**************

The following is a speech by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, in addressing the ASOCIO Conference and Exhibition in Canberra today (Monday):

Mr Roach, Mr Baxter, Mr Maloney, Senator Campbell, distinguished guests, ladies and gentlemen,

I am honoured to be invited to speak at the opening of the 1999 ASOCIO Conference and Exhibition today. The ASOCIO Conference and Exhibition is one of the most important IT events in the region.

All of us who work in the IT field know that IT will be the engine of growth in the next millennium. Like most other economies, Hong Kong fully recognises this and has formulated an IT strategy with the aim of enhancing and promoting Hong Kong's information infrastructure and services so as to make Hong Kong a leading digital city in the globally connected world of the 21st century.

Today, I would like to outline to you some of the initiatives which we have launched under our IT strategy.

First, we recognise that to become a leading digital city in a globally connected world, we must have a high quality and high capacity telecommunication infrastructure which would provide bandwidth and services at affordable prices. This is a prerequisite for us to fully exploit the business opportunities in the Information Age. Judging by world standards, Hong Kong is not lagging behind. For example, our broadband network covers practically all business buildings and some 75% of all households. And the network is continuing to be rolled out and we expect the residential coverage to increase to 85% within the next year.

Despite our relatively small size, we have four local fixed telecommunications network operators and we expect to license a fifth one shortly, based on the local cable TV network. This will bring broadband coverage to even more homes. But we think that demand for bandwidth will rise at such a rate that we must encourage even more broadband capacity locally. This is because we have some 1.5 million Internet users (out of a population of 6.8 million people) and the number is continuing to grow, while Internet traffic measured by dial-up minutes have doubled in the past year. To encourage further local broadband coverage, we have decided to license local wireless fixed telecommunications networks. This policy has been well received by industry, as evidenced by the response to a recent open invitation for applications to provide such wireless networks. We received a total of 14 such applications and are aiming to complete the evaluation process so that we can award licences to successful applicants early next year.

On the external front, we are already well connected to the global telecommunications network. This enables us to access literally anywhere in the world through electronic linkages. Today, our total capacity of submarine cables stands at 44.1 Gbps, second only to Japan in Asia. With more additional capacity being put in place in the coming years, our external capacity will increase to 764.1 Gbps by 2002. But we are not complacent. The growth of data traffic is such that we must substantially increase our external capacity if we are to maintain Hong Kong's position as a leading telecommunications hub in Asia. We have therefore decided to further liberalise the telecommunications market to encourage even more investment in external capacity. I am glad to say that this policy has also met with very positive response from the market and we received 34 applications for external facilities licences to provide and operate new external cables and satellites. If all these applications came to fruition, we will see yet another several fold increase in our external telecommunications capacity!

Second, we note that one of the primary reasons people have not taken up electronic commerce over the Internet as enthusiastically as they have taken up browsing is the concern over security of such electronic transactions. To resolve this problem, we will provide a safe and secure environment for the conduct of electronic commerce in Hong Kong through a local public key infrastructure supported by the establishment of certification authorities.

With the use of digital signatures and public/private key mechanism, we will be able to establish the identity of the parties to an electronic transaction, authenticate the electronic messages transmitted, guarantee the integrity and confidentiality of the messages exchanged and ensure that the transactions made with these messages cannot be repudiated. We will take the lead in the establishment of a public certification authority through the Hongkong Post. The department has already awarded the contract for the supply of the public key infrastructure system and is aiming to offer public certifications services to both businesses and individuals by the end of this year. We will actively explore and develop cross recognition for certification authorities between Hong Kong and other economies, including Australia, either on a bilateral or multilateral basis in order to facilitate cross-border electronic commerce.

Third, the HKSAR Government is taking the lead in electronic business by providing public services on-line under our Electronic Service Delivery (ESD) Scheme. Under the scheme, we will provide Government services to the public over the Internet and through other electronic means via an open and common information infrastructure. The services will be provided in a citizen-centric and seamless manner and the services will be available 24 hours a day, 7 days a week. The public services that we have chosen for inclusion in the first phase of the scheme are the ones which members of the public are most likely to use. So they include payment of Government bills and fines, submission of tax returns and payment of taxes, applications for driving and vehicle licences, notification of changes of addresses and job matching through the Labour Department.

We have just awarded the ESD contract to Timbo Star, a joint venture between a local fixed telecommunications network operator and a multinational computer company. It is committed to completing the infrastructure and systems for the launching of services by October next year. The contractor will be allowed to use the same infrastructure and systems to provide e-commerce services to the private sector. Through ESD, we will not only improve the quality of our services, but also help to create an environment and a climate conducive to the development and take-up of electronic commerce.

Fourth, we are establishing a proper legal framework to provide certainty for electronic transactions. We have recently introduced the Electronic Transactions Bill into our legislature. The Bill seeks to give electronic records and digital signatures used in electronic transactions the same legal status as that of their paper-based counterparts. The Bill will also seek to establish a framework which will promote and facilitate the establishment and operation of certification authorities in Hong Kong. We expect the Bill to be passed by our legislature by the end of this year.

I am confident that with all these initiatives, we shall see the wider adoption of e-commerce in Hong Kong. Indeed, 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 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 have the second largest Internet population in the world in a few years time. Also, industry experts have forecast 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. And this forecast was made before the recent successful conclusion of the negotiations between the US and China on China's accession to the World Trade Organisation. The potential for electronic commerce to develop in the Mainland of China is thus enormous. 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.

I am confident that you will find excellent and rewarding opportunities for doing business, either by yourselves or in partnership, in Hong Kong. And of course, you should also consider using Hong Kong as a bridge to the enormous market in the Mainland of China. We look forward to partnering with you to jointly exploit the opportunities in the Information Age.

Thank you.

End/Monday, November 22, 1999

NNNN