Charter cities to simulate growth
Could some advanced country businesses join forces to lease an undeveloped country city for (say) 30 years, running its economy, its politics, and its police? Could this bring dramatic investment and growth, especially if it were a port city?
This is a challenging political economy proposal that touches on economic development theory, sovereignty, international law, and colonial history. The core idea is one of Charter Cities and Special Economic Zones.
It has serious intellectual backing. Economist Paul Romer famously proposed the concept of charter cities, where a host country leases territory to one or more ‘guarantor’ nations that import better institutions, rule of law, and governance. The theory is that good rules matter more than aid or capital, so importing them wholesale can jumpstart development.
This is distinct from a simple Special Economic Zone (SEZ). It is something closer to full jurisdictional transfer - politics, policing, and economy - for a fixed term. These arrangements have actually existed
Hong Kong (leased to Britain from 1842–1997) is the most successful example. A port city that became one of the world's great economies under imported rule of law and free trade. Hong Kongers contracted out government, the economy and the police to the British and concentrated on making money.
Singapore under British rule, before independence, had strong institutions that were inherited and kept. The Panama Canal Zone was a US-administered territory within a sovereign state
The track record of consensual, well-governed versions is genuinely impressive. Institutional import is the key mechanism. Developing nations often struggle not from lack of capital but from weak property rights, corruption, and unpredictable courts. A leased city could import transparent commercial law (attracting FDI immediately), independent courts (perhaps applying Singapore or Swiss law), professional, accountable policing, and a stable currency or currency board.
Port cities amplify everything because trade multiplies the effect. A well-run port becomes a regional hub, drawing shipping, logistics, finance, and manufacturing from a vast hinterland. Hong Kong served all of southern China; Singapore served Southeast Asia.
Time horizon creates credibility. A 30-year lease is long enough for investors to build factories, train workers, and recoup capital, the fundamental requirement for serious FDI.
Sovereignty is the central problem in practice. A government has to sell to its people the idea of leasing some of its territory to foreigners. It is not colonialism, but has echoes of it. The people have to be convinced that the rewards will justify it. Jobs, improved living standards, education and healthcare all follow.
Rwanda and Singapore achieved the outcomes of charter cities through strong domestic governance rather than foreign leasing. Dubai and Abu Dhabi created special zones (DIFC, etc.) with foreign legal systems applying within them - a partial version of the model.
The idea has Nobel-adjacent intellectual support and real historical precedents. And it only takes one country to pioneer it successfully to have others keen to follow suit and secure similar gains for themselves.
Madsen Pirie