing
competitiveness through innovation are witnessing
range of products, and also to introduce new prod-
a surge of the creative industry sector. For some of
ucts and services (see Table 1). The implication for
the regionÕs leading cities, these industries, currently
East Asia is that these kinds of services will be
starting from a small base, could become the leading
widely sought as the region urbanizes, expands its
sectors, with substantial spillovers for the rest of the
telecom infrastructure, and as firms gain in
economy and offering some of the best paid jobs.
sophistication.
As described below, the creative industries that are
flourishing in the key Western cities are now emerg-
ing as a significant presence in Singapore, Hong
6
In 2001, the GDP growth in Malaysia was a meager 0.2%. When Kong, Seoul, Taipei and several Chinese cities.
considering the sectoral growth, the services sector contributed 1.5
percentage points to GDP growth. However, this growth was
negated by an equivalent contraction of industry, leaving the
overall growth of 0.2% arising mainly from agriculture. Creative industries
7
This might reflect in part the misclassification of many service
activities conducted by manufacturing firms that are outsourced in
The creative industries in the US grew at an average
other countries. Even so, in larger cities in China, the services rate of 6.3% annually during 1977–97, compared
sector employs close to half of the labor force (Zhao et al., 2003). to just 2.7% for the entire economy. By 1998, they

111
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
Table 2 The size of creative industries in 1999 ($billion)
Global
Advertising 45
Design 140
Film 57
Music 70
Publishing 506
R&D 545
Software 489
Video games 17
Other 371
Total 2240
Source: Howkins (2001).
employed more than 4 million people,8 making the
United States the dominant producer with a global
share of more than 45% overall, with even higher
shares in advertising, R&D, and software (see Table
2). Japan and Germany, together with the United
States, currently account for majority of the output
from these industries (Howkins, 2001);9 however, fu-
ture growth is likely to be faster in East Asia, pro-
pelled by the demand from a rapidly expanding
and prosperous urban middle class.
A combination of market incentives and proactive
government policies is behind the increasing sal-
ience of creative industries in Singapore, Hong Kong
and Taiwan for example, where their contribution to
GDP rose to 3.0%, 3.8% and 5.9% by 2000, com-
pared to 7.75% per annum in the US. Annual
growth rates have averaged between 10% (Taiwan)
and 22% (Hong Kong) over the past decade, with
design, software, movie-making, electronic games
and publishing supplying much of the momentum
(Centre for Cultural Policy Research, 2003). The
push of market forces has been particularly notice-
able in Hong Kong but one can imagine the same
pattern being repeated elsewhere. Wage and rental
pressures are pushing manufacturing out of the cit-
ies, while the increasing availability of skilled work-
ers, innovation, and shifts in demand is inducing
creative industry clusters to take root. By 2000, over
1500 small companies were engaged in design activ-
ities and another 500 design establishments catered
to the needs of clothing and textile manufactures
within and outside the special administrative region
(SAR: Lau, 2003). In fact, 70% of the output of the
design industry, amounting to HK $10 billion, was
exported. Publishing is another major industry in
Hong Kong, producing 50 newspapers, 700 periodi-
cals, and 20,000 books each year. It is rivaled by
the up and coming software industry that now em-
8
Florida (2002) estimates that the number of workers in the
creative industries is closer to 15 million.
9
According to the Creativity Index in Florida and Tinagli (2004)
the six leading countries are Sweden, the US, Finland, the
Netherlands, Denmark and Germany.
112
Table 3 Number of films produced in Asia in 2000
US India 855
Japan 282
20 Hong Kong 150
50 China 91
17 Korea 60
25 Taiwan 19
137 Thailand 18
243 Singapore 8
325
5 Source: Centre for Cultural Policy Research (2003).
138
960
ploys 90,000 (Leung, 2003). In all, there are over
800 software vendors and 50 developers of games
(see Table 3).
Of lessening significance in Hong Kong, although
it remains the fourth largest producer worldwide, is
the film industry, with more than 1700 establish-
ments employing close to 9000 workers (Leung,
2003). Starting with an international audience drawn
mainly from the Chinese diaspora, the Hong Kong
brand of action movies now has a globally recog-
nized aesthetic signature. However, the waning for-
tunes of this industry also points to the footloose
nature of firms producing for the entertainment sec-
tor and the need for caution in projecting future
trends.
By 2001, Hong Kong entrepreneurs had built up
the digital entertainment industry, now comprised
of over 1600 firms engaged in animation, computer
graphics, the developing of games and digital special
effects. These are now competing with similar com-
panies that are springing up in Korea and China.
There were 200 Korean firms in the animation
sub-sector alone in 2001, generating $270 million in
revenues. The digital entertainment industry serves
a huge and growing population of on-line gaming
enthusiasts in East Asia. In 2001, the overall market
for games in Korea was valued at $3.2 billion, with
the share of on-line gaming amounting to $450 mil-
lion and rising. When Shanda Networking of China,
now the worldÕs largest on-line gaming company,
launched the Korean-made game ‘‘Legend’’, it at-
tracted 850,000 subscribers (Hong, 2003). ‘‘Contests
2 Win’’, created by Indian entrepreneur Alok Kejzi-
wal, enrolled 1.3 million users in China by 2003
(Financial Times, 2003). Current projections suggest
that by 2006, the market value of ChinaÕs on-line
gaming industry could easily exceed $1.0 billion,
compared to about $110 million in 2002 (Hong,
2003). But both Hong Kong and Seoul face the risk
that some part of the digital entertainment industry
will migrate to China.
How metropolitan areas in East Asia fare will
depend to considerable extent on the interplay of
innovation, IT and services. As Scott and Storper
(2003) observe ‘‘there is mounting evidence that
creativity and learning have a distinctive geography,
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
with regions playing active roles as sites of continu-
ous and informal but cumulatively significant
improvement in industrial products and processes’’
(p. 13). The creative industries have all the charac-
teristics of high-tech industries. They demand a di-
verse mix of skills and are likely to gravitate
towards urban areas that either have or are acquir-
ing the institutions and other attributes to meet the
labor requirements of the creative sector. They re-
quire a well-developed ICT infrastructure to serve
their clientele, and interaction with an IT manufac-
turing base to create and target their products. Cre-
ative subsectors, such as movie making and
electronic games, depend upon local and interna-
tional networking in order to develop commercially
successful products and to enhance their market
prospects. The nature of such local networking is
presented in Figure 1. Being highly export-oriented
and dependent on personal contacts with buyers,
their reliance on networking is even greater than
for manufacturing firms. Allen Scott observes that
‘‘cultural-products industrial agglomerations around
the world are increasingly becoming caught up with
one another in global webs of co-productions, joint
ventures, creative partnerships, and so on. In this
manner, productive combinations can be established
that draw on the specific competitive advantages of
diverse clusters without necessarily compromising
the underlying force of agglomeration itself. Many
film stars from Hong Kong sell their place and cul-
Arts & Culture Media
Publishing
and
Printing
Broadcasting
Media and
Performing Arts
Cinema
Services
Significant Linkage
Note: The creative industries acquire on average 0.35 percent of their inputs from each of the 155 I-O sectors in the economy. The forward linkage is assessed
to be significant if the source industry accounts for at least double the economy-wide average – 0.7 percent of the purchasing industry’s total goods and services
inputs. The linkage is considered strong if this dependence is at least 3 percent.
Source: Adapted from Economic Survey of Singapore (2003).
Figure 1 Networking among creative industries.
tural specific human capital to Hollywood produc-
tion companies, a practice that in turn enhances
the market power of the films they make when they
return to their home base’’ (Scott, 2003, p. 19).
Some governments in East Asia are now looking
to creative industries to drive future growth of
metropolitan economies. The most energetic is the
Singaporean government, which anticipates sizable
multiplier effects from creative industries. In fact,
estimates for the cultural industries in Singapore
show that the multiplier for broadcasting media is
1.66 and 1.76 for design industries, which are well
above those for some of the manufacturing indus-
tries (Economic Survey of Singapore, 2003). The
Singaporean authorities are attempting to create
the nucleus of a creative industry through two large
and linked office and area development schemes
called One North and the Esplanade, a short dis-
tance from the Orchard Road commercial district.
A Multimedia Super Corridor with its own univer-
sity at Cyberjaya is being developed in the vicinity
of Kuala Lumpur. And similar attempts at seeding
creative industry clusters are underway in Pucheon
near Seoul, in Shanghai, and in Taiwan.
Because the research on creative industries is still
in its infancy, East Asian developers have been tak-
ing their cues from cities in the US that are viewed
as being among the most ‘‘creative’’, such as
San Diego, San Francisco, Boston, Minneapolis,
Washington, DC, and New York, with the Califor-
Design
IT and
Software
Services
Architecture
Graphic,
Industrial
Design
Advertising
Strong Linkage Estimated Linkage
113
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
nian cities leading the field.10 Each of these cities is
noteworthy for its attractive physical environment, a
diversity of lifestyles, the availability of recreational
spaces, and low levels of pollution. Since the late
1980s, considerable efforts have gone into contain-
ing crime, in creating mixed neighborhoods that in-
duce a vibrant street life, and reversing the flight
of the wealthy and talented to the suburbs.11 These
cities also offer other amenities sought by the so-
called Ôcreative classÕ viewed by Richard Florida as
the prime mover behind the most innovative activi-
ties. Among such amenities are mixed residential
and business neighborhoods, multiple options for
pursuing outdoor pursuits, cultural activities, and a
multifaceted entertainment industry catering to a
variety of tastes. The role of amenities in the con-
centration of creative industries is also apparent in
London, Paris, Milan, and Tokyo.
East Asian cities seeking to promote innovation
and the creative industries remain uncertain as to
the winning formula, but as a start they have begun
to reverse past neglect of the physical environment
and of their urban amenities. Shanghai, Singapore
and Seoul are being transformed physically, are
cleaning up the environment and have begun deep-
ening their cultural and entertainment offerings in
a bid to establish a base of creative industries that
would eventually rival those in the West. How this
process evolves will depend upon the outcomes of
the tentative first steps and on further experimenta-
tion that seeks to align a ÔwesternÕ model with East
Asian cultures and contexts so as to achieve a fruit-
ful interplay between innovation, services, and high-
tech manufacturing in an urban milieu. In the next
section, we explore various factors thought to influ-
ence the location of firms, especially of firms in
creative industry.
Value creation by urban centers
A firmÕs decision to locate in a specific urban area is
guided by a number of economic and non-economic
considerations. High on the list are the value-creat-
ing attributes of cities, attributes that affect the per-
formance of firms. Fifty years ago, a manufacturing
firmÕs perspective on urban value creation would
have been different; land rent, an adequate supply
of labor, decent urban services and transport links,
moderate levels of local taxation and the locational
preferences of the owners were likely to have been
the principal determinants of choice. These are still
very relevant, but with the decline in transport and
communication costs, the falling resource intensity
of products and the greater importance of knowl-
10
San Francisco and San Diego rank second and third in the field
of biotechnology and biomedicine (New Scientist., 2003).
11
Florida (2002) cites evidence based on the trend in housing rents
relative to incomes suggesting that the flight from dynamic cities is
being reversed in the US.
114
edge inputs, high-tech services or manufacturing
firms have become far more demanding. Hence cit-
ies will need to constantly adjust their value-creating
attributes to keep pace with the times, because with
greatly improved communication technologies and
globalization, firms (and the workers they seek),
have many more choices and are readier to exercise
them. What facets of the urban environment are
most advantageous for high-tech firms; and to what
degree is it within the capacity of municipal admin-
istrations and central governments to promote those
conditions that are value creating? In the balance of
this section, we will mainly address the first question.
The avenues for policy are explored in the final
section.
Attributes of successful cities
The creative industries differ from manufacturing
activities in a number of crucial respects. As they
are skill intensive and footloose, and because they
are focused on the quality of the labor force,
they are drawn to cities where market opportunities
and easy access to producer services are combined
with an attractive urban environment. Unlike manu-
facturing, creative industries do not require much
land for production facilities and their products are
high value items that are easily distributed, many
of them electronically. This industry is heavily reli-
ant on ICT and such infrastructure significantly
influences location. Instead, the quality of housing
and recreational amenities is far more important.
In fact, many more and different attributes of cities
are being scrutinized than was the case in the past.
Critical urban services and amenities
From the experiences of the US, the UK and some
of the Nordic countries, it appears that creative
industries and other high tech industries are reliant
on sources of venture capital, legal, marketing and
advertising services and the assistance of head hunt-
ing and consulting firms (Bresnahan et al., 2001). All
types of businesses are concerned about the nature
of the urban social environment, especially the avail-
ability of housing, schooling and personal services,
but equally they attach a high weight to the quality
of power and water supplies12 as well as the trans-
port, telecommunication, and sanitation infrastruc-
ture. The value-creating contribution of these
mundane but essential services has only increased
as incomes and thresholds of adequacy have risen.
The competitiveness of advanced industries,
whether these be in the manufacturing sector or in
12
Water used in Singapore goes through a dual filtration process
whereas not all of the wastewater is treated even once in Shanghai
and Taipei (Ng and Hills, 2003) and in Hong Kong, it receives only
the primary treatment (Cullinane and Cullinane, 2003).
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
Table 4 Total reported crimes for selected Asia-Pacific cities, the gradual dissolving of relational networks, or of
2000 (per 100,000 population) neighborhood ties (Putnam, 2000).
Country City Rate

USA Washington, DCa 7273

Human capital
Canada Montrealb 7234 A substantial body of research suggests the supply of
USA Houstona 6742
USA Philadelphiaa 6458
human capital fuels the growth of urban economies
Canada Torontob 5295 through its effects on a range of skill intensive manu-
Japan Osakac 5251 facturing activities, producer services, and most
USA Los Angelesa 4866 emphatically, the creative industries (Florida, 2002,
Korea Deagud 4067 p. 222; Glaeser et al., 2000). If skill coefficients from
Korea Seould 3974
Korea Pusand 3729 the US are a guide, the share of professionals in busi-
Japan Nagoyac 3642 ness services and in the creative industries ranges
USA New Yorka 3600 from 20% to 51% of total employment, compared
Japan Tokyoc 2674 to only 12% for other industries (Drennan, 2002).
USA San Josea 2549
China Hong Konge 1137
In fact, the experience of the US during 1980–2000
Singapore Singaporef 807 suggests that for every one per cent increase in the
share of the urban population over 25 years with col-
a
US Federal Bureau of Investigation, Crime in the United States, lege degrees, economic growth rose by almost 2%
From Statistical Abstract 2002.
b
(Glaeser, 2003).14 Not only do business services and
The Daily, Thursday, July 19, 2001, also see http://www.statcan. creative industries employ a higher proportion of
ca/Daily.
c
Estimated from total reported crimes in 2000 and population in
professionals than other industries, but they also gen-
2001, see http://www.city.yokohma.jp/me/stat. erate larger numbers of clerical and other services
d
Analytical Report on Crime. 2001. Supreme Public ProsecutorsÕ jobs that require high school degrees or less. Thus,
Office, see http://eng.sppo.go.kr/; Population Projections by even when a metropolitan region shifts its focus from
Province: 2000–2030, 2002, Korea National Statistical Office, see primarily manufacturing activities towards producer
http://www.nso.go.kr/eng/.
e
see http://www.info.gov.hk/info/sar4/elaw.htm. services, the net result is more jobs, including
f
SingaporeÕs Ministry of Home Affairs, see http://www.singstat. white-collar jobs of a clerical nature (Drennan, 2002).
gov.sg/keystats/annual/socialchart/html. Cities such as Beijing, London, Seoul, Tokyo, and
Washington, DC also derive strong benefits from the
central government, that is not only a source of sta-
ble demand but also provides resources for research
producer services, depends even more than in the past
that help boost innovation. The development of the
on the smooth functioning and affordable pricing of
biotechnology cluster in the Washington, DC area
these services and on the capacity of suppliers—
has hinged on the funding provided by the Federal
public or private—to stay abreast of technological
government and the presence of the National Insti-
advances, in fields such as telecommunications.
tutes of Health, which is a source of research find-
Mega-cities throughout East Asia—and not just the
ings, demand for services, and of individuals with
larger cities—are struggling to meet the desired vol-
skills (and, occasionally, the entrepreneurial acu-
ume and quality standards for public services, while
men) needed to commercialize innovations (Lawlor,
being forced by political pressure to limit the increase
2003; Michelacci, 2003).
in prices. This poses major challenges, and several cit-
The formation of a large pool of knowledge work-
ies are fighting a losing battle to sustain key urban
ers, who can support networked industrial clusters in
infrastructures. Where the electricity supply is uncer-
a metropolitan region, appears to be inextricably
tain and the IT infrastructure is weak, or IT services
tied to the presence of several universities with a
expensive, businesses cannot thrive in the face of com-
strong multi-disciplinary research orientation.
petition from firms in neighboring countries that are
World-class universities enlarge and continually re-
not subject to such constraints.
new the pool of skills by attracting students and
Containing crime—as has been achieved by Singa-
scholars from across the nation and from other coun-
pore, Seoul and Japanese cities (Chang, 1994)—is of
tries. At their most effective, they can serve as nodes
equal significance (Table 4).13 This requires not only
linked to other major centers of learning across the
an effective and well-trained police force able to
world—contributing to the sparking and diffusion
impartially enforce the law, but also various commu-
of ideas as well as the circulation of talent. More di-
nity services primarily oriented towards lower in-
rectly, they are crucibles where people, who will in
come households that substitute for some of the
social capital lost during the course of urbanization,
14
Glaeser (2003) explains the revival of BostonÕs economy led by
the finance technology and education sectors in the 1980s with
reference to the local pool of skills. Glaeser and Saiz (2003) also
13
See Yuen (2004) on the urban environment and crime in link the resilience of urban economies in the face of shocks to the
Singapore. available supply of skills that facilitate shifts to new activities.

115
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima

the future run businesses and do research, contribute Discriminating markets

to the fund of knowledge and commercializable
Firms make decisions to locate with reference to po-
innovations, and make contacts that can spawn
tential markets and the availability of resources for
industrial networks.15 In other words, universities
production. The markets with the greatest appeal
that integrate with the metropolitan economy can
for firms engaged in high value-adding activities
add to the social or network capital, enabling inter-
are broad, stable, sophisticated, receptive to new
dependent creative industries to flourish.
products and services, and growing rapidly. Scale,
Where a university sector intermeshes with the re-
stability, and growth are desirable for any type of
gional economy, as for instance in the Boston area
firm but for the high-tech company, a local market
(Appleseed, 2003), it can provide a stream of com-
that is ready to try a novel or experimental product
mercializable innovations—backed by advances in
and to provide feedback that can help decide
basic sciences—as well as some of the technical sup-
whether, how, and with what modifications a prod-
port, the technology incubators, a slice of the risk cap-
uct is marketed, can be especially advantageous. A
ital, and a sprinkling of the entrepreneurship to seed
large and highly discriminating market provides
the development of new industrial shoots. Research
the best possible test of the viability of a product
by Adams (2001) suggests that the effects of R&D
or a service in the national market and also its po-
in universities and contacts between firms and
tential in the global market place, quickly weeds
researchers tend to be localized, and that research
out those with limited prospects but also quickly
conducted in universities stimulates R&D by firms.
generates profits for those products with real poten-
In other words, universities can be drivers of growth
tial. The Akihabara district in Tokyo, the Mecca for
but generally within their metropolitan neighbor-
buyers of electronic gadgetry, allows Japanese pro-
hood. Other institutions can complement universities
ducers to gauge the market response for new prod-
in stimulating the creative industries. In the inner city,
ucts and sense latent wants that can be tapped by
according to Hutton (2004), design institutes and
future offerings. Shiseido, the Japanese manufac-
schools specializing in the training of artisans can pro-
turer of cosmetics, was only able to enter the market
vide the skills sought by design intensive activities.
for premium fragrances when it acquired two chains
It is notable that only a tiny number of metropol-
of beauty salons in Paris—Carita and Alexander
itan areas have succeeded in making their tertiary
Zouari—and set up production facilities in Gien in
institutions into growth poles, but the rewards for
proximity to other firms catering to the discriminat-
those that have found the elusive formula have been
ing clientèle in the Paris region. Thus in the fast
handsome indeed. A competitive environment that
paced world of high-tech activities, the mega-cities
compels universities to meet high standards of qual-
with a sizable segment of affluent consumers are
ity and forces researchers to strive after innovation
much more likely to create value for firms than smal-
is almost certainly a plus. The advantages of such
ler urban areas. Moreover, when stable demand is a
an environment are greatly reinforced by academic
significant concern, urban areas with a diversified
openness that is hospitable to new ideas and encour-
industrial composition weighted towards specialized
ages the circulation of foreign students and research-
producer services that are less prone to cycles may
ers. Among universities in East Asia, as yet
be more attractive than cities dominated by a single
relatively few meet the criteria of scale, quality,
major manufacturing industry.
competition, academic freedom and foreign pres-
ence. The Hong Kong Science and Technology Uni-
versity is the closest approximation, with other Diversified industrial structure
universities in Singapore and Taipei raising their
There has been much debate over the relative
sights. Elsewhere, there are large university estab-
advantages of industrial specialization over diver-
lishments that remain insular, do not impart quality
sity. For high-tech activities, on balance, the indus-
skills, undertake little research, and at this stage may
trial diversity of mega-cities seems to be a definite
be unable to drive the formation of creative industry
plus so long as activities do attain a critical mass.
clusters.16
Furthermore, the experience of Tokyo and New
York suggests that a mix of high-tech producer ser-
vices and manufacturing may have an edge over a
purely services-oriented economy with respect to
stable growth and innovativeness (Duranton and
Puga, 2001; Florida, 2002; Hanson, 2000).17 High-
15
tech manufacturing, producer services, and the crea-
On the varying nature of contributions made by universities to
the regional or national economy and the conditions affecting these
tive industries co-exist in Tokyo and this industrial
contributions, see Boucher et al. (2003).
16
Rather than using existing universities and tertiary institutes as
17
catalysts, the Malaysian government is planning to establish six Duranton and Puga (2001, p. 1455) point to the advantages of an
new universities within MSC to supply the needed skills (Inderg- urban metropolis where diversified and specialized cities
aard, 2003). co-exist.

116
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
diversity confers substantial competitive advantage.
The leading producers of consumer electronics can,
for example, draw on the vast pool of talent from
the metropolitan area for their research and design
labs, manufacture the initial batches of new product
lines next door in local factories with the highest
concentration of production expertise and tacit
knowledge, and then harness the cityÕs advertising
and marketing firms to sell the new product—first
to TokyoÕs exacting shoppers and then to the world.
It is the advantages of such synergy that has induced
firms to maintain expensive research and production
facilities in the metro area and keep close to thirteen
percent of TokyoÕs labor force in high-value added
manufacturing (Fujita, 2003; Fujita and Child Hill,
2004; Hill and Kim, 2000). By comparison, much
manufacturing in sectors such as defense, clothing,
and engineering has exited New York, where
employment in manufacturing has declined to less
than 10% (Abu-Lughod, 1999).18 These jobs have
been replaced by far lower paid employment in
retailing, restaurants, personal services and the hotel
industry. However, the concentration of knowledge
workers in the area and the deep base of producer
services have given rise to one of the worldÕs most
fertile clusters of creative industries. Known as
New YorkÕs Silicon Alley, it encompasses media,
internet and telecommunications-related businesses
that employed 250,000 people in 2000 and is an
example of a creative industry cluster adjacent to a
major hub of producer services (Oxford Analytica,
2000). The proximity has proven advantageous for
all parties. ManhattanÕs core producer services are
vital for the creative industries and these in turn
boost the fortunes of Wall Street investment houses,
and of the providers of advertising, legal, and con-
sulting services. The clustering and interaction
among clusters is possible because New York does
offer the amenities, services and the kind of urban
space, promoting frequent face-to-face encounters,
that are no less essential for the very existence of a
dynamic services economy, even in an age when
electronic communication is an omnipresent factor
in the lives of most urbanites in large metropolitan
areas.19
For a metropolitan region, building a diversified
industrial structure is advantageous for several
reasons, arising from interlinked and mutually rein-
forcing manufacturing and service activities (as in
18
In mid-town Manhattan, for example, 45% of the premium office
space in 1960 was occupied by headquarters of manufacturing or
mining firms while financial and law firms occupied only 10%. By
the 1990s, financial and law firms occupied more than half of the
office spaces in Manhattan (Drennan, 2002).
19
The advent of the telephone led to speculation that people would
meet less often. This did not happen then and has not happened
even with the spread of e-mail and the use of mobile telecommu-
nications. Gaspar and Glaeser (1998) find that the ease of electronic
communication tends to increase rather than decrease the fre-
quency of face-to-face interaction.
Silicon Valley). First, through agglomeration econo-
mies create value for all types of firms (but particu-
larly so for the high-tech firms).20 Second, a diverse
base of activities provides the mix of interdisciplinary
skills that multiply the possibilities for unforeseen
technological advances and their commercializa-
tion.21 Third, new firms need a multitude of business
services and manufactured products—to gain trac-
tion and to expand, especially into a competitive
global marketplace (Kenney, 2000).22 Fourth, many
creative industries and service activities in turn are
voracious consumers of manufactured products such
as computers and printing, photographic, office tele-
communication equipment, often of an advanced or
experimental kind.23 Effectively utilizing or even
customizing this equipment is most conveniently
done when the producers are nearby, as in Tokyo
or Seoul. Fifth, a diversified base provides some
guarantee of stability for the municipal economy,
which Tokyo, for instance, has achieved in difficult
times but New York, with its dependence on the
securities industry, has not. It is noteworthy that
the largest East Asian metropolitan areas such as
Bangkok, Kuala LumpurÕs Klang Valley, Seoul, Tai-
pei, Shanghai, Beijing and Guangzhou, are all well
positioned to achieve a diversified structure similar
to that of Tokyo.24
Openness
One of the more controversial attributes of ÔcreativeÕ
cities is openness to the flows of goods, capital and of
diverse creative people (as already noted
above), who bring ideas that can eventually be trans-
20
Architectural firms in Hong Kong are clustered in Wanchai and
Central/Western districts, in the interests of proximity to the
Building Department and to supporting firms such as structural
engineering firms, model and printing shops offering support
services for architects (Centre for Cultural Policy Research, 2003).
21
Kevin Kelly (1998) observed that the ‘‘in the network economy,
nine times out of ten, your fiercest competitor will not come from
your field. In turbulent times, when little is locked in, it is
imperative to search as wide as possible for places where
innovations erupt. Innovations increasingly intersect from other
domains’’ (1998, p. 93).
22
This also accounts for the increased demand for advanced
consulting services. Reflecting this demand, global consulting firms
such as Accenture, Ernst and Young, and McKinsey & Co. now
have offices in major South and East Asian cities (Wirtz et al.,
2002). Other companies, big and small, are entering the consulting
business, seeing this as a high margin activity—IBM, EDS, and
WIPRO are all treading this path.
23
In 1996, the sales by manufacturing firms to producer services
and creative industries in the US amounted to $222 billion, slightly
higher than the $205 billion worth of services supplied by producer
services and creative industries to the manufacturing sector
(Drennan, 2002).
24
They have the broad manufacturing systems and are building
clusters of other activities.
117
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
lated into commercially successful services or prod-
ucts.25 Much has been written (and rightly so) about
the role of trade liberalization in inducing a compe-
tition and innovative economic environment.26 Dur-
ing the 1990s, attention was directed towards the
opening of capital accounts, as economists came to
perceive more clearly the contribution of financial
markets to growth and view the integration of inter-
national capital markets as a step towards financial
development and easier access to financing by firms.
This remains a contested terrain but global financial
integration is proceeding and openness is helping to
strengthen market institutions and to diffuse finan-
cial innovations worldwide, and can be a means of
containing the concentration of market power that
controls can introduce (Rajan and Zingales, 2003).
Reflecting their role as transportation hubs of the re-
gion, both Hong Kong and Singapore are identified
as well-connected world cities, not only in their
transportation capabilities but also as the location
of choice for foreign subsidiariesÕ regional headquar-
ters and financial hubs. From these locations, MNCs
manage their subsidiaries in the region (Sim et al.,
2003; Taylor et al., 2002).27
An open environment and the emphasis on re-
search are both needed to bring forth skills of
the requisite quality and to germinate new ideas
which lead to cultural and business dynamism
(Hall, 1998). The circulation of knowledge workers
is the only sure way of ensuring access to the lat-
est scientific advances and the most up-to-date
technologies (see Yusuf et al., 2003). One of the
most striking and consistent findings of recent re-
search is that tacit knowledge crucial to the full
understanding of the most advanced and uncodi-
fied technologies is location specific, diffuses
slowly, and its diffusion is remarkably reliant upon
face-to-face (F2F) communication. This is so even
in an age when great advances in communication
have resulted in a smaller world in which most
knowledge workers are only a few clicks from
their peers, wherever these might be (Keller,
2002). The continuing importance of F2F commu-
nication for sharing ideas and technology has been
repeatedly reaffirmed (Storper and Venables, 2002;
Leamer and Storper, 2001).
The apparent benefits of openness do not stop
with the services and activities noted above. The
25
Many of the networked industries in East Asia and the US are
dominated by ethnic communities composed of both fairly recent
and not-so-recent immigrants.
26
Openness measured by lower tariff rates itself is not automatically
translated into higher growth. Trade liberalization needs to be
accompanied by stable macroeconomic management and good
institutions (Baldwin, 2003).
27
Because of their late start, these cities do not host many
headquarters of firms. These are concentrated in the home
countries of MNCs in Europe, US, and Japan. Because of this,
the true headquarter functions tend to be concentrated in London,
New York, and Tokyo (Taylor et al., 2002).
118
openness and diversity of the urban cultural environ-
ment in Southern California is believed to be
responsible for making it the center of the design
industry and the performing arts. In California, No-
kia finds designers for mobile phones and BMW the
designers for its cars.28 Thus, it is also in California
that some of the most popular video games are writ-
ten, and the bubbling of ideas in this corner of the
United States is responsible for some of the fashions
dominating the music, video, and movie entertain-
ment businesses, not just in the US, but globally.
The big trend-setting Asian, American and Euro-
pean cities are where the ‘‘buzz’’ about a new prod-
uct or fashion commences and its acceptance, often
communicated by word of mouth, is becoming inte-
gral to the market performance of even the best
established companies and can be decisive for new
starts (BusinessWeek, 2001).
Cities such as London, Tokyo, New York, or
Hong Kong owe their continuing success as centers
of creative industries to policies and institutions that
have welcomed the ceaseless circulation of re-
sources, goods, and talented people.29 Florida
(2002, p. 35) observes that ‘‘creativity flourishes best
in a unique kind of social environment: one that is
stable enough to allow continuity of effort, yet di-
verse and broad-minded enough to nourish creativ-
ity in all its subversive forms’’. When openness is
used to buttress the building of institutions—finan-
cial, services-related, education and research—it
can be a powerful force supporting the business
sector because it helps feed value creation through
multiple channels.
What can governments and municipalities do?
In a globalizing world, municipalities will need to
compete by taking measures that create value for
firms; and the business community will need to cap-
italize on the opportunities that exist or are likely
to emerge but also contribute in turn to the future
dynamism of these cities. The question facing ma-
jor cities seeking to strengthen innovative capacity
is what models they can use as points of reference
and what measures they can take to enhance their
attraction for firms, and in particular, to create clus-
ters of industries and services that can accelerate
income growth. In general, geographical location
and historical circumstances have had a hand in
shaping a cityÕs fortunes. San Francisco, Shanghai,
28
Major car manufactures from the US, Europe and Japan locate
their car design centers in Southern California, especially in
Ventura and Orange counties (Scott, 2000).
29
One striking difference between Tokyo and the three other cities
is the number of foreign born residents. In Tokyo, their share was
just 1.8% whereas 28% of New YorkÕs population in 1990 was
foreign born (Hill and Kim, 2000). However, data presented in
Kuratani and Endo (2003) indicate that a fifth of all those
emigrating to Japan settle in Tokyo and a large proportion of these
hold advanced degrees.
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
Singapore, and Hong Kong are among the cities
that have been blessed by geography. A remote,
interior location, poorly served by transport infra-
structure, can be an insuperable handicap. While
models for development led by the creative indus-
tries and business services are still being sought,
there is a great deal that urban municipalities can
do, generally in conjunction with central govern-
ments to change the economic structure and the
growth potential. As Mitchell puts it (1999): ‘‘[cit-
ies] will need the right sorts of local attractions to
retain the talent—in particular, pleasant and stimu-
lating local environments, high quality educational
and medical services, and sufficiently flexible trans-
portation infrastructures and building stocks to
accommodate rapidly reconfiguring patterns of
activity’’.
But all this clearly depends upon effective strat-
egies for sustaining social investment under the
condition that geographic communities and eco-
nomic communities are no longer co-extensive in
space or time. How can enterprises with global
interests be motivated to support infrastructure,
construction and maintenance, preservation of
environmental quality, and provision of good edu-
cation and medical care in particular local con-
texts? How can the notoriously short time
horizons of these big time economic actors be ex-
tended far enough to make a real difference? How
can they become committed citizens of the diverse
and scattered local communities that they en-
gage?’’ (p. 111). There are no simple recipes to
be drawn from the experience of the frontrunners
in this development race, and there is no reason to
expect a linear relationship between policy actions
and the growth of creative industries or other
activities. This is in no small part related to the
rising competition among cities for key industries
and the strong likelihood that these are likely to
cluster in only a few locations. There will be many
cities vying to attract the high value added service
activities and, in all probability, there will be only
handful of winners in any region.
Policy framework
In this section, we will suggest a framework for pol-
icy actions by sub-national governments for promot-
ing creative industry development. Irrespective of
which model of urban development one uses, indus-
tries creative and others seek, in general, macroeco-
nomic stability—that is to say, an environment in
which fluctuations in prices and economic activity
are minimized and where this is combined with trade
liberalization. While such trade liberalization (Bald-
win, 2003) and financial policies are rightly empha-
sized, of rising significance for the growth of IT
services and the creative industries is the protection
of intellectual property rights through the enforce-
ment of patents, copyright and trademarks.30 This
is an important first step, but much remains to be
done before the enforcement of patent and copy-
right protection is realized, especially for software,
music, books, movies, videos, and other products
that are easily duplicated.31
Earlier we noted the contribution that the interna-
tional circulation of talented individuals can make to
the development of business services and the crea-
tive industries. Looking back over urban history,
Peter Hall has observed that ‘‘the creative cities
were nearly all cosmopolitan; they draw talent from
the far corners of the empires they controlled, often
far flung. Probably no city has ever been creative
without this kind of continued renewal of the crea-
tive bloodstream’’ (2000, p. 646). Such talent under-
girds LondonÕs stature as a world city and
continually reinforces the cityÕs competitiveness in
major service industries. While much depends on
whether a city is able to attract knowledge workers
in the first place, ease of entry into a country, rules
governing work permits for foreigners in various
skill categories, and immigration laws can all influ-
ence the number of visitors, the duration of their
stay and the nature of their contribution to the local
economy.
Municipalities have much more leeway in deter-
mining urban transport policies that can profoundly
affect the ‘‘mobility environment’’ and ease of
doing business (Bertolini and Dijst, 2003).32 There
are essentially four main areas where municipal
authorities can make a difference by enhancing
accessibility, facilitating interaction and minimizing
environmental externalities (Bertolini and Dijst,
2003). First is the provision of public transport
and measures to regulate the use of motorcycles
and private automobiles. Cities such as Singapore
have taken the lead in this regard by investing
heavily in multi-modal public transport facilities
and complementing this with an elaborate system
of electronic road pricing and rules that constrain
the use of private cars (Ibrahim, 2003; Phang,
2000). A second and related area for municipalities
30
For small firms the cost of registering property rights and
enforcing these rights through legal action is a major hurdle even in
the US.
31
Such piracy remains a commonplace in several East Asian
economies and severely compromises the viability of service
producers and the creative industries. The movie making industry
in the Philippines has been decimated by piracy and producers of
toys in Hong Kong and Taiwan fight an uphill battle against
piracy, although by tightening the enforcement against piracy of
recorded music, Hong Kong was able to reduce the piracy rate
from 25–50% in 2000 to 10–15% in 2001 (Centre for Cultural Policy
Research, 2003). Piracy also discourages FDI in service activities
and the location of research facilities by MNCs in East Asian
economies where intellectual property rights in certain areas are
especially vulnerable.
32
High transport costs are perceived as a major disincentive by
knowledge workers and their employers (Glaeser et al., 2000).
119
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
is the building and widening of streets, of ring roads
and intra-city rail system,33 coordinated with the
provision of a mass transit system, along with regu-
lation of traffic flow to minimize congestion at peak
hours. Third is the building of airports and ports to
facilitate travel and logistics capability commensu-
rate with the needs of a world-class city (as Shang-
hai is undertaking) that depends for its vitality on
domestic linkages as well as frequent and depend-
able transport connections with other parts of the
world. It has become abundantly clear in recent
years that the growth of business services and of
high-tech manufacturing is increasingly dependent
on transport and telecommunication that enable
producers to quickly meet the needs of clients, per-
mit interaction among knowledge workers, and col-
laboration among researchers or business people.
These often require face-to-face meetings, espe-
cially so in East Asia where personal contact is
given an even greater significance than in the West.
Some of the larger and favorably located cities are
in a position to take the lead in each of these areas,
although they may need the backing or approval of
the central government where major transport
investment is concerned or where significant actions
are proposed that affect the use of private vehicles.
Throughout East Asia, there is plenty of evidence
of municipal action to regulate urban transport,
and of inaction, the effects of which are clearly visi-
ble on the physical as well as on the business
environment.
Policies to regulate urban transport intersect with
urban land use and zoning policies that have major
implications for business services and the creative
industries. Zoning rules impinge upon the value cre-
ating attributes of an urban area through their ef-
fects on the transport system, the reserving of land
for recreational purposes, for housing, for the mixed
use of land particularly in downtown areas, and for
the regeneration of inner city areas.34 All of these
will become progressively more important if busi-
ness services and the creative industries complement
or supercede manufacturing as the engines of urban
development in the major East Asian cities. For
these industries, the ‘‘livability’’ of cities, the quality
of the urban environment and the amenities on offer
are vital. In particular, amenities that induce recrea-
tional and entertainment activities, such as green
spaces and mixed-use neighborhoods, are seen as
adding value because service providers can lure
and retain creative knowledge workers. Moreover,
within some of the older cities a ‘‘reconstruction of
the inner city landscapes’’ can help provide an
33
The Yamanote line that rings TokyoÕs inner core is the preferred
corridor for many of the cityÕs high tech and creative industry firms
because it greatly facilitates F2F interaction.
34
On this last point, see Hutton (2004).
120
‘‘environment of experimentation’’, inducing a flow
of new investment in real estate and in new business
starts (Hill and Kim, 2000, p. 12).
Infrastructure, transport policies, and effective
zoning regulation can go a long way towards creat-
ing an urban environment that is perceived as
‘‘business services friendly’’. It can provide the ba-
sis for the emergence of amenities, recreational
facilities,35 and cultural activities valued by the cre-
ative class of workers (Glaeser et al., 2000). How-
ever, the municipality and the central government
might often need to take a hand in providing the
desired social landscape by some Ôpump-primingÕ
cultural investment, such as in museums, an opera
house or other facilities which would help promote
the performing arts, as is being attempted by Singa-
pore, Beijing, and Shanghai, for example. Private
sponsors can and generally do contribute, as with,
for example, the music facility financed by Paul Al-
len in Seattle.
A social ambience that will be seen as value-creat-
ing by sought-after business and knowledge workers
also needs to be bolstered by policing mechanisms
and legal systems that are efficient and whose integ-
rity is credibly demonstrated. Again, several cities
have achieved these objectives in conjunction with
the central authorities but legal development still
lags in much of East Asia and shaping the urban po-
lice force into a dependable and relatively incorrupt
instrument has proven to be a challenging task.36
This leads to urban governance (and e-governance)
and fiscal issues whose importance we fully recog-
nize but which lie beyond the scope of this paper.
Needless to say, municipalities where governance
is wanting will struggle to satisfy the expectations
of business in the areas noted above. In addition,
without effective governance, sound urban fiscal
management and favorable intergovernmental fiscal
relations with the center, the task of attracting or
nurturing a range of business services that will stim-
ulate high rates of urban growth, becomes immen-
sely more difficult.
Concluding observations
This paper has highlighted two structural changes
ongoing in East Asia. One is the shift of a major-
ity of the population from rural to urban areas.
The second is the shifting economic center of
gravity of the leading cities from manufacturing
to business services and the creative industries.
For these cities that are likely to lead growth over
35
Florida (2002) stresses the importance attached to outdoor
recreation by individuals engaged in creative activities.
36
The growth of the police force, improved methods of policing,
and the incarceration of many more of those convicted contributed
to the decline in the incidence of crime in New York during the
1990s (Corman and Mocan, 2002).
 Creative industries in East Asia: Shahid Yusuf and Kaoru Nabeshima
the coming decades, the key to a successful transi-
tion from export-oriented manufacturing to a ser-
vice economy that is competitive and integrated
with the global systems may involve a reshaping
of the urban landscape so that providers of busi-
ness services and the creative industries perceive
it to be value augmenting for their purposes and
a basis for competitive advantage. There are sev-
eral different attributes of a city that can add va-
lue. Some are geographical or have arisen from
historical accidents. Others are amenable to policy
and regulatory actions by various bodies of gov-
ernments. On the central government rests the
responsibility for ensuring macroeconomic stabil-
ity, the quality of tertiary education, incentives
for R&D, openness to flows of trade, finance and
knowledge workers and strengthening the institu-
tions for the protection of intellectual property,
commercial contracts and other economic rights
that are the bedrock of domestic prosperity and
fruitful international economic relations.
On the shoulders of municipalities rests the com-
plementary responsibilities for providing services
and for regulating a wide spectrum of activities in
ways that contain the transaction costs for business
while adding value. Provision of infrastructure, the
regulation of transport and of zoning, support for
recreational and cultural amenities, effective polic-
ing and environmental management are some of
the key activities municipal governments need to at-
tend with a close eye to the standards set by their
competitors across East Asia. Only a few cities in
East Asia are going to evolve or remain as the
service-providing hubs for the region or the centers
of creative industries. Cities will need to compete
fiercely for these services, as they are notoriously
footloose, having very few assets other than their
highly talented knowledge workers. Thus, meeting
or exceeding the requirements of the service provid-
ers and their employees will be decisive to the future
economic performance of the main urban centers of
East Asia.
Acknowledgments
We thank Marc Shotten, Maribel Flewitt, and
Shiqing Xie for their assistance in preparing this
paper.
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