5 Aug 1999
rade in the Internet Age - Hong Kong's Window of Opportunity by Dr Victor Fung
Distinguished Guests, Ladies and Gentlemen.
It is a great pleasure to see so many friends, old and new. Market Day is the one occasion during the year when the Trade Development Council gets to show all the different services we offer, especially to our core clients, Hong Kong's small and medium-sized enterprises (SMEs). Thank you all for coming.
Today, I would like to talk about the two most important trends affecting the way trade will be done in the future: e-commerce and the delivery of business information, via the Internet.
Strengthening Hong Kong's capabilities in e-commerce and as a provider of business "content" is, I believe, not an option - but an imperative - if we are to remain Asia's premier international trade and business hub. Today I would like to outline:
- why this is so important
- how TDC is ready to show the way for Hong Kong manufacturers, traders and service exporters
- where Hong Kong stands right now in the world of information services and e-commerce
- and why Hong Kong's SMEs - the backbone of our economy are natural players in this new Internet world.
I will close by giving you a preview look at some of the action plans TDC has for strengthening Hong Kong's leadership position for Asia-Pacific trade in the Internet era. But first let me sketch the big picture.
I have a vision of Hong Kong as the virtual hub for trade in this region - Asia's trade "cyber-hub". And of the Trade Development Council's Internet site as the key portal in that hub, from which the "spokes" -e-commerce and business information radiate.
This is a vision born of a belief that Hong Kong, right now, has a window of opportunity. We have within our grasp the means to take a decisive lead in Asia's "cyber-trade". Equally, I believe this window is not open for long. Things are moving fast. Others in the region are already "wiring" their economies.
We must move to embrace this fundamental and far-reaching change in the way business is now being done.
Many in Hong Kong recognise what is at stake. "Hong Kong Inc." is acting upon the IT clarion call of Chief Executive, Mr Tung Chee Hwa, with major projects such as Cyberport and the building of a mosaic of alliances with Silicon Valley and other technology centres.
A deliberate move, now, to put Hong Kong at the centre of the Internet revolution in regional trade - and to build TDC as its trade portal, or electronic gateway - is, I believe, an important and necessary complement to these other initiatives. For only when the SMEs driving Hong Kong's trade embrace e-commerce, will we truly become an Internet society.
As history tells us, from an entrepot, to a manufacturing base, to a services centre, successful economic transformations happen fastest in Hong Kong when they become mainstream for our SMEs; part of their daily reality.
The New Wave
Now, there is a new wave of change for Hong Kong. The race is on to transform economies in the Asia-Pacific into knowledge economies, just as we see happening in the United States.
This move will not displace services as the key part of Hong Kong's economy, but ratchet them up to a new level. E-commerce will enable Hong Kong to deliver our services faster and in an even more efficient manner.
The old support network of trade related services - the freight forwarding, financing, insurance, licensing and quality control - that Hong Kong provides so competitively at the moment, will still be needed. So, too, will the knowledge of how to integrate
them. But now we must migrate this unique combination of strengths to the new realm of cyberspace.
This is the biggest challenge facing Hong Kong as an international trade hub: to replicate in cyberspace, the current gateway function we provide for trade in the physical world.
Just as Hong Kong handles 40 per cent of all physical trade moving to and from the Chinese mainland, so must we strive, in the future, to handle a significant share of the world's "cyber-trade" with the mainland - in knowledge and ideas, as well as goods and services.
Just as we co-ordinate billions of dollars in trade around the region through networks of offshore factories and distributors, so must we be able to transact that business regionally and globally, over the Internet - linking production in remote factories to demand in sophisticated world markets.
Make no mistake, we must move fast. Our competitors are not standing still. And, increasingly, customers in our biggest markets, especially North America, are dealing with suppliers over the Internet. Most analysts now believe that e-commerce will be dominated by business-to-business transactions.
Traditional information hub
We have three core advantages to propel us forward. First, Hong Kong is already the clear leader as Asia's information hub in a conventional sense. We have the region's:
- first fully digitised telephone system
- most liberalised telecoms sector
- freest information flows
- heaviest concentration of publications and media outlets
We are world leaders in generating Chinese-language content and active in developing Chinese software, which is crucial for international business partners using Hong Kong as an Internet base for the China market.
Second, the core of Hong Kong's economy - our 260,000 SMEs - have a natural affinity for this new world of the Internet and e-commerce. Hong Kong SMEs are successful because they are flexible, fast-moving and entrepreneurial - exactly the same attributes that characterise the way business spins across the web.
My son, who is currently hard at work in Silicon Valley, speaks these days in terms of "Internet time" and divides companies and people into those who "get it," and those who don't. I believe Hong Kong SMEs are exceptionally pre-disposed to "get it"; to embrace EDI, e-commerce and the individualistic culture of the Internet.
But what will be needed is the commitment to do this - to accept the challenge, make the mental leap and enter this new world of cyber trade.
Many have already made that commitment.
About a million Hong Kong people - or 15% of our population - use the Internet and the number going on-line is growing rapidly - by 30 % every six months. A recent IBM study indicates that up to 60 % of SMEs in HK have e-mail and about 20 % have web sites.
Even in the world of on-line shopping, market research shows that Hong Kong now spends about half a billion Hong Kong dollars a year on-line. That per capita spending rate puts us where the US was only 2 or 3 years ago.
The third built-in advantage is the TDC itself. We already have the content and the connections that are crucial to building this trade portal site.
Our content - comes from our global network of 50 offices feeding market intelligence to Hong Kong, as well as a research staff of economists producing sophisticated economic analysis and trade information. On top of this we also produce 20 publications offering detailed information on Hong Kong products.
Our connections - come from our trade enquiry service which matches business-to-business enquiries, puts partners together and creates business opportunities, from a vast databank of some 620,000 companies, the largest of its kind in Asia. We leverage our connections even further through the thousands of international exhibitors and buyers who attend our trade fairs and our ties with high-level business groups overseas.
Many organisations have advanced IT infrastructure. But it is this matrix of content and connections that makes TDC different.
We are also willing to continually add new services and capabilities to provide the best value for SMEs and Hong Kong. Four years ago TDC launched a programme to get ready for the Internet Age.
We invested 180 million dollars in upgrading our IT infrastructure - putting in place more sophisticated computer systems and software.
And we began to migrate our core strengths - our content and connections onto the Internet. Market intelligence and economic information moved to our web site first.
In 1996, we moved our most popular product magazine - "Hong Kong Enterprise" - onto the Internet, facilitating even faster product enquiries and putting buyer and seller into direct contact, electronically. There are now more than 9,000 on-line advertisers.
In 1997, we moved TDC-Link, Asia's largest electronic trade information service, with 13,000 subscribers, onto the Internet and opened our on-line trade-matching services to global participation.
In the past couple of years, TDC's Internet services have mushroomed. Internet training courses for SMEs, a huge Business InfoCentre that offers on-line demonstrations, e-commerce and a virtual marketplace called "Bids and Offers."
Today is a major milestone in this process of becoming Internet compatible.
Today, I am committing TDC to create the premier trade portal for e-commerce and business information in the Asia-Pacific.
Of course, TDC does not have all the connections and information that will be needed to construct this trade portal in-house. We will actively look for strategic partners with whom we will link sites and work together to bring this vision to life. But what will a trade portal at the centre of a trade cyber-hub actually do? What will such a business environment look like?
The Shape of Things to Come
First portal of call
In many ways, a portal web site is like a hub airport. Customers go there to make connections that take them to other web sites. As they pass through the hub, they are offered services and information by the web site operator and by other suppliers, who have paid to locate there.
As Asia's trade portal, TDC will function as this first-stop, regional service centre for trade connections, market intelligence and business information. We will offer strategic links to other key sites in Hong Kong and the region, making it more attractive for global business partners to enter Asia's cyberspace through Hong Kong.
Playing to our strengths
The essential "middle-man" function of our SMEs - bringing together potential partners, creating opportunities and adding value to the business process - is even more important with the advent of the Internet.
For the Internet's greatest asset is also its greatest liability. Where, in those vast oceans of information, do you begin searching for who and what you are looking for?
In trade, investment and service industries in Asia, Hong Kong SMEs already provide many of the answers. Only now, with the Internet, they have scope to become "players" like never before.
The availability of new information technology and Internet connections at affordable prices effectively levels the playing-field between large and small companies. Unlike the process in the physical world, the basic business constraints of overheads and inventories are greatly reduced in cyberspace.
Hong Kong's ability to compete in this new world will depend on how successfully we leverage, in cyberspace, our existing skills as the chief intermediator of trade and investment in Asia.
The Way Forward
The same insight applies to TDC. To help our customers succeed in the Internet age, we must give our existing core competencies a new dimension; take them to a new level.
In pursuit of our vision of TDC as Asia's trade portal, we are developing a full programme to help SMEs make the transition to conducting business and trade on the Internet. TDC will announce details of this plan soon. But in the meantime, I thought I would give you a preview of the kinds of things we are looking at.
We will expand and deepen the market intelligence we gather from TDC's global network of 50 offices. We will liberalise access to our database of trade contacts and liberalise our fee structures, so that customers will no longer pay to use our standard Internet-based services, including trade enquiries.
We will step-up our advertising and marketing efforts especially in key markets. And we will actively seek strategic partners to further develop our Internet strategies and help build this trade portal.
This effort to position Hong Kong as Asia's trade cyber-hub and to build Asia's trade portal is of crucial importance. I believe it is the way for TDC to help Hong Kong Inc. capture its next big opportunity.
Many of the pre-conditions for Hong Kong's success in the Internet age already exist - products, services, contacts, knowledge and advanced IT delivery systems. Our SMEs will be key players in this effort because of their natural affinity with the Internet culture.
Remember. We're on Internet time, now. The moment has arrived for Hong Kong, its SMEs and TDC, their trade promotion organisation, to accelerate our entry through this portal to the future - and begin our next great adventure, together.