"The main message that I'm about to say is relatively simple," began Anthony May, vice president of Monitor Group, in his luncheon address to the audience of the PRD conference. "Further integration and tighter collaboration between the PRD ... is going to be important to the future, not only for Hong Kong, but for the PRD."

Given the "complex problem" of the "one country, two systems" policy, such integration, argued Mr May, will only succeed at the meso-economic level, which addresses how interactions between firms and agents affects prosperity within nations or regions. Economic clusters -- defined by Mr May as "a geographically close group of interconnected companies and associated institutions in a particular field" -- constitute the bulk of the meso-economic landscape. Thus, an in-depth study of clusters will help smooth out Hong Kong's march toward integration.

Competitiveness and innovation -- the two most essential contributors to a nation's prosperity -- depend on the condition of the nation's clusters, asserted Mr May. Their strengths and weaknesses can be analysed through a diamond-shaped framework, whose four points each measure a separate quality:

Factor (input) conditions Strong clusters begin with strong input available to firms, e.g: in human/ capital resources, physical and information infrastructure.

Demand conditions Strong clusters "keep on their toes" in catering to sophisticated customers, whilst anticipating future customer needs.

Context for firm strategy and rivalry Clusters succeed in barrier-free environments (provided by the government), where collaborative institutions facilitate information exchange. Mr May pointed out that the Hong Kong Government and the HKGCC were on the right track.

Related and supporting industries Clusters are maintained by local suppliers in related fields, and clustered -- not isolated -- industries.

The ultimate aim, concluded Mr May, is for existing clusters to deepen linkages and share their unique resources, whilst exploring opportunities that may develop from intersecting with other clusters. Already, Hong Kong and other PRD cities are promoting greater co-operation throughout established industries such as logistics, transportation, tourism, and financial services. Using this framework, further analysis will help to accelerate and accurately measure the integration that already has, and will, take place.

In closing, Mr May addressed three important entities. To the government, he urged the continued promotion of clusters within the whole PRD; to companies, he stressed the need for innovation and co-operation among associated clusters; and to collaborative institutions, he advocated the creation of a formal structure in which intra-regional co-operation could function.