In a report released yesterday, the grants committee spells out that funding should focus on areas of excellence, with a small number of research universities receiving a greater proportion of public money. Funding will also be linked to performance.

Dr Lam said the higher education system should be seen as 'one force' to make Hong Kong the regional education hub and support the development needed to make it 'Asia's World City'.

'Each university should fulfil a unique role based on its strengths,' she said. There should also be extensive collaboration between institutions, in order to make best use of resources at a time of budgetary constraints.

A grants committee working party on institutional integration has also decided that a merger of Chinese University and the Hong Kong University of Science and Technology (HKUST) should not be explored for now.

Dr Lam defended her decision to set up the working party and stressed no institutions would be forced to merge.

The committee is offering $200 million in grants to help the eight institutions restructure and to fund collaborative projects.

She would not specify which programmes at certain institutions that might have to close down, saying that would be up to the universities.

Dr Lam said funding for 2005-08 would be based on institutions' roles and their performance. Institutions deemed not to be fulfilling their roles could have 10 per cent of their funding cut.

The report says the University of Hong Kong and Chinese University will offer a comprehensive range of programmes and research across both the humanities and sciences, including medicine.

HKUST will focus on science, technology, engineering and business, and its humanities programmes should aim to give intellectual breadth for students.

City University and Polytechnic University will offer professionally oriented programmes for first degrees and a few at sub-degree level.

Hong Kong was too small a place for overlapping of research and teaching, Dr Lam said.

The committee report urges universities to allow the transfer of students to interconnected programmes within and between institutions. There should also be greater collaboration in research, with universities focusing on areas within their specified areas of excellence. Those outside these fields would not be eligible for grants.

Academics criticised the grants committee for infringing on university autonomy.

Shum Kar-ping, chairman of the Federation of Higher Education Staff Associations, said the move was short-sighted.

'It seems the government only wants to develop HKU and Chinese University as world-class institutions. With a population of seven million, Hong Kong needs at least four world-class universities to cultivate elites,' he said.

Chan Chi-wai, who chairs the HKU Academic Staff Association, said it would be unhealthy to force institutions to be highly specialised, as this would cut competition.

The report maps out how to implement strategies laid down in Lord Sutherland's review of higher education in Hong Kong, published two years ago.

WHAT THEY DO

Centres of excellence

All conduct postgraduate research for significant numbers of students

University of Hong Kong

- First and postgraduate degrees in Arts, Science, Social Science, and Business and Economics

- Professional schools in Medicine, Dentistry, Architecture, Education, Engineering and Law

Chinese University

- First and postgraduate degrees in Arts, Science, Social Science and Business Administration

- Professional schools in Medicine, Architecture, Engineering and Education

University of Sicence and Technology

- First and postgraduate degrees in Science, Technology, Engineering, Management and Business Studies

- Professional schools in Science, Technology, Engineering and Business

Liberal arts

Lingnan University

- First degrees in Arts, Business and Social Sciences

- Taught and researc postgraduate programmes

Teacher training and others

Institute of Education

- Certificate, first degree and postgraduate diploma programmes in education and vocational training

- Professional education and development programmes for teachers

Baptist University

- First degrees in Arts, Business, Chinese Medicine, Communication Studies, Education, Science and Social Sciences

- Taught and research postgraduate programmes

Vocation-oriented teaching and applied research

Polytechnic University and City University

- Professionally oriented first degree and sub-degree programmes

- Taught and research postgraduate programmes in professional and applied fields