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Following is a speech by the Secretary for Information Technology and Broadcasting, Mrs Carrie Yau, at the "Hong Kong as the Preferred IT Hub after WTO" Conference today (May 10):

Mr Yu, Ladies and Gentlemen,

Thank you for inviting me to the conference today to speak on a subject that is close to my heart - "Hong Kong as the Preferred IT Hub after WTO". I am delighted to see so many leading CEOs and CTOs from different businesses this morning and I would like to share with you the Hong Kong Government's strategy and initiatives to drive IT development in Hong Kong.

Today, I will focus on three areas : first, where we stand on IT development; second, our Digital 21 Strategy to drive Hong Kong's development as a leading digital city connecting the world; and finally, potential business opportunities in the IT and telecommunications field with China's entry to the World Trade Organisation.

IT Development in Hong Kong

Let me start with a brief overview of the latest IT development in Hong Kong. We are an early adopter and mature user of IT:

* 60% of our households have installed personal computers;

* our broadband network reaches all commercial buildings and over 95% of households;

* 50% of our households are connected to the Internet, and of which 40% are using broadband;

* nearly 40% of our businesses have made use of the Internet in their operation, and of which over 30% are using broadband;

* there are over 2.6 million Internet accounts for a population of around 7 million people;

* all our schools are linked to the Internet, with 90% by broadband or leased line;

* our Internet services are among the cheapest in the world. For dial up service, it costs less than US¢F20 (HK$1.6) per hour; and for broadband service, it can be less than US$25 (HK$200) per month for unlimited usage;

* our external connectivity has reached 900 Gbps, a substantial increase since 2000. This is amongst the highest in Asia, putting us in an excellent position to serve as a hub, connecting the world;

* 85% of our population have mobile phones;

* we are one of the first in Asia to introduce GPRS service; and

* there are over 8 million e-payment smart cards in circulation. This means every person, on average, has a smart card in the pocket.

With these achievements, we have gained international recognition as a preferred location for IT and e-commerce investment and activities. To name but a few,

* the Economic Intelligence Unit and Forrester have ranked Hong Kong amongst the top in Asia with best e-business readiness and potential;

* Hong Kong is a preferred location for holding major international IT events. For example, the International Telecom Union TELECOM ASIA will be held in Hong Kong again in December this year after it was successfully held here back in 2000; and

* The Hong Kong International Arbitration Centre has been approved by the Internet Corporation for Assigned Names and Numbers as Asia's first and the world's fourth provider of Internet domain name dispute resolution service. In collaboration with its Mainland counterpart, our International Arbitration Centre now provides domain name dispute resolution service for the whole of Asia, including the Mainland.

As an IT hub, Hong Kong has been actively participating in international and regional forums, such as the WTO, APEC and OECD, and make our contributions in the IT and telecommunications field. We have also been fostering close ties with countries which are advanced in the use of IT. The aim is to create synergetic relationship with our partners to enhance each others' IT and telecommunications development. So far we have signed memorandum of understanding or agreement on IT cooperation with ten countries, namely, Canada, Australia, the United Kingdom, Finland, India, Israel, Republic of Korea, Germany, France and the Netherlands. The fact that these countries are keen to establish partnership with Hong Kong reflects our value, and our strategic role as the hub in the region.

Digital 21 Strategy

All these underline Hong Kong's position in the forefront of IT development. However, we cannot afford to stand still in the information age. We must drive forward our IT development. We need to adopt a strategy that is focussed, with clear targets and implementation timetable. With this in mind, we reviewed last year our Digital 21 IT Strategy, which was first published in 1998, and then promulgated a revised strategy. The main goal is to position Hong Kong as a leading e-business community and digital city in the globally connected world. There are five key result areas under the strategy. I will now elaborate on them.

The first area is to enhance our e-business environment. The Government is committed to developing a favourable environment and the necessary infrastructure for e-business to prosper. We enacted the Electronic Transactions Ordinance in 2000 to provide a clear legal framework for the conduct of e-business. Electronic records and digital signatures now have the same legal recognition as their paper-based counterparts. We are now reviewing the Ordinance to ensure that Hong Kong has the most up-to-date legislative framework.

We also established a public key infrastructure in 2000. There are now four recognized certification authorities in Hong Kong, providing authentication services for e-commerce applications. We are also the first economy in the world to issue mobile digital certificates for community wide adoption. We can now make use of PDA for carrying out Internet stock trading in a secure manner. Other applications in the pipeline include mobile banking, and the use of mobile digital certificates can soon be extended to cover mobile phones as well.

To promote e-commerce adoption in our business sector, in particular the small and medium enterprises (SMEs), we have organised seminars and exhibitions and distributed publicity materials to enhance awareness. We have also recently launched an IT assessment service for SMEs to encourage and assist them to adopt e-commerce for strengthening their competitiveness.

The second area is to build E-government. The Government is committed to leading by example in the use of e-business. We have been making substantial investment in building the necessary IT infrastructure. In the 2002-03 financial year alone, the estimated capital spending on IT within the Government is over US$220 million (HK$1.7 billion). We expect that the bulk of these works would be outsourced to the private sector.

To drive E-government, we have promulgated a comprehensive strategy and set up an E-government Coordination Office within my bureau to take forward the E-government agenda and drive the related policies and initiatives. Currently, over 70% of the public services amenable to the electronic mode of service delivery have an e-option. These include submission of tax return, renewal of driving licence, booking of leisure or sports facilities, etc. Our target is to increase the current level to 90% by end 2003. We also launched in December 2000 the Electronic Service Delivery Scheme, which is a one-stop portal providing integrated public and commercial services under a customer-centric approach. It won the internationally acclaimed Stockholm Challenge Award last year. The Accenture also recently ranked Hong Kong amongst the top in the world as well as in Asia in terms of e-Government development. We are classified as a visionary challenger. All these reflect that our E-government efforts are well recognized in the international arena.

The third area is to develop our IT workforce. To sustain our development in the information economy, we must have adequate and quality IT manpower to meet the needs in the community. We have adopted a two-pronged approach by first, developing local talents and then where there is a gap, recruiting professionals from the Mainland or overseas.

To develop local talents, we have partnered with multi-national IT companies to provide professional training to our secondary students. We also facilitate renowned international training institutions to establish operation in Hong Kong and encourage prestigious overseas IT training institutions and companies to provide exchange and internship programmes for local students and practitioners. On recruitment of IT professionals outside Hong Kong, we have implemented a scheme to admit Mainland IT professionals, and we have also streamlined the admission regime for overseas IT professionals.

The fourth area is to build a digitally inclusive society. To ensure that different sectors of our community can participate in and benefit from the information economy, we seek to foster the community to embrace and use IT, targeting specifically at those who have less opportunities to use IT facilities.

We have launched an "IT Hong Kong campaign" to raise the awareness and use of IT in the community. We have provided under this campaign free IT awareness courses to elders, housewives, people with disabilities and the general public to raise their knowledge about IT and confidence in using IT in everyday life. We have also installed computers with Internet connection at convenient locations for free use by the community.

We are going to launch an IT user support service, called "IT Easy Link", next month in partnership with the Hong Kong Computer Society. The public will be able to make enquiries on general problems encountered when using basic IT applications. This would help encourage them to adopt IT and raise their confidence.

To ensure that Government websites are accessible to all, including the blind and the visually impaired, we have developed in collaboration with the industry and disabled groups a set of accessibility guidelines for best practice in web site development and electronic transactions. All Government websites will comply with the guidelines within this year. We will also encourage Government-related organisations and the private sector to adopt these guidelines.

Finally, the fifth area is to exploit enabling technologies. Hong Kong has long been recognised internationally for our achievements in commercialising new technology applications. We will continue to leverage our strength as an early adopter and a mature user of technologies.

The Government will issue a new generation of smart ID cards starting from mid 2003. This is another US$160 million (HK$1.23 billion) project. The new ID card will be a multi-application smart card with the capacity to support different types of applications, so as to establish a user-friendly platform to provide more efficient, better quality and value-added e-business services to the community. The Gratner Group has regarded this as a key initiative to drive the IT development of Hong Kong. We will develop value-added applications for riding on the smart ID card. These include the use of it as a driving licence as well as library card. We will also offer to provide a free digital certificate with one-year validity for embedding in the smart ID card to facilitate the public for carrying out electronic transactions which require authentication. All these applications will be provided at the discretion of the card-holder, i.e. the choice rests with the card-holder himself.

As regards mobile commerce, we issued four third generation wireless communication service licences in October 2001. Our operators are now developing mobile applications making use of the 3 G platform which would in future spur the further development of mobile commerce in Hong Kong.

Before I move on to the third area of my presentation, I need to talk about the Cyberport, which is our IT flagship project, marking Hong Kong's development as an IT hub. This infrastructural project will create a strategic cluster of IT companies specialising in IT application, information services and multi-media content creation. It also symbolizes Hong Kong's determination to become a leading digital city.

The Cyberport, which will provide about 120,000 square metres of world-class office space to accommodate IT companies, is scheduled for completion in phases by 2004. The first phase will be ready for occupation soon and we have admitted tenants like General Electric, Sonera and PCCW. Discussions with other prospective tenants are in progress. There are some concerns on our commitment in fulfilling the mission of building a Cyberport as an anchor base for our IT industry, given that only half of the office space is filled in phase I. I must reiterate that the Cyberport is still under construction and most of the soft infrastructure has yet to be put in place. It is understandable that it will take a bit of time to fill up the Cyberport in phases. We remain confident and committed to making the Cyberport an excellent infrastructure to drive IT development in Hong Kong.

By the time it is completed in 2004, the Cyberport will be served by state-of-the-art telecommunications infrastructure comprising optical fiber network as well as wireless local network. Abundant bandwidth will be provided. There will also be a wide range of sophisticated high-tech facilities for shared use by the tenants, including teleconferencing suites, visitor centre and multimedia laboratory. To serve the Cyberport office tenants and to provide an interface with the public, we are building a specially designed Cybercentre to provide combined media and technology focussed entertainment and retail services. The Cyberport project also comprises a 176-room hotel, which will be completed by end 2003, to entertain international visitors. The Cyberport's world class infrastructure will be neatly interwoven into a pleasant low-rise, campus-like environment to foster creativity among Cyberport companies.

I should also mention that we are working with the University of Hong Kong and some major companies to establish a "Cyberport Institute" right at the Cyberport. The "Cyberport Institute" will provide market-driven courses to nurture IT talent. The major companies will provide input to the courses and also internship opportunities.

Post-WTO Business Opportunities

Let me now turn to business opportunities in the telecommunications and IT sector after China's accession to the WTO. The telecommunications market of China has enormous potential for further development. The number of mobile telephone service users in the Mainland has risen to over 160 million and China has overtaken the United States to become the country with the greatest number of mobile telephone subscribers. But the current penetration rate is just over 10%. There are now 190 million fixed lines in China and the penetration is only 14%. There is thus a huge potential for further growth. According to the statistics published by the Ministry of Information Industry, the spending of China's telecommunications industry on fixed assets jumped by 36% in the first quarter of this year to US$2.3 billion, a clear sign that operators have increased their expenditure to respond to the opening of the market after WTO accession.

With the liberalisation of the Mainland telecommunications market, Hong Kong stands ready to seize the opportunities arising, given our competitive advantages of having built a world class local IT and telecommunications infrastructure, our experience in Mainland business operation, bilingual language capability, geographic proximity and cultural affinity.

With these edges, I believe that Hong Kong would be able to apply its expertise and talents in several key areas. First, with our excellent connectivity with the Mainland and the rest of the world, we can serve as a telecommunications entrepot for international telecommunications traffic to and from China. Flourishing under a more liberal community environment, Hong Kong could also develop into a content hub serving the Mainland and indeed East Asia as a whole. In this respect, Hong Kong could explore the development of Chinese web content, e-commerce application packages and other telecommunications products that embed Chinese cultural, social and economic features.

Hong Kong can also serve as a wireless technology promotion fulcrum. Due to the vast geographical span and disperse population distribution in the Mainland, mobile and wireless technology and products should have a higher growth potential. Our advantages in having an advanced mobile telecommunications network including the third generation mobile service soon to be rolled out, our experience in building sophisticated network, excellent customer service and quality marketing personnel make Hong Kong best placed to explore the Mainland market in various ways including forming joint ventures with Mainland enterprise, undertaking individual service contracts, or forming alliance with strategic partners overseas and help them expand into the Mainland market.

Hong Kong could also serve as an information product development and marketing centre. Hong Kong is competitive in the design, development, marketing and sale of information products, and also in software application. By exploiting our experience and competitive edges, we may integrate the development of Hong Kong and China and create a win-win situation.

No doubt these constitute the reasons which drive companies like Philips to move its operation elsewhere in Asia here for combining with its local operation to form its Asia-Pacific headquarters. And this is not just for multi-national companies. The same applies to overseas SMEs and this week alone I have already witnessed two smaller hi-tech companies from Canada which established collaboration with strategic partners in Hong Kong, with eyes closely on the Mainland market. It is only natural that we want to stay close to the market which has the largest potential to grow in the region. And Hong Kong is ideally located at the window of China, and with the necessary hard and soft infrastructure including the rule of law, independent Judiciary, free flow of information, free market economy, business-friendly tax regime, a clean civil service as well as excellent transport linkage and communication services, etc., to allow these multi-national companies and overseas SMEs alike to position themselves strategically for exploring the Mainland market.

This brings my presentation this morning to a close. I have set out what makes Hong Kong the preferred IT hub in the region. But Government's efforts alone are not sufficient. We need your participation, and your drive to make all these work, and with our concerted efforts, Hong Kong will be the leading digital city, connecting the world. Thank you.

End/Friday, May 10, 2002

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