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Report on Hong Kong Conference

This report has been written by one of the participants to the conference, Frank Waeltring.

From 9 to 11 November 2005 I had the opportunity to participate in the 8 th annual international Cluster Conference of the Competitiveness Institute (TCI) in Hong Kong; the TCI is an international network of cluster promotion practitioners. This year the Conference was hosted in Hong Kong with the overarching question every cluster practitioner should ask him- or herself:
What will be the impact of China's growing regional economies for developing and industrialised economies and clusters? Or as Michael Enright, the well known cluster researcher, South
China expert and host of the Conference in Hong Kong, pointed out: "If you are worried about China you are probably not worried enough. If you are excited about the opportunities, you probably aren't excited enough."
Two days before the official start of the conference, economic visit tours of institutions and companies in South China as well as of clusters in Hong Kong were organised. The program of the 3-days conference then offered the opportunity for information exchange on many cluster issues in industrialised and developing countries (see program at
www.tciconference8.org/schedule.htm). In overall there are several impressions we would like to highlight:

· China as the dragon for developing or even industrialised Countries?
· The Discovery of Common Cluster Problems during Practical Implementation
· Integrating the Experience of Developing Countries and Donor Institutions
· The organisation of the conference and the weak participation of the business sector

Even seasoned cluster experts can be impressed. While crossing the border to the South China mainland and driving into the fastest growing economic region of the world, the Greater Pearl River Delta, colleagues in the bus were still chatting to get to know each other. This situation changed some minutes later when everybody started to look out of the window while passing kilometers of lined-up high-rise flats of the Chinese cities like Shenzhen or Guangzhou. On the way to visit large specialised technology parks, development institutes, and multinational companies in South China everybody realised with their own eyes that this country bases its competitive advantages not only on cheap labour.
"Scary", "Crazy", "Frightening" were the comments of everybody while realising the emerging knowledge-intensive power and self confidence with which the country is crashing into the world economy. 25 years back, towns like Shenzhen and Guangzhou were small towns (that is, by Chinese standards). But at the end of the 1970s the Pearl River Delta became one of the main laboratories of Chinese open market economy. At present each city has more than 10 Million habitants and the area still appears like a large construction site that will grow even faster in the next decade. The region accounts for less than 0,5% of the land mass and less than 5% of the population of China but approximately 20% of its GDP and nearly 40% of the exports. "What we see here in China implies the biggest change the economic history experienced so far", said Hubert Schmitz, the prominent cluster expert. "And it will affect every other country all over the world". According to estimates China will become the largest importer and exporter by 2010, it has increased its competitiveness in particular areas of international chains (software, textile, clothing, toys, leather products etc.), and it is continuously increasing its national and international market integration. Increasing foreign direct investments are focused not only on assembly and production but also increasingly on innovation activities and R&D. The best international supply chain coordinators of Asia are based just around the corner in Hong Kong. Intermediaries like Li & Fung are sourcing garments and other products world-wide and thereby increase their purchasing power continuously.

In plenary sessions the conference deepened the understanding of the participants regarding Chinas development in the next decade. Some aspects of Chinas way of development, like its tendency to weaken international rules (like international property rights, labour, social and environmental standards), were not really a subject of discussion.

Common Problems in the Implementation of Cluster Initiatives
Cluster development is easy, at least theoretically. But as soon as it comes to practice many initiatives face similar problems and challenges. The TCI conference demonstrated the continuing challenges that are involved in bringing different actors with different interests together. Especially Scandinavian, Baltic, East European, Eurasian as well as African and Asian countries were represented at the Conference. Although their economic structures and prerequisites differ dramatically, many cluster initiatives face similar problems in implementation. Many of the new cluster initiatives in the more developed countries have done extensive research work on different clusters and have developed several competence centres or project plans. In developing countries like Tanzania, Uganda, and Mozambique initial cluster or business network activities were developed on an ad-hoc base oriented to produce quick wins and to gather experiences in the implementation of activities. Cross-cutting problems that many cluster initiatives are facing include
· the difficulty of moving from information gathering into real implementation procedures,
· the genuine involvement of the business sector,
· a certain frustration due to the relatively long process it takes to get a cluster initiative going and to identify really motivated actors for a longer period of time,
· the identification of training tools for the implementation of cluster initiatives. The process of setting up a cluster is defined in several concepts. But practical tools and formats to facilitate the communication process, to overcome mistrust and to manage network failures are still lacking,
· the difficulty of identifying strategies and follow-up procedures to move from quick win activities towards longer-term and more sustainable and institutionalised activities.
Integrating the Experience of Developing
Countries and Donor Institutions
Several sessions were focusing specifically on an exchange of information between developing countries. For example, a cluster initiative of three universities in East Africa (Mozambique, Uganda, Tanzania) presented their activities, and within a Developing Country Forum a email-based cluster network was set up to increase ex-change of information and cooperation, and to foster the participation of developing countries in future TCI conferences.
In general, the conference demonstrated increasing interest of networking between initiatives and institutions in industrialised and developing countries. Development agencies and other institutions especially of Scandinavian countries (VINNOVA, Stockholm School of Economics, also Cluster Navigators from New Zealand) have started to cooperate with some African and Baltic cluster initiatives. Several business associations and governmental bodies, e.g. in Indonesia and Thailand, have started to work together more closely with MNCs and international supply chain coordinators (e.g. Thai actors with Li & Fung). The developing countries increasingly have to increase their sectoral expertise, their knowledge about international trade conditions in regard to specific sub products and components. Local governments and business organisations have to become more entrepreneurial in their thinking.

Hubert Schmitz gave this recommendation to developing country representatives: ?Come to China to face reality and the challenges as well as opportunities.? You will come back sobered, but also with a more realistic perspective and maybe with new ideas and more motivation to encourage cluster and LED processes in your country.
International donors with valuable experiences in initiating cluster initiatives were hardly represented at the conference. In our view, this is a real pity. They miss a great opportunity for networking and marketing of own valuable experiences. Their absence reinforces at the same time the prejudice of many conference participants that international donors are mainly working in an isolated manner (see also results of the newest survey for the greenbook undertaken by SSE). An increasing participation of developing countries within the TCI conference would be recommendable because many tools, activities and experiences that have been tested in these countries (with regard to integrating the private sector, to encourage quick win activities, to monitor and evaluate processes effectively, etc.) can also enrich discussions in industrialised countries.