★ The Hong Kong Model

Stanford professor and entrepreneur Paul Romer has a fascinating idea for how to turn developing nations into developed nations: charter cities. His model for these cities is British-controlled Hong Kong. The host developing nation will lease land to a developed country which will govern it, providing stable, business-friendly rules.

Kyle Baxter reports on Paul Romer's idea explained in an Atlantic article. Although intrigued by it, I find myself more on the side of the skeptics.

First, cities need to be connected in many ways. Roads, electricity, clean water, internet, supply chains—everything in a city needs to be connected the outside world for a city to prosper. If these connections only exist with out-of-country infrastructure, nothing is accomplished from the perspective of the country other than "loosing" a city.

Second, single well-developed cities can only stay well-developed when they retain their independence. If China hadn't preserved special rules for Hong Kong (see Google's China Issue), the city would probably have suffered under Chinese "ownership". Hence it is unclear whether a well-developed city would really influence the whole country it resides in, and thus whether outsourcing city development is a valid means of state-building.

Third, giving up control of a city that is worth developing is hard. Do you think a sovereign China would have given control of Hong Kong to the British Empire without losing a war? Outsourcing city development means giving up most of your regulative and executive power. Most countries would have a hard time taking that reputation hit, especially the ones needing city development most: poor dictatorships and developing countries without a global identity. So if city development needs to be forced upon a country from the outside, even with non-violent methods, will it create more political trouble than it's worth?

In my opinion, a less radical approach could be more successful. Governments should set up enclaves themselves and experiment with relaxed regulation. Without the notion of modern imperialism it would be easier to develop a region and enable long-term development of the whole country. There might be a sweet spot between government control and special, lax regulation that attracts enough foreign investors.

Who knows, maybe Masdar City will become one of these places?