Following is the full text of the speech (English only) delivered by the Director of Information Technology Services, Mr Lau Kam-hung, to a forum on venture capital and technology financing in the Hong Kong Information Infrastructure Expo and Conference 2000 today (March 17):
Mr. Lam, Honoured Guests, Ladies and Gentlemen,
Good morning! Let me start by saying how delighted I am to be able to participate in this forum today, and to talk to so many prominent leaders from the venture capital and information technology industries. Today's forum features a number of internationally distinguished speakers from both Hong Kong and overseas, and I would like to take this opportunity to express our sincere thanks to them for sharing their valuable experience with us and for helping us identify new and exciting opportunities in the commercialisation of innovative IT projects.
Although we come from different organisations, I believe that we all share the common goal of using advanced technology to shape our future. And for that reason, over the next few minutes, I would like to share some of my thoughts with you and provide a brief outline of some of the Government's programmes related to technology development.
These days, when we talk about advanced technology, we usually mean information technology. And in the context of IT, it is widely accepted that Silicon Valley is the centre of worldwide innovation and technology and the paramount symbol of success in IT. In fact, many governments throughout the world have more or less set themselves the target of creating their own Silicon Valley.
Our Chief Executive, Mr. Tung Chee Hwa, once made a joke during his visit to Silicon Valley. He said words to effect that: "In Hong Kong a US$1 billion dollar company is a very successful company but in Silicon Valley a US$1 billion dollar company may be just a start-up company!" Certainly, compared with Silicon Valley, Hong Kong is just a beginner in IT innovation. However, I believe that Hong Kong is already in possession of the critical success factors that will make us the Silicon Valley of Asia. These factors are: a free market, an entrepreneurial spirit, a sound legal system, excellent infrastructure and a well-developed capital market.
Hong Kong is well known as one of the freest and most open economies in the world. Our free market principle has been established and in effect for many years. This has nurtured a dynamic and flexible entrepreneurial spirit which has been, and will continue to be, our most critical success factor. We believe that businessmen here should be absolutely free in making their business decisions and we will make every effort to uphold that principle.
At the same time, our sound legal system is fundamentally important in providing a transparent and supportive legal framework for our free market and in safeguarding our level playing field. Our legislative provisions are particularly important as regards IT, where protection of intellectual property rights is always one of the biggest concerns.
Hong Kong's telecommunication facilities are undoubtedly amongst the best in the world. Our excellent telecommunications infrastructure has placed Hong Kong in pole position in the race to become Asia's leading Internet traffic and content hub. Moreover, advanced telecommunications are critical to the development of e-commerce which has already been recognised as a cutting-edge tool for honing our competitiveness in the cyberworld.
On the financial side we have the second largest financial and capital market in Asia, next to Japan, and our venture capital market is amongst the largest in Asia. This again puts us in a favourable position on the road to becoming a truly knowledge-based economy, since easy access to financial and capital markets is crucial to the commercialisation of innovative ideas and research results.
But simply possessing all these critical success factors is not enough to turn Hong Kong into Asia's Silicon Valley. Much more has to be done and the Government has a vital role to play in facilitating the development of advanced technology and in strengthening the private sector's capability to develop innovative ideas for commercial use.
Recently, new high-tech projects in Hong Kong such as the Cyberport and the Science Park have attracted considerable investment interest. This is reflected in the good response from the multinational companies which have already signed up as anchor tenants at the Cyberport. We believe that these new projects and others like them will create an environment conducive to the fruitful exchange of ideas and technology.
Another initiative which will boost support for Hong Kong's industries in developing high value-added products is the establishment of the Applied Science and Technology Research Institute, or ASTRI. Targeted for completion in 2004, ASTRI's role will be to carry out high-quality mid-stream research and development projects for transfer to the industry sector.
The five billion Hong Kong dollar Innovation and Technology Fund provides essential financial support to projects which will contribute to innovation and the technological upgrading of our manufacturing and service industries. Applications were invited last year and the response has been enthusiastic and very encouraging, with more than 300 applications received by the closing date.
There are also a number of programmes under the Innovation and Technology Fund which are intended specifically to promote different aspects of innovation and technology. The Small Entrepreneur Research Assistance Programme is one such example. This programme is designed to fill the funding gap during the start-up phase of a fledgling technology firm. This is particularly important to the small and medium enterprises, the SMEs, of the IT industry as SMEs usually find it difficult to secure the necessary funding, even for a relatively small amount.
In addition, venture financing is also provided through the Applied Research Fund, the ARF, to the private sector to assist companies undertaking technologically innovative projects with real commercial potential. The 750 million Hong Kong dollar ARF has been entrusted to and is managed by three leading venture capital firms. We are glad to see that more than ten investments have been made so far, accounting for around one-quarter of the fund's total.
Also, GEM, the Growth Enterprise Market, is already providing an alternative mechanism enabling emerging companies to raise funds for business development. A successful GEM will in turn help attract greater amounts of venture capital to Hong Kong. At the same time, GEM also gives retail investors a new opportunity to invest in rapidly growing companies and to share in the profits of their success.
Having talked so much on the Government's initiatives, I would also like to point out that the active participation and support of venture capital and technology financing from the private sector is equally essential in enabling our new technologies to flourish in Hong Kong.
Nowadays, the number of software and Internet related companies in Hong Kong is growing at a rapid pace. These companies are different from the companies of the so-called "old economy" in that they usually invest very little in fixed assets. This makes it very difficult for them to secure loans from conventional financial institutions, which are comparatively conservative and usually focus on the value of the applicant's fixed assets. Therefore, to provide a financing solution for local IT companies, we would very much like to see venture capital firms who understand the local IT business to be more proactive in providing appropriate financial services in Hong Kong. These venture capital firms are familiar with or can easily research applicants' technological direction, as well as their growth and profitability potential so that financial arrangements may be considered for them.
With active participation from the venture capital firms in providing supportive financial services, IT companies here will thereby secure a greater opportunity to take root and flourish in Hong Kong.
Developing Hong Kong into a centre of innovation and technology requires long-term commitment from the Government and the community at large. The Government is fully committed to building an even more successful future for Hong Kong, and government initiatives will play an important part in meeting our targets. However, to be really successful we will need the involvement of the whole community, especially the venture capital community.
Today's forum gives us an exciting opportunity to share our views on tackling and exploiting the challenges of the knowledge-based world. I wish you all a most interesting and fruitful discussion.
End/Friday, March 17, 2000