Information Technology in 21st century Management

Dr Li, ladies and gentlemen, friends,

Let me first of all thank you for inviting me to the Annual Fellowship Dinner tonight. It is my great privilege and honour to address this distinguished audience in my capacity as Chief Executive of the HKSAR. This is a particular sentimental occasion for me and indeed a nostalgic return for me as I have been Chairman of the Hong Kong Management Association for four years before David took over from me. I am thrilled to be with so many good friends and old friends. I am also impressed that the affairs of the Hong Kong Management Association have gone from strength to strength since I left the Association some years ago.

This evening I would like to address the role of information in modern management and to look to what the future might hold due to the powerful forces being unleashed by rapid developments in the information industries globally.

As is well known by managers everywhere, whether in Government or in business, complete, accurate and timely information is essential to every managerial task. Good communication has been the key to the organisation of human societies from the earliest times. Great steps in human progress can be charted throughout the ages by milestones such as the development of languages, the codification of written records, the making of paper, the manufacture of the first printing presses and the establishment of institutions of learning.

Over recent times parallel developments in communications and in information processing technologies have greatly expanded the possibilities for human endeavour. For example the laying of the first submarine communications cable to Hong Kong was described by one historian (Endacott) as more significant to Hong Kong than the physical easing of travel brought about by the Suez Canal! More recently the mass penetration of telecommunications means that anyone can keep connected virtually anywhere, anytime and even whilst on the move. The rapid developments in computing technologies have meant that we can now store libraries of information in digital format, process great volumes of data in fractions of a second and, utilising the telecommunications networks, send that processed data right around the world instantly.

Could the nineteenth century pioneers in telecommunications and computing technologies have ever imagined where their efforts would lead. I suspect that they might be surprised and amazed by the sophistication of the electronic toys which our infants take for granted and by the complexity of computer games our older children enjoy today. I say this not to disparage such games: they can serve as excellent educational aids and develop our children's skills for the future. What these games do illustrate, however, is how technological development can create whole new sector of economic activities. In the case of educational games our entrepreneurs here in Hong Kong have seized such opportunities and have carved out a global leadership position.

When I think about what impresses me the most about the information industries it is the way that their products and services have become so commonplace in our daily lives that we no longer notice them. We do not marvel at our ability to call some-one long distance and reach them on a mobile telephone; we take it for granted that trains run on time, and safely, due to computerised control; likewise we expect real-time quotations on stocks, bonds, commodities and all sorts of financial derivatives and we expect sales and purchase orders to be executed promptly whether here in Hong Kong or London or New York. We also expect money to be dispensed from automatic teller machines even when abroad. We have become so accustomed to our household appliances being intelligent that we are even enticed to buy products which utilise something called "fuzzy logic".

As far as modern business is concerned, information technologies have fundamentally altered the organisation of production and distribution of physical goods. For Hong Kong we could never have achieved the high level of productivity that we record in our factories, nor could we have moved them into China and other places in the Region, without harnessing these new technologies. The very concept of "just-in-time" owes it existence to these technologies and without it I question how we could keep our factories at world-class standards or even our supermarket shelves fully stocked.

But these things are known to you: I mention them only to look back and to see where information technologies have come from and their role here today. But looking back is easy - hindsight is 20:20 vision. The challenge for policy makers is to look forward and to show leadership.

In my Policy Address of 8 October 1997 I decided to make a feature of the information industries as I strongly believe that information technologies will be the tool that will shape the 21st century. While we can see today's uses of information technology we are experiencing only a foretaste of what will become possible. I have a vision that we can work together to make Hong Kong a leader, not a follower, in the information world of tomorrow.

To facilitate the process to achieve this objective, I am proposing to start by addressing the policy setting and administrative structure within the Government itself. This step is an essential pre-requisite for providing a focal point within Government and a commitment towards assuming leadership in this important field. In future the IT-related responsibilities within the Government will be re-grouped so that the portfolio can be entrusted to one Bureau Secretary. Our target is to implement this commitment in early 1998. At present, such responsibilities are borne by a number of Bureaux, namely Finance Bureau, Economic Services Bureau, Trade and Industry Bureau, Broadcasting, Culture and Sport Bureau, Home Affairs Bureau and Education and Manpower Bureau.

The Chief Secretary for Administration's Office is co-ordinating a review of the institutional framework within the Government with a view to re-adjusting the portfolios of existing Bureaux rather than set up an additional Bureau for IT in the overall Government framework. Whether the Bureau Secretary with the IT portfolio should only deal with IT-related responsibilities will be considered in the review, having regard to the overall distribution of responsibilities among all the Bureaux Secretaries. Once the review is completed and a conclusion reached within the Government we will announce the details.

Having a single Bureau Secretary charged with these responsibilities will establish a focal point within the Administration for policy co-ordination across the information industries and allow us to accelerate the development of comprehensive strategies which help our entire community as we go forward into the Information Age. Many of our Regional neighbours and trading partners have been studying the relevant policy issues and have produced strategies of one sort or other. We have been discussing these issues and exchanging views with them in many fora, particularly within APEC.

While the work in other countries has a lot in common it is also quite noticeable how each Government approaches the issue with a cultural sensitivity and, therefore, attempts to fashion policy in the context of the unique circumstances of each individual country or region. In Hong Kong we certainly can learn from others' experiences but ultimately we need to develop our own strategy uniquely suited for Hong Kong. Naturally a Bureau Secretary to co-ordinate the work within the Government is the first step towards developing our own strategy.

The vision of Hong Kong as a leader in information technologies is one which the Government is keen to turn into a reality and we shall pursue it vigorously. But we should not lose sight of the fact that it is a long term vision - something which we must get right and evolve towards over the next decade. It will take time because developing our information infrastructure is a technically complex undertaking which will involve heavy capital investments by service providers as well as users and consumers. Also it takes time for people to learn about new services, to adjust to them and to become confident and comfortable users. The challenge to make the information society 'user-friendly' will be just as large as any other challenge which will arise in building the information infrastructure for Hong Kong's future.

We can take comfort that no country or region is expecting to realise its vision of an information society in any shorter timeframe, even including those countries that have already done a lot of planning. In addition we do have the good fortune of a headstart advantage by way of the excellent physical information infrastructure that we already have achieved. Now we must build on this good start. My Policy Address pointed out that we know what needs to be brought together to make Hong Kong a leader, not a follower in the information world of tomorrow.

First, we must have the hardware. This is likely to be the least of our concerns. Hong Kong has one of the most sophisticated telecommunications markets in the world because as we have excellent telecommunications facilities and competition is providing the incentive for operators to innovate. The networks are already digital and all over Hong Kong. When we look at optical fibres, which are the essential backbone for the high capacity communications networks we will need in future, we can see that Hong Kong already has over 300,000 km installed. The private sector has shown its willingness and commitment to invest many billions of dollars every year building up its capital stock. There is no doubt investors will increase their capital expenditures under the right policy and regulatory conditions.

Second, we need to develop the software. The software creates applications which are essential if we are to make good use of our hardware and unlock its full potential. We can claim some successes in developing such applications. The anticipated launch of commercial scale video-on-demand programme services is a good example. The development of the Community Electronic Trading Service is another. Applications for restrained textiles export licences and lodgement of trade declarations can now be made over telecommunications networks. Yet these are only the tip of the iceberg. The real promise of the information society lies in the applications that might be developed - and these would appear to be limited only by imagination. When we start to think about the applications we could develop for Government, for business, for the delivery of better services to the old, the sick, the less fortunate, the list seems to be endless. Apart from the possibilities of home shopping and entertainment, we could, for instance, consider having more terminally ill patients taken care of in their own home through remote diagnosis and monitoring. Open learning, training and retraining could be provided for the workforce through electronic learning centres and on-line libraries. The development of applications is therefore a key area which needs to be given specific attention in Hong Kong's information infrastructure development.

Third, we must not forget about people. Supporting both the hardware and software requires a large pool of talented and trained people: also effective use of information technologies requires competent users. Developing our people skills will become a key component of our strategy. The Government has already invested heavily in information technology education, including the provision of computing facilities and teacher training. I have already announced that we will launch a five-year strategy for IT in education to promote the use of IT to enhance teaching and learning. The main tasks of the strategy are to equip our teachers with the necessary IT skills; to apply computer-assisted teaching and learning across the curriculum; and to place students in an environment where they can use this technology as part of their daily activities and grow up to use it creatively. Our aim is ambitious; we want to give our young people much more than a superficial exposure to IT - we aim to prepare them to become solid contributors to tomorrow's workplace and social structures.

Fourth, we need to be alert to issues of culture. While preserving the best features of our culture we must also develop it to be in line with tomorrow's needs. Hence we should look to developing a culture within our community which positively encourages creativity, use information technologies and preparedness to be innovative. This may well signal a shift in our previous business models. It is generally accepted that in the past Hong Kong has built its economy through smart use of technologies pioneered elsewhere and that when it comes to research and development, the private sector has given more priority to development than research. We have been quick on our feet to utilise others' intellectual property and invest in productive capacity. In the information world it will be knowledge which generates the intellectual property that creates wealth. Therefore we will need to adapt and to become quick with our minds to exploit the opportunities. To do this, our culture needs to stimulate our people to think and act creatively in an information context.

These four elements constitute the conceptual thrusts that the Government will pursue in turning our vision into reality. It is premature to propose detailed work programmes on each of these four elements. What the Government is doing right now is setting up the appropriate institutional arrangements and the processes by which all four elements will be fleshed out in detail. Over the coming months as the institutional arrangements are settled and the IT-related responsibilities are re-grouped, work will proceed on developing detailed strategies and policy targets.

In the meantime my Administration continues to promote a wide range of initiatives in the information industries from licensing video on demand, to negotiating changes to liberalise our international services, to providing more Government services over Internet and so on and so forth. Much is being done but we know much more can be done by giving priority to the information industries sector.

I am excited by the possibilities that may unfold for Hong Kong. Enhanced support for many of our existing strong industry sectors will emerge: in addition, entire new areas of economic activity may develop for Hong Kong. The way we live and work and our quality of life should be beneficially impacted by transformation of Hong Kong into an Information Society. I trust all of you can share in this vision and can work with us to bring the vision into a reality.

It will not be right if I do not say a few words on the financial turmoil in Asia and how it is affecting Hong Kong. I am sure, this is a subject more on your mind than information technology. Let me first emphasise that Hong Kong Dollar/US Dollar linked exchange rate is here to stay. This policy will not, and I repeat, will not change.

We are fully committed to the linked exchange rate, not just for political reasons, but on good economic grounds. For 14 years, the link has provided the economic stability and contributed to the maintenance of confidence in Hong Kong's role as an international trading and financial centre.

Given the open nature of Hong Kong's economy, such a fundamental change in policy as delinking would cause grave uncertainty and disturbance which would weaken investment sentiments. Interest rates and financial market volatility would remain high due to the market uncertainties.

Let us not lose sight of a few important facts.

The first fact is that our economic fundamentals are strong. The IMF mission had just testified to that last week. The Government's financial management continues to be prudent - our budget surplus for this year will exceed 2% of our GDP. Our banking system is strong and highly capitalised. As IMF noted in its recent assessment, the banking system in Hong Kong will be able to withstand the effects of recent financial market volatility. Because of the high interest rate, banks' profit may be affected. But as they are well capitalised, banking system in Hong Kong is safe. We have the fourth largest foreign exchange reserve in the world. Despite the contagion effect of the market volatility in the region, we are free from the types of the political, economic and financial problems that are still haunting some other parts of Asia. Furthermore, China's economy which continues to expand in an orderly manner will have a major positive impact on us this year, next year and the years to come.

The second fact is that the success of our economy has been built upon free and open market forces. Economic adjustment must be allowed to run their course. Any short term intervention in changing the ground rules will impede the cycle of recovery. Indeed. through the short period of slower growth in 1994-95 we witnessed the prompt recovery of the economy which was backed by high degree of resilience of our economy and the vitality of our asset market.

The third fact is we are acutely aware of the need to sustain and enhance our competitiveness and these efforts will contribute to a speedier recovery. I have outlined a number of major initiatives in this respect in my policy address - by providing sufficient land to build 85,000 units of apartments per annum to enhance the competitiveness in the cost of our housing and by examining what needs to address the manpower shortage especially at the high end of the market, by enhancing the value-added in our manufacturing industry, by finding better ways to attract tourists back to Hong Kong despite the currency advantage in the neighbouring economies, and so on and so forth.

In defending the linked exchange rate, interest rate has gone up. Indeed, continued uncertainty surrounding the linked exchange rate as well as the currency turmoil in other part of Asia tend to keep interest rate high. But presently we have no other alternatives. I myself and my colleagues in the Government are acutely aware of the pain caused to many sectors of the community as a result of the high interest rate. There are those who needs to service the mortgage on the homes. There are those in business which borrows money from the banks. There are those who invested in the stock market which has taken a tumble. And there are those in the retail and consumer business whose activities will be affected by the slowdown in spending by the population at large.

Yes we know the pain, but we do not expect high interest rate to remain longer than necessary. Indeed, the sooner we can remove the doubt in our determination to maintain the linked exchange rate, the sooner the interest rate will begin to come down. For the immediate future, it is possible that the interest rate may even increase but I hope this is only a short term phenomenon. Let us take a look at our future.

* The level of our housing cost is already coming down which should greatly improve our overall competitiveness.

* China's economy will continue to do well as we move into the 21st century and Hong Kong is uniquely positioned to benefit from this development.

* When compared with other Asian markets, our highly liquid, well regulated and transparent stock market will be the first to attract foreign investment back once the dust settles down.

* Our high foreign exchange reserve and fiscal reserve will provide an anchor for our future economic development.

Indeed, of all the countries and communities that have been affected by the financial turmoil, I know ours will be the first to rebound. I look forward to the future with confidence.

Thank you.