Beijing's Business E-Park

Beijing's Business E-Park Abstract Beijing, the capital city of China, began its "Digital Beijing" initiative in the year 2000. Zhongguancun E-Park, at www.zhongguancun.com.cn is a pilot project that applies the latest computer and Internet technologies to improve the efficiency and responsiveness of government. Since the E-Park system went online in 2000, the more than 6,000 businesses in the Beijing hi-tech park of Zhongguancun have been able to apply for a license, file monthly financial reports, submit tax statements and conduct 32 other "g to b" and "g to c" functions online. The system has greatly increased government transparency and efficiency, and reduced the opportunities for corruption. The mayor of Beijing announced that in five years, most government administrative functions in the city will be performed online as they are in E-Park. Application Context Since Deng Xiaoping's reforms of the late 1970's that opened China's economy to the outside world, bureaucracy and corruption have been persistent concerns of the Chinese government's socialist system. To address these problems, the Chinese government began a government reform and digitalization campaign. E-Park of Zhongguancun Science Park (ZSP) is one of the earliest and most advanced e-government pilot projects in China. Zhongguancun Science Park is the first and biggest national science park in China, established in 1988. Located in northwest Beijing, it covers about 100 square kilometers. Inside the Science Park, more than 6,000 hi-tech enterprises in the fields of information technology, biology, medicine and others have their offices. Large multinational information technology (IT) corporations such as IBM, Motorola, Microsoft, Lucent, HP, and Epson have R&D institutes here. Thirty-nine prominent universities and colleges, such as Tsinghua University and Beijing University are also located within the Park. More and more companies are moving into the Park, attracted by its hi-tech business development environment and preferential tax treatment. The ZSP administrative committee, which is the local government body that regulates the Park, has twelve departments, each with different functions, like hi-tech company certification, taxation, etc. Before the E-park system, each department worked completely independently. The workflow was not integrated, and offices did not share information -- each department had its own, private database with information on the same companies. The old system was very difficult for the enterprises. If a group of investors wanted to set up a company, they had to apply to at least five, and sometimes as many as eight separate government departments for approval; and they needed to visit each department in sequence, in person, a minimum of three times. They would first visit a department, ask for the relevant forms and instructions on how to fill them in, and learn about all the requirements, terms and procedures. They would then fill out the forms and bring them, together with other required papers, back to the office for approval. If they were lucky, in five to ten days they would get a notice that the application had been approved and stamped. They then would go back to that office a third time, pick up the approval paper and go to the next department, starting the whole cycle

again. If the application was not approved the first time, which happened 80% of the time on average, they would have to go back again and again until approved. In total, a prospective company physically had to visit government offices a minimum of fifteen times, a process that would take at least two, and often as many as three, months. Obviously, this was an inefficient and unresponsive system. It placed a great burden on IT companies that fuel hi-tech growth -- growth that the Chinese government believes is very important for the Chinese economy. Companies in the Park generated a total of $12 billion in revenue in the year 2000 and $200 million in foreign investment, so they clearly contribute significantly to China's economic welfare. A New Approach To improve the situation, the directors of the ZSP administrative committee decided to create the E-park. Through a partnership with an Internet application software company, Beijing Beauty Beard Ltd., founded by a group of business people who studied overseas, the E-park project began in May 2000. The first phase (E-application) was completed in August 2000 and the second phase (the remainder of the E-Park functions) was completed by the end of 2000. The E-park has applied the latest computer and Internet technology to build a common administrative platform that connects all government departments. The central database and Web site allow data sharing and workflow integration among all the departments. Now the government works as an integrated body and shows only one face to public. The system includes five functions, all of which are accessed from the same home page. 1. E-application: The first step a company must take to set up operations in the ZSP is to apply for approval from ZSP to get a "hi-tech company certificate." "E-application" is a Web-based program that provides applicants with all forms and documents to be prepared as well as related laws, regulations, requirements and procedures -- everything they need to know about setting up an company in the Park. After choosing an ID and password, the applicants can fill out the forms directly on the Web or download the forms, fill them out on the computer, and then upload them. Because of the different procedures and different agencies involved, there are five different modules, depending on what type of company is applying -- domestic hi-tech company, foreign company, foreign joint venture company, foreign hi-tech company or returned overseas scholar-founded company. Almost instantaneously, the ZSP administrative committee staff receives the application files and begins the approval procedures online. There are two or three layers of approval. For each layer of approval, officials will give feedback to the applicants directly via the Web, and the applicants can revise the file and resend it by the Web to ZSP until they receive final approval. Next, the applicants print out the approved file, sign or stamp it as required, bring together with all other original documents to the ZSP office building. (Applicants do not use standard mail because of the slow speed of the postal system.) After the e-files and paper files are carefully compared and checked, the certificate can be issued to the applicants. Now, throughout the entire E-application procedure, the applicant needs to go to the ZSP office only one time. Compared to the traditional method, the turnaround time is reduced from an average of 15-work

days to only 3 days. And the application process works anywhere and anytime, no matter whether the applicant is in New York, Paris, or China. Foreign investors especially welcome this convenience. Applicants can track the progress of their application on the Web and even can see which official has it. Business phone numbers of the relevant officials are all posted on the Web in case assistance is needed. 2. E-registration: After a company is initially approved, it must provide additional information to register with other ZSP departments, like the statistics bureau, the finance bureau, the quality control bureau, etc. Companies can do this via the Internet as well. 3. E-reporting: Each hi-tech company must report about 100 pieces of operational data, such as revenue, tax, costs, cash flow and so on, to the appropriate government offices each month. This is now done entirely online. (Companies must pay a fee to have a digital identity established by the Certification Authority.) The Chinese government system is a complicated one based on the old Soviet Union socialist model. Each government department -- such as tax, finance, statistics, human resources -- has its own data reporting system, from each enterprise to the local/county office and then to the city/province office and finally to the central state ministry. In China, all tax is calculated and paid monthly. This system places a heavy burden both on the tax department and on enterprises. 4. E-administration: There are several documents that companies must file on a regular basis, and these are now all filed online: a) When a new product comes out, it must be registered and assessed by the relevant government authority to determine whether it qualifies for a hi-tech product tax break. b) All the technical contracts a company signs must be registered for tax purposes. c) To comply with an annual review of their hi-tech tax-preferred status, companies must submit a large volume of financial and other data along with supporting documents. 5. E-consulting: Government officials can provide interactive online consulting services about any of these procedures, and can provide answers to FAQ's by email or fax. Other notable features of the E-Park include: Red light reminder system: In the traditional system, applicant files in ZSP government offices were in total disarray. Neither the government officials nor the applicants knew the status of any application -- where it was, who had it, or when it would be complete. It was the classic so-called "black box." Now the system automatically keeps track of all applications and reminds the officers of how many days the application documents have been on their desk waiting for review and approval. The reminder light is clearly shown in the job list on the officials' computer screen. The first day is green light, the second day is a yellow light for warning, the third day is the red light, indicating that the official has not completed the job on time. When the light turns red, a report is automatically sent to the boss who can criticize or impose a heavy fine on the official. So far, however, no red lights have occurred. Monitoring system: Higher level managers can go directly into the staff member's virtual office to check and review their work.

Statistics and query system: This system is a powerful tool for managing the documents and data used for tax-preferred status reviews. Statistics collected include number and salary of staff, sales, revenues, costs, etc. Before E-park, the thousands of accumulated files occupied several storage rooms. It was nearly impossible to find files in a timely fashion or get accurate statistics data. With the E-park system, all the data is computerized and easily accessible. Optical Character Recognition (OCR), Voice Character Recognition (VCR) and Hand writing Character Recognition (HCR) The input of Chinese characters by a keyboard can be difficult, especially for older staff members who are not used to it. The OCR, VCR and HCR tools can be very helpful for making officials comfortable with data entry. Standard templates system: The system not only provides standard forms and file templates, but also provides FAQs reply templates. So officers only need to click the mouse to finish their work. They work with a simple interface and do not need to learn any complicated programming or key strokes. Implementation Challenges Because E-park was such a new and unfamiliar concept, it met with some resistance in the early stages. Some agencies were not willing to join in E-park's unified platform because they were concerned that the E-park system would decrease their power and limit their autonomy. Historically, cooperation and coordination among public agencies has been very difficult. Support from government leaders was critical to gaining cooperation. From a management perspective, the first challenge was to change old habits. It is very hard to wean people off traditional methods which they have used for years. Government officers must now use a computer keyboard rather than paper and pen. They had to learn to do their jobs more quickly and efficiently. A key step was to educate government leaders, to explain to them what e-government is and what its benefits are. Second, both the government staff and the public users of the E-government system had to be given basic computer and Internet training. We have run more than 20 classes, lasting about 2 hours each, training a total of over 5,500 people from various companies. The second challenge concerns legal Issues. E-Government and e-business laws have not been formulated in China yet. The digital ID or signature is not valid and accepted. In our E-park system, CA (Certification Authentication) has been established, but companies have to sign an agreement with the government that makes their digital documents legally binding, to make up for the legal shortage. ZSP must still keep paper copies of the original licensing documents in case there is any legal dispute. From a technical perspective, there were also many challenges: Security: We integrated CA, a hacker's detection and monitoring system and anti-virus software into the system for protection. We also implemented a PKI safety mechanism for security of data transfer. Flexibility: China's government is undergoing dynamic reform. Bureaucratic organization is changing dramatically. Procedures are changing almost every month and so are the regulations. So the system had to be flexible and broad, and the database structure had to be very carefully designed to accommodate these changes.

Expandability: In the early stage of system development, there were only a few agencies willing to join the platform. Later on, more and more agencies joined in, so the system had to be able to expand. Compatibility: The system is for use by the public. The many thousands of users all use different operating systems, different types of computers and different networks. The system had to account for all these variations and be useful to everybody. Benefits and Costs Since August 2000, more than 200,000 people have visited the Web site zhongguancun.com.cn. The number of daily Web site visitors has increased from 500 to over 5,000 in the last ten months. Nearly 1,200 companies have applied through e-application and, among them, 755 companies have gotten their "hi-tech company" certificate online (252 of the total were foreign companies). Now 90% of the applications and approval procedures are performed on the e-gov platform. Over 4,400 companies have submitted their financial information, statistics, and tax clearance monthly report by the E-report system. Some of the benefits of the system are: Interactivity. As previously described, the whole platform is a two-way channel connecting the public and government. It provides service 7 days a week, 24 hours a day to anyone, anywhere, anytime. Efficiency. The e-government system greatly reduced the turnaround time for government approvals from 2-3 months, on average, to 10-15 days. It also reduced the routine filing burden on the companies. For data reporting, before E-Park, each company needed 2 or 3 employees to visit the ZSP office and to stand in line each month for one to two days. Now it only takes a few seconds to submit the data through Internet to the ZSP central database. The new system also greatly reduced traffic congestion. Before E-park, during the monthly data reporting period, thousands of financial staff had to go to the ZSP office building by car or by bus, and it always caused a heavy traffic jam! Now, only the few people who are having problems need to appear in person. Transparency. The E-Park system enables a visible government. The black box is opened and the opportunities for corruption are greatly reduced. The requirements, procedures, official comments on applications, and results have all become transparent. These results have attracted the attention of China's top leaders. The cost of the whole system, including hardware, software and networking, was less than $1.5 million -- about $500,000 for the Intranet using optical fiber for the vertical main frame, $600,000 for the hardware platform with 12 servers, and $400,000 for application software. Most of the government workers are pleased with the system that makes their work simple. Some companies have written letters of thanks for a system that greatly reduced their burden. Key Lessons Support from government leaders was and is vital to the success of E-Park. The mayor and deputy mayor of Beijing city held several meetings to coordinate all the related agencies and convince them to join E-Park's coordinated interface and share information from their individual databases with each other.

The consequences of e-government also must be considered. Many public agency officials were afraid of losing their jobs after the implementation of E-Park system because all manual data is replaced by automatic, computerized data input. Some redundant work, like registration in each department, was eliminated and so jobs were also eliminated. These former employees cannot easily find new positions because the unemployment rate in China is already high. The government is training the staff to do service computer work in private small business. In a socialist country like China, it is unacceptable and illegal to just kick these workers out because that might contribute to societal instability. The successful implementation of E-Park within a short period was possible because of the strong commitment and vision of top government leaders of ZSP, a software developer who had creative ideas and had mastered advanced IT technology, and the strong support of the hi-tech companies and overseas investors in the Park. In a socialist country like China, the government plays a vital role in digitalization. In the five year strategic plan, China has highlighted the vital role of the information industry and the importance of advanced information technology for promoting traditional industry. Several nationwide broad bandwidth optical fiber cable network systems are under construction and will be in full operation soon. Once the Internet infrastructure is ready, it is anticipated that within a decade e-government will spread all over the country. Case study authors: Mr. Ma Lin, Vice Head of the Beijing Haidian District Government and President of the Administrative Committee of Zhongguancun Haidian Science Park; Mr. Rapheal Zhu, President and CEO of Beijing Beauty Beard Ltd.; and Ms. Nina Hachigian, Senior Fellow at the Pacific Council on International Policy.