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SCIT on development of information technology and intellectual property right


Following is a speech by the Secretary for Commerce, Industry and Technology, Mr Henry Tang, at the Information Technology and Intellectual Property Committees Joint Luncheon Meeting of the American Chamber of Commerce in Hong Kong today (January 9)(English only):

Harold (Mandel), Jeff (Bullwinkle), Jim (Thompson), Ladies and Gentlemen,

I am very pleased to speak at this AmCham luncheon today. I always treasure the opportunity of speaking to our American business community in Hong Kong. Not only have you made significant contributions to our economic and trade development, but you have also been instrumental in fostering stronger ties between Hong Kong and the US.

Today, I would like to share with you my thoughts on how Hong Kong can capitalize on the rapid development of the Mainland IT industry and what I see Hong Kong's competitive edges are as the IT hub for the Pearl River Delta (PRD). I would also touch on our efforts in the areas of intellectual property right (IPR) protection and E-government development, which are crucial prerequisites for the development of any IT hub.

First, the Mainland IT market. The rapid growth of and the enormous opportunities presented by the Mainland IT market need no elaboration. But let me just recapitulate some key statistics to put the issue in perspective. The Mainland is already the largest mobile market in the world, with nearly 200 million subscribers. But the penetration rate is only 15 percent of the population. The number of Internet users has surged by more than 70 percent from 27 million in 2001 to 46 million in 2002 - less than 4% penetration rate, and the potential is anybody's guess.

Seeing IT as a strategic industry and a key enabler in the economic development of the country, the Central People's Government has formulated policies and launched various measures to promote the development of the Mainland IT industry, through upgrading information infrastructure, providing tax and other incentives, encouraging research and development, applying IT in traditional industries as well as improving the regulatory environment. The Ministry of Information Industry's target has been that, in the five years leading to 2005, the average annual growth rate of the information industry would exceed 20 percent, and the added value of the industry would be over 7 percent of the total GDP. By 2010, the information industry will become twice as large as that in the year 2005.

Part of the expected strong growth can be attributed to China's accession to the World Trade Organisation (WTO). The Mainland is now opening up its IT and telecommunications market in accordance with its WTO commitments. For example, it is relaxing the restrictions on Internet service and will open up consultancy services on hardware installation, software implementation services and data processing services.

And as we all know, the PRD is the fastest-growing and most affluent part of Mainland China. It is China's largest export base, with a total export capability of over US$280 billion in 2001. The Economist magazine has described the area as "an industrial region so huge as to transform global trading patterns and investment flows". In the field of IT development, the PRD is a leading centre in the Mainland. Around 2 800 software companies of different sizes cluster around Shenzhen, Guangzhou, Zhuhai and Dongguan, with a total employment size of 100 000. Take Shenzhen as an example. Its software product sales receipt amounted to US$1.7 billion in 2001, and eleven of its companies are on the league of the top 100 software companies in China.

With the supportive policies and measures adopted by the Central, provincial and municipal governments, and an adequate supply of good quality IT manpower, the PRD is well poised to grasp business opportunities arising from the increasing domestic demand and the large international IT market. Indeed, in order to achieve the target of an annual growth rate of 20 percent in the coming years, the Mainland's IT industry cannot rely solely on the domestic market. It also has to actively explore business opportunities overseas. And with a population of 50 million people and the highest per capita GDP in the Mainland, the PRD is itself a strategic market which overseas IT industry cannot afford to neglect. I believe that Hong Kong has a crucial role to play as a two-way platform, by partnering with the Mainland IT industry to tap the international market, and at the same time, facilitating overseas companies, including our friends from the US, to explore the vast PRD market.

Hong Kong and the PRD can complement each other's strengths. We have extensive project management experience, marketing techniques and international exposure as well as good quality control standard. Coupled with the adequate and economical land and IT talent supply in the Mainland, Hong Kong's integration with the PRD can develop a very competitive business collaboration model for developing IT products and services for the international market. Moreover, the PRD can serve as a centre for overseas IT projects to be outsourced. And the well-established financial and venture capital market in Hong Kong can help raise the necessary funds for developing these initiatives.

We are therefore an ideal operational base and launching pad for overseas IT companies to develop their business operation in the PRD. Indeed, many well-known overseas companies have invested in the PRD but operate their regional headquarters or offices in Hong Kong. A few of these names are Philips, Samsung, etc. I am sure many of you are doing precisely that too. That way, you get the best of both worlds. You can look after your businesses in the PRD while still enjoying the cosmopolitan lifestyle of Hong Kong.

Our role as the IT hub connecting the PRD and the rest of the world will be further strengthened with the completion of our flagship IT project, the Cyberport. A major mission of the Cyberport is to build up a strategic cluster of quality IT and IT related companies critical to creating synergy for IT application, telecommunication service and multi-media production. To this end, we are committed to providing a state-of-the-art infrastructure conducive to the creation of such a strategic cluster and its development. The building and infrastructural development programme of the Cyberport is on schedule so far and we have succeeded in building up the first cluster of IT companies. Our confirmed tenants at the Cyberport include many household names from the US, like Microsoft, Sybase, ESRI, GEIS International, etc.

To further strengthen our competitive edges as the hub, we will enhance our transport links with Mainland cities in the PRD so as to cut down travel time. We are taking various actions to speed up the flow of people and goods across the boundary with the Mainland as announced in the Chief Executive's Policy Address.

We have set up an Economic and Trade Office in Guangdong to provide first-hand market information about the Pearl River Delta, to organize trade missions and business-matching activities. We will take a proactive approach to foster two-way collaboration. In November last year, we successfully brought a group of Canadian companies here, many of which IT related, for a trip on "Hong Kong - Your Fast Track to China". The participants visited factories and enterprises owned and managed by Hong Kong companies in the PRD, with a view to identifying potential business partners.

This April, we will team up with Shenzhen to organize a mission to San Francisco and attract hi-tech companies in the Silicon Valley to invest in Hong Kong and the PRD.

At the industry level, the IT associations of Hong Kong and Mainland cities in the PRD both recognise the benefits which closer integration can bring, and have already established a Pearl River Delta Software Alliance which provides a framework for software collaboration.

All these add impetus to Hong Kong's development as the IT hub for the Pearl River Delta.

I would now like to turn to the protection of intellectual property rights (IPR). Respect for and effective protection of IPR is essential to anchoring our innovative and creative talents and to assuring our investors, be they overseas or local, that the economic rights of IPR owners in Hong Kong would not be infringed or compromised.

In this respect, we have a good story to tell. We protect IPR through comprehensive legislation, vigorous enforcement actions, public education and close cooperation with copyright owners. The IPR laws in Hong Kong fully comply with international standards. And, they are complemented with vigorous enforcement action. Our Customs and Excise Department, which has one of the strongest dedicated enforcement teams in the region, spares no efforts in enforcing the new criminal provisions. As a result of the Customs' relentless enforcement actions, local copyright piracy has been generally brought under control.

Our IP laws also provide for civil remedies. The court awarded in a recent case damages in the amount of US$4.6 million whereby a computer dealer was found to have sold computers pre-installed with unlicensed business software.

We have also implemented an on-going community education programme to promote the public's respect for IPR, and there is regular cooperation with copyright owners and other law enforcement agencies in combating copyright piracy. In particular, we appreciate the assistance offered by US-based copyright owners, especially those in the business software field.

The Hong Kong Government is also leading by example in IPR protection. We accord high priority to the proper management and use of computer software. We have already implemented software asset management for all Government bureaux and departments.

With all these initiatives and efforts, our work on IPR protection has been recognized and commended by our major trading partners, including the US, and we have been regularly cited as a model for the rest of the region to follow. I was also honoured to have received the Cyber Champion Award from the Business Software Alliance in November last year, in recognition of the legislative framework developed by the Hong Kong Government to protect IPR as well as the leadership the Government has demonstrated in IPR protection work. And this comprehensive IPR protection regime has become a critical element in our development as the IT hub for the region.

Where E-government is concerned, Hong Kong Government is committed to making the full use of IT in conducting internal business operations and in delivering public services to the community. Not only will this enhance efficiency and improve quality of services, it will also, through our aggressive outsourcing strategy for IT projects, help create a market of sufficient size to nurture the development of the local IT industry.

Our target for E-government development is to provide e-options for 90% of the public services that are amenable to the electronic mode of service delivery by end 2003. We have now achieved about 80% and are on track to reach our target. We have also launched the Electronic Service Delivery Scheme, a one-stop portal providing over 140 public services online to the community in an integrated and customer-oriented manner. The Scheme has won the prestigious Stockholm Challenge Award which reflects the high quality of Hong Kong's IT development. Next step will be to pursue higher usage.

The Electronic Tendering System used by the Government Supplies Department since April 2000 is also one of the world's first government tendering systems, allowing suppliers from all over the world to receive notification of our tenders, submit tender offers to us and receive notification of tender awards through the Internet.

In addition, we will start rolling out our multi-application smart ID cards this year. The public can use the smart ID card as library card or driving licence, and opt to install digital certificates offered by the Hongkong Post on their smart ID cards to conduct electronic transactions in a secure manner. The certificates will be free for trial for one year. With the smart ID cards and fingerprint verification technologies, we will introduce automated passenger clearance system in 2004-05 to speed up passenger flows at Mainland border control points as well.

All these flagship E-government projects were awarded to local IT companies, or consortia with participation of multinational companies partnering with local IT firms. This demonstrates that Hong Kong's IT industry has the capability to undertake large scale, complicated E-government projects which require expertise and professional knowledge in different domains.

Our IT industry will have an important role to play with the growing adoption of IT applications in Mainland China, where many provinces and cities have accorded an increasingly high priority to developing E-government. According to the Ministry of Information Industry, in the first half of 2002, the total value of purchase in the Mainland's E-government market reached US$1.9 billion. And Hong Kong IT companies are particularly well placed to support the development of E-government projects in the PRD, thus augmenting our position as the IT hub for the region.

Ladies and Gentleman, as the Chief Executive has also said in his Policy Address, the economic future of Hong Kong hinges on our greater integration with the Pearl River Delta, and on reinforcing our strengths in the higher value-added and knowledge-based economic activities. I am confident, and you will agree, that Hong Kong's role as an IT hub in the Pearl River Delta will bring with it enormous opportunities and potential. I look forward to working hand in hand with the IT trade and industry, including our good friends from the AmCham, to realize these economic potential and benefits.

Thank you very much.

End/Thursday, January 9, 2003


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