What is a Charter City?
A charter city is a city given a special jurisdiction to create a new governance system.
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• Education• 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.