Speech by Ms Joyce Tam, Principle Assistant Secretary for Information Technology and Broadcasting at E-commerce Seminar, Hong Kong International Arbitration Centre

December 2, 2000

Covering slide

It is my great pleasure to address such a distinguished audience this morning. I am pleased to note that the Hong Kong International Arbitration Centre has responded to the enormous opportunities of e-commerce by establishing an E-commerce Committee this April to promote the development of alternative dispute resolution for e-commerce in Hong Kong. Your turnout today is a clear indication of the industry's keen interest in this area.

2. I have been asked to give a brief overview of what the Government is doing to promote the development of e-commerce in Hong Kong. But before I do that, I believe it would be useful to set the scene by first looking at the potential of e-commerce and how it is developing in Hong Kong so far.

Slide 2 - Internet Revolution

3. The proliferation of the Internet has completely transformed the way businesses are now operated around the world. Companies can link their systems directly with those of their partners, transact business online around the clock and with clients in all corners of the world, automate their operation and provide tailor-made and value-added services to their customers. According to recent industry estimates (Forrester Research), revenue generated by e-commerce will account for over 8% of the world's total sales of goods and services by 2004, with the US leading the way and Europe and the Asia Pacific region closely behind.

Slide 3 - E-commerce Adoption in Hong Kong

4. In Hong Kong, the development of e-commerce has come a long way in the last couple of years. Besides the emergence of many local dot.com companies, which have been going through a phase of consolidation lately, there has been a massive shift in perception towards e-commerce amongst the conventional brick and mortar companies, including many of the so called "old economy" companies like property developers and utility companies. E-commerce will be entering hyper-growth in Hong Kong. Forrester Research forecasts that this would come in 2002. As for local SMEs, over 40% have already adopted some form of e-commerce, up from 34% a year ago (according to surveys conducted jointly by HKPC and IBM). And we are convinced that the increasing trend will continue.

Slide 4 - Hong Kong's E-business Potential

5. In fact, Hong Kong is recognised internationally as one of the places with the best potential to develop e-business. According to the London-based Economist Intelligence Unit, Hong Kong's e-business readiness is ranked ninth in the whole world, and second in Asia. Hong Kong's traditional strengths have contributed to the positive outlook of our e-business development. These include an excellent business environment, world-renowned physical infrastructure such as the port and the airport, an open market economy, free flow of information, freedom of speech; the rule of law; and our position as a world class international financial centre and Asia's largest venture capital centre. According to Forrester Research, the value of e-business in Hong Kong is expected to increase from US$ 2 billion in 2000 to US$70 billion in 2004, indicating a huge potential market ahead.

6. The Government fully recognises the importance of e-commerce to our long-term competitiveness in the new global economy. To parallel, and hopefully to exceed, our achievements in the physical world, the Government is committed to creating a favourable and conducive environment for e-commerce to take hold and flourish and developing Hong Kong into the pre-eminent e-commerce hub in the Asia Pacific region. In doing this, we have taken a three-pronged approach. First, by putting in place the necessary infrastructure; second, by Government taking the lead in the adoption of e-commerce; and third, which is perhaps the most important prong among the three, by providing a secure environment for electronic transactions.

Slide 5 - Telecommunications Infrastructure

7. In terms of hard infrastructure, we have developed an excellent and advanced telecommunications infrastructure, which provides the backbone for our information-based economy. We now have 100% full broadband coverage for commercial buildings and over 90% coverage for domestic households, all developed through investment from the private sector. In terms of external connectivity, 31 external facilities operators are licensed or about to be licensed to operate satellite and cable facilities. By 2002, our external connectivity, currently at 44 Gbps and is amongst the highest in Asia, is expected to increase by over ten-fold. For mobile phone, the current penetration rate has reached 71%, which is the highest in the world outside Scandinavia, and we are aiming to issue third generation mobile service licences next year which will provide a readily available platform for mobile commerce applications to develop. Through the progressive liberalisation of our telecommunications market in the past few years, the Government has put in place a liberal, pro-competition and pro-consumer regime, which ensures that businesses and consumers alike can have access to advanced and quality telecommunications services at affordable and competitive prices.

Slide 6 - Electronic Transactions Ordinance

8. In terms of soft infrastructure, Hong Kong is amongst the first few places in Asia to have enacted a comprehensive Electronic Transactions Ordinance. The Ordinance was passed in January this year and its aim is to enhance public confidence in the legality and enforceability of electronic transactions. I believe many of you are familiar with this piece of legislation. In short, the Ordinance is largely based on the UNCITRAL Model Law on E-commerce and it gives electronic records and digital signatures the same legal status as that of their paper-based counterparts. It also gives assurance that electronic records can be used in contract formation and they will not be denied admissibility as evidence in courts on the sole ground that they are in the electronic form. In order to ensure that the Ordinance is updated and able to catch up with technological changes, we have undertaken to review the operation of the Ordinance within next year.

Slide 7 - Government Leads By Examples

9. In addition to providing the infrastructure, the Government also seeks to promote the development of e-business by taking the lead and setting a good example for the private sector to follow. This is the second prong of our approach. The most notable Government initiative in this regard is the launching of the Electronic Service Delivery (ESD) scheme, which will be the flagship Government-to-Citizen (G2C) and Government-to-Business (G2B) online service. Starting from next week, services like payment of Government fees, submission of tax return, voter registration, renewal of driving and vehicle licence, change of personal address, etc. will be available online 24 hours a day and 7 days a week. The public will be able to access these services through their computers via the Internet. Public information kiosks will also be installed later at various convenient locations like MTR stations, supermarkets and major shopping malls. Our long-term aim is to include all Government services which are amenable to the electronic mode of delivery under the scheme. More importantly, we will allow the private sector to make use of the open and common information infrastructure of the ESD scheme for conducting private sector e-commerce activities. This will serve as a catalyst to pump-prime e-commerce development in Hong Kong.

Slide 8 - Public Key Infrastructure

10. The third prong entails the provision of a secure environment for electronic transactions, so as to instil public trust and confidence. Security is a critical factor in the adoption of electronic commerce. Who would be willing to exchange important information, enter into agreement or make payment through electronic means, if it is not secure to do so? It has therefore been a top priority of the Government to establish a local public key infrastructure in Hong Kong. With the use of digital certificates issued by certification authorities and the use of strong encryption technologies, parties to electronic transactions are able authenticate the identities of other parties to the transactions, ensure the integrity and confidentiality of the messages exchanged, and prevent the transactions made from being repudiated on the mere ground that they were carried out electronically.

11. We are pleased to witness the establishment of the Hongkong Post Certification Authority at the beginning of this year to provide electronic authentication services to both businesses and individuals. This breakthrough has spurred the use of public key infrastructure technology in new online services provided by both the public and private sectors, like online stock trading, Internet betting, and bidding for Government tenders via the Internet, and very soon, submission of your tax return or renewal of your driving licence.

Slide 9 - Other measures in Creating a Secure Environment

12. The establishment of a technological framework of PKI under which transactions can be conducted securely is only one aspect of a secure environment. The Government has been taking a number of measures to address the other aspects of the security issue. For example, we recognise that our legislation needs to cope with the advances of technology and the emergence of computer related crime. In order to strengthen the framework within which law enforcement against computer crime can be effectively and efficiently carried out, the Government has established an inter-departmental working group in March this year to study the problem and to make recommendations on the way forward. The recommendations of the working group have just been released for public consultation. I am sure that you would contribute a part to this important work.

13. Due to time constraint, I will not go into all of the other measures in details. Briefly speaking, they include -

• the pursuing of an international framework for electronic authentication (e.g. by establishing mutual recognition of Certification Authority services) to enhance the security of cross-border electronic transactions;
  
  
• the establishment of a computer emergency response centre to enhance our capabilities in handling crisis situations that may arise from hacking incidents or virus attacks; and
  
  
• promotional efforts aiming to enhance public awareness on e-security, etc.

Slide 10 - Role of the private sector

14. We are, however, fully aware that Government efforts alone are not sufficient. Private sector involvement is an equally important element in the build up of a secure environment in e-commerce. We therefore strongly encourage private sector initiatives in the form of code of practices and quality labels dealing with issues of consumer protection and information disclosure. A notable example of such initiatives in Hong Kong is the WebTrust programme of the Hong Kong Society of Accountants, which is a seal programme designed to enhance trust and confidence among consumers purchasing goods and services over the Internet.

15. Another important area for private sector involvement is the provision of dispute resolution services. E-commerce transcends geographical borders. Very often, parties to electronic transactions are located in different jurisdictions. When suppliers fail to deliver as contracted, or when goods were damaged or defective when they arrive, assigning liability and providing avenue for redress can be very complicated. Jurisdictional issues and the high cost of multi-jurisdictional litigation render the court system an ineffective means for settling disputes in cross-border electronic transactions, particularly in the case of consumer transactions where the value of the transactions are usually quite low. Therefore, the development of an effective alternative dispute resolution mechanism would be a crucial enabling factor for the wide spread adoption of e-commerce.

Slide 11 - Hong Kong as an Arbitration Centre for E-commerce

16. Hong Kong has already established itself as an international centre for arbitration. The recent amendments of the Arbitration Ordinance and the signing of the agreement on reciprocal enforcement of arbitral awards between the Central Government and the HKSAR have paced the way for Hong Kong playing an even bigger role in this respect. Furthermore, the imminent accession of China to the World Trade Organisation (WTO) will undoubtedly add further impetus to Hong Kong's e-commerce development. All these factors put Hong Kong in a unique and advantageous position to serve as the arbitration centre for e-commerce in the Asia Pacific region.

17. This concludes my presentation and I would be happy to take any questions that you may have.

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