Hong Kong Tech Executives Eye WTO Fallout

Hong Kong's high-tech sectors can reap the benefits of China's anticipated admission to the World Trade Organization (WTO) by leveraging the territory's entrepreneurial spirit and business sophistication, executives said today as they unveiled a report on the possible impact of such a deal.

Executives representing Hong Kong's technology and telecommunications industries echoed the overall conclusion that Hong Kong could benefit greatly from China joining world trade as an equal partner, but that the territory would have to maximize its basic advantages. These include cultural and business ties to China and well-developed infrastructure and business institutions, according to a report from the Hong Kong General Chamber of Commerce.

In high-tech industries, Hong Kong is well positioned to add value through software and Internet content development, according to representatives from two working groups in the Chamber, who spoke at an event where the report was issued. Both pointed to education as a critical need.

Local telecommunications companies can develop on-line services on top of Chinese-built network infrastructures to take on the Internet market in Asia and even the world, said Norman Yuen, deputy chief executive at Cable & Wireless HKT, Hong Kong's biggest telecommunications service provider. The expected opening of China's telecommunications and Internet markets to foreign investment will allow such partnerships between Chinese and Hong Kong providers, he said.

"Hong Kong is an incredible test bed for applications," Yuen said, pointing to services such as business-to-business procurement over the Internet. "It is in this area where we have the biggest opportunity."

Hong Kong can also serve as a model for telecommunications law, which effectively doesn't exist today in mainland China, creating a major barrier to foreign investment, Yuen said. Without good laws, "it will be very difficult to operate multi-billion-dollar investments," he added.

Another industry representative voiced deeper concerns about Hong Kong's ability to compete in the emerging Internet economy. If local government does not act soon to promote education and nurture innovation, the territory could be left behind, said Lily Chiang, executive director of Chen Hsong Holdings Ltd., a maker of machine tools and medical equipment.

Although entrepreneurialism has always been a strength of Hong Kong, it must be combined with technology expertise, Chiang said.

As it stands, "the mainland definitely has more talent," Chiang said.

Moreover, when restrictions on foreign investment are lifted, Hong Kong may lose its role as a gateway to the market in mainland China, Chiang said.

"Many venture capitalists are interested in the mainland directly. Why should they go through Hong Kong? They would rather have direct management over operations in China than to go through a Hong Kong vehicle," Chiang said.

The Commerce Chamber's report came out the same day the French telecommunications and networking equipment giant Alcatel SA announced it will open an Asia-Pacific regional headquarters in Shanghai. The company said in a statement that it chose Shanghai for the center, where 10,000 employees will work, because it has so much invested in the mainland already.

One analyst agreed that there is potential for software development in Hong Kong, particularly for electronic commerce, but said both business and government will have to act quickly to catch up with rival cities on the mainland and elsewhere.

"There isn't anything progressive being done here in terms of writing software," said Matthew McGarvey, an analyst at International Data Corp.

Asia-Pacific, in Hong Kong. "To make it happen, companies and the government have to start getting more aggressive."

More investment funds are needed to help small, innovative companies get started, and much more must be invested in education, he said.

The Hong Kong General Chamber of Commerce can be reached at +852-2823-1210, or on the Web at http://www.chamber.org.hk

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