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The following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at the International Telecommunication Union (ITU) Forum of ITU TELECOM WORLD 2003 in Geneva, Switzerland, today (October 14) (English only):

Ambassador Hill, Excellencies, Distinguished Guests, Ladies and Gentlemen,

It is a great pleasure for me to join you all at today's forum.

Reaching out to others is one of our basic instincts. For millennia, people have been sending all kinds of signals over distances, using, for example, homing pigeons, drums and smoke to carry their messages. When Alexander Graham Bell invented the telephone in 1876, he heralded a new era of communication. What is ironic is that while it took us thousands of years to learn to apply the technology for telephony, we had to chase in the subsequent 130 years the development of technology that took quantum leaps in application advancements. Indeed, the speed, the volume and the quality in which information is transmitted now is totally unimaginable even in our parents' generation. And it would be mind boggling to imagine what it would be like in our children's generation. The sky is the limit as to what we can achieve next.

Yet what is the use of such a glorious harvest of human genius and endeavour if it were kept merely as the privilege of a select few protected by artificial trade barriers? We must seek to actualise the dreams of our forbears. We must seek to open up trade in telecommunications. We must seek to achieve communication for the masses.

The topic of today's forum "Opening Up Trade in Telecommunications", therefore, takes on special significance in the communications revolution that we witness today.

In 1997, the extended WTO negotiations on telecommunications succeeded in introducing, for the first time, different levels of liberalisation in nearly 90% of the world's telecommunications markets. In the new round of WTO services negotiations that started in 2000, WTO members have been seeking to deepen and broaden the market-opening commitments of their trading partners. Active exchanges of specific liberalisation requests have been taking place since June last year.

These are positive developments, and I hope we can step up negotiations in this area despite the recent setback at the WTO Ministerial Conference in Cancun. For one thing, services negotiations are part of the so-called Built-in Agenda items of the WTO. Members have agreed to engage in these negotiations regardless of developments, or perhaps, more accurately, lack of developments, on other issues. For another, services negotiations under the Doha Development Agenda have so far progressed in a relatively constructive manner contrary to general perception. I certainly hope this will continue.

Telecommunications is no doubt one of the most sought-after sectors for liberalisation in this new round of services negotiations. And while more than half of the WTO members have already made commitments on telecommunications services, there is still room for further offers. Given the broad economic, infrastructural and developmental impact of telecommunications and the related ICT sectors on an economy, many of us look to multilateral negotiations to provide an additional and comprehensive channel for securing meaningful liberalisation commitments. We have seen ambitious liberalisation requests, and substantive concessions as well, in initial offers from WTO members at different stages of development. This has helped lay a promising foundation for meaningful negotiations for further liberalisation.

As one of the world's most free and open economies, Hong Kong fully supports opening up trade in telecommunications. The liberalisation journey is fraught with difficulties - such as resistance from incumbent operators and ground-breaking regulatory policies to balance the conflicting interests of industry and consumers - just to name a couple. But it opens up a new horizon in the market landscape, and the rewards are tremendous. New opportunities for telecommunications corporations and related ICT sectors have been created. This translates into stronger infrastructure, more and better services, new investments in facilities, cheaper prices and wider use of telecommunications and IT services by consumers.

Hong Kong's experience is a good case in point. After the first few years of progressive opening up, we decided that a fully liberalised market would be in the best overall interest of further market development in Hong Kong. Our mobile market has been competitive from the get-go. We started to liberalise local fixed telecommunications as early as 1995. In 1999 and 2000, we opened up the external services market and facilities market respectively. All sectors of our telecommunications market were fully liberalised on January 1 this year.

Hong Kong is now one of the most competitive telecommunications markets in the world. We can boast a number of significant achievements:

First, prices have dropped considerably. Since liberalisation of the IDD market in 1999, consumers have saved about US$4 billion. That translates into some US$600 per capita. Businesses have also benefited - for example the monthly rental of privately leased international lines has dropped more than 85% to US$2,500.

Second, a world-class telecommunications infrastructure has emerged. We now have almost total mobile and fixed broadband coverage throughout Hong Kong. External connectivity has also jumped 20-fold since opening up in the year 2000 to 900 giga bits per second. We are now second in Asia after Japan in terms of external connectivity.

Third, there has been significant investment by telecommunications players. Between 1991 and 2002, Hong Kong attracted cumulative investments of US$1,760 per capita in telecommunications infrastructure - higher than countries such as the US, Singapore and South Korea; and

Fourth, lower prices and better infrastructure have resulted in an extremely high uptake of new and innovative telecommunications services. Our mobile penetration rate now stands at 96%. And 48 of every 100 households are connected to the Internet via broadband - the second highest rate in the world after South Korea.

Liberalisation has injected great vigour and vitality into our telecommunications sector. The dynamic and comprehensive services it provides, characterised by high efficiency and reasonable prices, boost the competitiveness of many sectors of our economy. Telecommunications, indeed, is one of the worst kept secrets of Hong Kong's economic success.

Always on the lookout for new business opportunities, Hong Kong's existing market players are ready to leverage their strengths and experiences across the boundary to the north to take advantage of the unprecedented business opportunities flowing from the gradual opening up of the telecommunications market in Mainland China.

China is now the world's biggest mobile market. Over the past six years, the mobile phone penetration rate has jumped from 1% to 8%. This may seem miniscule, but for a big country like China, the small percentage translates into a subscriber base of 244 million people. Every month, another 4.5 million new mobile users come on stream.

Growth in the Mainland's fixed market has been equally astonishing. Penetration rates have jumped from 3% to 19%, with more than 245 million fixed-line subscribers. Internet penetration rates have risen from almost zero to over 4%. The readiness of this massive market in taking up new services is truly impressive. For example, there has been a rapid uptake of Short Messaging Services, which benefits mobile operators and content providers. And just to give you another example of how huge this market is, there were 95 billion short messages sent in China in 2002 - that makes 260 million short messages a day! Not a small sum, indeed.

We are dazzled by the enormous business prospects augured by China's WTO commitments. From December this year, foreign investors will be allowed to hold up to 50% equity in the value-added services sector. For the mobile phone and fixed-line sectors, foreign investors will be allowed to hold up to 49% of equity from December 2006 and 2007 respectively. This gradual opening up will add breadth and depth to global telecommunications development in terms of both business volume and technological development. The 64 dollar question or should I say the billion dollar question, on everyone's mind is how best to tap into this wealth of business opportunities.

In this regard, Hong Kong offers a unique combination of advantages when it comes to doing business in China. We are well placed to explore the enormous market of China. We are seen more than ever as invaluable strategic partners for our international friends in expanding their entrepreneurial reach.

We have always been the gateway to China. Hong Kong is the premier import and export hub for trade between Mainland China and the rest of the world. Hong Kong is the largest source of foreign investment in Mainland China, and the Mainland is the second largest source of external investment in Hong Kong. A growing number of Chinese corporations are setting up in Hong Kong to raise capital and to tap into the marketing network worldwide. Nobody knows the China market better than we do in Hong Kong. We have the language and cultural ties, and decades of experience in dealing with the intricacies of this vast market. At the same time, our free and open economy is underpinned by the rule of law upheld by an independent judiciary, free flow of information, level playing field for business and a clean, efficient public administration.

In addition, we have a vibrant media and telecommunications industry, and a rigorous intellectual property protection regime that complies fully with the WTO's TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights).

More recently, the signing of a Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA) reinforces Hong Kong's role as the strategic two-way business platform for the China market. This landmark free trade agreement - the first of its kind signed by China as well as Hong Kong - will provide Hong Kong manufacturers and service providers with preferential and WTO-plus access to the Mainland market - and it includes telecommunications services.

Under CEPA, Hong Kong companies have been allowed to explore business opportunities in value-added telecommunications services in the Mainland from October 1 this year. And while this is good news for Hong Kong, it is also good news for the global telecommunications industry. We will be most pleased to work with overseas investors in reaping the benefits from the liberalisation of one of the world's largest telecommunications market.

Turning back to the global scene, there is definitely scope for further opening up in the current round of WTO negotiations.

First, elimination of market access barriers such as foreign ownership restrictions. Whether it's all in one go, or on a phased basis, elimination of ownership barriers will provide a more predictable environment for investors and operators. It will also attract inward investment in markets where this is done.

Second, wider acceptance of the Basic Telecommunications Reference Paper. In the last round of WTO negotiations, members formulated a paper that outlines principles to safeguard competition, ensure interconnection on timely, reasonable and non-discriminatory terms, and to ensure the independence of regulators. While the Reference Paper has been adopted by a majority of participants in part or in full, a wider acceptance would be advantageous to the world-wide development of telecommunications services.

Third, we need to explore the impact of technology convergence to ensure the applicability and relevance of existing telecommunications commitments. This would help clarify existing commitments, and also pave the way for new commitments in the future.

As far as Hong Kong is concerned, we will continue to contribute to meaningful liberalisation in these areas. I firmly believe that WTO members, irrespective of their level of development, stand to benefit from further opening up in telecommunications services. I urge them to engage actively in the current round of WTO services negotiations, and to seize the opportunities offered by liberalisation.

Ladies and Gentlemen, we have come a long way since the first telephone was invented. Further opening up of the telecommunications trade is the only way to ensure sustained and enduring benefits of modern communication to our world. Further liberalisation is the key to reaching out to those parts of the world that are still waiting to be connected. We should all play our part. Let them wait no longer.

Thank you.

Ends/Tuesday, October 14, 2003

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