This is an excerpt of a essay on the Southeast Asian art market by Patricia Chen. The full article with charts and images in print, published in C-Arts, March - April 2008.

The two-year boom in the Southeast Asian art market has brought about fundamental changes in the trading and practice of art in the region, to which the inclusion and the popularity of contemporary art in auctions can be singled out as one major contributory factor. As contemporary artists become more well-off, and galleries rake in record profit, the real impact on artists and investors has always been assumed to be positive. But is it really so? This article attempts to survey the impact auctions can have on contemporary artists and point out some key dynamics at work. It will also, by extension, question the implications these observable trends have on investment in contemporary art.

Contemporary art in Southeast Asia was only introduced in auctions in 2004/05. Before that, art markets generally operated within somewhat distinct and differentiated ”jurisdictions” - primary, secondary and tertiary. While some dealers specialize in talent-spotting, showcasing new art and managing artists’ market development, others involve themselves in selective secondary sales of artworks. Auction Houses, on the other hand, traditionally position themselves as connoisseurs of “high art’”, involving in the trading of rarer, exquisite “blue chip” pieces in the tertiary market.

Due to various economic and art market factors, contemporary art really only took off in auctions in 2007. Its popularity brought an added dimension to auction houses’ offerings and altered the general state of affairs in the art market. Previous delineations between auction houses and dealers seem to blur overnight with the inclusion of “the art of the present”. With the growing number of auction houses and intense competition, auction houses moved down the food chain to also include very young artists in the auction circuit.

The first generation of contemporary artists who first appeared in auctions from late 1990s to early 2000, who were born between 1955 and 1960, included artists like Heri Dono, Ivan Sagito, Neif Ariefien, Nasirun and Dede Eri Supria. The second generation who appeared between 2003 and 2008, like Nyoman Masriadi, Rudi Mantofani, Putu Sutawijaya, were born at least 15 years after. Some of the recent debutants of Masterpiece, Larasati and Sotheby’s in 2009 were born as late as 1984. In a matter of a few years, the “admission criteria” seemed to have shifted by two generations.

On top of that, the age of works in auctions has also become more ‘current’ (Figure 1). Auction houses say that this is inevitable as contemporary art involves works produced by artists who are living and active. As such, many in the art trade have used affordable prices as a justification for investors to enter in. Judging from the prices achieved, collectors seem to welcome this move.

These seemingly “harmless” shifts in the market have profound implications on contemporary artists and art investors. Analyses done using empirical data and market observations reveal that auctions can be a double edged sword. Artists whose works are in auctions appear to have much more volatility in their prices than those who do not. Artists who remain in the gallery circuit actually enjoy a steady 10 percent to 20 percent price appreciation per year, an increase that is closely monitored and managed by their dealers. However, once artists enter the auction circuit, their prices operate in a totally different realm altogether.

In this space, once the artworks leave the studio, artists have no control of the art works that appear in auctions, nor can they have any say in the pattern in which prices should operate. The advantage is that prices can be driven sky high in competition, but by the same token, they can also be subjected to a free fall with low demand.

Prolific artists suffer this fate much more than the considered ones. Here, Putu Sutawijaya (Putu), the market’s first ‘hot market casualty’ is pitched against Rudi Mantofani (Rudi), to present an illustration. Figure 3a and 3b show the artists’ market in terms of units available and sold in auctions and their impact on prices on a per square centimeter basis. Putu’s work, Looking for Wings (2002), hammered down at S$95,000 (US$ 60,000), caught the market by surprise in April 2007.

Taken as a signal of the strength of demand for his art, auction houses went on a maniac hunt for his works and in the following 12 months, flooded the market with six to 12 lots per auction. The combined effect of such an aggressive supply in a single season was devastating for Putu’s market. On a sustained basis, it had a crippling effect on his prices when, after April, 2008, the law of diminishing returns eventually set in. In May, 2008, seven of the 15 offered works went unsold merely a year after his glorious entry—understandably, causing the artist some degree of distress.

Putu is a prolific and vivacious artist. Rudi in contrast, appear to be more cautious in his approach to his work and people. Though Rudi’s prices did experience an increase, the circulation of his works in the market seemed to be much less. In any one month, only two to three lots were available compared to Putu’s seven to 10 lots. While collector profiles of the two artists may have something to do with this, the supply factor seems to be integral to price performance.

Putu is not alone in this and one can already observe the beginnings of similar supply factors operating in Nyoman Masriadi’s and Yunizar’s markets. Clearly, Putu’s plight points to the greed of auction houses and their attempt to maximize profits where supply is available. There seemed to be little consideration of the medium to long term impact on the artist’s market. After all, Putu’s art had not changed, neither had his way of working. The only variable was the supply that auction houses allowed in each auction, a factor that was very much within their control, but a discretion they chose not to exercise. Putu’s saving grace, though, is the collector base his dealers have helped develop over time before his works hit the auction market.

In reality, artists can lose more than market control when their works hit the auction market, sometimes, the integrity of their works may be at risk as well. This was clearly demonstrated in the journey of a diptych by Nyoman Masriadi, Es krim & minuman berengergi (Ice cream and energy drink). The work was first transacted at Christie’s in Hong Kong in November 2006 for S$ 26,000 (US$17,000). Later, a work that resembled the left half of the said work was sold at Masterpiece in Singapore in August 2008 while another resembling the right half was sold at Borobudur in Singapore 2 months later for S$ 190,000 (US$ 120,000) and S$ 170,000 (US$134,000) respectively. As the title and size of the work remain unchanged, there is reason to believe that it was the same work in circulation. If it was really so, it means that the work may never be seen in its entirety again, the way the artist had intended it.

These criticisms of auction houses are at best only valid on moral and ethical grounds. In the above examples, auction houses can be said to have fully discharged their formal duties to their shareholders with due diligence, as businesses set up for the trading of art (and “investments of passion”) with the express objective of profit-taking. After all, they are commercial operators and not preservers of culture. Artists need to be mindful of such consequences, beware of the risks and rethink their distribution channels more deeply.

If these can happen to artists who are relatively more seasoned, what can be said of young debutants who are increasingly represented in auctions? Figure 4 pitches the price trajectory of young artists who debuted in late 2007 against Heri Dono and Agus Suwage, the relatively more validated artists of Southeast Asia.

Agus Suwage for example, took about four years for his prices to hit the region of S$100,000 (US$ 65,360) in auctions. Haris Purnomo, M. Irfan, Dipo Andy and Ronald Ventura did it in their third to seventh auction within a short span of six to 10 months. While it could be attributed to market timing and demand, the artists’ standing in the eyes of the academic art world should also not be ignored.

Interestingly, checks with the academics reveal that most of the debutants in auctions are either too new to be recognized or poorly validated. Yet the prices of these young debutants suggest a different story.

Nora Taylor, in her monograph, Writing Contemporary Southeast Asian Art History echoed this, “Auctions of contemporary Southeast Asian art in Singapore at Sotheby’s and Christie’s since 1996 are interesting illustrations of how the art market controls information, discourse, art historical practices in relation to contemporary art in Southeast Asia as opposed to how artists view the issue. For example, most of the paintings at auction have never been published in an art historical sense.”

The auction market is littered with many such examples of what Don Thompson, in his The $12 million stuffed shark – the curious economics of contemporary art described as ”the ease at which art history is now written with a check book.” This can be observed in established Western markets and equally and perhaps more so in the information inefficient Southeast Asian market.

Post-auction, young debutants face a different dilemma. With gallery definitions of “emerging” artists standing at roughly below the S$ 7,650 (US$5,000) level in the region, the young debutants clearly do not fit into the “up and coming” category. Yet they lack the exposure and the experience to stand next to those who have invested time in building their body of works and collector base. At higher price levels, they run the risk of appealing to a much thinner collector catchment even before they have a consistent sustainable track record of success at the primary market.

Perhaps even more damaging is the false sense of affirmation and value premature auctions give young artists early in their career, which can hamper their development – giving them a sense that they have arrived. This has already been observed in dealers’ accounts of artists preferring to produce works for auctions, to gallery and collaborative regional exhibitions that strengthen their curriculum vitae, as auctions pay more and carry a certain prestige.

Dr. Oei Hong Djien, a respected collector of Indonesian art, expressed this succinctly, “Before the boom, I used to have time to ‘follow’ the artist for some time and allow him to mature before buying his art, just to ‘save’ him. But last year, there was absolutely no time to wait or do research. If I didn’t buy, auction houses would take it. Collectors were not just competing with dealers and collectors, we were also competing with auction houses.”

If even relatively more experienced artists are vulnerable to negative market forces, the prognosis cannot be good for young artists. Artists and dealers working with auction houses need to be aware of the potential setbacks and manage the process in full view of the risks involved.

Having contemporary art in auctions too, has implications for art investors. Genuine collectors are not affected as much, as the concept of contemporary as something that is possibly “temporal” and “reflective of the current time” should have been embraced at the point of purchase.

However, for the nine out of 10 buyers of art in Southeast Asia whom dealers say buy art with an intention to sell for profit, investing in contemporary art has profound implications. At the point of purchase, investors would have to navigate with a different unknown – what would the potential supply dynamics be for this artist? Would the artist be active 10 to 20 years down the road? In that time, how will collectors’ fickleness and changes in tastes impact the artist’s prices? Is the artist able to continually reinvent himself, sharpen his expressions and remain relevant? Would he still be represented in auctions when the work is ready to be re-sold for profit? What if he is not? In 2008, Masriadi was only one out of nearly 300 artists who achieved substantial appreciation.

For these reasons, investment in art—especially in contemporary art—is generally classified as a high-risk alternative investment and reserved only for those who come with passion, with an equal dose of guts and wealth.

The argument against investment in art is a fundamental one. Assets are only investment-worthy if divestments can be assured. Without this, investing in art is no different from putting the money in high-risk equities or asset classes with no capital protection. If that is so, what kind of risks do investors shoulder when young contemporary artists are involved? Auction houses and dealers who readily promote art as an investment are up against these odds.

In the current environment, these issues are already surfacing through the cracks. Collectors who have attempted to liquidate their collections are already finding difficulty. Auction houses that were enthusiastic in taking in works and giving sizable estimates based on brand names are now turning their backs on these very works in view of the conservative market environment.

In summary, while auctions are excellent launching pads for artists, they are not always beneficial. The inclusion of contemporary art in auctions is in itself a positive development, after all, contemporary art of today is the modern art of tomorrow. While artists of today need support for their art- making, this support can come in different forms as premature auctions can harm more than they build. Knowing the potential pitfalls, it will be helpful for artists to consider the position they wish to take on these issues and establish a response that would allow them to adopt a considered approach in their artistic productions and avoid such minefields.

Masriadi and his contemporaries have frequently been singled out as examples of how lucrative investments in art can be. These examples are not wrong, except that volatility and risks such investments carry must also be accounted for. Disregarding them is like hoping to make money from the jackpot while blindly ignoring the odds of winning. Investment in art is not for amateurs.

At the end of the day, it also drives home the point of how wealth in competition can potentially alter and substitute perceptions of the value of artworks, somewhat independently of the artistic and aesthetic quality of artworks. The pervasiveness of auctions and auction houses in attributing value to artworks speaks more about the sad state of cultural infrastructure in Southeast Asia than the strength of auction houses. The region has so little going that auction houses need not have to do much to be seen and heard.

Artists, collectors and investors as participants of the market need to acquaint themselves with the workings of the market in more critical and reflective ways. Where business enterprises are concerned, market interests will always take precedence and its players need to learn to protect themselves more effectively. Investment in contemporary art is not as simple as people have been led to believe.

Copyright © 2008 Patricia Chen. All rights reserved. No part of this writing may be reprinted, reproduced or utilised in any form or by any electronic or mechanical means including printing, recording or information storage and retrieval systems, without written permission in writing from the author.

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