Charter City - Development Potential

Development Potential

Economist Paul Romer proposes founding many new charter cities in developing countries. Romer suggests that a developing country pass a law that sets aside a tract of land for a new charter city. This charter city would be administered by a developed third-party guarantor government, and citizens from the host country (and maybe other countries) could move in and out as they please. The point of the charter cities idea is to give citizens the choice about where they want to live and to provide the basic rules and amenities required for economic growth. Ideally, by establishing a city with highly-developed rules and governance in an underdeveloped region, living and working in a charter city may provide a closer and more attractive alternative to moving far away to more developed countries.

In Romer’s conception, there are three main actors in the creation of a charter city. First, there is the developing host country. The host country provides the land, and designates that land as a special reform zone, subject to the foundational set of rules. Second, the developed guarantor country administers the region, perhaps with a board of governors and an appointed chairman like the Federal Reserve System in the United States. Third, the source country will be where the charter city’s residents come from. This may be predominantly from the host country, but there also may be a number of source countries.

In practice, some countries have been receptive to Romer's idea. Upon meeting with president Marc Ravalomanana, Madagascar considered creating two charter cities, but the plan was scrapped when the political leadership that supported the idea was removed from power. Most recently, the government of Honduras has considered creating a charter city.