They are the monarchs of Hong Kong business: the Hongkong Bank, Swire Pacific, China Resources and many other leading companies. But they have finally met their match. They may be able to erect skyscrapers with a single stroke of the pen, but when it comes to getting together with the Government to use modern technology they have failed badly. But not as badly as the taxpayer, who on Friday stumped up a loan of $425 million to pour into the troubled Tradelink computer system. This is on top of the $162 million that has already been spent in equity and overdrafts, of which about half came from the Government. But the real cost of the Tradelink problems cannot be calculated. The real cost is the millions of staff hours spent unnecessarily shuffling pieces of paper, both in the Government and the private sector, which could have all been saved years ago. For a peek at the world Tradelink is trying to revolutionise, just take a trip to the Trade Department HQ in Mongkok. The crowds of clerks hauling bundles of paper present a mind-boggling vision of spent time. Somewhere out of public gaze is an equally vast empire of staff pushing, chopping, clipping and signing these sheets before they are shoved back into the hands of the applicant a few days later. A commercial data transfer company estimated in January that exchange of paper documents for trading costs about $77 billion a year - about five per cent of total trade. All this work is necessary because of the highly-regulated nature of international trade, where quotas need to be tracked and goods carefully proven to come from where they claim. Other government paperwork empires include Government Supplies, Customs and Excise, and Immigration. Bill Clinton realised this years ago. Shortly after taking office he mandated a major reform programme. Now, when the US Government buys anything, from a packet of screws to the Hubble Space Telescope, the whole process is done on screens. As a demonstration of the potential, in a few years' time the US will rip out its immigration counters. Passengers flying to the US will have their passport details sent to the US when they check in. US Immigration computers will have plenty of time to check details during the flight, and once the plane touches down most passengers will be able to just stroll out of the airport. Here in Hong Kong, things are done differently. Tradelink was first set up in the late 1980s by major hongs such as Hongkong Bank, Standard Chartered, Hongkong Telecom, China Resources, the three shipping terminals and business groups. The Government joined in 1992 and its stake has increased to 48 per cent. As currently planned, Tradelink is relatively modest in scope. It allows trading firms in the territory to apply for Restrained Textile Export Licences and Trade Declarations via computer links in their office. As well as saving time and cash, the US told the Hong Kong Government in March that it would eventually want to stop accepting paper textile import licences. Singapore, which set up its own TradeNet system in 1988, already sends all this paperwork across the Pacific electronically. Although relatively simple, the volumes are staggering. There are 14 million trade declarations issued a year in the territory. About 12,000 companies have textile quotas. Typically, submitting a document electronically would cost $100, a rate set by Exco, and this revenue stream is supposed to pay back Tradelink's investment within seven years of starting to accept documents, at which point the Government will get the whole project for free. The consortium awarded a contract to IBM to develop the system in 1993. Tradelink's own staff, numbering about 45 and led by general manager Juletta Broomfield, moved into offices in Times Square, Causeway Bay, and started beavering away. Meanwhile, according to insiders, the civil servants started building their defences in a way that undermined the whole basis of the project. Unless the Government processes the documents more quickly than before then no one will use the system. And unless the Government eventually stops using paper altogether it will never reap efficiency gains because it will have to run two systems side-by-side, and the system would never attain critical mass. The initial offer by the Trade Department was to stop paper processing of trade declarations only five years after the computer system was available. For textile licences it was three years. And as for speeding up processing, the offer was hardly generous. At present, a company lodging an application on paper on Thursday can get it back on Tuesday. The Trade Department's offer was to send it back on Monday if it was lodged electronically. 'We had meeting after meeting, with no results,' said an insider. Last week Denise Yue Chung-yee, secretary for trade and industry, admitted to Legco:'The administration did not do enough to take a leading role.' The consortium awarded a contract to an IBM-led consortium in October 1993 - one of the largest government-linked computer contracts awarded in the territory, with a value put at $200 million over seven years. The deadline for operation: a pilot project by January 1995, full operation in July 1995. The first concrete sign that things were off the rails was December 1994. Just one month before the theoretical start of operations, Tradelink announced it had been unable to agree terms with IBM, so it was signing with Hewlett-Packard instead. Ms Broomfield's husband was, and is, a senior staff member of Hewlett-Packard, and was based in their Hong Kong regional office when Hewlett-Packard landed the contract. Anthony Charter, managing director of freight firm HACTL and then-chairman of the Tradelink board said the directors knew about it and were satisfied there was no conflict of interest. 'It was all above board,' he said. Meanwhile, government wrangling continued. Originally, Tradelink was supposed to be a gateway between government and the outside world. Then the Information Technology Services Department got involved in another gateway project, so Tradelink was merely a gateway to another gateway. In total, Tradelink had to co-ordinate dealings with no fewer than nine government departments. Deadlines continued to slip, and when the system was first switched on for testing in July 1995 'the numbers of errors encountered were much higher than expected', according to a consultancy study tabled in Legco last week. This in turn meant that testing, which was supposed to finish in February this year (according to the revised timetable), is only finishing now. The consultants also noted that project management techniques were only started in December last year. Hewlett-Packard's MD Jack Lee Kwok-jing concedes there are problems but says: 'For a project of this size and complexity we are quite happy with the progress.' One staff member claims that with a lot of cash and no firm timetable from the Government it was turning into a Taj Mahal among computer systems. In contrast, Singapore created its equivalent system, TradeNet, from a blank sheet of paper to traders in the country using it exclusively in fewer than four years. Civil servants viewed Tradelink as an outside organisation, despite being 48 per cent owned by government and still dragged their feet. The crisis came to a head when the project started getting near to the end of its current funding, and needed more around the beginning of the year. The private shareholders refused to pay any further cash, saying it was not a commercial investment. It was apparent that if the Government did not come up with hundreds of millions of dollars the project would die. Consultants for the Government studied the options. Scrapping it, even if the Government then immediately started work on a fresh system, would not only be costly and delay efficiency gains but would 'damage Hong Kong's image as a leading trading centre in the world', the study said. In addition, there was the embarrassment factor; in the Governor's 1994 policy address it was 'the adoption of this emerging international trading method will result in improved efficiency, which is essential for Hong Kong to maintain its position as one of the world's leading trading centres'. The blame was handed out by the consultants evenly, but thickly. 'Tradelink lacked credibility in the wider community'; 'With funding running out at the end of May 1996, Tradelink's position was untenable'; 'A lack of revenue stream early enough combined with the finite project life had rendered the business plan unviable'; 'There were difficulties with the delivery of [Tradelink] as a project'; The potential customers showed 'a general lack of vision' and the big companies who were shareholders had an unrealistically high requirement for profit of 18 per cent. But the harshest criticism was reserved for the Government, which had 'a lack of vision' and 'an inability to identify cost-benefit rationale' and generally a reluctance to take tough decisions or even understand what Tradelink was supposed to do. So the administration took hold of the consortium with both hands. Previously, even though nine government departments had dealings with Tradelink the only civil servant on the board was from the Treasury, charged with making sure the Government got a good return on its investment. Denise Yue was made chairman of the consortium and Director-General of Trade Tony Miller also joined the board in February. Ms Broomfield is leaving Hong Kong as her husband has moved to the US, and three new top executives are to be recruited. The abbreviated list of changes circulated to Legco comes out at more than a page. Shortly after a reluctant Legco approved the cash on Friday - equivalent to six months of running the Vietnamese camps - Ms Yue said: 'I don't think it's useful for anyone to look back. The important thing is for all parties concerned to look forward and work as a team to deliver the project to the trading community of Hong Kong'. Mr Griffith's current estimate of starting full operation is January next year. 'I'm confident we can do it,' he said. The Government has finally bitten the bullet on ending the paper chase. Two years after accepting electronic applications for textile licences, the Trade Department will refuse paper applications. Fifteen months later, the counter accepting paper trade declarations will, for the last time, hang up the 'Closed' sign. As Mr Griffith concedes, these schedules will represent the real test. Can 10,000 or 20,000 companies be switched over to the system in two years, a rate of 500 or 1,000 a week, even with a wide network of training firms and computer firms working hard to make it happen . . . particularly given that the software operates solely in English? Mr Griffith is confident. Others point to the 'British Naturalisation Syndrome', in which the Immigration Department's smooth plans were derailed by tens of thousands of people who refused to apply until the very last day possible. Anthony Charter, the original chairman and managing director of freight firm HACTL, admits 'with hindsight, it should have been totally as a government project from the start'. His own air freight firm often holds goods for days while pieces of paper shuffle around the territory. 'If we could get it moving better we could handle more throughput with the same facilities,' he says. 'It is a great shame that after so many years we're still trying. Singapore must think we are really strange that we haven't got it working yet.'