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Encouragement for small and medium size enterprises (SMEs) to form industry clusters, and the provision of better financial support are two main recommendations to government on how to enhance productivity and growth in the Hong Kong-Pearl River Delta region.
    Details of the recommendations are being finalised by academics at The Chinese University of Hong Kong following more than five years of research into factors that result in growth and increased competitiveness.
    The research dispels conventional thinking that development comes directly from foreign direct investment (FDI). The finding is significant in view of the phasing out of FDI preferential treatment for Hong Kong under China’s WTO membership.
Researchers under Principal Investigators Prof Chyau Tuan and Linda F Y Ng say they have proved that sustainable growth in industrial productivity in the Hong Kong-Pearl River Delta region is the result of factors which include:
The mobilisation of FDI due to the formation of a core-periphery system where Hong Kong has been the core since the mid-1980s.
The building of “agglomeration economies;” cost savings resulting from enterprises and activities locating near each other.
The industry clustering effect which becomes the major competition base for SMEs.
   “More specifically,” said Prof Tuan, “agglomeration economies can be observed via industries’ and firms’ own chains of suppliers, customers, and service centres with competencies complementary to the industry cluster.”
    He added: “Relationships within the cluster are more permanent and stable than in an outsourcing or sub-contracting arrangement which can be just one off. Factors that keep the relationships stable include distance and travel time, social networking, availability of technical expertise, and government assistance.” The recommendations will be made to Hong Kong’s Trade and Industry Department, and the Hong Kong-Guangdong Cooperation Coordination Unit, said Prof Tuan.
    On the clustering of SMEs, Prof Tuan said: “If the government can help Hong Kong manufacturers to form and to facilitate clustering so they can better network with each other, we believe productivity and prosperity will be enhanced.”
    On the second recommendation of providing financial support in the form of credit guarantees and loans, he said: “We believe much more can be done in this area.”

Principal Investigators
Prof Chyau Tuan:
Prof Linda F Y Ng: