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SCMP Reporter

Cepa II leaves Hong Kong sector scrambling for increased preferential treatment

Hong Kong's information technology sector is scrambling to obtain more trade concessions from mainland authorities as competition builds up in the IT services market in China.

IT leaders in the private and public sectors said they were pursuing increased preferential treatment for Hong Kong's IT services firms in the mainland because the second stage of the Closer Economic Partnership Arrangement (Cepa II) lacked this guarantee.

'There are many questions not yet fully answered in the announcement of Cepa II,' Hong Kong Information Technology Federation  president Charles Mok said.

He noted that there were uncertainties in the determination of the final Cepa regulations.

'This will likely take months, which will affect the planning of companies with an interest in doing business in the mainland.'

The federation plans to begin formal discussions with the Office of the Government Chief Information Officer (GCIO), which is at the front line of negotiations with mainland authorities, to push for more aggressive proposals to open up China's IT services market to Hong Kong companies.

Mr Mok said: 'We would like 'domestic subject treatment' for Hong Kong companies and individuals, if not in the whole mainland then at least in the Pearl River Delta.'

Hong Kong has direct interests in the Pearl River Delta, where more than 50,000 Hong Kong-owned manufacturing enterprises operate.

'We should get provincial governments in the Pearl River Delta to allocate quotas of e-government and commercial IT projects to Hong Kong companies that are willing to work with local partners,' Mr Mok said. 'This is one way to help Hong Kong companies get established in China, and for the mainland IT industry in the Pearl River Delta to benefit from technology transfer.'

What the Hong Kong government has accomplished so far  is a new free-trade agreement, signed last month, that opens the door to a host of new Hong Kong goods and services entering the mainland.

This second stage of Cepa eliminates import quotas on another 713 product categories and grants preferential access to the mainland for eight new services. It brings to 26 the number of service sectors covered by Cepa.

Officials from both regions said Cepa II would provide a new source of growth for Hong Kong's economy and was the starting point for a further broadening of trade.

But even incumbent GCIO Alan Wong Chi-kong believes that plenty more needs to be done,  and his office is racing against time to get more concessions in place before the agreement takes effect on January 1.

Under Cepa II, Hong Kong-registered IT service providers will be allowed to apply for Computer Information System Integration Qualification Certification.

'We have already obtained approval in principle that Hong Kong IT firms will be allowed to apply for this licence, but that is not good enough,' Mr Wong said.

He said the Office of the GCIO was working with its counterpart from the Ministry of Information Industry to get the stringent financial and technical requirements demanded of companies bidding for government IT projects relaxed.

'We would like to get a transitional period that will relax these rules for Hong Kong IT companies, especially the small and medium-sized enterprises,' Mr Wong said.

The  office also wanted the mainland to recognise the technical qualifications and degrees held by Hong Kong engineers, project managers and other IT professionals, he said.

The mainland has about 1,400 certified local IT services companies, a comparatively small number considering the market's size.

Hong Kong has about 700 independent software vendors and systems integrators, of which about 43 per cent have operations of some sort in the mainland.

But research firm Gartner said merger and acquisition activities by mainland IT firms - including Lenovo, Digital China and UFSoft - picked up last year to build a formidable group of IT services firms.

The China IT services industry consists of three sectors: outsourcing, consulting and system integration, and technical product support. International Data Corp predicts IT services spending in China will grow about 25 per cent a year until 2008, from US$3.72 billion last year.



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Push for IT concessions