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Following is a speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the luncheon meeting of the Rotary Club of Peninsula's today (Tuesday):

Mr Chan, Ladies and Gentlemen,

Thank you for inviting me to the luncheon meeting today. I would like to use this opportunity to introduce to you the Government's strategy on the development of information technology (IT) and in particular, to talk about the Cyberport Project which I think many of you will be interested in.

Advances in IT have brought about a lot of changes, from the way we work, the way we communicate, to the way we do business. The important question is how should we prepare ourselves for the Information Age and how to grasp the opportunities offered by the digital world.

In November last year, my Bureau issued the "Digital 21" IT Strategy which contains a range of initiatives to enhance and promote Hong Kong's information infrastructure and services in order to make Hong Kong a leading digital city in the globally connected world.

Our key initiatives include: first, the development of high capacity telecommunications networks which provide the arteries through which digital information flows; second, the establishment of an open and common interface as well as a public key infrastructure so that individuals, businesses and the government can interact through digital networks easily and securely; third, the adoption of IT in education and provision of IT training in order to equip our younger generation and our work force with the necessary skills required in the digital world; and fourth, the cultivation of a culture which welcomes the use of new technologies in the community.

We believe our IT Strategy will ride on Hong Kong's strengths. Instead of going through the initiatives of the IT Strategy one by one, I would like to focus on the two specific areas which relate directly to the business sector. They are the adoption of electronic commerce and the development of Hong Kong into an Internet content hub.

The rapid development of the Internet has great impact on the way we do business. Let's first take a look at the adoption rate of Internet and transactions over the Internet. In 1994, there were about 3 million Internet users world-wide, most of whom were in the US. Now there are some 112 million Internet users all over the world. In Asia alone, there are about 12 million users. The growth in the value of transactions over the Internet is equally impressive. It grew from virtually nothing in 1994 to US$43 billion in 1998. Some analysts have suggested that the figure would reach US$1 trillion by 2002.

So what does this mean for our businesses? The short answer is it means new opportunities. Let me briefly talk about some of these opportunities.

First, the Internet knows no geographical boundaries or time zones. Through electronic commerce conducted over the Internet, businesses, especially small and medium-sized enterprises, can reach new markets which may be too costly to explore through conventional means.

Second, through closer and more direct contact with both customers and suppliers via the Internet, businesses can trim down unproductive inventory, shorten production cycles and reduce time to market for new products and services. With electronic commerce, expansion of sales and marketing activities will incur much less additional costs and efforts. And over time, we shall see web sites over the Internet gradually replacing physical shops and sales teams in many traditional businesses.

Third, by putting information on product description, support services or order status online, businesses will be able to provide more efficient and effective services to customers.

The challenge for Government is for a safe and secure environment to be created for the conduct of electronic commerce. To meet this challenge, we will establish a local public key infrastructure and a root certification authority in Hong Kong. Through the use of digital signatures, accompanied by properly issued digital certificates and encryption using public/private key pairs enabled under the public key infrastructure, we will be able to establish the identity of the parties to an electronic transaction, authenticate the electronic messages so transmitted, guarantee the integrity and confidentiality of the messages and ensure that they cannot be repudiated. I am glad to say that the Hongkong Post which has been tasked with the establishment of the public key infrastructure has worked expeditiously in this regard and its certification service should be up and running by the end of this year. In response to the Hong Kong Posts, recent tender exercise for the design, supply, and implementation of the relevant systems, 13 bids have been received. Thus shows the keen interest by the industry in helping to build this environment as well.

In parallel, we are preparing legislation to provide greater certainty in the conduct of electronic transactions. Briefly, the legislation will prescribe that electronic records will have the same legal status as their paper-based counterparts. It will also provide for the voluntary registration of certification authorities and the legal recognition of digital signatures accompanied by certificates issued by these registered authorities.

On top of these, Government will take the lead in introducing the Electronic Service Delivery (ESD) Scheme which enables the delivery of public services online through the Internet and other electronic means. We expect that the ESD will act as a catalyst to pump-prime the development of electronic commerce in Hong Kong. In response to our tender exercise, 6 proposals have been received. They represent solid overseas and local companies in the telecommunications or IT sectors. Again this is a good sign of the industry rising to the challenge in this very important initiative.

Turn to the second area of focus, i.e. the development of Hong Kong into an Internet content hub. As many of you will know, the global Internet boom has already given rise to a whole new industry of Internet service providers, web-page designers, Internet shopping support services and so on. While I agree that there is a lot of scope for the consumption of Internet services and content in Hong Kong, I think an even greater opportunity lies in the development and supply of these services and content from Hong Kong to the rest of the world. Given our bilingual capability, the free flow of information in and through Hong Kong, the freedom of expression that we enjoy and our unique position as a Special Administrative Region of China, Hong Kong is particularly well placed to serve as the Internet content hub for the Asia Pacific region and as the digital intermediary for doing business with the Mainland of China. With this in mind, we are now working with our universities and trade and industrial organisations to develop Internet-based applications and contents which will leverage on our uniquely advantageous position.

In parallel with this, another major initiative that we have undertaken is the proposed development of the Cyberport which was recently announced by the Financial Secretary in his Budget Speech. This Cyberport project will be implemented through partnership between the Government and the private sector. We plan to build in the Cyberport an ultra-modern intelligent building complex, equipped with state-of-the-art broadband telecommunications and information backbones to meet the needs of leading edge IT applications and services companies. Also, the Cyberport will provide a wide range of shared facilities for tenants, such as media laboratory, a cyber library and a cyber mall. There will also be educational, entertainment and recreational facilities related to information technology and services for visitors and tourists.

Our target tenants are companies that apply advanced IT for applications and services to enhance the competitive edge of our leading businesses and industries, and for multi-media and other content creation, such as film production, 3-D graphics and animation. Since we intend to make the Cyberport a central point for exchange of expertise in technological advances, tenants introducing new, leading-edge applications of IT to Hong Kong will be most favourably considered. In addition, services enhancing traditional business, for example, electronic commerce, companies providing essential services in support of tenants' global or regional business, and utilising Cyberport as a hub on the global information infrastructure will also be highly considered. We will aim to maintain a healthy mix of IT and services companies in the Cyberport.

We expect that the Cyberport will help spur the development of the information technology and services industries in Hong Kong. Furthermore, by attracting both leading multinational and local information technology and services companies to the Cyberport, local companies will be able to benefit through working closely with market leaders and achieve synergy, including collaboration in developing local content and applications, which will go a long way in advancing the realisation of Hong Kong's position as a major Internet content hub.

The digital world offers enormous opportunities for everyone of us. I would like to urge everyone of you to tap the strengths we already have and to grasp these new opportunities and maintain Hong Kong's leading position in the ever competitive business world.

Thank you.

End/Tuesday, April 13, 1999

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