**********************************************************

Following is the full text of the speech (English only) by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the International Conference on Business Incubation today (Wednesday):

Dr Liu, Dr Ling, ladies and gentlemen,

It gives me great pleasure to have the opportunity to address today's International Conference on Business Incubation.

The theme of this forum "Business Incubation - A Key to Competitive Economies" is well chosen for it highlights the importance of business incubation in helping our economy to thrive in a world where advanced and innovative technologies are the primary drivers of economic growth.

The rapid development and wide adoption of digital technology in recent years has brought enormous changes to the way we communicate, the way we do business and the way we run our lives. These changes have far-reaching impact on us all. They are changing the world as we know it today to one based on knowledge. And in the knowledge-based world of the 21st century, the competitiveness of an economy will be determined mainly by its ability to develop and exploit technology.

There is a common misconception that technological development and advances are relevant only in the so-called "high tech" industries. This is not true. Indeed, the defining edge of digital technology is its general applicability to any industry. It is an enabling and generic technology which can be applied across the board to practically all industries and businesses. It is also giving rise to a whole range of new industries such as Internet service providers, web content designs and many other kinds of electronic shopping and delivery services. The question is not whether your industry is "high tech" or "low tech". The question is how effective you are in exploiting the technology to improve your productivity, to innovate in your products and services and to open up new market niches. Thus, even so-called "traditional" industries such as textiles, consumer electronics and plastics, and "traditional" services such as banking, insurance and retail sales, can all benefit from the adoption of new and innovative technologies.

We know that much good work has been done by the private sector in developing and adopting new technologies. Nevertheless, we also appreciate how difficult it is for the private sector, particularly small- and medium-sized enterprises, to invest in research and development which may not come to fruition until after a long gestation period. Thus, we accept that there is a role for the Government in facilitating the development of advanced technologies, and in promoting their use by the industry, business, and the community.

To play this role of a facilitator and promoter, we in the Hong Kong SAR Government, are financing technology development projects and research undertaken by the industry and business sectors through various funding schemes. First is the Industrial Support Fund which finances projects beneficial to the industrial and technology development of Hong Kong. To date, the Fund has committed $1.2 billion to some 340 projects. These projects seek to introduce new technologies, enhance infrastructural support for industry, or improve productivity in specific industries. The Applied Research Fund is another funding source which provides venture capital for technological ventures and R&D activities that have good commercial potential. This Fund has a capital of $750 million.

We have also established the Hong Kong Industrial Technology Centre Corporation which operates a business incubation programme. The programme is intended to nurture newly set-up companies, and help them survive and grow during the start-up period when they are most vulnerable. Of course, the importance of business incubation lies not only in the survival of individual start-ups, but also in strengthening the whole economy by encouraging the growth of small businesses and providing effective access to new technologies as well.

In Hong Kong, the business incubation programme offered by the Industrial Technology Centre helps technology-based start-up firms by providing them with low-cost accommodation as well as management, marketing, financial and technical assistance in the critical initial years. I am very pleased to note that since its establishment in 1992, the programme has been well received and a total of 21 companies have graduated from the programme so far.

Without naming names, I would like to use one of the encouraging examples to illustrate the significance of business incubation. A small technology company which offers product design and system engineering consultancy services for the telecommunications industry in the Asia-Pacific region was admitted into the incubator programme in 1992. At that time, the company employed only six people with an annual turnover of $400,000. It graduated in 1994 after a locally listed company made an equity investment into it. It has since grown into a 300-people company with an annual turnover of over $200 million. In 1997, the company developed a Radio Data System pager, one of two pager products of its kind available in the world today.

But we should not be complacent with what we have done so far in facilitating and promoting innovation and technology. Given the increasing competition that we are facing in the knowledge-based world, we have decided that we should do more to strengthen the technology base of Hong Kong and we are embarking on a number of new projects to achieve this.

First, we have now started work on the development of the Hong Kong Science Park. The mission of the Science Park is to help position Hong Kong as a regional centre for innovation and R&D activities by providing land and premises suited to the needs of high technology firms. Our plan is to complete the first phase of the Science Park, at an estimated cost of $3.3 billion and covering a site of 8 hectares, by 2001.

Second, we have accepted a key recommendation of the Chief Executive's Commission on Innovation and Technology, which is to establish an Applied Science and Technology Research Institute to conduct mid-stream R&D activities, with focuses on development and adaptation of generic and pro-competitive technologies for transfer to industry.

Third, we have also accepted a recommendation of the Commission to set up a $5 billion Innovation and Technology Fund to finance individual projects that contribute to innovation or technology upgrading in our manufacturing and service industries.

Fourth, in addition to direct financial assistance, we are considering other measures to assist the growth of small businesses in Hong Kong. In recent years, there have been comments from trade and industry bodies, and other interested groups about the lack of capital for funding technology ventures by small- and medium-sized enterprises. One of the suggestions put forward is the formation of a second board in Hong Kong to enable smaller and emerging companies to raise capital to finance their business expansion and development. The Financial Services Bureau of the HKSAR Government is now working with the Stock Exchange of Hong Kong and the Securities and Futures Commission to develop implementation plans in 1999 for the establishment of such a second board in Hong Kong.

Fifth, we are exploring with the tertiary institutions ways and means through which they can more readily and effectively transform the fruits of their research into technologies for eventual application by industry. This is consistent with the recommendation of the Commission on Innovation and Technology that we should foster university-industry collaboration in technology transfer and commercialisation of research results in leading-edge technologies. These can be achieved through various means, such as the publication and dissemination of research reports, organisation of conferences and exhibitions to promote research results, and regular meetings between industry and academia to discuss areas of collaboration.

Also, the universities can play an important role in business incubation as well. It is worth noting that in addition to running its own in-house business incubation programme, the Industrial Technology Centre operates jointly with the Hong Kong University of Science and Technology a "distributed incubator centre" on the campus of the University. This is an important first step. Indeed, I think our universities can do even more as they are in an ideal position

to operate incubator schemes given the availability on campus of technical facilities, libraries and databases, as well as an environment which would encourage the cross-fertilisation of ideas between the incubatees and the academic staff.

Finally, I wish to commend the Hong Kong Industrial Technology Centre Corporation, the International Association of Science Parks (IASP) and the Pacific Economic Cooperation Council (PECC) for organising this Conference. The Conference provides an ideal forum for the exchange of views between entrepreneurs and experts in business incubation. I am sure

that your ideas and views will provide a valuable input to our work in promoting business incubation and technology development in Hong Kong. I wish you all a fruitful conference.

Thank you.

End/Wednesday, November 18, 1998

NNNN