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Following is a speech by Secretary for Information Technology and Broadcasting,Mrs Carrie Yau, at the Hong Kong Information Technology Forum of the International Federation for Information Processing World Computer Congress 2000 today (August 21):

Distinguished guests, ladies and gentlemen,

Welcome to the Hong Kong IT Forum. I am honoured that we are able to stage a special event on the Hong Kong Special Administrative Region (HKSAR) at the World Computer Congress here in Beijing. And delighted that with me today is a delegation of prominent Hong Kong IT industry leaders. With experts and friends from all over the world, this forum is a valuable opportunity for us to share with you the information technology strategy and development of the HKSAR.

First, a word on our economy. Following a difficult 18-month period arising from the wider financial and economic turbulence in the Asia-Pacific Region, the Hong Kong economy showed signs of a strong rebound starting from the second half of last year. Growth in our GDP had taken a sharp turn upwards of over 7% in real terms in the final quarter of 1999, with the year ending with a GDP growth of 2.9%. The figure for the first quarter of this year is even more spectacular. The economy grew by over 14% in the first three months. We have recently revised the forecast of economic growth for the whole year from 5% to 6%. Private commentators are expecting an even more impressive growth.

The economic recovery in Hong Kong is fairly broad-based, led by strong export growth of about 20%. Private consumption and investment have also been on a steady rise. Tourists are arriving in record numbers. Our container port is seeing double-digit growth. Air cargo traffic is growing equally strong.

The economic downturn earlier has given us a rather unique opportunity to look more critically at the strengths and weaknesses of the Hong Kong environment and, in a way, has helped to refocus our efforts in developing our knowledge-based industry, including the IT sector. During the financial crisis, we pushed through much-needed reforms in the financial sector to make us more competitive and to enhance our regulatory framework. We have continued to liberalize our telecommunications and broadcasting sectors. We continue to invest heavily in transport infrastructure. We are pushing ahead with reforms of the education system to equip young people with the skills needed to sustain the knowledge-based economy.

Realising that IT is the engine to drive future economic growth, the HKSAR Government has committed to developing Hong Kong into a leading digital city to help retain our competitive edge and to drive our overall economic expansion. Our framework for IT development is "Digital 21". It identifies four key factors we need to pursue so as to keep pace with the remarkable changes that are taking place. They are - developing a high capacity telecommunications system; establishing an information infrastructure with an open, common interface for secure electronic transactions; empowering our people with the know-how to use IT; and cultivating an environment that stimulates creativity and welcomes advances in the use of IT.

As we all know, a fully digitized, efficient and high capacity telecommunications infrastructure is a pre-requisite for the development of IT. This enables us to expand the amount of information we can push down the line (so to speak) without interruption. And in this respect, we are amongst the leaders. Our telecommunications system was fully digitized in 1995, and today it is one of the best and most advanced in the world.

All commercial premises and nearly 90% of our households are covered by broadband connections. Our external capacity, currently 44.1 Gbps, will increase ten-fold in the next three years. This first class infrastructure is backed up by our policy of providing a completely liberalized market emphasizing free competition and a level playing field to encourage investment. As a result, our telecommunications system is characterized by efficient and innovative services at competitive prices.

We encourage and welcome the introduction of new innovation and technology. One major example is that we plan to issue 3G licences by the end of this year. We are presently engaged in a public consultation exercise over the most appropriate way we should go about issuing 3G licences. In other words, whether we follow the lead set by the UK and adopt the auction method which may bring in a great deal of revenue for the government or use the merit system by selecting operators who are able to offer the best services to consumers at the lowest price.

There is no doubt that IT is having a profound impact globally. Not only in the way we live, but in the way we conduct business. With the advent of e-commerce, we have truly entered the borderless world. Reaching a potential customer on the other side of the globe in a matter of seconds with the click of a 'mouse' and at very little cost, is a remarkable achievement.

We want to encourage a much greater use and awareness of the advantages of e-commerce. One hurdle to overcome is making people more confident in the security of electronic transactions. We have been working on this. Supported by the operation of certification authorities and with the use of digital certificates, we can, and are, addressing the issues of authentication, integrity, confidentiality and non-repudiation in electronic transactions. The first certification authority was set up by the Hong Kong Post early this year to provide secure electronic authentication services.

We have also enacted special legislation which provides a secure and clear legal framework for electronic commerce. The legislation is based largely on United Nations' guidelines and gives electronic records and digital signatures the same legal status as that of their paper-based counterparts. And we are now accepting submissions from the public in the electronic form under the bulk of the statutory provisions in the laws of Hong Kong.

In about two months' time, we will also be implementing the first phase of our on-line Electronic Service Delivery (ESD) scheme. This will enable the public to access, a wide range of services from their home or office or special strategically-located information kiosks. Submitting tax returns, paying government bills, renewing driving and vehicle licences, and registering as a voter will be amongst the services on offer 24 hours a day, 7 days a week. The ESD scheme will also serve as a stimulus for the development of electronic commerce in the private sector by allowing commercial services to be provided electronically via the same ESD information infrastructure.

But the government is going much further in its efforts to diversify the economy into new areas, particularly in innovation and technology. We are investing in a different kind of hardware - the bricks and mortar kind - with the development of the Cyberport which will be a strategic cluster of IT companies. In the Cyberport, we will provide a world class working and living environment aimed at attracting a critical mass of IT professionals.

It will be a comprehensive development comprising a mix of offices, residential, commercial and recreational facilities. These will be supported by state of the art telecommunications infrastructure and a wide range of high-tech facilities including a multimedia laboratory and cyber library. In short, an ideal place for multinational corporations and promising local companies to apply innovation and technology. There will be a custom-built environment for the like-minded companies and professionals to exchange ideas, expertise and unleash creative synergy. The Cyberport will develop itself into an international IT centre famous for creative and innovative IT applications.

Cyberport is our IT flagship project and it is proceeding quickly. The building works are in progress and the Cyberport will be completed in three phases between end 2001 and end 2003. To date, 15 leading IT companies have signed letters of intent to become anchor tenants, such as Cisco, IBM, Microsoft, Yahoo!, Hua Wei, and Legend from Beijing, etc. Another 140 companies, local and overseas, have also registered interest to become tenants. To help the tenants to succeed, we will provide a wide range of services which are useful to them. We are now exploring collaboration opportunities between the Cyberport and the universities within and outside Hong Kong. We are also exploring an interface with other high tech centres, including, for example, Zhong Guan Cun in Beijing and INNOPOLI in Finland.

Of course, the most critical factor in our drive to embrace the New Digital Economy and to develop a knowledge-based society rests squarely on the shoulders of education and manpower training if we are to have the qualified people needed to develop and drive our IT industry. So, we have launched a five-year strategy which, in simple terms, means turning our schools into dynamic and innovative learning institutions to develop the capabilities of our students to process information effectively and efficiently; and to encourage the concept of life-long learning. I'm sure you won't be surprised when I tell you that one quarter of all our full-time degree-level students are studying IT-related courses. Even then, we still won't have sufficient number of qualified people and that's why we are looking to attract IT professionals from here in the Mainland and overseas.

Indeed, IT has become an indispensable element in the daily lives of Hong Kong people. One in two households now has a computer at home. Over one-third, or 2.5 million of our population, are Internet users. Internet traffic doubled from 5.3 billion minutes in 1998 to 11 billion minutes in 1999. And to foster even greater usage, we have implemented a wide range of measures, including the provision of computers, Internet and electronic mail services at district offices, community halls, post offices and libraries for use by the public free of charge. So this largely addresses the question of digital divide.

So far I have confined my speech to the IT scene in Hong Kong, but there are opportunities for us to link up with developments here in Beijing and in the region as a whole. We believe that China's accession to the World Trade Organisation will bring enormous business opportunities to the HKSAR. We already have well-established partnerships with provincial and municipal enterprises and with the opening of the Mainland's markets there will be substantial room for Hong Kong companies to further develop, especially those in the IT and telecommunications sectors. This investment will benefit both Hong Kong and the Mainland.

Secondly, Hong Kong is well-positioned to provide services such as resource and market matching for Mainland IT research and development. For example, our Innovation and Technology Commission provides information, through its web site, on science and technology institutions in the Mainland; the Hong Kong Trade Development Council provides information on Mainland enterprises; and the Hong Kong Productivity Council has established the Hong Kong Industry Online database. This has been linked to the China Productivity Promotion Net database in over 20 productivity centres in various cities and provinces. The database covers information about companies, markets, products, policies, investment and partnerships. And the linkage helps introduce China's technological development to the world.

Thirdly, Hong Kong's sophisticated and sound financial and banking system can continue to provide capital financing services for the development of IT enterprises in the Mainland and the wider Asia-Pacific Region. Mainland enterprises have generally preferred raising capital through Hong Kong as evidenced by the growing listings on the HK Exchange. And Hong Kong's Nasdaq-style Growth Enterprise Market, or GEM for short, was established late last year to provide development capital for emerging local, Mainland and regional enterprises, especially those related to IT. Since its inception, GEM has helped 41 emerging growth companies to raise over US$2 billion.

At the same time, Hong Kong has also developed into one of the Region's largest venture capital centres providing start-ups with a readily available source of capital. Over US$17 billion in venture capital was managed through Hong Kong last year. What this adds up to is that Hong Kong can, and does, play a significant role in the high-tech development of the Mainland and the region.

As an international city in China, Hong Kong is also well-placed to become the Internet content hub of the region, especially for Chinese-speaking communities. We are formulating suitable policies and implementing appropriate strategies to encourage local development and establishment of innovative and attractive web sites. And here I refer in particular to those that can help Hong Kong to develop into an electronic commerce gateway to the Mainland.

While I have naturally focused on areas of mutual co-operation in the IT field, we will continue to promote closer links with the Mainland in a host of other areas. Two examples readily come to mind. Recently we amended our legislation on arbitration to ensure that the spirit of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards - or what we call the "New York Convention" - also applies to the enforcement of arbitral awards between the Mainland and Hong Kong. The other example is the recent permission granted to Hong Kong solicitors and barristers to set up representative offices in the Mainland which, no doubt, will lead to further business partnerships in the future.

Ladies and gentlemen, there are other speakers to come who will give you insights into the commercial IT world, so I would simply like to leave you with this one last thought. Hong Kong's entrepreneurs are renowned for their flexibility, responsiveness and adaptation to change. Coupled with the HKSAR Government's commitment to provide a favourable environment and the necessary infrastructure for enterprises to thrive, you can't go wrong in joining us as we embrace the new era and the new Digital Economy in the 21st century.

Thank you.

End/Monday, August 21, 2000

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