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Following is the speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the Hong Kong's IT Future - Telecommunications and InfoTechnology Forum today (Tuesday):
Ladies & Gentlemen,
It gives me great pleasure to have the opportunity to address the Telecommunications and InfoTechnology Forum today.
I recalled that I was first invited in February to address this Forum at its first quarterly meeting in April and to give the inaugural keynote speech. Regrettably, as I was then still wearing the hat of the Secretary for the Treasury and was fully committed to steering all the Budget-related legislation through the legislature, I was not able to accept the invitation at that time. In mid-April, the Information Technology & Broadcasting Bureau was formally established and I officially took up the post of Secretary for Information Technology & Broadcasting in May. I was then invited again to address this Forum, at its second quarterly meeting to be held today. This time I accepted the invitation without any hesitation at all. The organiser's persistence seemed to have made addressing the this Forum a top priority for the policy secretary with responsibility for IT and telecommunications - very much like the competitive pressure in the international business arena has made the promotion of IT usage a top priority for Hong Kong.
The topic of today's forum discussion is "Hong Kong's IT Future". I would rather put it as "IT is the Future of Hong Kong". There are indeed few areas of modern life today that are not touched by IT in one form or the other. If Hong Kong is to maintain its status as a leading international financial and business centre and to remain competitive in the global market, it has to keep itself in the forefront of IT development, and to make the best use of advances in information and communications technology to improve the quality and efficiency of the services that it can offer.
IT is of course a very big field. Today, I would like to focus on one important aspect of IT development - the Internet and its use in electronic business. Internet is basically a global matrix of interconnected computer networks which can communicate with each other. It has developed in an exponential fashion in the past few years. Under 40 million people around the world were connected to the Internet in 1996. By the end of 1997, more than 100 million people were using the Internet. Traffic on the Internet has been doubling every 100 days. In the case of Hong Kong, there are now over 400 000 Internet accounts. This is a third more than the figure of 300 000 accounts about a year ago.
With the extensive reach of the Internet comes expanded opportunity for doing business across the globe, some times in ways not possible in the past. The global value of purchases over the Internet by consumers and businesses, including both physical and electronic delivery, is predicted to grow from US$10 billion in 1997 to US$ 220 billion by 2001. The market potential is thus enormous.
There are many advantages that the use of Internet can bring to businesses. Let me just cite a few examples.
First, more efficient and effective customer services. By putting product descriptions, technical support and order status online, customers could look for such information through the Internet at their own time and pace. It would therefore reduce operating costs by freeing up a company's customer service staff to focus on the management of more complicated cases. This will help to improve customer relationship.
Second, reducing sales and marketing costs. In a traditional business environment, an individual sales person can support as many customer accounts as he can physically visit or contact. Therefore, as the number of accounts increases, so does the size of the sales force. By contrast, an Internet business can add new customers with little or no additional cost. As its sales functions are housed in a computer server rather than in physical store locations or sales people, its reach is bounded only by the capacity of the server to respond to enquiries and orders. Moreover, electronic catalogues can present far more information and options than their paper counterparts. Direct marketing online can also shorten repurchase cycles and increase the ability to make additional sales.
Third, new sales opportunities. The Internet operates around the clock and around the world. As a result, businesses on the Internet can reach new markets which could not be approached through conventional business operations. This is particularly true for small and medium size enterprises who cannot afford the costs of physical presence overseas.
Fourth, reduction in inventory. This is made possible by the shortening in the supply chain. With the linking purchasing information directly between customers and suppliers via the Internet, the unproductive inventory held at the wholesale and retail level could be reduced. Also, more efficient and effective communication between the suppliers and other related parties in the production cycle reduces the throughput time.
And I could go on and on; but I would stop here and turn my attention to the benefits to the consumers.
To name a few, the consumers can access a much larger number of suppliers all over the world and hence have a much wider choice. They can have easier access to a lot more information on the goods and services they want to purchase. They can save money by shopping around with their browser and seek the best prices available. They can save time and effort as suppliers customise their sales pitch to the individual Internet purchasers. And of course, they would benefit from the reduction in costs and hence prices of the vendors who take advantage of the Internet to shorten their supply chain.
The use of the Internet is changing in a fundamental way how we do business. In the process, there will be disintermediation as the traditional middlemen is cut out from the supply chain. However, there will also be reintermediation as new ways of adding value emerge which make use of the versatility of the Internet to push tailored information and service to the customer.
Obvious examples of the disintermediation and reintermediation that I talk about can be found in the travel business, in retail banking and financial services, and in the sale of intellectual properties.
In Hong Kong, we are witnessing the emergence of some innovative use of the Internet. For example, one local ISP is providing on-line supermarket shopping and on-line banking. And the Trade Development Council is operating a cyber bookshop. But this is not enough. There is tremendous potential in Hong Kong for the further development of electronic commerce in Hong Kong. The reason is simple - we have an excellent communications backbone on which business applications could be built.
To encourage the development of such business applications on the Internet, it is important that we provide the right environment. And here, we see an important role for the Government. Specifically, we believe that the Government should take the lead in using the Internet for the delivery of public services on-line, or Electronic Service Delivery in our parlance. In the process of the development and implementation of this mode of service delivery, we aim to identify and remove any impediments which might hamper on-line service delivery. For example, we will have to deal with the questions of security, authentication and payments; we will have to consider the legal backing for electronic transactions; and so on. Resolution of such issues will ensure that we will have an environment which is conducive to the growth of electronic business.
Also, in developing our Electronic Service Delivery system, we will aim to use an open common interface so that it may be used by the private sector for transacting electronic commerce at a later stage. Of course, we will leave it to the market to decide if businesses want to make use of this common infrastructure, or other systems developed in the private sector. Our aim is simply to create an environment and to provide a ready access means to pump-prime the development of electronic commerce in Hong Kong.
Last week, we issued an open invitation to all concerned to seek expressions of interest from the private sector to build and operate an Electronic Service Delivery system for the Government. I do hope that we will receive a good response from the IT sector. And of course, those of you in the audience today who may be interested can download the invitation from our bureau's web site at your convenience. The address is www.info.gov.hk/itbb.
I look forward to hearing from you. Thank you.
End/Tuesday, July 7, 1998
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