The SARS Outbreak in Hong Kong: Use of the Internet in Times of Crisis

BACKGROUND

At the same time as the first cases of atypical pneumonia were dribbling on to the radar of local health authorities, the Information Technology Services Department and the Hong Kong Productivity Council were releasing the results of their bi-annual survey detailing the progress of e-business adoption in Hong Kong. Surprisingly, the number of companies that did not use email or the Internet in the conduct of business had risen from 44 to 47% over the period of continued economic downturn since the previous survey was conducted in June 2002. The vast majority of these non-adopters were small and medium sized enterprises (SMEs) with fewer than 10 employees A mere 3% of all companies surveyed had established means for online business-to-consumer commerce, or had achieved a basic level of integration of their systems with external partners.

The Hong Kong Government has faced a long, uphill struggle in its plight to promote the adoption of electronic business in the territory. While Hong Kong's regional counterparts - such as Taiwan, Singapore and South Korea have achieved high rates of e-commerce adoption, the special administrative region's various public and private sector-lead initiatives to create a thriving information economy have met lukewarm responses. The Tung administration's major vision to foster a competitive IT infrastructure in Hong Kong was articulated in its 1998 "Digital 21 Strategy" initiative and saw the establishment of an Information Technology and Broadcasting Bureau (ITBB) to consolidate government policies for telecommunications, information technology and broadcasting under one roof.

The Government's flagship Electronic Service Delivery (ESD) Scheme was seen as a leading effort to promote e-commerce in the greater community and aimed to offer the capability of completing, digitally signing and submitting government forms via the Internet. It was envisioned that the information infrastructure developed under ESD would eventually become available for private-sector use. As of March 2003, 140 public services and information from various government departments and public agencies were available through the 3-year-old "ESDlife" (www.esd.gov.hk) branded portal. The portal was recording usage in the range of 130,000 to 150,000 monthly transactions, which encompassed tax returns filing, licence renewals, marriage registrations, booking of leisure facilities, and a variety of other services.

The progress of the Government's ESD scheme would seem to indicate rising computer adoption among Hong Kong's general public - but would this translate into increased adoption of electronic business among Hong Kong's technologically-lagging SMEs?

Hong Kong's Mixed Appetite for E-Commerce

Hong Kong has an excellent telecommunications infrastructure and was the first major city in the world to have an entirely digital telephone network. It has broadband networks that cover all commercial buildings and about 90% of households. In addition, it has one of the highest penetration rates of cellular phone services in the world (about 84%)¹. Use of bar-coding and sophisticated inventory control systems is widespread among Hong Kong's retailers and the territory also has a burgeoning design and multimedia industry.

Hong Kong's government and business community have long recognized the importance of establishing a community-wide infrastructure to support electronic business and were among the first in Asia to embrace the use of electronic data interchange (EDI) in the early 80s, and Internet-based networks in more recent years. The most prominent adopters of e-commerce can be found among the territory's financial establishments, which offer an advanced range of online banking capabilities including online consumer banking, securities and foreign exchange trading. Hong Kong Exchanges and Clearing - the holding company of The Stock Exchange of Hong Kong, began development of an electronic trading system in 1986 and launched its Automated Order Matching and Execution System (AMS) in 1993. A second-generation AMS/2 was launched in 1996, which allowed for the installation of off-floor trading terminals in broker's offices. The third-generation AMS/3, launched in 2001, allowed for trading over new channels such as the Internet and mobile communications and offered multiple-market and multi-product trading capabilities, in addition to other enhancements.

Away from the world of high finance, however, Hong Kong's experiences with nurturing e-commerce and a budding information economy have not always been rosy. Examples of failed ventures are rife and range from the well-publicized failure of online-shopping venture adMart, to the tenant-starved Cyberport technology park project. The Hong Kong example demonstrates that a sophisticated infrastructure and vigorous government backing are not always sufficient factors to ensure widespread participation in an information economy.
On its part, the government took the initiative of setting up a Public Key Infrastructure and established a clear legal framework to provide a secure environment for the growth of e-commerce in Hong Kong - most significantly by enacting the Electronic Transactions Ordinance in early January 2000 that granted full legal status to electronic records and digital signatures. Indeed, the Economist Intelligence Unit's "ebusiness forum" rates Hong Kong 10th out of 60 countries in its 2002 "e-readiness rankings" which are derived from a model weighing quantitative and qualitative indicators under the categories of Connectivity and technology infrastructure, Business environment, Consumer and business adoption, Social and cultural infrastructure, Legal and policy environment and Supporting e-services.

So why hasn't Hong Kong's experienced broad based e-commerce adoption and a smooth transition into an information economy? On the consumer side - in spite of ubiquitous Internet access and a high broadband penetration rate, Hong Kong is extremely condensed, with abundant access to shopping of every imaginable nature. Its consumers are renowned for their love of browsing, comparing and handling physical products. Among business, it is important to note that 98% of total establishments in Hong Kong are regarded as small and medium enterprises (SMEs). According to the government's classification, SMEs consist of manufacturing enterprises with fewer than 100 employees and non-manufacturing enterprises with fewer than 50 employees. Most of Hong Kong's SMEs are in the import and export trades, followed by wholesale and retail trades, restaurants and hotels. In December 2002, about 1.36 million people were employed by SME establishments - roughly 60% of total non-civil service employment in Hong Kong. ²

Supporting Hong Kong's SMEs

As early as 1988, Tradelink Electronic Commerce Limited (initially "Tradelink Electronic Document Services Limited") was established by 11 leading Hong Kong organizations to develop an electronic platform for common trade transactions (such as certificates of origin, trade declarations, and receiving textile export licenses). ³ After several false starts, the Hong Kong government saw the need to ensure Hong Kong's competitiveness as a service industry and signed on as Tradelink's single largest shareholder in 1992.

The first Tradelink e-commerce service was launched in 1997 and the government established tiered cut-off dates over the next several years, after which paper-based applications would no longer be accepted. The price for submitting a paper application was raised relative to the electronic alternative - but new user enrolment continued to lag behind annual targets.
To date, several surveys have shown that the rate of e-commerce adoption among Hong Kong businesses remains moderate. In response, initiatives such as the "Try it Online Week" campaign and the more recent E-commerce Adoption Campaign (launched in November 2002) were devised as a joint effort between business and government sectors to promote commercial use of the Internet by the wider Hong Kong community.

Among Hong Kong's SMEs however, certain segments have expressed discontent at being pressured to adopt e-commerce and resent being branded "uncompetitive" for holding on to long-established manual processes. Failing to see the direct benefit of e-commerce tools, they maintain that they are willing to embrace technology only if there is a clear benefit to their specific circumstances.

Almost as a precursor of things to come, Hong Kong's trade and transport industry received a shock in late 2002 when the United States Customs Service instituted tighter security regulations governing air and maritime exports of US-bound goods as part of the broader anti-terrorism campaign. The U.S. - Hong Kong's major export partner, imposed new rules requiring that all air cargo be registered with authorities no less than eight hours before departure. The local logistics and trade industries scrambled to meet the new requirements and voiced concern that the new regulations could stunt growth and threaten Hong Kong's role as a regional logistics hub. A major hindrance was the fact that many local exporters still relied on paper-intensive operations that were not adaptable to a sudden change in procedure.

The SARS Effect

During the financial reporting season of early 2003, senior executives of Hong Kong's listed companies warned of political and economic uncertainties in the year ahead (in reference to the war in Iraq, tensions on the Korean peninsula and the global economic downturn). They could not have anticipated that just weeks later, the region's economy would be broadsided not by offshore conflict or economic reverberations, but by an outbreak of a mysterious disease called SARS. In the trying months ahead, socio-economic dynamics in Hong Kong would receive a massive jolt.

In the midst of disrupted operations, school closures, quarantines, hospital crises, travel restrictions, declining consumption and widespread anxiety, would Hong Kong's massive investment in electronic services infrastructure finally pay off? Would the SARS crisis demonstrate the potential of Internet-based technologies and provide the impetus for a "breakthrough" in e-commerce adoption across the community? This section will document some of the ways in which Internet-based services and technologies have played a pivotal role in the unfolding SARS saga and to a large extent, mitigated the difficulties facing Hong Kong. Specifically, examples of technology at the forefront of crisis management will be presented under the categories of information dissemination, business continuity, consumer electronic commerce, and online education.

1. Economist Intelligence Unit, 2001
2. Trade and Industry Department, 2002.
3. China Resources (Holdings) Ltd, Hong Kong Air Cargo Terminals Ltd (HACTL), Hong Kong Association of Freight Forwarding Agents (HAFFA), The Hong Kong General Chamber of Commerce, Hongkong International Terminals Ltd (HIT), Hongkong and Shanghai Banking Corporation, Hong Kong Telecom, Modern Terminals Ltd (MTL), Standard Chartered Bank, Swire Pacific, and Maersk Hong Kong Limited