Our research shares various analysis on the case of special jurisdictions- Economic zones, charter cities and other innovative governance models as the future of development

Read our blog about special economic zones,
charter cities and other related topics by various authors in the industry

Michael Strong co-founded Freedom Lights Our World (FLOW) with John Mackey in 2005, which later spun off Conscious Capitalism and Peace through Commerce. He has also been a leader in the global Startup Societies movement, signing the first agreement with the government of Honduras to set up an innovative legal jurisdiction to create prosperity (a newer iteration of which is now welcoming its first residents) and coining the expression "Startup Cities" in a 2013 talk available here. He continues to speak and promote new jurisdictions to create prosperity to elevate the global poor.

He is a lifelong education entrepreneur who created and led a charter school in NM, one of the lowest ranked states educationally, that was ranked the 36th best public school in the U.S. by its third year and has remained a top ranked school. He also founded The Academy of Thought and Industry, a network of innovative high schools that serves as the high school program for the largest Montessori chain in the U.S. His current educational project is a virtual school, The Socratic Experience.

Michael is the author of The Habit of Thought: From Socratic Seminars to Socratic Practice, and lead author of Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems. He has written for academic journals (Economic Affairs, Critical Review, Journal of Business Ethics, etc.) as well as popular publications (Barron’s, HuffPo, RealClear Politics, etc.). He has spoken on entrepreneurial solutions to world problems at dozens of universities including Harvard, MIT, Columbia, Dartmouth, and University of Chicago, as well as many conferences around the world. He wrote his dissertation on "Ideas and Culture as Human Capital" under the supervision of Nobel laureate Gary Becker at the University of Chicago.

What are Special Jurisdictions?

Special jurisdictions are regions with new set of laws other than the laws of a particular nation state. They offer alternative governance models to experiment deeper reform adaptive to best practices in innovation. Examples include special economic zones (SEZs), Startup cities, Charter cities, etc.
Special  Economic Zones

Special economic zones are small geographical areas with fiscal incentives and relaxed regulations with the primary goal of fostering industrial expansion and attracting foreign investment. SEZs are jurisdictions on a small land mass with improved trade laws focused on a particular industry; Logistics, manufacturing, textile, warehousing etc. SEZs expansion are limited in scope. A typical example of a special economic zone is Shenzhen.

Charter cities
Charter Cities are geographical locations on a large landmass with the intent of building full fledged cities. They allow deep governance reforms for the experimentation of new laws in commercial regulation that are independent of the host nations’ laws. These laws are built from a blank slate to reduce regulatory constraints, offer fiscal incentives and devolution of authority to the city government. Its framework is built on a public private partnership arrangement with the government of the host nation. It extend the scope of SEZs by encompassing a mixed used environment; business district, residential districts, recreational districts, etc. This creates better agglomeration effect and long term expansion. An example is Talent city and Nkwashi

Startup Cities

Startup Cities are Urban development with startup DNA in a defined territory focused on delivering economic growth or a better way of living through an innovative vision. Simply put, cities that can run as a product or service customized for its citizens (shareholders). They are public or private enterprises, public-private partnerships, for-profit or non-profit, or a combination. They can be outside the purview of a zone. That is, Cities working to emulate a startup, such as Austin, and Miami which is under the leadership of Mayor Francis Suarez adopting governance reforms and innovation in technology to attract  talents.

Other innovative governance models

This are areas that falls within the purview of competitive governance are; Micronations, Microstates, Decentralized autonomous organizations and so on.

Institutional gaps

1. Poor Legal Infrastructure– Excessively complicated legal systems make it difficult to uphold laws and contracts, which deters investors’ confidence in said systems and discourages investment.

2. Institutional and regulatory constraints– Excessive regulation restricts ability to set up businesses. This results in few income opportunities for citizens of developing nations, which leads to a low standard of living and poverty.

3. Fragmented infrastructural development– Lack of coordinated infrastructural development prevents network effects in response to population growth.

Why Special Jurisdictions?

A world bank report stated that human capital and the value of instituions as measured by the rule of law constitutes the largest share of wealth in virtually all countries. In other words, the health of a system  of government is the most valuable thing in the world that affects every human environment. However, government policies are not meeting up to the needs of the state in the third millennium. It has defaulted in freedom of expression, property rights, free trade, overcriminalization, and so forth. These policies falls prey to human influence especially in the hands of politicians willing to sacrifice  long-term benefits for short-term personal gains.

China was able to lift over 800 million people out of poverty within four decades with economic policies that fostered free enterprises. Hong Kong’s success was replicated in other regions of China, and Shenzhen is a foremost example. Singapore and Dubai moved from impoverished to first world cities with the implementation of deep governance reforms and free enterprises to build economic prosperity. 

Our organization views replicating these autonomous and semi-autonomous zones as a practical method of creating favourable business environments, attracting talents and foreign direct investment thereby promoting economic growth and flourishing  societies in developing countries.

 

Benefits

1. They offer a more relaxed regulatory environment and this increases the overall ease of doing business.

2. It serves as testing grounds for Government and city builders when they are seeking to implement innovative policies.

3. They offer a plethora of advantages to investors looking to set up in an unfamiliar foreign country by having access to relaxed labor, registration and land use laws.

4. They offer Tax incentives in form of tax breaks, tax waivers etc. There is usually a reduced bureaucratic interference.

5. They attract industrial development to developing countries and technical know how of local workforce.

6. They help to promote exportation and export diversification from traditional to non-traditional exports.

7. They help to increase foreign exchange earnings for countries.

8. They help to create employment both direct and indirect employment opportunities.

9. The business environment are insulated from some of the costs borne by businesses in the host nation.

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