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The following is the speech (English only) by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the luncheon gathering organised by the Hong Kong Economic and Trade Office in London today (Thursday) :

Ladies and Gentlemen,

Good afternoon. I am glad to have this opportunity today to share with you my views on the IT trends and development in the 21st century, to introduce to you the key initiatives in the recently published Information Technology (IT) Strategy for Hong Kong and to explore with you how these initiatives might translate into opportunities for British businesses.

As many of you would agree, the rapid development of digital technology has brought about some revolutionary changes in the way we do business. The underlying feature is the integration of telecommunications, information technology and content development. This integration enables processed information, be it voice, data or multi-media entertainment to be delivered to individual customers in digital form over vast interconnected networks quickly and cheaply. The processed information can in turn be manipulated by the customers and fed into other uses, as appropriate, over internal or external systems and networks.

Thus, in the digital and interconnected world of tomorrow, where telecommunications, information technology and entertainment are fast converging, we have to increasingly work across traditional business boundaries in order to exploit the opportunities ahead of us and to avoid lagging behind in sunset businesses.

I am glad to say that Hong Kong companies are working earnestly in this direction. I would like to use the Hong Kong Telecom group, which has substantial British interest in it through Cable and Wireless, as an example. The group's turnover in Hong Kong showed a 3% growth in 1998, and stood at (2,758 million pounds, despite the economic recession resulting from the adverse impact of the Asian financial crisis. What deserves our particular attention is the group's strategic move to develop new businesses across traditional boundaries. In the telecommunications sector in which its traditional business lies, the group has expanded into the mobile phone business and now operates two mobile phone networks. As a result, industry estimates have put its share of the total mobile market in terms of subscribers at about 30%. The group has branched out into the IT sector, and now runs the largest Internet service provider business in Hong Kong, with about 50% of the total Internet market, again in terms of subscribers. It has recently introduced broadband Internet connections to its customers, a much sought after service by those who surf on the Internet day and night. Building on top of the Internet service business, the group provides other value added services such as e-commerce and e-banking. And that is not all. The group has branched even further into the entertainment business by becoming the world's first commercial provider of video-on-demand over its telecommunications network. It has now attracted over 80,000 customers, an impressive figure given that the video-on-demand service was only launched in March last year. To do all that, Hong Kong Telecom has built a substantial broadband network which now covers 58% of all buildings in Hong Kong. This broadband network is expected to reach some 80% of all buildings by the end of the year.

Of course, governments, like businesses, must also adapt to the rapidly changing environment resulting from the fast advances in technology and its applications. With this in mind, the HKSAR Government published its IT strategy - "Digital 21" - last November. The document sets out our vision and strategy to changing Hong Kong into a leading digital city in the 21st century.

Given the trend of convergence of telecommunications, information technology and content development to which I refer at the beginning, our Digital 21 IT Strategy is complemented by our strategy to open up the telecommunications and broadcasting markets in Hong Kong. I shall outline the key initiatives in each of these three areas.

First, telecommunications. Hong Kong has an excellent telecommunications network by world standards. For example, our network is fully digitised. In addition, as I have just pointed out, we have a very good broadband coverage. Our mobile telephone penetration is around 40%, the highest in the world outside of the Nordic countries. Hong Kong also has the largest capacity of submarine cable connectivity in the Asia Pacific region. But we cannot be complacent. In order to maintain our position as the pre-eminent telecommunications centre in Asia, we have just completely opened up the external telecommunications services market. Thus, from 1 January 1999, any competent telecommunications company can apply for a licence to provide external telecommunications services (such as long distance phone calls, fax and data transmission). As a result, there are now 45 operators of external telecommunication services, and some 45 further applications are being examined. In addition, the lowest possible charge of IDD calls to the UK has dropped from around 20p (HK$2.57) per minute to 8p (HK$0.99) per minute, a 60% decrease. We are now actively examining the question of liberalisation of the external telecommunications facilities markets with the policy objective of enhancing the attractiveness of Hong Kong as a place for investment and innovative services in telecommunications and businesses which rely heavily on broadband telecommunication services at a competitive price.

Second, broadcasting. And here, I shall focus on the TV market, perhaps the more exciting part of the broadcasting business. In order to create an environment which is conducive to the continued development of the TV market and the introduction of innovative multi-media services using new technology, we have decided to liberalise the TV market in Hong Kong. Specifically, we have decided to open up the existing cable TV network so that its full potential for the conveyance of multi-media content could be realised. As a mirror image of this liberalisation, we have at the same time decided to allow the telecommunications networks to carry broadcasting and other multi-media services. To complement the opening up of the networks, we have also decided to open up the TV market so as to attract content creators to develop and supply a much wider choice of content to the consumer. The opening up of the telecommunications and TV markets complement one another and offers new opportunities not only for telecommunications or broadcasting companies, but also for those who can make use of the networks to provide new content, including entertainment programmes, multimedia services and other services such as

e-commerce and distance learning.

This brings me to our IT agenda. One of the key initiatives in our Digital 21 IT Strategy is to promote electronic business. In order to do this, we must create an environment in which people can readily and willingly engage in such electronic transactions. With this in mind, we have decided to introduce the Electronic Service Delivery (ESD) Scheme - a scheme aimed at delivering Government services over the Internet.

The purpose of ESD is twofold. On the one hand, we wish to improve the delivery of Government services by making it possible for the public to transact business with Government departments electronically round the clock, using various electronic means, including their PCs at home or in the office, interactive TV, interactive public pay phones and other electronic devices. On the other, we want to use ESD to drive the development of electronic commerce in Hong Kong. Our plan is to work with the private sector in implementing the ESD project. We will select a private sector partner through an open tender who will act as the ESD service provider. The invitation for tender has been issued on 22 January 1999. I encourage British companies who might be interested in this project to examine the tender invitation closely, team up with local Hong Kong companies as appropriate to obtain the necessary local skills and knowledge and send in their proposals before 9 April 1999.

In parallel with the introduction of ESD, we are working on several fundamental issues which are essential to the development of electronic business in Hong Kong. They include the establishment of a common Chinese language interface to facilitate the exchange of information between Government and the public. In addition, to instil public confidence in the security and integrity of electronic transactions including payment transactions, we will develop a public key infrastructure and help establish Certification Authorities in Hong Kong. The first public Certification Authority, to be operated by the Hongkong Post, will be established within this year. We will also introduce legislation to ensure that electronic transactions are accorded the same degree of recognition and protection in law as their paper-based counterparts.

With the establishment of an enabling and attractive environment, I believe that electronic commerce will expand and take off more quickly. I urge British companies specialising in electronic commerce and related services to take an active part in exploiting these opportunities. Our Economic and Trade Office in London will, as always, be ready to assist them in partnering with Hong Kong companies, if they wish, in their efforts.

I note that many of you here today come from the software industry, so I would like to spend some time on Hong Kong's software industry. A recent survey in Hong Kong indicates that the software business there will see the largest expansion in the coming years despite the economic downturn. This encouraging result is, in part, attributable to the fact that, apart from the local market, Hong Kong software vendors are working closely with their counterparts in the Mainland of China in developing application software which can serve the specific needs of the China market.

Talking about Hong Kong's co-operation with the Mainland of China, I should of course point out that Hong Kong can act as a good conduit for British companies which want to do business there. We have managers and IT professionals who have a good understanding of the market in the Mainland, its customer characteristics and business needs. They can help to open the right doors and lay the necessary foundation for business ventures much more quickly than anybody else can.

Lastly, I would like to talk about our aim to develop Hong Kong into an Internet traffic and content hub for the Asia Pacific region. Given our telecommunications link both internally and with the outside world and the free flow of information, it is only natural that we have seen an exponential growth in the use of the Internet in Hong Kong. The number of Internet accounts has increased at a phenomenal rate of some 35% every six months in the past 18 months. As at the end of 1998, there were some one million Internet users in Hong Kong. Besides, there are now more than 130 Internet service providers in Hong Kong offering Internet services which cater for the specific needs and interests of local users. While there is of course a lot of demand for Internet services and content in Hong Kong, I think an even greater potential lies in the development and supply of those services and content from Hong Kong to the rest of the world, especially the Mainland of China.

Let me elaborate on the last point. Given the history of the development of the Internet, communication on it is primarily based on the English language. However, the situation is changing rapidly. For example, there is growing demand for Chinese content not only in the Mainland of China, but also in Chinese speaking communities overseas. Hong Kong, as a bilingual city, is well placed to provide Chinese language support for the development of Chinese Internet content and related applications. Coupled with our excellent telecommunications infrastructure and our unique position as a Special Administrative Region of China, Hong Kong is well placed to develop itself into an Internet traffic and content hub of the region.

For British IT companies which are advanced in networking hardware and software, or Internet-based applications, there are clearly opportunities for them to partner with Hong Kong companies in this quest of ours.

The digital world is growing so rapidly these days that I could go on and on. But I think I should pause here and perhaps answer a few questions if you wish.

Thank you.

END/Thursday, February 4, 1999

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