Frequently Asked Questions

Charter Cities
Q.

What is a charter city?

A.

A charter city is a new city with new rules. Developing new cities on greenfield sites with significantly devolved administrative and regulatory authority can help countries in the Global South overcome the political and technical obstacles to improving governance and fostering growth. See our Introduction to Charter Cities for additional details.

Q.

How do charter cities help alleviate poverty?

A.

Governance is a key determinant of long-run economic outcomes. Charter cities create institutions which allow for policy experimentation and the employment of best practices across a variety of administrative and regulatory domains. Good governance attracts investment, creates jobs, improves productivity, and is necessary to successfully manage rapid urbanization at scale. Shenzhen, Hong Kong, Singapore, and Dubai demonstrate that with good governance and strategic foresight, it is possible for cities to leverage urbanization to achieve prosperity within two to three generations. Charter cities are a technology for implementing lessons from and replicating these successes in low- and middle-income countries.

Q.

What constitutes good governance?

A.

Good governance consists of two key elements. The first element is state capacity, the ability of a government to efficiently execute the tasks it intends to. In the case of a charter city, this refers to the ability of the governing authority to build and maintain public goods like transportation infrastructure, water systems, and power generation; collect tax revenue; and maintain the rule of law. The second element of good governance is the extent to which a government's policies support the functioning of markets and inclusive economic growth. The governing authority should facilitate economic activity, rather than place harmful restrictions upon it. Registering a business, investing in a business, resolving disputes, trading across borders, paying taxes, and other such activities should be free of overly burdensome regulations or compliance processes.

Q.

What factors other than governance are important for a charter city's success?

A.

Strong governing institutions alone are insufficient for the success of a charter city. Other important success factors include the location, size, urbanization rate, trade patterns, and anchor tenant(s).

  • Location matters greatly for the success of a charter city. The charter city's proximity to existing cities, industries, and transportation and trade infrastructure partially determines both the opportunities available to and investments needed for the city.
  • All else equal, a larger charter city can be expected to outperform a smaller charter city. A larger geographic area under the jurisdiction of the charter city allows for greater urban expansion and agglomeration over time to accommodate more residents and economic activity. The large geographic size of China's special economic zones relative to that of most zones is one of several factors credited with their extraordinary economic success.
  • The urbanization rate of the host country and surrounding region will play a large role in determining how quickly the charter city grows. Charter cities can have the greatest impact in countries that are rapidly urbanizing, helping to accommodate a surging urban population, while being less impactful in countries where urbanization is largely complete.
  • Current and future trade patterns accessible to the charter city, a function of its location, will help determine what industries are viable for to the city to pursue. New economic opportunities and challenges are always emerging from economic growth in other countries and regions, from technological innovation, from climate change, and from geopolitical cooperation and competition, among other considerations. These factors will shape the policies implemented and investment received in a charter city—the specific economic profile of a charter city in Central America will likely differ from that of a charter city in West Africa or South Asia.
  • Charter cities need one or several anchor tenants, a large employer that can attract a substantial population in a short period of time while also generating spillovers and linkages with suppliers and complimentary industries. The trade patterns mentioned above play a critical role in determining what anchor tenants are available to charter city developers. Anchor tenants can include a wide variety of activities, from manufacturing plants to logistics hubs to universities. All potential anchor tenants enjoy relative advantages and disadvantages, and the economy of a charter city is best served over time with a diverse economic base. The idea of an anchor tenant is frequently associated with shopping malls: one or more large tenants, like a department store, drives foot traffic to the mall, benefitting the smaller stores inside. In exchange for providing this public good to the mall and interior stores on a long-term basis, the anchor tenant typically enjoys a lower rental rate for its floor space.
Q.

How is a charter city different from a special economic zone, free port or other special jurisdiction?

A.

There are several dimensions along which charter cities are distinct from other special jurisdictions.

First, most special jurisdictions operate under a prescribed set of powers and policies. Each special jurisdiction possess little or no authority to make meaningful improvements to governance or the business environment beyond marginal changes like tax incentives, expedited customs procedures, one-stop shops, and other minor reforms. In contrast, charter cities possess the authority to craft and implement reforms across the administrative and regulatory domain as they see fit, allowing for much deeper governance reforms.

Second, most special jurisdictions are either focused on a specific activity, like export processing or trade facilitation, or a specific industry, like textiles or agricultural products. Charter cities are intended to generate a wide variety of economic activities, as well as provide housing, recreation, and services for a large population like any other city.

Third, most special jurisdictions cover a relatively limited geographic area, whereas charter cities are intended to cover a large geographic area to allow for urban expansion as the city grows over time.

Q.

How are charter cities governed?

A.

There are many different forms the governing entity of a charter city could take. Our recommendation is that charter cities are organized as a public-private partnership between a private city developer (ideally one that is based in the host country or surrounding region) and the host country government.

Under this proposed arrangement, the charter city would be governed by a council featuring representatives from the city developer and the host country government (and local government if applicable), with the potential addition of relevant stakeholders like multilateral institutions or community groups as determined by the enabling legislation.

This council should then appoint a city manager that oversees the administration of the city. The city developer should bear responsibility for land acquisition and the initial infrastructure buildout to ensure that market forces influence decision-making and that most financial risk is borne by the private sector.

After a period of time agreed upon at the onset of the development (50 years, for instance) that enables the administration to focus on generating growth and recouping the costs of the initial investment, the city should transition towards a more standard form of governance.

Q.

What are the minimum requirements to classify a development as a charter city?

A.

We define a charter city as a city with a special jurisdiction that devolves broad governing authority over most administrative and regulatory domains to the local level. We expect that the powers granted to individual charter cities will vary by country and in response to local considerations.

We consider developments of at least 1000 hectares, with a minimum target population of 100,000, as well as an economy that is not dependent on a single industry, to be charter cities. Ideally, the charter city will be permitted to expand its jurisdiction to bordering areas as the population grows over time. Developments smaller in scope can be thought of as "charter towns," but they do not posses the geographic or population size to meaningfully scale and become self-sustaining economies.

Q.

Why would a host country want a charter city?

A.

Governments in the Global South are aware of the challenges to their ability to deliver infrastructure, services, and prosperity posed by rapid urban population growth without corresponding industrialization and economic growth. Governments intent on introducing substantive reforms also recognize the political challenges of doing so in existing cities or nationwide.

Charter cities help overcome these problems by easing the infrastructure and services burden facing existing cities and by offering governments a way to pilot new reforms and demonstrate their success. Furthermore, charter city development can largely be financed with private capital, limiting the need to expend scare public resources.

Q.

How experimental should charter cities be with regard to policy or institutional arrangement?

A.

For the first generation of charter cities, we place a significant emphasis on using best practices that have proven successful in similar institutional contexts. Over time, however, charter cities could become more experimental if that is the intention of the city government.

For example, see this paper by Paul Healy and Matt Prewitt of the RadicalxChange Foundation on how new methods to structure property rights, fund public goods, and vote could be employed in a charter city.

Q.

Are there any good locations left for charter cities?

A.

Yes. Rapid urbanization and the rapid growth of secondary cities throughout the Global South suggests there is a strong demand for new urban spaces. Dozens of new or substantially upgraded ports have emerged worldwide in recent decades. Major coastal land reclamation projects in countries around the world demonstrate that is also possible to create new land in attractive locations for charter cities.

Q.

What countries are most amenable to charter cities?

A.

There are four approximate criteria we utilize to assess the feasibility of charter cities being adopted in a country.

First, the country should be experiencing rapid urbanization. Countries that are not urbanizing or have already largely urbanized face limited demand for new urban spaces.

Second, the country should be low- or middle-income. People in these countries have the most to gain from an acceleration of economic growth and institutional reform.

Third, the government must be capable of maintaining a baseline level of stability in the country. Countries with ongoing civil wars or unchecked insurgencies, for example, are not stable enough to attract international investment.

Finally, there must be a minimum level of political openness, such that a country's political leaders are willing to grant a devolution of authority and that the state is unlikely to expropriate the city or rescind the devolution of authority.

Q.

What industries should charter cities target?

A.

There are several factors for charter city developers to consider when attracting investment and building out the city's economy. These include the capacity of the industry to create jobs, establish linkages with local and global value chains, improve productivity, and attract additional investment over time.

Given these considerations, as well as the economic opportunities that tend to exist in countries amenable to charter cities, medium- and large-scale manufacturing, natural resource processing, agricultural processing, and services are four broadly defined industries that charter cities would sensibly target.

Nearly all industrialized countries first began to develop with a shift away from agriculture and to manufacturing, most notably and rapidly occurring among the East Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore) and China in the 20th century. This economic activity generated, among other benefits, significant improvements in productivity and income as the industries matured into producing more complex and higher value-added products. See our Industrial Strategy Guide for a more thorough discussion of this question.

Q.

What metrics should determine the success or failure of a charter city?

A.

Important metrics include the following:

  • Population—How many residents has the city attracted?
  • Income—How has the income of the residents changed over time? A successful charter city should see steadily increasing incomes.
  • Investment—Is the charter city attracting investment? If so, how much compared to the host country? What types of industry clusters are emerging?
  • Land values—Are land values, a function of greater economic activity, increasing?
  • Reforms—Are reforms pioneered in the charter city being implemented in the host country or nearby countries? ‍
Q.

Where can I learn more about charter cities?

A.

For short form, topical content, check our blog. You can find research papers, policy briefs, and journal articles on our research page. Model laws and legislation, handbooks, and other materials for city developers and governments can be found on our Reference Guides page.

Listen to the Charter Cities Podcast on your favorite podcast service for interviews with academics, public intellectuals, developers, and others working on charter cities and related topics. Finally, check out our reading list for resources on charter cities, special economic zones, new cities, and other related topics

The Institute
Q.

What does the Charter Cities Institute do?

A.

The Charter Cities Institute is building the ecosystem for charter cities by: creating legal, regulatory, and planning frameworks; advising and convening key stakeholders including governments, new city developers, and multilateral institutions; and influencing the global agenda through research, engagement, and partnerships. To achieve this mission, we conduct both practical and academic research, produce popular media, provide technical assistance to new city developments and governments, and engage relevant stakeholders through a variety of partnerships and events.

Q.

What are the five-year goals for the Charter Cities Institute (2021 - 2026)?

A.
  • Support the development of charter cities in 20+ countries by working with governments, multilateral institutions, city developers, and international financial institutions.
  • Put charter cities on the agenda of development multilaterals, development finance institutions, regional organizations, and national governments.
  • Become a top research institution in the areas of governance, urbanization, and poverty reduction.
Q.

Why does CCI focus on new cities?

A.

There are three reasons we focus primarily on new cities rather than existing cities. First, substantial institutional and policy reforms face fewer political barriers in greenfield cities than in existing cities.

Second, cities in the Global South are growing extremely rapidly. Of the 2.5 billion new urban residents expected worldwide by 2050, 90% will live in Africa and Asia. Governments will continue to struggle to provide adequate infrastructure and services to support such a vast urban expansion and so new urban spaces with adequate infrastructure and effective urban planning are needed.

Finally, there are hundreds of new cities in various stages of development worldwide. Leveraging existing and future new city projects to spur economic growth and encourage reform is a previously untapped opportunity. For these new cities not to be used as vehicles for institutional reform and to instead operate under the dysfunctional institutions of the broader host country is as a major lost opportunity.

Other
Q.

How is the Charter Cities Institute's vision of charter cities different from that of Paul Romer?

A.

In his initial TED Talk, Romer argued that high income countries with strong institutions could administer charter cities in low-income countries. While we think Romer's insight about the ability of new cities with new rules to alleviate poverty is valuable, we believe this approach is neither desirable nor politically feasible.

Instead, we work with host countries and local new city developers to create charter cities that are governed locally, rather than by a different country. Charter cities are not sovereign entities—they are subject to the criminal law, constitution, international treaties, and any other host country laws or institutions stipulated in the country's charter city legislation or concession agreements.

Q.

What are examples of a charter city or similar development that failed or is failing in adopting the charter city model? What lessons can be learned from their mistakes?

A.

While there are not yet any sufficiently advanced charter city projects to assess, there are new city projects featuring some elements of charter cities that can be evaluated. Lavasa, a new city in India, entered bankruptcy proceedings in 2018 and its future remains unclear. Saudi Arabia's King Abdullah Economic City, launched in 2005, has achieved virtually none of its stated objectives and has since been eclipsed by a new Saudi city development, NEOM. With a price tag of $20 billion, Masdar City, Abu Dhabi has likewise proven extremely underwhelming. Eko Atlantic, a new city near Lagos, Nigeria, is planned to house 250,000 people, however, the vast majority of the 20+ million people living in the Lagos area cannot afford this housing. There are hundreds, if not thousands, of failed or underperforming special economic zones and other special jurisdictions worldwide.

These and other examples impart a valuable lesson: cities are an emergent phenomenon. As such, new cities should be built in a phased approach, with planning decisions responsive to market incentives rather than a rigid master plan. Most new cities are far too expensive for most of the local population—this is a missed opportunity to tap a very rapidly growing, very large market. Through their location and governance reforms, new cities must offer a viable value proposition to potential investors and entrepreneurs in order to create an economy that is self-sustaining.

Q.

What if charter cities become "ghost cities" like those in China and elsewhere?

A.

As noted by journalist Wade Shepard in his book, Ghost Cities of China: The Stories of Cities Without People, the China "ghost cities" narrative has been overstated. Because of China's rapid urbanization, many of these cities have since filled up with new residents. A similar story has played out with "ghost cities" elsewhere, such as in Kilamba, Angola, a Chinese-built satellite of Luanda.

Q.

How can the risk of charter city developers securing land via expropriation be minimized?

A.

The Charter Cities Institute will never become involved with a project that takes land from its rightful owners. Charter cities are decades long projects and we accordingly encourage city developers to take a long term view towards land acquisition. While expropriation (if allowed under law) might save money in the short run, it delegitimizes the charter city and will entrench hostility among the displaced population.

Rather than use legal force to acquire land, charter city developers should at minimum offer fair market value for property and a financial stake in the project. The developer can also offer benefits like priority hiring for local residents, and include local communities in planning processes. Other alternative tools like land pooling or land sharing are also available to charter city developers

Q.

How does a charter city include and provide opportunities for a more diverse socioeconomic population?

A.

By creating public goods and an enabling environment for markets to function, charter cities can introduce broad-based economic growth that reaches all segments of the population. Low-quality public services and overbearing regulation are extremely regressive, inflicting substantial time and pecuniary cost on the lowest-income segment of the population, while also subjecting this group to perpetual informality. For example, in Sub-Saharan Africa, it takes on average 21 days and 36% of per capita income just to register a business. After bearing these extraordinary costs to gain access to the formal economy, low-income entrepreneurs will then pay taxes in exchange for low-quality public services.

Those same entrepreneurs in Sub-Saharan Africa, for example, must contend with the least reliable electricity utilities in the world and endure frequent blackouts at high cost. Charter cities can create an equal economic playing field so that all-segments of the population can begin to participate in the national, regional, and global economy.

Q.

Why wouldn’t the host country just expropriate the charter city as soon as it is successful?

A.

Charter cities should be viewed as a component piece of a national development strategy, not as a isolated island of prosperity. Charter cities can only be successful if they are an embodiment of the best things about their host country, becoming a source of pride. There are additional ways to minimize the risk of expropriation, including:
1) Creating jobs and upward mobility for residents, as well as economic linkages to the broader region, which in turn creates natural constituencies that support the charter city;

2) drafting the language of the enabling legislation that affords compensation if expropriated, including in international arbitration;

3) drafting the language of the enabling legislation to include a revenue sharing agreement between the city and the host government, in which the host government receives some share of the city's tax revenue;

4) listing the city developer on the local stock exchange to ensure the support of investors, banks, pension funds, and other institutions that have a vested interest in seeing the city succeed. See our Risk Mitigation Guide for additional details.

Q.

Why not focus on charter cities in the United States, Western Europe, or other high-income countries?

A.

While the charter city model of significantly devolved administrative and regulatory authority could have applications for policy experimentation or accelerating technological innovation in high-income countries, we believe the highest value use of charter cities is to support development in low- and middle-income countries.

Most high-income countries are already highly urbanized with little demand for new urban spaces outside of existing cities—a charter city in this setting would likely be a charter "town" at best. It is also unlikely that a charter city in this setting would receive sufficiently devolved authority as to justify significant investment or even classification as a charter city

Q.

What work is currently being done around the idea of refugee cities?

A.

Although it is not our primary focus, charter cities do have the potential to help improve refugee responses that presently do not fully account for the long-term nature of displacement or the economic needs of refugee communities. There are several organizations working directly on this issue, including the Sustainable Development Zones Alliance, the Innovation and Planning Agency, and Politas Consulting.

Read the latest expert analysis and commentary on new cities, charter cities, economic zones, and innovations in governance