Legislative Council
Panel on Trade and Industry

The Community Electronic Trading Service

Proposed Prices Submitted by Tradelink
Introduction

Tradelink Electronic Commerce Ltd. (Tradelink) has submitted to the Government for approval its proposed prices for the Electronic Trade Access Service (ETAS) to be provided under the Community Electronic Trading Service (CETS).

Background

2. Government entered into an agreement with Tradelink in December 1992, requiring the company to provide a CETS in Hong Kong. CETS is to lay the foundation for the widespread use of electronic data interchange within Hong Kong's business community to improve efficiency and competitiveness. As part of the agreement, Tradelink was granted the exclusive right to provide services through CETS to handle a range of government trade-related transactions 1 for a period of seven years and prices to be charged by Tradelink for such exclusive services are subject to the prior approval of the Government.

3. In October 1996, we consulted Members on Tradelink's proposed prices for the period 1997 - 2003 for services to be included in the commercial launching of the CETS in 1997 and the company's proposed prices were subsequently approved by the Government in November 1996.

4. At the meeting held on 7 September 1998, Members noted our intention to make the CETS the only means of applying for Restrained Textiles Export Licences (RTEL) in January 1999 and lodging Import and Export Declarations (commonly known as Trade Declarations or TDEC) in April 2000. Members also noted that Tradelink would set up service centres to convert paper submissions into electronic ones for companies that may not be ready to start using the CETS or may only need to make submissions occasionally. Such a conversion service is referred to by Tradelink as ETAS.

Tradelink's Proposed Prices for ETAS

5. During the phasing-in period, Tradelink will provide ETAS free of charge. With the introduction of full-scale electronic submission, Tradelink will charge a fee for ETAS to recoup the costs involved. Tradelink's proposed prices for ETAS are set out in the table below:


1999
$ 		2000
$ 		2001
$ 		2002
$ 		2003
$
ETAS for RTEL 2

- fully paper 75.0 75.0 80.1 85.5 91.5
- others

37.5 37.5 40.1 42.9 45.9
ETAS for TDEC 2 - 25.0 26.7 28.5 30.5

Prices for Tradelink's Existing Services

6. For its existing services, Tradelink will not charge fully the approved prices for the years 1999 and 2000 in view of the difficult economic conditions that Hong Kong is experiencing. For 1999, Tradelink will continue charging at the 1998 levels. For 2000, Tradelink will charge prices slightly lower than those already approved.

Tradelink's Projected Return

7. On the basis of the proposed prices set out in paragraph 5 above and the action to be taken by Tradelink in paragraph 6 above, the company's projected internal rate of return upon the expiry of its exclusive right in December 2003 is in the region of 5 to 8%. A summary setting out the highlights of Tradelink's business plan is at the Annex.

8. Tradelink will continue to introduce new exclusive services as required under the CETS and the relevant proposed prices will be addressed in due course.

Advice

9. Panel Members are invited to give their views on Tradelink's proposed ETAS prices as set out in paragraph 5 above.




Trade and Industry Bureau
21 October 1998



Highlights of Tradelink's Business Plan

Year ending 31 December

Actual
1997 		Forecast
1998 		Plan
1999 		Plan
2000 		Plan
2001 		Plan
2002 		Plan
2003
Annual increases in Tradelink's prices

- 8% 0% 13% 12% 7% 7%
Annual increase in staff costs

5.5% 4.3% 2% 6% 6% 6% 6%
Loan interest rates

9.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%
Identified operating profit (loss) ($'000s)

(86,440) (85,496) (59,069) 55,189 156,538 185,158 205,576
Profit (loss) before tax ($'000s)

(97,462) (105,745) (105,696) 16,792 130,031 180,594 213,537
Profit (loss) after tax ($'000s)

(97,462) (105,745) (105,696) 16,792 130,031 180,594 194,871
Dividends payable ($'000s)

- - - - - - 94,462
Total Government loan at the end of year ($'000s) 150,000 253,000 343,000 288,000 118,000 - -


1. (a) Restrained Textiles Export Licences;
(b) Other quota related transactions;
(c) Import and Export Declarations;
(d) Production Notifications and Certificates of Origin;
(e) Cargo Manifests; and
(f) Dutiable Commodities Permits.


2. Tradelink will provide ETAS for RTEL free of charge until the end of December 1998. Tradelink will also provide ETAS for TDEC free of charge until the end of March 2000.