Can Private Cities Help Solve the Refugee Crisis?

Free cities at the hot spots: Would that be the solution for refugees and migrants?

At present, 70 million people worldwide are fleeing from their homes, mostly as a result of armed conflict. Think of Za’atari, the great tent city, which is composed of 80,000 refugees and NGO workers making it Jordan’s fourth-largest city. 

Normally, war refugees find shelter in neighboring countries and return home after the conflict has passed. But this option can be difficult, if not impossible. As long as conflict and persecution persist at home, the refugees will be denied reentry or belong to an oppressed minority. Beleaguered refugees are forced to find new homes elsewhere.

The situation becomes more dramatic when one considers the extent of non-war-related migration. 

According to a Gallup survey from 2017, nearly 710 million people want to leave their homeland, mostly from African and Arab states. Their preferred destinations are Western states.

From a humanitarian perspective, this is understandable. Western states offer greater opportunities. But when the number of those willing to emigrate is high, helping immigrants integrate can be problematic, even in stable industrialized countries. Conflicts are programmed into this scenario. 

But it doesn’t have to be this way. Shouldn’t asylum seekers be offered opportunities—somewhere—to prove themselves and improve their lives?

“Special Economic Zone Plus”

Migrant cities based on the concept of free private cities would be one such option. Think of these as “Special Economic Zone Plus,” that is, semi-autonomous areas run as profit-oriented companies. For a one-year fee, the operating company could guarantee the protection of life, freedom, and property in a defined territory.

Free private cities would include basic infrastructure, police, fire brigade, emergency rescue, a legal framework, and independent jurisdiction that would allow residents to enforce their legitimate claims through a regulated process.

Here’s how it works: 

  1. All residents receive a written civil contract from the operating company, which regulates the mutual rights and duties. This includes the services to be provided by the operator and the sum to be paid, as well as the applicable rules and the inalienable rights of the residents.

  2. Disputes regarding the content and interpretation of the civic contracts take place in fully independent courts, which insures the operating company doesn’t breach the contract or trample newcomers’ rights.

Migrant cities are therefore free private cities for refugees and migrants, providing a reliable, on-the-ground, legal framework. 

Furthermore, free private cities offer opportunities for migrants easily to acquire real estate, as well as to import and export goods without corruption. Establishing a company should be quick and easy. These are precisely the conditions usually missing in the countries of emigration that therefore hinder economic development.

The Approach

First, it is necessary for free private cities to secure appropriate territories in a given host country. The establishment of such a territory requires an agreement between the respective government and the private operator. It makes sense for such an agreement not only to be concluded between the private operator of the private city and the host country but also to have other countries’ governments sign, acting as quasi-guarantors of the migrant city. 

For example, the contractual parties would agree to respect fundamental rights and international agreements in a free private city, such as prohibitions against inhumane working conditions, human trafficking, and money laundering.

States can be persuaded of the value of free private cities if they expect to benefit from them.

Nevertheless, the advantages that would come from migrant cities run by private companies are not to be underestimated. Because no country likes to have territory within their own jurisdiction managed by foreign powers, adoption of free private cities is likely to be much higher if a host state takes over the administration but leaves the free private cities legal framework as a carveout from the host-state’s status-quo institutions. 

Under international law, the private city would be still part of the host country but would constitute a special administrative area that maintains its own rules, its own jurisdiction, and its own security. A comparable example is the status that Hong Kong has vis-à-vis China. Such a regime can initially be put in place for a period of time—for example, 50 years—long enough to provide security for residents and investors.

States can be persuaded of the value of free private cities if they expect to benefit from them. That’s precisely why a belt of densely populated and prosperous areas has formed around the city-states of Hong Kong, Singapore, and Monaco. These newly-created areas belong to the surrounding states. If similar metropolitan areas emerge in a previously underdeveloped area, then this is also just good business for the host country.

Security

In conflict areas, it’s essential to protect the migrant city from the outside. The city itself should be absolutely neutral, like the Swiss model, and should abstain from any interference in conflicts nearby or far away. External security should not be provided by local forces, then, but by internationally active and recognized security companies. This is especially true if one wants to avoid the presence of military troops from other states. If other guarantor states have signed the contract, they can provide a security guarantee for the migrant city.

What about security within the city? 

Here, a certain robustness is inevitable if one does not want to carry over existing regional conflicts into the city. In the contract with the operating company, each resident commits to the observance of the rules, which include renunciation of violence against people of other faiths and dissenters.

Ultimately, a migrant city will only be economically successful if the personal freedom of those who have different beliefs is guaranteed.

A violation, on the other hand, could lead to the termination of the contract and removal from the city. Each resident declares in advance in the covenant contract that he or she is prepared to leave in such a scenario. If this is not possible, the city sets up a reception center that the expelled resident can leave at any time.

This may seem harsh to some, but it sets the critical incentive to renounce violence. This is precisely because in a migrant city, it is expected that there will be diverse groups that may lack cultural and religious understanding. Ultimately, a migrant city will only be economically successful if, in addition to economic freedom, the personal freedom of those who have different beliefs—even non-believing ones—is guaranteed. Proving this relationship in practice is a meaningful way to take the wind out of the sails of fundamentalists.

Financing

Building basic infrastructure, security, administration, and a judicial organization requires significant funding. Given the policy component of the project, it is obvious that potential immigration countries will provide financial support, such as lenders to the operating company. This would not be a bad deal at all.

According to estimates, the costs of mass immigration to Germany in 2016 have amounted to 23 billion euros, and this amount is expected to rise to 30 billion euros per year by 2020. This amount of money would support the pre-financing of several migrants' cities in the affected areas. Unlike detention centers, after a start-up period, they would be self-supporting and, if successful, able to repay the benefits.

Newcomers with no financial means could be subsidized by the private city for one year—provided that the costs are to be repaid later once income is earned.

Administrative activity, including municipal services, is carried out by the operator himself or assigned to an experienced general contractor. This corresponds to the Sandy Springs model, named after the city near Atlanta, Georgia, that privatized all public functions and, after 10 years, concluded that the quality of urban services consistently increased while costs decreased by 10 to 40 percent depending on the administrative department.

Private security service providers are already exercising a police function when it comes to ensuring security and order in special economic zones. The operator of the city also provides a civil law system that includes courts. The idea is to adopt a proven legal system that offers investors security and is suitable for promoting economic prosperity, such as the Swiss civil law or English common law. There are already precedents for such imports of foreign legal systems, as evidenced by the Dubai International Financial Center and Abu Dhabi Global Market Special Economic Zones, which have both introduced legal systems based on British common law.

Newcomers with no financial means could be subsidized by the private city for one year—provided that the costs are to be repaid later once income is earned. This would reinforce the idea that the area is not a refugee camp that is run for charity or the United Nations, but a city that lives by and through its inhabitants.

Success

It is important that migrant cities provide incentives for the settlement of more highly-educated individuals, entrepreneurs, and investors. Cities whose inhabitants consist exclusively or predominantly of people who lack literacy, education, and basic skills will find it hard to succeed. Therefore, each city needs to be able to choose its own inhabitants to achieve a healthy mix of quantity and quality. If the private city flourishes later, additional jobs for the unskilled will automatically be created.

The operating company will certainly have to pre-finance the first few years. However, if the break-even point is calculated to be 100,000 inhabitants, for example, and then 200,000 people actually come to live there, the company will make a profit. The reason is that police, justice, and infrastructure do not have to be doubled to provide the same level of service.

Due to the system itself, political conflicts in the migrant city do not even emerge—the less politics the better.

Alternatively, or additionally, it is possible to levy indirect taxes, in particular, value-added taxes or moderate real estate-related taxes such as property transfer taxes or property taxes. The operating company initially acquired the landed property in the area of the private city. The subsequent increase in the value of the land may represent a profit and allow for the cross-financing of other areas. If a particularly high surplus is generated, the contributions can be reduced.

Political System

The private structure of the city avoids the risk that in the event of a victory through election, the winner will favor a close associate or install a regime that jeopardizes stability or chases away businesses and investors. As experience shows, this, unfortunately, happens again and again at both the city and national level, especially in Africa and Arabia.

Due to the system itself, political conflicts in the migrant city do not even emerge—the less politics the better. Economic development, security, and stability take precedence over political participation. This can be introduced in a second phase, say after 10 years, with the residents then being able to choose the city manager or mayor or refuse measures or rule changes through referendums.

[Migrant cities] can offer many people a real perspective that they otherwise would not have simply because they were born in the wrong place.

Further, it is conceivable that over time, the inhabitants themselves become their co-owners through the allocation of shares in the operating company. This would bring about an alignment of interests, as the residents would then not only have the right of participation and co-decision at the shareholder meetings of the municipal operator, but also an economic interest in the prosperity of the private city.

The allocation of shares can be linked to a minimum length of stay in the city and the punctual payment of the contributions or similar criteria, which create incentives for good behavior.

Conclusion

Imagine a new Hong Kong or a new Dubai arising one day in the Mediterranean! This would have significant positive effects for all nearby communities. In terms of size, free private cities should comprise at least 10 (better 100) square kilometers in order to enable later commercial and industrial development. Ideally, the corresponding area has access to the sea and is initially unpopulated.

Guaranteed security, commitment to law and contracts, personal and economic freedoms, and refusing to accept political or religious conflict are all indications that such communities will grow and thrive. They can offer many people a real perspective that they otherwise would not have simply because they were born in the wrong place.

Translated by Nikolai Stengel.

This article was originally published in German at the Neue Zürcher Zeitung

Further Reading

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