Asian Style

• Author: Alan Wheatley
• Position: an economics writer and editor, formerly with Reuters, and editor and coauthor of The Power of Currencies.

The love story of a 400-year-old alien and a pop diva who chows down on fried chicken and guzzles beer sounds like an unlikely harbinger of a new phase in Asia’s growth.

Not so fast: The phenomenal success of the Korean television drama My Love from the Star has underscored the potential for cultural products, from computer games to contemporary art, to play a much bigger role in the regional economy as disposable incomes rise.

The series has attracted more than 2.5 billion views online (Korea.net, 2014), and when the final episode was broadcast in Korea on February 27, 2014, Chinese viewers were able to watch it in real time, a first in the history of Chinese television.

Chinese newspapers extensively analyzed the success of the show. Wang Qishan, one of the Chinese Communist Party’s seven top leaders, acknowledged that it had taken China by storm. A committee of the country’s political advisory body even spent a session agonizing over why China cannot make high-quality soaps of its own.

“If you listen to policy addresses, cultural industries generally get mentioned fairly frequently. Governments like to feel it’s part of moving up the economic development ladder,” said Marcel Fenez, global leader of entertainment and media practice at PricewaterhouseCoopers (PwC), based in Hong Kong SAR, in an interview with F&D.

Granted, a blossoming of modern Asian culture is not about to turn the economy on its head. Even in rich countries, spending on culture averages no more than about 5 percent of GDP. Asia will largely remain synonymous with manufacturing things that people can see and touch (van der Pol, 2007).

A compelling opportunity

“We make semiconductors, autos, cell phones and ships. Of course, the cultural stuff will grow, but it won’t be as big as those sectors,” Kevin Jin, an analyst with Hyundai Securities in Seoul, told F&D.

However, cultural industries represent a compelling opportunity for growth-hungry governments, especially when demand for their traditional exports is still sluggish following the global financial crisis. What’s more, unlike steel production, pop music and smartphone gaming apps do not pollute much and gobble relatively little in the way of costly natural resources. And cultural smash hits project a positive picture of a country, allowing other exporters to piggyback on their success and attracting tourists.

Until recently, many foreigners associated Korea with the Korean War and the unpredictable, authoritarian government in Pyongyang, North Korea, Jin argued. But the Korean Wave of entertainment and pop culture, known as hallyu, has ushered in a modern, fun image typified by the tubby rapper Psy, whose Gangnam Style dance video has been viewed nearly 2 billion times on YouTube—a record.

“It’s not a matter of money. It helps people to look at us in a different way. The effect is priceless,” Jin said of Korea’s cultural rebranding.

After Daesang Corp, one of Korea’s biggest food companies, hired popular girl band Kara to model in its advertisements in Japan, its sales in the second half of 2011 were 15 times higher than in the first half of the year, according to Min-Soo Seo with the Samsung Economic Research Institute in Seoul (Seo, 2012).

He cited an estimate by the Korea Foundation for International Culture Exchange that put the economic benefits from the surge in Korean pop exports at 5 trillion won (about $4.3 billion) in 2010.

“K-pop’s stature now transcends economic terms; it has become a strategic asset with halo effects on Korea’s brand and its products,” Seo said in a report.

What is it worth?

Statistics about cultural products need to be taken with a bucketful of salt. Weighing the worth of cultural data is almost as subjective as appreciating a work of art. Tastes and perspectives vary greatly.

Despite the ubiquity of cultural goods, they are largely neglected in economic studies. The U.S. Journal of Economic Literature classifies them under “Other Special Topics” (Chang, 2012).

Hendrik van der Pol, director of the United Nations Educational, Scientific and Cultural Organization (UNESCO) Institute for Statistics, frames the problem nicely: the cultural sector exploits an infinite raw material—creativity—that proves difficult to trace in physical form.

For instance, current statistics do not accurately capture copyright flows and other intangible assets. Definitions and...