The following is the speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the luncheon meeting of the German Industry and Commerce, German Business Association, Australian Chamber of Commerce, French Chamber of Commerce, Hong Kong Austrian Association, Singapore Chamber of Commerce and Hong Kong General Chamber of Commerce today (Friday):
Ladies and Gentlemen.
Thank you for inviting me to the luncheon gathering today. I am delighted to have the opportunity to speak to the members of the business associations of Germany, Australia, Austria, France, Singapore, and Hong Kong in one go this afternoon. I will talk about the development of electronic commerce in Hong Kong.
Let us first take a look at the opportunities and challenges faced by businesses in the Information Age. In the information world of today, there are few areas of our everyday life which are not touched by information technology in one form or another. A prominent feature of the Information World is the phenomenal growth of the Internet. By exploiting the convergence of computing power, telecommunications and multi-media presentation, the Internet has created an ever expanding and digitally connected virtual community - a community which transcends geographical and time boundaries. This ever-expanding virtual community is not only a vast source of information and resources; it also provides new and enormous business opportunities.
To put in perspective the astonishing speed at which the Internet and the globally connected virtual community have developed, I should perhaps cite some statistics here. It took 38 years for the radio to reach an audience of 50 million people globally, and 13 years for television. But it took the Internet only four years to cross that threshold. The number of Internet users worldwide has now exceeded 100 million and is growing by the minute. Traffic on the Internet has been doubling every 100 days. And the volume of transactions over the Internet has been surging too. Recent industry estimates suggest that global purchases through the Internet will increase to US$220 billion by 2001. The potential market for electronic commerce that one can tap in cyberspace is thus enormous. Experience in the US has shown that electronic commerce is transforming the way that business is operated. There are some key issues which I would like to highlight.
First, development of new markets. The Internet knows no geographical boundaries or time zones. Through electronic commerce conducted over the Internet, we can reach new markets which may be too costly to explore through conventional means. This is particularly useful to small and medium sized enterprises which cannot afford the cost of establishing physical presence overseas to tap these markets.
Second, reduction of sales and marketing costs. There are many constraints for businesses to physically expand their sales force in order to cope with market demands. However, with electronic commerce, expansion of sales activities would require minimum additional cost and effort as the expansion could often be achieved by simply expanding the capacity of the network servers. This is of course much cheaper and more flexible than the employment of additional sales personnel.
Third, reduction in inventory. Through closer and more direct contact with both customers and suppliers via the Internet, we can trim down unproductive inventory, shorten production cycle and reduce throughput time.
Fourth, better customer relationship. By putting information on product description, support services or order status online, we will be able to provide more efficient and effective services to our customers. The services can also be individually customised to build up customer loyalty in an increasingly competitive world.
The points I have just set out should have made it crystal clear that Hong Kong has to embrace electronic commerce in order to stay competitive in the information world.
The HKSAR Government fully recognises the importance of electronic commerce in driving our future growth. We are firmly committed to promoting the development of electronic commerce in Hong Kong, especially amongst the small and medium sized enterprises, which make up over 95% of our businesses. It is our aim to provide a favourable environment for electronic commerce to take hold and flourish in Hong Kong. Let me take this opportunity to outline Government initiatives in this important area.
First, we will take an active part in demonstrating to the community the benefits of electronic commerce by becoming a leading user. We will launch the Electronic Service Delivery scheme - a scheme to provide Government services over the Internet. Our aim is not only to provide more efficient and better quality public services to the community, but also to encourage the community to accept electronic commerce as an integral part of daily living. By raising general awareness in, and acceptance, of electronic business, the ESD scheme will also act as a catalyst to pump-prime the development of electronic commerce in the private sector.
We will establish an open and common information infrastructure accessible throughout the territory for our ESD scheme. At a later stage, we intend to open up the infrastructure for the conduct of electronic commerce by the private sector. We have invited tender for the supply of the Electronic Service Delivery system. The tender exercise will close on 9 April. We expect to have the first phase of the scheme up and running in the latter half of next year. Phase I will cover the services of ten departments and public agencies.
Second, we will provide a safe and secure environment for the conduct of electronic commerce through the establishment of a local public key infrastructure and the public certification authorities. With the use of digital signatures using public/private key mechanism, we will be able to establish the identity of the parties to an electronic transaction, authenticate electronic messages, guarantee the integrity and confidentiality of the messages and ensure that they cannot be repudiated. Government will take the lead through the Hongkong Post. The department has just invited tenders for the supply of the system and services for the establishment of a local public certification service. The tender exercise will close on 5 March. The service should be up and running by the end of this year.
Third, we will develop a clear legal framework to provide certainty in the conduct of electronic transactions. We will give the same legal recognition to electronic records and digital signatures as that for their paper-based counterparts. We are now working on a bill to establish the legal framework, and we aim to introduce the bill into the Legislative Council within the next quarter.
Fourth, we will launch a series of publicity and promotion activities to encourage the business community to adopt electronic commerce. My speaking to you this afternoon is part of our efforts in that area.
Fifth, we will try to nurture the growth of our IT industry as a strong IT industry is essential to the development of applications for electronic commerce. A key element in our strategy is to outsource Government IT projects as much as practicable. In 1998-99, Government spending on IT is expected to reach HK$2.1 billion, an 11 % increase over the last financial year. Despite the current economic downturn, we will continue to push vigorously the use of IT within Government, both to improve services and to enhance productivity. Starting from next financial year, all new IT development and maintenance projects will, as a preference, be outsourced unless there are over-riding reasons for retaining the work in-house. Our target is to outsource two-thirds of all new IT projects in Government by 2001 so as to create a market of sufficient size to stimulate the development of the IT industry.
Through all the above initiatives, I am confident that we will have created a favourable environment for the development of electronic commerce in Hong Kong.
Cyberspace is a new frontier and it offers enormous opportunities for everyone of us. To retain our position as the front-runner in a very competitive business world, I urge you all to grasp these new opportunities and plunge into doing electronic commerce as aggressively as you could. I am sure that, as a result, you will have a very prosperous Year of the Rabbit.
End/Friday, February 26, 1999