A charter city is a city given a special jurisdiction to create a new governance system. The purpose of the special jurisdiction is simple but lofty; it allows the city to adopt the best practices in commercial law. As the successes of Singapore, Hong Kong, Shenzhen, and Dubai illustrate, by improving governance it’s possible for cities to achieve prosperity more quickly than ever before. Inspired by such success, charter cities offer a set of policy reforms for new cities to create the institutions required for sustained economic growth.
Though the scope of reforms to commercial law in each new charter city will depend on political context, common features of charter cities include:
- Building on undeveloped land avoids the political challenges of implementing a new governance system in an existing city
- Charter cities are built with exclusively private financing which protects the host country from financial risk
Independent Administrative Entity
- Public-private partnership between the developer and the host country
- Retains a wide range of freedom to implement and reform commercial law as it deems fit
- Taxing authority, including a revenue-sharing agreement with the host country
- Authority to establish commercial courts
Blank Slate in Commercial Law under the Independent Administrative Entity
- Business registration
- Property registration
- Transportation law
- Labor law
- Energy law
- Financial law as it relates to banking, insurance, capital, and securities and derivatives
- Healthcare law
- Building codes and construction permits
Governance—defined as a country’s set of formal institutions—is a key predictor of a country’s economic trajectory in the long run. The economic literature largely finds that governance and institutions, not natural resources or a country’s proximity to waterways, determine the conditions for growth or stagnation across time. Unfortunately, politics often prevents needed reforms from being implemented on the national level.
Charter cities, by focusing on limited geographic areas, allow for deeper reforms than would otherwise be possible. Importantly, they succeed by creating the infrastructure—both physically and legally—which attracts new residents and businesses and sows the seeds for a world of human flourishing.Read More
We’re pleased to share our new brochure, “Building the Future of Governance.”
Included in the brochure is a breakdown of how we build the ecosystem for charter cities through content, events, and strategic collaboration, mini spotlights of Singapore, Dubai, and Shenzhen, and testimonials from several of our partners. You can view the brochure at this link: Center for Innovative Governance Research Brochure
Please email Tamara@innovativegovernance.org with any questions.Read More
Thanks to all who participated in our Charter Cities AMA on the r/neoliberal subreddit. Inspired by these questions and others we’ve received, we’ll also be posting an FAQ on the website in the coming days.
Q: I know when people talk about charter cities Hong Kong is commonly used as the prime example.
How do you help cities avoid political strife? Would it simply be maintained through incentives i.e. if a charter city doesn’t have good political systems in place no one will move there? Or do you model city’s structure off of some model?
Im also curious as to what the outcome will be for charter cities which, for whatever reason, people do not chose to move to. Will they sit empty like Chinas ghost cities? I personally feel a large part of the problem in China is that they create these cities based on their own assumptions as to where people want to go instead of simply letting the choices be made, or letting the economic sector develop in these areas before throwing up 20 skyscraper apartments.
A: 1) Political Strife: We work closely with host countries and real estate developers to create charter cities—our work hinges on ensuring sure that we don’t develop an antagonistic relationship with them. The best way we’ve found to this is to ensure their concerns and needs are heard and understood. Within the city itself, strife is best avoided by adopting a governance structure that leads to shared prosperity for the city’s residents. Of course, strife is always a possibility but we anticipate that charter cities will have less strife than comparable cities.
2) Ghost Cities: The China ghost city narrative is largely overrated. Journalist Wade Shepard who wrote the book, “Ghost Cities of China: The Story of Cities Without People” noted many are filled. We avoid this problem by partnering with private developers who have strong incentive mechanisms to avoid overbuilding.
Q: Hi, Tamara and Mark. Thanks for doing an AMA.
A few questions:
What is the best example of a charter city or similar policies?
Do you think it would be better to ‘adopt’ a current city or get in on ground zero of a new city?
How much influence do you think your think tank has on government: local, state, national, or international?
A: 1) Best example: The best example of a charter city is the Dubai International Financial Center. They realized that Islamic law wasn’t generally conducive to international finance. As such, in 2004 they hired a British judge to create a common law system to attract international investment. Today they’re regarded as a top 20 global financial center, and an example of how to successfully import/create a legal system from scratch in the modern era.
2) There are far fewer political barriers to the governance reforms in greenfield sites, which are new city developments. There are dozens of new cities being built around the world, so there’s no shortage of opportunity. Our goal is to showcase the benefits of greenfield charter cities, and then to use that as leverage to enter conversations with existing cities. Once they see their newer neighbors benefiting from rapid and sustained growth, it’s unlikely the reforms will stay confined to the initial limited jurisdiction.
3) Influence: We are focused internationally. Low- and middle-income countries are rapidly urbanizing and thus much more open to charter cities than high-income countries. Currently our influence is moderate. However, we are hiring a Director of External Affairs to work with/influence multilateral organizations such as the World Bank, UN, etc. We expect to garner widespread support for charter cities on the next 3-4 years.
Q: How do you reach agreement between so many stakeholders?
What have you learned in the past year? What has been surprisingly effective? Ineffective?
A: 1) Stakeholders: Charter cities transcend many political divisions. Almost everyone believes in the importance of good governance. More generally, it is important to listen to stakeholders, understand their needs, and frame charter cities in a manner which responds to those needs. For example, everyone doing policy in Africa understands the challenge of urbanization, charter cities help address that. Additionally, with our next hires we hope to nab individuals with the explicit skills to engage stakeholders that we yet qualified to engage (e.g. sovereign wealth funds and other investment funds).
2) Our progress has been more rapid than expected. Our goal this year is to ‘incubate’ 5 charter cities. We define incubation as helping to put together teams on the ground that need minimal involvement from us. So far we have incubated two, with three more in the pipeline.
3) Our events have been quite effective, but we’re still working through how to develop useful, understandable content for anyone to view. Harder than it looks, but we’ll continue to improve.
Thanks for your questions!
Q: What relationship do you guys have with Paul Romer?
A: We invite him to speak at our events and he ignores us (for now). But wouldn’t you if you’d just won a Nobel? Paul, if you’re reading this, call us. – Tamara
Q: Any good ways the charter city policy space is thinking about how to learn from Rawabi’s successes and failures to expand opportunities for growth/good governance in Palestine?
-concerned Israel dove/solution hawk
A: Great question. Unfortunately we’re not sufficiently familiar with Rawabi to offer strong opinions.
Q: How does a charter city avoid being a playground for the already privileged, and instead meaningfully include and provide opportunities for a more diverse socioeconomic population?
A: I hope you’ll forgive me for deferring for the moment, but this is a really excellent question and I’ve been thinking about writing something about this in longer form for the website. This is the push I needed. Thanks! – Tamara
Q: Thanks for doing this!