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Following is the full text of the speech by the Secretary for Information Technology and Broadcasting, Mr Kwong Ki-chi, at the Hong Kong General Chamber of Commerce luncheon meeting today (Monday):

Mr Sutch, ladies and gentlemen,

It gives me great pleasure to have the opportunity to speak to you this afternoon. I think it may be useful if I first briefly outline the scope of responsibility of my new bureau.

The Information Technology and Broadcasting Bureau was established in April this year to oversee policies for Information Technology, Telecommunications and Broadcasting. The need for this new grouping of policy responsibilities arose from the fast converging technology in IT, telecommunications and broadcasting. Indeed, these days, telecommunication operators are able to use their networks for broadcasting, as has already been done by the Hong Kong Telecom Company in the provision of Interactive Multimedia Service; and broadcasters are able to use their networks for telecommunications through cable telephony. The primary goal of my new Bureau is to ensure the development of Hong Kong as the leading IT, telecommunications and broadcasting centre in the Asia-Pacific region.

On IT in particular, I am sure you will agree that there are 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 IT to improve the quality and efficiency of the services it offers.

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 commerce. The 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 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 Internet can bring to business operations. For example, more efficient and effective services can be delivered by providing business information on-line to clients. Through the Internet, we can approach new customers at little or no additional cost. Sales and marketing expenses can thus be reduced. Also, as the Internet operates around the clock and around the world, we can reach new markets which could not be approached through conventional business operations because of geographical or time-zone separation. This is particularly relevant to small and medium-sized enterprises which cannot afford the costs of physical presence overseas. With the linking of purchasing information directly between customers and suppliers via the Internet, unproductive inventory held at the wholesale and retail levels could be reduced and the supply chain can be shortened. I can go on with more examples of how the Internet can benefit businesses. But I would now turn to look at the use of the Internet from the perspective of the customers.

Through the Internet, 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 purchase information. They can shop around with their browsers and seek the best prices available. They can save time and effort as suppliers customise their sales pitch to suit the needs of individual Internet purchasers. The benefits to the consumers are thus wide-ranging.

The use of the Internet is changing in a fundamental way how we do business and the development of electronic commerce is a world-wide trend. In Hong Kong, we are witnessing the emergence of some innovative use of the Internet in business operations. But this is not enough. There is tremendous potential 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 electronic commerce 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 development of electronic commerce.

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 carrying out electronic commercial transactions at a later stage. Our goal is to create an environment and to provide a ready means of access to pump-prime the development of electronic commerce in Hong Kong.

Late last month, we issued an open invitation to seek expressions of interest from the private sector to build and operate this Electronic Service Delivery system for the Government. I do hope that we will receive a good response. The deadline for submission is August 15. Those of you in the business community who may be interested in the initiative can download the invitation from our Bureau's web site <www.info.gov.hk/itbb> at your convenience.

I now turn to another topical issue in IT - the Year 2000 problem. I think, by this time, all of you should have heard of the problem. The question is how to deal with it.

According to a survey conducted by the Hong Kong Productivity Council in the first quarter of 1997, about two-thirds of the businesses in Hong Kong would be affected by the Year 2000 problem. Given our reliance on computer systems nowadays, the survey result is not surprising at all. But how well are we doing in solving the problem? According to the same survey, about 40 per cent of the respondents which were mainly small and medium-sized enterprises (SMEs) did not know or had never heard about the problem; 40 per cent did not know if their systems would be affected; and almost half of them did not have plans to solve the problem. This was the situation more than a year ago. And I think you would agree with me that awareness of the problem has improved significantly since then, and particularly in recent months following the publicity campaign launched by my Bureau.

Nevertheless, even if people know what the problem is, they may not be fully aware of its impact. Some have suggested that the problem is exaggerated. I agree with that to a certain extent. But beneath all the exaggeration, there are some hard facts about the Year 2000 problem which we cannot afford to ignore.

First, it is not just a technical problem. As I repeated on many different occasions, it is a management issue which affects the survival of businesses if it is not fixed in time. It is a management problem because it goes beyond the narrow confines of IT. On the face of it, if the problem affects a computerised system or a system with embedded microprocessors, the IT professionals should know what the consequences of failure of that system. But this is too superficial an inference. The true consequence will need to be assessed by the management carefully, taking into account all upstream and downstream implications. And, the risk extends far beyond the confines of the company concerned. This is because no business works in isolation. It must also examine the potential disruption which may be caused by its suppliers and customers if their systems are not Year 2000 compliant. Also, the more sophisticated the company in the use of IT, the more likely it is to have frequent and extensive exchanges of information with third parties, including its customers, business partners and vendors. Obviously, the longer the dependency chain, the harder is the problem.

Second, I have heard from many IT professionals working in the larger firms that the real difficulty faced by them is not the lack of technical expertise or resources. What they lack is the management will and determination to face up to and tackle the problem. Once again, it is a management problem. Here, we are talking about the continued competitiveness, and possibly survival, of the business. That certainly deserves top priority support from senior management.

Third, we are all facing the same immovable deadline. I think many of you have experience similar to mine, in that IT projects are delivered late. But for the Year 2000 problem, the rectification projects must be delivered ahead of time as arrival of the new millennium cannot be deferred. What is more, we are competing with all other businesses in the world for similar technical services or products to solve the problem. The best way to solve the problem, therefore, is to start early, to allow sufficient float for project slippage or delay due to foreseen or unforeseen factors; and most important of all, to give enough time to perform testing before the new systems are allowed to run through January 1, 2000.

After you have started your Year 2000 rectification project, you may soon discover a frustrating fact, which is that you will not be able to correct all the systems by December 31, 1999. This is common, but not fatal if you plan in advance for it. My suggestion is that you must first prioritise your rectification work on the basis of the criticality of the systems to your business survival, and then draw up contingency plans just in case you cannot complete all your rectification work in time. In Government, we have adopted the same approach - critical systems which affect our essential services are given first priority. For systems which cannot be rectified in time, we have contingency plans in place. It is worth noting that even if your own systems are compliant, you may still need contingency plans for dealing with those of your business partners who may still be Year 2000 non-compliant for whatever reason.

The Year 2000 problem is a complex one and for those who are interested in learning more about it, I invite you to browse our Year 2000 web-site at <www.year2000.gov.hk>.

Thank you.

End/Monday, July 20, 1998

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