Following is a speech (English only) by the Secretary for Information Technology and Broadcasting, Mr K C Kwong, at the Hong Kong Toys Council Annual Dinner,at the Grand Hyatt Hotel tonight (Monday):
Mr Wong, Ladies and Gentlemen,
I am honoured to be invited to be your Guest at the Hong Kong Toys Council's first annual dinner in the new millennium. I would like to take this opportunity to share with you some of my thoughts on the development of information technology and electronic commerce, and the implications of such development for the toy industry.
The toy industry is one of the most important industries in Hong Kong. In 1998, the value of domestic export of the toy industry was $1.2 billion. But this underestimates the true size of Hong Kong's toy industry, as many Hong Kong companies have manufacturing operations across the border in the Mainland of China and elsewhere in the region. If we take into account the total value of toys made by all these Hong Kong owned, managed or controlled toy factories, whether they are situated locally or overseas, then Hong Kong's total toy production and export would be many times bigger. Thus, for example, if we merely count our domestic export and re-export of toys, the value would be over $86 billion in 1998, making us the world's largest exporter of toys.
Hong Kong produces a wide range of toys, with particular strengths in plastic toys, electronic toys and games, remote controlled toys, and battery-operated toys. Our manufacturers are world renowned for their flexible production capability, reliable quality assurance, and the ability to meet customers' safety and testing specifications, even for small orders at short notice. This has made Hong Kong the preferred original equipment manufacturing (OEM) supplier to many overseas buyers. Also, many Hong Kong toy companies have developed their own private brands which are carving out a niche in the global market.
The success of Hong Kong's toy industry can be attributed in part to its ready acceptance and adoption of information technology. For example, it is quite common to find state of the art manufacturing techniques, such as computer-aided design and computer-aided manufacturing systems, used in product design, tooling and the rest of the manufacturing processes in our toy factories. And we are seeing more widespread application of embedded computer chips in "traditional" toys which allows them to become "interactive" and "intelligent". A notable example of this new breed of toys is the plush toy "Furby" which is marketed by a US toy company but made in Hong Kong on an OEM basis. "Furby", which makes use of the "artificial intelligence" in its embedded chip, can be trained to sing, dance and play games. It also interacts through sight, touch, hearing and physical orientation, and communicates with other "Furbys" via infrared signals.
The increasing popularity of the Internet also has a profound impact on the toy industry. There are now over 150 million users of the Internet world-wide, and a significant proportion are children. For example, in the US, about 40% of the children aged between 9-14 have access to computers and 22% are actively using the Internet. This means that an increasing proportion of children's time will be occupied by the PC and the Internet, time which might otherwise have been devoted to playing conventional toys. This makes it essential for the toy industry to expand into cyberspace and use the Internet as an additional channel for toy promotion and sales. Development in the US on this front is instructive. It is estimated that the value of toys retailed through the Internet in the US market will increase from US$ 68 million in 1998 to US$ 1.5 billion by 2003, an 20-fold increase over a period of 5 years. Thus cyber toy stores like eToys and Smartkids.com are making a serious challenge to the dominance of conventional brick and mortar toy stores. Moreover, these cyber toy stores often also provide other value-added features which conventional toy stores lack. For example, they provide guidance and gift ideas for customers and engage experts like educationists to review their toy products.
Separately, we have also witnessed a trend for toy manufacturers to collaborate with companies in the IT industry which helps to expand their company profile and increase their market reach. For example, we have seen the merger of toy companies with educational software companies which represents a strategic move to turn a conventional toy company into one excelling in producing innovative tools on children educational activities.
Ladies and gentlemen, the developments and trends which I have just outlined show clearly that our toy industry must use information technology aggressively if we wish to out-perform our competitors in the Information Age. The same applies to all other business sectors as well. And the use of IT must be extended beyond product design and manufacture. We must use IT aggressively in improving the whole of our business processes, up and down the entire value chain. By so doing, we can improve efficiency, enhance productivity, streamline supply chain management, reduce cost, provide innovative value-added services, and ultimately expand our market and strengthen our overall competitiveness in the global market. This relentless adoption of electronic business is a world trend. And we must join the club if we wish to stay ahead of our competitors.
The Government fully recognises the importance of electronic business to our future economic growth. We are committed to providing a favourable environment for electronic business to take hold and flourish in Hong Kong and have launched several bold initiatives to this end. For example, through the Electronic Transactions Ordinance which was enacted by the Legislative Council last week, we are providing a clear legal framework for the conduct of electronic transactions. Under the new Ordinance, we are giving electronic records and digital signatures the same legal status as their paper-based counterparts. We will also strengthen public confidence in electronic business by establishing a local public key infrastructure, to be supported by the operation of recognised certification authorities. Through the use of private/public key cryptographic technology and digital signatures, participants in electronic transactions will be able to ensure the authenticity, confidentiality, integrity and non-repudiation of messages exchanged in those transactions. The Hongkong Post will be providing the certification services shortly to both individuals and businesses. The Government will also take the lead in electronic business by providing its services to the community on-line. We are now working in earnest with our chosen private sector partner to develop the common open platform for the Electronic Service Delivery (ESD) Scheme. We expect phase 1 of ESD to be up and running in October. ESD will enable the public to obtain Government services through the Internet and other electronic means in a seamless manner, 24 hours a day and 7 days a week.
Through these initiatives, we aim to pump-prime the development of electronic business in the private sector. I am excited to learn that some of you in the toy industry are ahead of us in the adoption of electronic business and gained much success. For example, some of you have already set up your own on-line stores targeting the collectible toys market in the United States. Some have set up their web sites through the Enterprise Internet network of the Trade Development Council to market their toy products overseas. And some have formed alliances with major cyber toy stores to broaden their market reach in cyberspace.
All these initiatives have been well supported by the Toys Council. For example, the Council has organised seminars on "Hong Kong Toys Industry On-line", set up an electronic data bank for the industry to provide toy manufacturers with easy access to essential information conducive to raising productivity and improving operational efficiency, and developed a code of business practices certification programme to enhance the quality of Hong Kong toy production. Under its able leadership, I look forward to seeing further development in this direction which would make our toy industry even more competitive and versatile.
I take this opportunity to salute you and wish you every success as you rise to the challenges of the Information Age.
END/Monday, January 10,2000