Charter Cities Institute Interview

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Hi and welcome today, greater calm talks with Mark Lutter, who is the founder and executive director of Charter Cities Institute and as well the host of the Charter Cities podcast. And if you haven’t heard of them before or maybe even haven’t heard of charter cities before, don’t worry, because today we’re going to learn everything that you need to know about charter cities and you definitely want to press subscribe on YouTube or your podcast app. Why? Because charter cities could be a key to leading millions of people out of poverty. Mark, thank you so much for taking the time to speak with Great today.

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Thanks for having me on the show. Thank you so much for being here.

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Now, what do the Charter Cities do? Let’s start there, because I was not familiar with the term when I started doing research.

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Sure, so a charter city is a new city with better laws, and if we think about there’s some cities today that can be thought of as very similar to charter cities on a number of different missions.

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So Singapore, for example, is a city state.

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Hong Kong, well, until recently was a city that first operated under British Commonwealth, had a lot of self governance. And then it was part of China. But it was one country, two systems. It was a system that was separate from the rest of China. Unfortunately, that is changing today. There is also Shenzhen, which was a special economic zone that had a lot of autonomy, local autonomy to decide how to govern themselves. Dubai is another example. And so what these cities have in common is a lot of local authority over decision making.

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And this allowed them to respond more quickly to the needs of residents, to the needs of investors to grow rapidly from desert or from fishing villages, to become World-Class cities in just two or three generations.

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And so the idea of a charter city is that the primary determinant of long term economic outcomes is governance. If you have a good government, you will tend to do relatively well. You have a bad government, you will tend to do relatively poorly. Unfortunately, it can be very difficult to change the government on a national level.

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However, a charter city, because it is on a local level, allows for much more flexibility than otherwise might be politically possible if you combine that governance flexibility with the fact that in many countries in the global south, there is very rapid rates of urbanization that allows the right that that means that new urban spaces need to be created.

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So there need to be new cities. There need to be expansion of existing cities. And you can take advantage of this trend to say, OK, these new cities can’t have much better laws, much better regulations, make it easier to start a business, make it easier to pay taxes, make it easier to hire people, make it easier to do all these things, and that will attract more investment, create jobs, and hopefully set the stage for a long term economic development that can lift people out of poverty.

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I can definitely see all of the benefits of being able to take the actions that are necessary to make your individual city prosper. So what are the challenges then that are in the way? Why isn’t every city in the world a charter state? What is the problem?

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Sure, so value to having a single homogenous legal system at a country level. So part of the reason the United States, for example, has been successful is because we have a very large internal market.

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The EU was created in part to create a large internal market. And so there are tradeoffs.

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If you have more local governance, then the feedback loop between the government and the locals and the residents tends to be a little bit quicker. At the same time, oftentimes local governments tend to oppress people. So sometimes the governments are able to remove some of that oppression, as well as create markets where people are able to produce goods and trade, knowing that their goods are able to be bought and sold in nearby regional areas.

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I think the other reason is just great.

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We can think about current governance systems as having a historical legacy. And so the historical legacy is as nation states. And so when a lot of places in the global south were created, they were created based on lines that the colonizing countries drew somewhat arbitrarily. And those lines were handed down to the new countries that have largely embraced them. And they’re arbitrary. They cut across different ethnic groups. But there is that historical legacy that makes it quite difficult to change. And third, just any change tends to be difficult in terms of politics. Any change that will probably be some political losers and they will often fight very hard to protect that change. And so charter cities help because. They are focusing on greenfield sites where nobody lives, there aren’t really any political losers there, and so that allows for more changes to be made that can make the city a little bit better for investment, for job creation, for entrepreneurship and for economic development.

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Right, so you mentioned greenfield sites for someone that might not be familiar with the word. Does that mean that it’s just a big area where no one yet has built anything?

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Now, the Greenfield site is exactly what it sounds like, it’s a green field and it could be a forest, too, but it means that there are not actually buildings there. The green field that’s typically contrasted with the brown field. And so a brownfield site might be where there are buildings where some people live. But green field basically means it’s relatively uninhabited. Nobody lives there.

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There’s no economic activity. Of course, there’s always some. But it’s much easier to get Buy-In from if there’s a much smaller population than it is with a much larger population where a lot more people might say no, we might have different objections of various sorts.

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Thank you so much for taking the time to paint the picture. I suspect that the idea of Sadr City might be a new concept to some of our listeners. So help me understand then, what role does the Sadr City Institute play in the change you want to accomplish?

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So the Terrace’s Institute is a non-profit, a five one Sikri, and we act in two matters.

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One, we act as a think tank. So we produce papers, we have a podcast, we have a newsletter. We try to spread the message of charter cities. Then in addition to acting as a think tank, we also provide technical assistance to charter city developers on the ground. So we are currently working with projects in Zambia, in Nigeria, in Honduras to help

then improve their governance structures, to help them execute a bit more effectively. And our goal is really to create this ecosystem, to share best practices amongst different developers and by doing so to help accelerate the development of charter cities worldwide.

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I see, and what is the.

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Except for being a think tank and providing ideas, what are kind of the next projects that you’re working on right now for someone that might be wanting to stay in the loop of what you guys are doing?

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Sure, so we’re working with a handful of projects in different countries, we are working with them.

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It’s a new city development in Zambia being built for one hundred thousand residents. We are working with an economic city, a new city project in Nigeria, as well as Talent City, another project in Nigeria. We worked a little bit with Sudan, mortise on a project in Honduras. Then if you’re following the Charter Space Institute, we have a handful of publications that are coming out in the near future.

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And those include a governance handbook, which is a step by step guide to create a new governing structure from scratch planning guidelines to help people think about urban planning in charter cities.

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And we are going to plan a conference for twenty twenty two to bring Ferdowsi’s advocates together. And so if you’re a student or if you’re interested in charter cities, this is a very young space. So it’s possible to have an impact very quickly. So if you want something new that’s exciting to get involved in, that has a lot of growth potential. I’d recommend thinking and talking about charter cities.

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Yeah, I’m getting excited now. And for anyone that is interested in Sadr City is making an impact or even just the SIM City enthusiast, like, I’m curious, how do you build then a city from scratch? Like what is. I asked, imagine this Greenfield, like what should be done differently from the way we have been building cities in the past?

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So there’s a handful of things, one is you want to have a governance structure that is responsive to people and businesses. So in a lot of the global south, it’s very expensive to register a business.

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So in sub-Saharan Africa, it costs on average thirty six per cent of per capita income just to legally register business. And obviously the Hibbitts job creation.

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A lot of countries, Honduras, for example, is a very violent country. So it’s possible to provide security services better than how they are currently being provided. A lot of people in Honduras, they might go to work and they work in an industrial park or they work in a business park in that park. It’s very safe. They will take out their phone or talk to friends, et cetera. They go home and they’re afraid to leave their houses, right, because the houses there have no security. The police aren’t doing a very good job. And so because the violence rates are so high, they’re much more safe at work than at home. So how can we create an environment where they have similar levels of safety, both at work and at home? And so it depends on the level of the country, but on the country. But there are, I think, a lot of ways to improve the provision of government services.

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Then in addition to that, there is the challenge of how do you get people to live there, even if you have the best government in the world, if it’s in Antarctica, nobody will want to live there.

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So you want to build on trade routes, you want to be integrated into the local community and the local economy, and you want to offer a value proposition where in addition to offering a very strong, effective government, you also want to offer jobs.

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You want to offer the opportunity for a better life. You want to offer things like education. You want to offer fun.

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People should have things to do at night. People should hopefully have the opportunity to meet and date other people and to create families and to settle down. So you really need to offer a whole concrete element of a city that comes together to make the charter city a strong value proposition.

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Right, and you guys come up with the idea for a think tank, you create these manuals, if you will, for how to build these really strong cities, who is then doing the investment? It’s the governments that are interested. Or is it like communities? Who is using the information?

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So the governments need to be involved. They’re necessary partners for charter cities, they need to pass legislation that creates the special jurisdiction that allows for the more effective local government. But we don’t see why we don’t want to ask governments for money for two reasons. One, if we’re asking them for money that they probably probably don’t get a charter city.

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And then, too, oftentimes government investment comes with a lot of strings and makes it very difficult to execute effectively. And any project of this magnitude needs to have very tight execution. Otherwise it might not succeed. And so we typically prefer to work with private projects that are funded by private sector developments and these have been financed. You seem to finance in a variety of ways. Some do pre-sales on lots.

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So they say, all right, you can buy this plot and then you use the revenue from the sales to invest in the city infrastructure. Other projects have raised money through.

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Have used revenue from existing businesses to invest in the city and to build the city.

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Others have gone to international financial institutions such as the African Development Bank or the IFC and these large investment banks to raise the money to build. There is no standard model for.

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How purchases are being invested in any of these days.

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I appreciate this opportunity to pick your brain. I feel like I’m learning a lot and I’m having more and more curiosity opening up as we speak. And I’m wondering, is this this shot or is it mainly for countries where you want to alleviate poverty? Or do you see this in the future as something where we could have a lot of charter cities in all parts of the world?

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So we do this primarily as a.

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Way to alleviate poverty in the global south is a rapidly urbanizing population, so there is a demand for new urban spaces. Most high income countries have below replacement level births. So there is not a in fact, urban areas are getting hollowed out instead of there being a demand for new urban areas.

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And so hopefully right by the perforates improve, hopefully they’re more immigrants and that will create demand for new cities and then some more cities can be built. But right now, I don’t think there is a demand for the new major urban spaces in most high income countries.

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Additionally, most high income countries are relatively well covered. They’re not right. While there are improvements, the improvements aren’t huge.

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So if we think about a lot of countries, let’s say Central America, if one Honduran moves to the US, their income increases by about a factor of 10 per capita income in Honduras is twenty four hundred dollars. My guess is that per capita income of Hondurans who migrate to the US could be around twenty four thousand dollars. So that’s a huge difference. And we can imagine if we create a good city, a charter city in Honduras with very good laws and regulations, maybe that maybe it’s not a factor of 10, maybe increases by a factor of five. So that’s a huge difference. If we’re thinking about a high income country with laws and regulations are already relatively good, income might increase by 10 percent, 20 percent, which is substantial.

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But it’s not five bucks, it’s not 10x. And so but given the cost associated with the infrastructure to build an entire new city, it’s not clear that a relatively small change in incomes will justify all that expense.

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Right, so which would you say is the best example of a successful Söder city so far?

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So I would look at.

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I would look at Hong Kong, I would look at Singapore actions in Dubai, all of these became world class cities in the last two or three generations, in part because of their governance. And I see those as models. If we think about the modern charter city space, there’s a handful of early stage projects, but they’re all quite early. And so it’s too early, I think too difficult to say which of them will end up having a lot of success.

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And we need to write.

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Our cities are decades long, decades long projects, so we need to be patient and see how they can execute over an extended period of time.

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Got it.

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And imagine now that someone listening to this sees these great examples of the success that can be accomplished by charter cities. And they want to do something to support your cause or shelter cities in general. What can they do to help out?

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They can always donate and are tax deductible.

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In addition to that, you can check out our website, Tortoise’s Institute TAG. We have a Twitter account, Skytop City. We have a Facebook account. If you send me an email, I will probably respond if you have ideas to start a blog and talk about it, but I think this is still a very early, very young stage. So there’s a lot to be had from participating in the discussion.

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And we love when smart kinds of people get involved. So if there are questions, you have let me know and follow us on Twitter and Facebook and let’s build something cool.

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Beautiful. Well, Mark, thank you so much for coming on and talking with great about charter service today. I feel I’ve learned quite a bit of things that I didn’t know before this call. So thank you so much.

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Great. Thanks for having me.

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Thank you. And for you listening, if you enjoy this conversation, if you learn something, please consider subscribing on YouTube or on your podcast app that will help us reach more people so that more and more people can hear these kinds of conversations and make a positive impact. Thank you so much for listening and we’ll see you in the next episode.

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