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The following is a speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, in addressing the Alliance Partner Presentation in Vancouver today (Monday, Hong Kong Time):

The Honourable Mike Farnworth, Mr Kevin Lynch and Mr Stuart Culbertson, distinguished guests, ladies and gentlemen,

I am very pleased to have the opportunity today to share with you some of my thoughts on the subject of electronic commerce and its development in Hong Kong.

Electronic commerce is in fact not a new phenomenon. Those of you who have worked in the Information Technology industry for some time will recall the introduction of electronic data interchange as the means to enable communication along the whole supply chain electronically. Alas, EDI has not taken off in a big way on a global scale. The primary reason is it relies on proprietary technology and private communication networks. The advent of the Internet, with its open IP platform and global connectivity has changed all that. Companies, big and small, can now communicate electronically at affordable prices over the Internet, using readily available non-proprietary software and standard format. What is more is that by leveraging on the latest advances in information technology, telecommunications and multi-media content creation, electronic commerce has become the key tool in enhancing corporate competitiveness. The increasing connectivity of the world via the Internet enables businesses to become more adaptive and responsive to changes in market conditions, allows them to develop new markets globally and more effectively, facilitates their targeting of customers on a localised or even individual basis, and helps them to improve their management of the entire value chain.

All this has enabled electronic commerce to really take off. Industry estimates suggest that the total value of transactions worldwide over the Internet stood at US$200 million in 1998 and will grow to over US$ 1 trillion in 2003. In the Asia Pacific region, similar phenomenal growth is expected.

So, what is the situation like in Hong Kong, or in China? In Hong Kong, our total number of Internet users has surpassed the one million mark (out of a population of 6.8 million) and is continuing to grow. In the past 12 months, the volume of Internet traffic has doubled and the number of Internet users making purchases online has increased by 50%. Industry estimates suggest that the total value of products and services transacted over the Internet in Hong Kong will increase from US$60 million in 1998 to US$2.4 billion by 2003. These statistics and forecast indicate that Hong Kong is poised to ride on the electronic commerce wave.

Of course, the potential market in Mainland of China is even more impressive. The number of Internet users there has doubled from about 2 million last year to some 4 million now. If this growth continues, China will be the second largest Internet population in the world in a few years time. Industry experts estimate that electronic commerce turnover in the Mainland of China will leap from a minuscule US$8.1 million in 1998 to US$3.8 billion by 2003. With the increasingly close ties between the Mainland and Hong Kong, and the affinity on the basis of a common language and culture between the two places, businesses in Hong Kong are uniquely well placed to capitalise on the opportunities in the Mainland by taking advantage of the development of electronic commerce there.

We in the HKSAR Government recognises that electronic commerce will be the engine of growth in the new millenium and we are taking every means to encourage its wider adoption in Hong Kong. I would like to highlight some of the initiatives that we have launched to achieve this.

First, we are implementing the Electronic Service Delivery (ESD) Scheme - a scheme under which we will provide government services to the public round the clock and in a seamless manner over the Internet. The services that will be included in the first phase includes payment of Government bills, submission of tax returns, applications for driving and vehicle licences, registration of voters, job searches and the like. ESD is intended not just to improve the quality of public services. It is also intended to pump-prime the development of electronic commerce in the private sector by getting our citizens used to obtaining services over the Internet and by providing a platform for use by the private sector for the conduct of electronic commerce.

Second, we are establishing a local public key infrastructure through the Hongkong Post. We recognise that a major impediment to the adoption of electronic commerce by individuals and SME's is the concern over security of transactions conducted over an open platform. By means of private/public key cryptographic technology and digital signatures, we can ensure the security of the transactions. We expect that Hongkong Post's public/private key and certification services will be available by the end of the year. But it will not be given exclusivity in the provision of such services as we would welcome the establishment of competing services by the private sector, including those from Canada.

Third, we are strengthening our legal framework to provide legal certainty for electronic transactions. We have recently introduced an Electronic Transactions Bill into our legislature. The Bill aims to give electronic records and digital signatures the same legal status as that of their paper-based counterparts. The Bill also seeks to establish a clear framework to support the operation of certification authorities in Hong Kong. We are optimistic that the Bill will receive the support of our legislature and be enacted before the end of the year.

Last but not least, in conjunction with our trade and industrial organisations, we have launched a series of promotional activities to educate our companies, especially SMEs on the why's and how's of electronic commerce. We are also providing easy-to-use packaged solutions aimed at providing them with the means to set up virtual shop fronts and to manage the electronic transaction data.

Through these initiatives, we seek to create a favourable environment for electronic commerce to take hold and flourish in Hong Kong. Canada has been one of the most important trading partners and business alliance with Hong Kong. Both places share the same aspiration to be a leading knowledge based economy. I am confident that the close cooperation between our two places will be mutually beneficial to our efforts to achieve that aspiration. I look forward to working together with you all.

Thank you.

End/Monday, November 8, 1999

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