Shenzen skyline
Photo by: Bloomberg
Public policy research organisation Charter Cities Institute (CCI) will, on March 17 and 18, host an inaugural conference in Sandton to create awareness around charter cities and the promise it holds for emerging economies in Africa.
CCI executive director Dr Mark Lutter says that despite the reduction in global poverty over the past 50 years, governments around the world still struggle to meet the challenges posed by demographic booms, poorly managed urbanisation, institutional failure and ever-changing economic conditions.
Decades of research has shown that sustained economic growth is the primary determinant of a country’s standard of living. Economic growth, however, requires access to well-functioning institutions.
Lutter explains that charter cities are a public policy tool to help emerging markets develop the institutions that can serve as the foundation for economic success.
They allow countries to experiment with new policies that are designed to attract business, foster economic growth, create jobs, empower small business and support historically disadvantaged groups.
“Charter cities are new city developments that are granted a special jurisdiction to create a new governance system and make their economic environments more competitive. Similar to the purpose of special economic zones (SEZs), the purpose of the special jurisdiction in charter cities is simple but powerful, allowing city officials to adopt the best practices in commercial regulation.
“Charter cities can jumpstart economic growth where it previously remained elusive, which could be especially helpful in emerging economies,” he notes.
The difference between an SEZ and a charter city is that an SEZ typically focuses on a single industry and has limited governance reforms. Charter cities are cities that host a variety of industries and implement deep economic reforms.
“Where SEZs focus on how to improve governance on the margin, whether through tax incentives or a one-stop shop, charter cities instead create a legal system from scratch, implementing wholesale reforms that touch every facet of commercial law,” says Lutter.
“Governance is a key determinant of a country’s economic trajectory. Unfortunately, politics often prevents needed reforms from being implemented at the national level.
“Because charter cities cover limited geographic areas, their administrations can pursue deeper reforms than would otherwise be possible,” notes CCI communications lead Tamara Winter.
She says common features of charter cities include public–private partnerships between real estate developers and the host country, a range of freedoms to improve the business environment, a tax authority and revenue-sharing agreement with the host country and an authority to establish commercial courts.
The potential areas for reform under the blank slate in commercial regulation of a charter city include business registration, property registration and laws relating to education, transport, labour, energy, finance, healthcare, building codes and construction permits.
Lutter points out that, as the successes of Singapore, Hong Kong, Shenzhen and Dubai illustrate, by improving governance it is 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.
For example, Shenzhen’s gross domestic product (GDP) per capita of $137 in 1980 grew to $13 997 in 2017. Singapore’s GDP per capita grew from $428 in 1960 to $64 582 in 2018, while Hong Kong’s GDP per capita grew from $5 700 in 1980 to $46 193 in 2018. Dubai contributed to growth of the United Arab Emirates GDP from $75-billion in 1980 to $689-billion in 2017.
Lutter says these cities or countries, despite pursuing different development strategies, all demonstrate that it is possible for cities to grow from impoverished to world-class cities in two to three generations. The rapid developments of these cities has lifted 800-million people out of poverty.
“Charter cities provide their residents with access to sustainable and efficient legal systems, making it easier for them to start businesses, removes barriers to entry and protects them from corruption and discrimination.
“Charter cities are simultaneously political projects and business proposals,” explains Lutter.
CCI builds the ecosystem for charter cities, bringing together new city developers, investors, government officials, policy experts and entrepreneurs to build a shared understanding of charter cities and foster relationships between stakeholders to facilitate the construction of a new charter city.