"Internet and Its Use in Electronic Commerce"
Luncheon Meeting of Century 21 Club
Speech by Mr K C Kwong, Secretary for Information Technology and Broadcasting

16 July 1998

Members of the Century 21 Club, Ladies & Gentlemen,

It gives me great pleasure to have the opportunity to speak to you this afternoon. I think it may be useful if I first briefly outline the scope of responsibility of my new bureau.

The Information Technology and Broadcasting Bureau was established in April this year to oversee policies for Information Technology, Telecommunications and Broadcasting. The need for this new grouping of policy responsibilities arose from the fast converging technology in IT, telecommunications and broadcasting. Indeed, these days, telecommunication operators are able to use their networks for broadcasting, as has already been done by the Hong Kong Telecom Company in the provision of Interactive Multimedia Service; and broadcasters are able to use their networks for telecommunications through cable telephony. The primary goal of my new Bureau is to ensure the development of Hong Kong as the leading IT, telecommunications and broadcasting centre in the Asia Pacific region.

On IT in particular, I am sure you will agree that there are few areas of modern life today that are not touched by IT in one form or the other. It is very clear to us that if Hong Kong is to maintain its status as a leading international financial and business centre and to remain competitive in the global market, it has to keep itself in the forefront of IT development, and to make the best use of advances in IT to improve the quality and efficiency of the services that it can offer.

IT is of course a very big field. Today, I would like to focus on one important aspect of IT development - the Internet and its use in electronic commerce. The Internet is basically a global matrix of interconnected computer networks which can communicate with each other. It has developed in an exponential fashion in the past few years. Under 40 million people around the world were connected to the Internet in 1996. By the end of 1997, more than 100 million people were using the Internet. Traffic on the Internet has been doubling every 100 days. In the case of Hong Kong, there are now over 400 000 Internet accounts. This is a third more than the figure of 300 000 accounts about a year ago.

With the extensive reach of the Internet comes expanded opportunity for doing business across the globe, some times in ways not possible in the past. The global value of purchases over the Internet by consumers and businesses is predicted to grow from US$10 billion in 1997 to US$ 220 billion by 2001. The market potential is thus enormous.

There are many advantages that the Internet can bring to business operations. For example, more efficient and effective services can be delivered by providing business information on-line to clients. Through the Internet, we can approach new customers at little or no additional cost. Sales and marketing expenses can thus be reduced. Also, as the Internet operates around the clock and around the world, we can reach new markets which could not be approached through conventional business operations because of geographical or time-zone separation. This is particularly relevant to small and medium size enterprises who cannot afford the costs of physical presence overseas. With the linking of purchasing information directly between customers and suppliers via the Internet, unproductive inventory held at the wholesale and retail level could be reduced and the supply chain can be shortened. I can go on with more examples of how the Internet can benefit businesses. But I would now turn to look at the use of the Internet from the perspective of the customers.

Through the Internet, consumers can now access a much larger number of suppliers all over the world and hence have a much wider choice. They can have easier access to a lot more purchase information. They can shop around with their browsers and seek the best prices available. They can save time and effort as suppliers customise their sales pitch to suit the needs of individual Internet purchasers. The benefits to the consumers are thus wide-ranging.

The use of the Internet is changing in a fundamental way how we do business and the development of electronic commerce is a world-wide trend. In Hong Kong, we are witnessing the emergence of some innovative use of the Internet in business operations. But this is not enough. There is tremendous potential for the further development of electronic commerce in Hong Kong. The reason is simple - we have an excellent communications backbone on which business applications could be built.

To encourage the development of electronic commerce applications on the Internet, it is important that we provide the right environment. And here, we see an important role for the Government. Specifically, we believe that the Government should take the lead in using the Internet for the delivery of public services on-line, or Electronic Service Delivery in our parlance. In the process of the development and implementation of this mode of service delivery, we aim to identify and remove any impediments which might hamper on-line service delivery. For example, we will have to deal with the questions of security, authentication and payments; we will have to consider the legal backing for electronic transactions; and so on. Resolution of such issues will ensure that we will have an environment which is conducive to the development of electronic commerce.

Also, in developing our Electronic Service Delivery system, we will aim to use an open common interface so that it may be used by the private sector for carrying out electronic commercial transactions at a later stage. Our goal is to create an environment and to provide a ready access means to pump-prime the development of electronic commerce in Hong Kong.

Late last month, we issued an open invitation to seek expressions of interest from the private sector to build and operate an Electronic Service Delivery system for the Government to provide public services on-line. I do hope that we will receive a good response. The deadline for submission is 15 August. Those of you in the local Japanese business community who may be interested in the initiative can download the invitation from our Bureau's web site at your convenience. I look forward to receiving submissions from you.

Thank you.

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