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

The following is the speech by the Financial Secretary, Mr Donald Tsang, at the Opening of the 10th Conference of the International Public Procurement Association, Hong Kong, today ( April 17):

Mr. President [Mr Nigel Shipman], Ladies and Gentlemen,

I am honoured to be here today to welcome delegates and their guests to Hong Kong for this important conference. For those of you making your first visit here, I hope you enjoy your stay. I certainly don't think it will be long before you start to feel the 'buzz' of our vibrant city - a feeling that hopefully will make you want to come back again and again. We like to have that effect on visitors as it does wonders for our tourism industry and the economy!

Of course, there are other international delegates who may have been here on previous visits prior to our reunification with China in July 1997. I am sure it will come as no surprise when I tell you that things are pretty much the same today as they were before the handover. Under "one country two systems", our free-wheeling capitalist way of life has not changed. All the freedoms we have grown up with over the years are alive and well. Our level-playing field for business, our clean and efficient administration, the independence of the judiciary and the rule of law are all protected and guaranteed under our new constitution, the Basic Law.

We continue to manage our own economic and trade affairs and the Hong Kong Dollar remains firmly linked to the US dollar - a factor that helped us to withstand the shocks of the Asian financial turmoil. Fortunately, we seem to have put the worst of the crisis behind us. Last year our economy grew by 2.9% and is forecast to expand by 5% this year with the prospect of sustained recovery in the medium term.

Even in difficult times we have been able to continue to develop our infrastructure, in particular a massive railway building programme involving more than $100 billion dollars (US$13 billion) , is now under way. We are pursuing robust measures to keep the public sector lean and efficient. And we are taking urgent steps to improve our environment, which has become a real problem in the past few years.

You may have noticed the quality of our air is not as good as we, or you, would like it. In fact, we don't want to be able to see it at all, and we have embarked on a programme that will result in cleaner air in the next three years. By that time there should be a 60% reduction in the emission of certain pollutants from vehicles. There will be far fewer diesel taxis on the roads and many of those will have switched to using liquefied petroleum gas. We are also adopting a raft of other measures to clean up our act so we can avoid a situation arising where environmental problems severely impact on our economic development.

While Hong Kong is bouncing back after the Asian financial turmoil, we have taken advantage of the past couple of years, not only to build on our strengths as a key international financial centre, but to diversify our economy into the new areas of growth - innovation and technology. The Internet, e-commerce, the dot-com revolution have been the catalyst for our entrepreneurs to seek out new ideas and discover new solutions for the new economy.

In conjunction with the private sector we are developing a high-tech Cyberport that will bring together a cluster of leading information technology and information services companies involved in advanced IT applications and services as well as multi-media and content creation. Cyberport, together with a Science Park now under construction in the New Territories, are designed to consolidate Hong Kong's position as the premier IT and communications hub in Asia, as well as a centre for innovation in technology-based industries. I was interested to learn that in your own industry you are taking advantage of innovation and technology to implement the latest best business practices and, in some cases, to break new ground in the use of the Internet and e-commerce. And I will come back to that point shortly.

One of Hong Kong's strengths as an IT centre is our comparatively high level of computer literacy and a readiness to make use of e-transactions in our daily lives. Analysts have estimated that the value of these transactions in Hong Kong will reach US$2.4 billion by 2003. Nowadays, young people find that learning to use computers is as natural as learning to walk or to speak. We are capitalising on this phenomenon by launching a major programme to integrate the latest information technology within our education system.

In support of the programme, our Government Supplies Department has entered into special framework agreements with suppliers of computers and related equipment. These agreements extend over 30 months and are valued at about US$130 million. But to get the best value, we departed from our traditional tendering procedures. Instead of requiring schools to engage the service of a single specified supplier, we now qualify five suppliers on the basis of their quotations of ceiling prices. Schools are then given the freedom to draw down their requirements from any of these five suppliers, at prices which may be less but no greater than that supplier's tendered prices.

These framework agreements provide for continued competition after the contract has been awarded and enable schools to obtain the best value in terms of price and the product range. As you all know, this is particularly important when purchasing high technology items because they can rapidly become obsolete and are subject to significant price mark-downs as newer and more advanced versions become available. They also allow suppliers to offer newer and more advanced versions at the prevailing market price.

While this is quite a divergence from the old tendering practices - certainly in our case - it is the Internet where we see the greatest scope for innovative developments in the government procurement field. The Hong Kong government already uploads a veritable mountain of information onto the worldwide web. And the Government Supplies Department is now breaking new ground by bringing e-commerce to procurement services.

A private sector-built electronic tendering scheme (ETS) has been launched by the department to enable subscribers to download the government's tender documents electronically and to submit their offers through secure electronic means. The tyranny of distance and time is overcome by this 21st century alternative to the traditional method of depositing paper copies in a tender box.

Some countries have already developed systems that allow for the electronic distribution of tender documents, but Hong Kong must be amongst the few to launch this dual-flow interactive scheme that not only distributes tender information, but collects bids as well. Of course, not all tender offers can be lodged electronically, but ETS is a major milestone for the government. I understand you will hear more on the scheme in a later session.

Our Government Supplies Department is also enhancing the use of e-communication in its own purchases through its web site. In addition to detailed information on current and planned future tenders, the government's system of procurement and standard contract terms, it recently added an electronic catalogue of the main common-user items that can be supplied by the department. When you consider the vast amount of money spent each year by governments around the world in procuring their necessary requirements, the more widely our services and needs are promoted the better the deal we get. Last year alone, the Hong Kong government spent a record US$865 million on purchasing supplies.

Of course, the greater use of electronic transactions in commerce and the delivery of services requires an appropriate legal framework and secure systems to prevent 'hacking'. In Hong Kong this is provided by the Electronic Transactions Ordinance which was enacted in January and gives legal recognition to electronic records and digital signatures, on a similar basis to that of their paper-based counterparts.

We are also providing a secure environment for the conduct of electronic transactions with the issue of digital certificates by certification authorities and through the use of digital signatures and public and private key encryption. Together, these will provide the means of ensuring that individuals and companies will be able to establish the identity of the opposite party in e-transactions, authenticate the messages received, ensure the confidentiality of the messages exchanged and safeguard against the retraction of commitments made in electronic transactions.

We hope these measures will give people in Hong Kong more confidence in using e-commerce over the Internet, something they have not taken up as enthusiastically as they have taken to browsing because of past concern over the security of electronic transactions.

In the next few days, delegates will be able to delve further into these and many other topical issues affecting public procurement. I am confident that these exchanges will be enlightening and thought-provoking for all of you.

Despite your hectic schedules, however, I do encourage you to reach out and experience the excitement and diversity of our city. But if you miss the chance, don't panic either. You are more than welcome to come by another time. After all, new attractions are being planned and projects like Hong Kong Disneyland are just around the corner.

Ladies and gentlemen, in closing, I just want to leave you with this little bit of 'procurement advice' from the 17th century English clergyman and metaphysical poet, George Herbert - "the buyer needs a hundred eyes, the seller not one". That may be as true today as when it was written in 1651.

Thank you.

End/Monday, April 17, 2000

NNNN