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Following is the full text of the speech by the Chief Executive, Mr Tung Chee Hwa, at the Microsoft Asia Enterprise Summit '99 today (Tuesday):

Ladies and gentlemen,

I am glad to take part in the Asia Enterprise Summit '99 today. The staging of this prestigious and important event in Hong Kong, which brings together the chief executive officers and other corporate officers of major companies in the region, reflects our position as a leading financial and business centre in the Asia Pacific region. I am grateful to Microsoft for sponsoring this event and offering me this opportunity to address such a distinguished gathering.

Ever since the establishment of the Hong Kong Special Administrative Region twenty months ago, we have sought to build on Hong Kong's economic strengths and to improve the quality of life for Hong Kong people. Despite the financial turmoil last year, we have never wavered from the implementation of this economic strategy. In fact, the Annual Budget announced by our Financial Secretary last week represents a key milestone in the implementation of this strategy. It also lays a solid foundation for the early recovery of our economy. We are pushing forward in many sectors including financial services, tourism and, of course, information technology.

It has always been my firm belief that innovation and technology are crucial drivers of economic growth and expansion. This is particularly so in the knowledge-based global economy in which we now live. Innovation and technology are the principal means to improve efficiency and productivity, add value and enhance our overall competitiveness. In short, innovation and technology are the architect for building our future.

This is well borne out by developments in Hong Kong and overseas. In 1998, notwithstanding the economic downturn in Hong Kong, our software business has grown by 21%. Moreover, there is virtually no unemployment in the information and technology field. In the world's largest economy, that of the United States for example, 80 per cent of productivity growth is attributed to technological and knowledge-based advances. In particular, the computer and telecommunications industries accounted for more than one-quarter of the US economic growth in the past five years. Another example is Israel, which I visited recently. The country's technology exports now account for 65% of its total exports. Through its strong commitment and firm dedication to investing in the technological infrastructure, Israel sprang from practically nothing to become one of the leaders in the field of information technology. I was deeply impressed by what I saw, and my first hand experience there re-affirms my conviction that we should develop long term policies to promote the development of a technology-based and high value-added economic sector in Hong Kong. This is particularly important when we are making adjustments to our economy as we emerge from the Asian financial crisis of the past year.

The Government has a vital role to play in creating the right environment for innovation and technology to develop and flourish in the community. Let me briefly explain to you some of our key initiatives. In the pursuit of innovation and technology, it is without doubt that human capital is the single most crucial ingredient that will materially affect our chance of success. In this regard, we will continue to invest heavily in education which at HK$44 billion will be the single biggest item of our recurrent expenditure in the coming financial year, as it was in the last financial year and the year before and years into the future, I believe. We will also be setting up a special Task Force to review our immigration policy critically to facilitate the inflow of talent. In particular, the Task Force will consider how best to remove restrictions on scientists and highly-skilled technologists from the Mainland entering Hong Kong to work. I hope our efforts in this respect will help to quickly widen the pool of potential talent and supply of quality people to help realise our vision.

Last year, I set up the Commission on Innovation and Technology, chaired by Professor Tien Chang Lin of the University of California, Berkeley. The Commission has completed its first report and made a number of recommendations to enable Hong Kong to, among other things, position itself as a leading city in the world for the development of information technology, especially in electronic commerce and software engineering.

To kick start the development of electronic commerce in Hong Kong, the Government will take the lead by implementing the Electronic Service Delivery scheme - a scheme to provide public services to the community via the Internet and other electronic access means using an open and common information infrastructure. The first phase of the scheme, which offers selected services from ten Government departments and public agencies, will be launched in the latter half of the year 2000. We shall provide a safe and secure environment for the conduct of electronic commerce through the establishment of a local public key infrastructure and a public certification authority by the Hongkong Post. We expect this public certification service to be available to businesses and individuals by the end of this year. We shall also develop a clear legal framework to enhance certainty in the conduct of electronic transactions.

In addition, we shall develop a common Chinese language interface to facilitate electronic transactions and information exchange in Chinese. With our excellent telecommunications infrastructure, our unique position as a Special Administrative Region of China and our bilingual language capability, we have an unparalleled advantage in serving as an information gateway to the Mainland and in developing into an Internet traffic and content hub in the Asia Pacific region.

We fully appreciate how difficult it is for our industry, particularly the small and medium sized enterprises, which comprise over 95% of all our businesses, to invest heavily in research and development. To strengthen the capability of our private sector in developing innovative ideas for commercial use, I have accepted two key recommendations of the Commission on Innovation and Technology. Firstly, the establishment of an Applied Science and Technology Research Institute to support and stimulate mid-stream research. Secondly, the setting up of an Innovation and Technology Fund of HK$5 billion to finance projects which will contribute to innovation and technological upgrading of our manufacturing and service industries. These may include commercially relevant R&D projects, activities to promote technology diffusion, sourcing and acquisition, and those which would enhance technological entrepreneurship.

In addition to the foregoing initiatives, we are embarking on a project that will put us in a strategic position in the development of information technology and services, namely the development of a "Cyberport". The project will be developed by the Government in partnership with a leading information services company in the private sector. Let me do a little bit of marketing here. The Cyberport is a US$1.6 billion development on 26 hectares of land on the southern part of Hong Kong Island. It will offer the best working and living environment and infrastructure facilities for leading-edge information technology and services companies. In addition to leading international names in the information technology and services field, the Cyberport will also cater for the needs of smaller local companies. These companies will be able to benefit from the shared facilities, such as multi-media laboratories and broadband telecommunication infrastructure, which we will provide in the Cyberport. They will also be able to come into close contact and exchange ideas with leading international companies in the industry. I am confident that a good cluster of information technology and services companies will form at the Cyberport. Already, a fair number of leading international companies in this field have indicated that they will become anchor tenants. I hope more will join later on.

In order to provide an environment conducive to the development of innovation and technology, we are fully committed to the protection of intellectual property rights. Infringement of intellectual property rights denies the rights owners the opportunity to make a reasonable return on their investment and to slow down the momentum of a knowledge-based economy in sustaining its growth. While we recognise that we are facing an uphill battle against infringement of intellectual property rights, I am pleased to note that our legislative regime is being recognised as one of the best in the world. We are currently conducting a public consultation exercise to see whether and how it can be further strengthened. At the same time, we will continue to step up our enforcement and education effort to combat all forms of infringement.

Ladies and gentlemen. Asia is now going through a difficult time after last year's financial crisis. But we in Asia are determined to recover - and to recover as early as possible. We in Hong Kong are very confident of our future. Hong Kong is fortunate, as we are the gateway of the fastest growing economy in the world. Under the framework of "One Country, Two Systems", a concept which has been successfully implemented in the past twenty months, we shall position ourselves properly to take advantage of the tremendous opportunities on the Mainland and of course we can also say this opportunity applies to areas of information technology in both development and the marketing point of view. We, as the Government, will continue to play a leading role in creating an environment that is conducive to expanding further economic links with the Mainland.

In closing, let me reiterate that innovation and technology are the keys to our continued growth. We must continue to invest heavily to promote innovation and technology, to provide a favourable environment to nurture them, and for them to flourish. This is our firm policy and this is how we are paving the way forward as we enter the new millennium.

Finally, let me thank Microsoft for bringing this Summit to Hong Kong. I am sure the discussions at both the formal sessions as well as in the margin of the meetings will provide pointers and insights as to how we should shape and build our future, and we will all benefit from it. Thank you very much.

END/Tuesday, March 9, 1999

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