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Following is a speech (English only) by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the Annual Science Conference of the Hong Kong Institution of Science today (Saturday):

Ladies and Gentlemen,

It is my great honour to be here today to share with you some of my observations on the opportunities for Hong Kong's information technology (IT) industry in the information world of tomorrow.

The pace of change in the IT industry has been phenomenal as a result of technological advances and, in particular, the wide adoption of digital technology. The changes are not simply in the context of data processing or computing. They are changes in a much broader context - changes in the way we communicate, the way we do business and the way we run our lives.

The driving force behind all these changes is the digital convergence. With the convergence of information technology, telecommunications and broadcasting, formerly disparate networks can now do essentially the same thing - transmit all forms of data, being then voice, texts or multi-media, at high volume and high speed. As a result, any information can be provided practically instantly on demand through a multitude of access devices like televisions and personal computers. These changes have far reaching consequences for business and industry. For example, the communication service providers have to rethink their strategies to handle these changes because their future depends on it. Media companies, from wireless to cable TV and to multi-media studios, have to rethink their strategies because their future depends on it too. The IT industry will be at the centre of all these. With powerful hardware and innovative applications, the industry will help to shape the world of tomorrow.

Before we look at the opportunities for the IT industry, we must first figure out what the "digital world of tomorrow" will look like.

One of the prominent features in the digital world of tomorrow is the expansion of what we now call the cyber space. In the past two to three years, we have witnessed the rapid growth in the number of Internet users and in the volume of business transactions through the Internet. In Hong Kong, for example, the number of Internet users has risen from about 750,000 in June 1998 to about 830,000 this month. At the global level, in 1996, there were less than 40 million people connected to the Internet. But by the end of 1997, more than 100 million people were using the Internet. Transactions via the Internet have been surging too. Recent industry estimates suggest that global purchases through the Internet will increase to US$220 billion by 2001.

As the digital trend marches on, the significance of physical distance diminishes and the world becomes a global village. Markets all over the world will merge into a single one and we will as likely to compete or co-operate with someone on the other side of the globe as we will with someone else we know down the street. But we will also as a result be able to cross geographic or time boundaries to deliver new products and services in markets which we were not able to reach in the past.

As a result of this digital revolution, new markets are emerging all over the world, presenting new opportunities and challenges. And the ability to make the optimum use of IT will be the key to maintaining our competitiveness.

So much for a peep into the future. I would now turn to the question of how we can grasp the opportunities, and more specifically do we have the competitive edge?

The answer is yes.

First of all, Hong Kong has an excellent communications backbone. Our telecommunications network, which is the cornerstone for the digital world of tomorrow, is one of the most advanced in the world, and I think this is well known. Our fixed telecommunications network has been fully digitized since 1995. We now have 3.6 million exchange lines serving the entire population, or about 108 exchange lines per 100 households, one of the highest in Asia. What's more, our broadband coverage for households and businesses will reach 70 per cent by the middle of next year. By then, the majority of our households and businesses will not be constrained by bandwidth in what they can do on the communications backbone.

But we are not resting on our laurels. We have recently proposed to introduce more competition into the telecommunications market as a means to promote more extensive network roll-out, greater innovation and wider choices for the consumers at lower prices. As a first step in that direction, we have announced a week ago that we would invite applications for the provision of external telecommunication services from January 1999 and the number of licences to be issued will be entirely dependent on market demand.

In parallel with our proposals to promote competition in the telecommunications market, we have also proposed fundamental changes in the TV broadcasting market aimed at creating an environment for more effective competition as well as for the introduction of innovative multi-media services using new technologies. Specifically, we have proposed to open up the existing cable network so that its full potential for delivering multi-media and telecommunication services could be realized. We have also proposed that the telecommunication networks be allowed to deliver multi-media and other electronic services. Furthermore, we have proposed to open up the pay TV market which we believe will help to speed up technological innovation, stimulate the growth of related industries including the production of content, and attract new investment.

Put simply, the objectives of all these proposals are to encourage optimal use of the existing networks as well as to promote the development of new applications and innovative content in all forms of media.

I would now like to talk about the advantages of Hong Kong in the digital world of tomorrow. Because of our unique history, Hong Kong possesses some distinctive comparative advantages which are not available to many of our competitors. To put those advantages in context, I should highlight the major obstacles to expansion and development of the cyber world to which I referred earlier. They are the differences in language, culture and institutional arrangements in the world that we live in today.

First, language. Hong Kong is a bilingual city. where English and Chinese are used. Thus, we are able to communicate with and obtain information from most regions of the digital world where English is the lingua franca. On the other hand, we can use Chinese to promote and develop Chinese content in the digital world, to cooperate with other Chinese communities, and to act as the digital intermediary between the Mainland of China and other parts of the world. Such capability is particularly important in view of the increasing number of Internet users in Chinese-speaking communities, and the ever-growing demand for Chinese Internet applications and content all over the world.

As regards the other two obstacles, namely, differences in culture and institutional arrangements, I think I need only remind you that Hong Kong, as distinct from many other places, is a cosmopolitan city which accepts different cultures in the world. We are also quick to assimilate the latest knowledge and technology. In addition, Hong Kong has a free and market-based economy where there is free flow of information, and the community can freely co-operate and make association with any other place in the world.

Having described Hong Kong's advantages, I think many of you would have guessed what I see as the opportunities for our IT industry. If I may quote Bill Gates who when referring to the development of the Internet, once said, "I expect the Internet to parallel television, where the greatest business opportunities have been in creating and broadcasting programmes rather than in manufacturing or selling TV." Applying this to Hong Kong, I would say that the greatest business opportunities for us lie in the development of innovative Chinese Internet applications and sophisticated content, as well as services related to electronic commerce.

The government do have an active role to play in helping our industry and business to exploit these opportunities. We should take the lead in using IT to demonstrate the potentials, create the necessary environment to facilitate the development of content and applications and raise awareness and confidence in electronic business. This is precisely what we are aiming to achieve with the Electronic Service Delivery (ESD) scheme, our plan to deliver on-line government services. Through ESD, the public will be able to transact business with government online and in a seamless manner by means of Internet, interactive telephone, TV or other electronic means of access.

In parallel, we are working on a number of supporting issues including the establishment of certification authorities to ensure security of electronic transactions, and the introduction of a legal framework which will provide the necessary backing for electronic commerce. More importantly, we anticipate that the open and common information infrastructure which we are going to develop for ESD will also serve as a platform which the private sector can make use of in conducting electronic commercial transactions.

The Government also understands that a thriving local IT industry is essential to the development of content and innovative applications in Hong Kong. We have therefore decided to adopt a vigorous outsourcing strategy for the provision of IT services within Government. Our objective is to create a market of sufficient size to encourage the development of and further investment in the IT industry.

Apart from electronic delivery of public services and outsourcing of government IT projects, we shall continue to provide direct support to the industry, in particular, by encouraging R&D activities in leading edge technologies through a range of funding schemes, such as the Industrial Support Fund and the Applied Research Fund; and related supporting facilities such as the Technology Centre and the Science Park, the latter of which is under planning. On top of these on-going initiatives, the Chief Executive, in his recent Policy Address, has announced two initiatives, namely the establishment of an Applied Science and Technology Research Institute and the setting up of an Innovation and Technology Fund. All these show our commitment to making Hong Kong an innovation centre for the region.

In order to keep ourselves in the forefront of IT development, and to make the best use of the ever advancing information and communications technology, we need not only the support from the industry and Government, but also participation of the academia and universities because they are the cradles of technological innovations and advances. In fact, the Commission on Innovation and Technology has also pointed out the importance of closer collaboration between the academia and the industry in making Hong Kong a centre of innovation and technology in the 21st century.

I agree wholeheartedly with Professor Tien that we should foster a better understanding within the industry of the research resources available in the universities and, at the same time, enhance the universities' awareness of the needs in the industry. These can be achieved through the publication and dissemination of research reports, organisation of conferences and exhibitions to promote the research results, and regular meetings between the industry and academia to discuss areas of collaboration. On the government side, we shall continue to explore ways to stimulate greater interest in conducting commercially relevant researches in the universities. We shall do what we can to strengthen collaboration between the industry and the academia, and to encourage commercialization of research results through, for example, award schemes.

In closing, I would like to quote what Darwin once said - "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change." The advances in technology have given rise to both opportunities and changes. Hong Kong people are well-known for their responsiveness to changes. And we must act now to take advantage of the changes. This is not a mere question of profitability. This is a question of survival.

Thank you.

End/Saturday, October 31, 1998

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