Is this the City that Launches a Thousand Charters?

Coming soon, a brand new city!

I’ve written enough about Charter Cities for most readers to know exactly what I think of the idea. Without restating my previous arguments, news that Honduras are considering (and indeed it appears that Congress has passed a motion in favour of) establishing a 1000 square kilometre “Charter City” within its own borders has set off a few thoughts in my mind.

  • There seem to be some pretty significant differences between what the Government of the Honduras is proposing and what the original conception of a Charter City was. Firstly, is there any external power providing enforcement and the rules? The whole basis for the Charter City idea was that developing countries themselves didn’t have the rules or the credible threat of enforcement – hence the need to borrow both from outside. Secondly, it doesn’t seem clear at all that workers from all over will be allowed to enter the Charter City, given the rhetoric that it is an alternative to Hondurans emigrating to the States.
  • If the rules, enforcement and people all come from Honduras, what makes this a Charter City, and not an special economic zone? A Charter City without foreign presence is just a city with a good set of rules, good enforcement and free entry/exit. Is calling this a Charter City rather than a special economic zone or semi-autonomous state/city simply a marketing exercise to attract attention and investors, by distinguishing it from all the other free zones worldwide (think Shenzhen, Dubai, Djibouti City and so on)?
  • If this is just a city with better laws and enforcement managed by the Honduran Government, I think the rest of the Honduras can easily argue: why don’t we get the better laws and enforcement? Why are they being restricted to this city? If finance is a problem, but they know what rules they need and how to enforce them, this is the perfect situation for ‘big aid’ to step in and fill the gap.
  • Lastly, for all I’ve criticised the idea as fuzzy thinking, it is true that rules and institutions are of crucial importance to development. Where Romer and I disagree is that Romer thinks these are transferable and easily applied in new contexts, and I do not. That said, some rules can be easily transferred if enforcement will is there. Whether this city in Honduras works will depend on how many alien laws, regulations and enforcement systems they import, and how many are homegrown.

My final word on it? I’m not sure it is a Charter City in the sense Romer had it when he first started working on the idea. But it does take ideas from the Charter City concept, and though we can argue about how new the ideas it is taking are, it’s still a great thing to see a country take a bold step in its attempt to create jobs and better conditions for development. I hope it works, and look forward to reading more about how it will be structured.