Welcome Address at the Electronic Commerce and the Capital Market Conference
5 September 1997 |   By : Dato' Dr. Mohd. Munir Majid, Chairman of the Securities Commission

Welcome Address by

Dato Dr. Munir Abdul Majid
Chairman, Securities Commission, Malaysia

at the

 Electronic Commerce and the Capital Market Conference

Let me first of all thank all of you for coming today, and may I express a special welcome to our speakers from abroad. It is most appropriate for us today to deliberate on this important topic of Electronic Commerce and the Capital Market. This subject is exciting to us, and we welcome the advent of the Information Age with its promise of a digital econmy where information, ideas, people, goods and services move freely across borders in cost effective ways. As traditional boundaries disappear, electronic commerce will fasten the pace of globalisation that is already taking place. We will embrace this new borderless world by the creation of our own Multimedia Super Corridor. The MSC will create an environment that encourages innovation, help our Malaysian companies to reach new technological frontiers, facilitate the creation of smart partnerships with global IT leaders and provide opportunities for mutual enrichment and success with our trading partners.

Technology is not new nor strange to us. In fact its applications are well accepted by our consumers and investors in conducting regular banking and investing activities. The banking industry pioneered the use of electronic systems in delivering financial services to its customers through the use of Automated Teller Machines (ATMS). Now, with the familiar use of tele-homebanking services, there is increased customer confidence in personal banking services outside of the traditional physical branch locations. In the process, banks, too, have benefitted from the cost savings derived compared to the high costs of manual handling of similar transactions by bank tellers. More recently, electronic broking services have gained acceptance in our capital markets. The systems may differ from each stockbroking firm, but the services provided are a mixture of real time price information for the investor in the comfort of his home or office, order routing, trade enquiries, account monitoring and market research reports.

Applications in foreign markets are an eye opener. Electronic broking services through discount brokerage firms are abundant in North America, which provide low cost execution services to retail investors. Both the US and Canada have launched electronic filing of documents such as prospectuses and continuous disclosure requirements, saving public companies time and money on paper filings. Even more significant is capital raising on the Internet. Spring Street Brewery, a New York microbrewery, was the first issuer cleared by the US SEC to offer securities through a formal online prospectus in early 1995. The company managed to raise USD1.6 million from 3,500 investors without paying any underwriters fees or brokers commission. This has since captured the imagination and having a financial market on the Internet has become, if not quite yet the rage, increasingly visible.

Common themes such as speed, reliability, convenience and lower transaction costs dominate these applications on a worldwide basis. Technology will continue to evolve around these same themes with greater sophistication and flexibility. Great distances and multiple time zones are no longer barriers to communications. The latest information and communication technology such as EDI has improved communication across the boundaries of firms and the boundaries of countries. The consequences are manifold, and significantly there will be a transition from private to public platforms that will transform the conduct of electronic commerce.

Let me elaborate. Many of the current more accepted applications are still through the use of private networks. These networks restrict access to specific entities and employ communication infrastructures that are exclusive. They have the advantage of security as the path of information flow is strictly controlled and circumscribed. A local bank's ATM network or SCANS clearing system are prime examples of a private network using proprietary protocols. A further extension of this is the intranet network, which are private corporate networks using Internet protocols.

The big change in communication platform came about with the introduction of public networks, as I just mentioned, such as the Internet. Electronic Commerce today has the ability to combine the advantages of computers, which are speed, reliability, and handling high volumes of data, with the creativity, flexibility and skills of people. The result has been a change from traditional commerce in the way information is exchanged and processed. Traditionally, information is exchanged through direct, personal contact, phone or postal systems. Now, information is conveyed via a digital communications network, computer system, or some other electronic media.

What impact will all this have on our markets and how will the way business is conducted be changed? Firstly, we will see convergence of industries and new partnerships. The dominating sector in the Information Age will not be manufacturing, automobiles or the electronics industry. Technology is rather moving towards a convergence of computing, communications and broadcasting, resulting in multimedia technology. The future promises an exciting mix of audio visual presentation of information integrating text, graphics, sound, animation and video clips. Supporting the applications of multimedia is the growth in fibre optics networks by public network providers and new communication standards that allow building of networks and interconnecting remote sites. Within the field of IT, networking technology such as ATM, Asynchronous Transfer Mode has capabilities to provide high bandwidth and high speed data transmission rates, which will support all manner of traffic such as voice, data, imaging and video. All this may sound very technical to many of us, and it is. And it is no coincidence that one of the seven flagship applications of our MSC is to develop a marketing and multimedia hub that can provide electronic publishing, telemarketing and remote customer care.

Secondly, Electronic Commerce is not just about conducting business the old way electronically. The new ways will bring buyers and sellers closer together, disintermediating the need for middlemen to play the role of executing transactions and brokering of transactions. We are not referring to just financial services but other types of services as well. Hotels and Airlines will require fewer travel agents to execute booking transactions when everything could be done by travelers through the Net. Tickets may even one day disappear if the whole process becomes totally digitized. Travel agents will have to assume new roles as travel consultants with added value services. Real estate agents will be affected too. The information they provide -- market prices, types of latest deals, leases, tax laws and location can all be wired directly between the buyer and seller. Similarly, remisiers, stockbrokers, unit trust agents and other financial intermediaries will have to find ways to deliver added value to their customers. Rather than being in the brokering or information exchange business, they need to become value added facilitators offering financial advice and knowledge of investments.

As financial markets change, and methods of customer service change, the structure of the financial services industry will also be evolving. We may see an influx of new players from outside the financial sector, the telecommunications, utilities, software providers and retailers providing financial information and analysis to investors having direct access to the market.

These changes will challenge the way we do business in the future. The users on the Internet are growing day by day. Once confined to military and government agencies, we have seen exponential growth in new users in the past few years. Surveys have been conducted on the use of the Internet. One source (Infoquest internet surveys and statistics) estimates that there are 35 million users in 170 countries today, and this is expected to grow to 250 million users by the year 2000. The electronic marketspace of the future promises to be much bigger than any of the current physical marketplace and brings with it exciting opportunities for electronic commerce. It will at the same be overwhelming as we grapple with these forces of globalisation and technological changes. I hope we will not resist but rather make adequate preparation for the future.

Throughout today you will have the opportunity to learn in greater depth the technology developments and applications of Electronic Commerce from many viewpoints. We have brought together speakers who are authors, consultants, suppliers and users of technology. I am particularly glad that Don Tapscott is able to come all the way from Toronto to deliver the keynote address this morning, and all the other speakers for taking their precious time to be with us and share their knowledge with us. And, as promised, I will, later this afternoon , release the discussion paper we have prepared on the Regulatory and Developmental Challenges which Electronic Commerce poses to our Capital Market.
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