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What’s the Future for Charter Cities after the Honduras ZEDE controversy? w/ Jeffrey Mason, Charter Cities Institute  – EP234

In this episode, we delve into the controversy surrounding the Prospera charter city in Honduras, which has embraced libertarian principles and adopted Bitcoin as legal tender and a unit of account. The city is currently embroiled in a legal battle with the Honduran government. Gene asks Jeffrey Mason, from Charter Cities Institute, what it all means for the future of charter cities. Jeffrey provides some good examples of how charter cities still have a lot of potential, and he talks about projects CCI is involved in in Africa, particularly in Zanzibar. Tune in to gain insights into the intersection of governance, economics, and innovation in the context of charter cities.

Please contact us with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. 

You can listen to the episode via the embedded player below or via podcasting apps including Google Podcasts, Apple Podcast and Spotify.

About this episode’s guest: Jeffrey Mason, Head of Research, Charter Cities Institute 

Jeffrey joined CCI as a Researcher in 2019. His research interests include urban economics, structural transformation, special economic zones, and technology ecosystems. He has worked on policy advisory projects in Nigeria, Tanzania, Zambia, and Honduras, among other countries. Prior to joining the Charter Cities Institute, Jeffrey worked as an MA Fellow at the Mercatus Center at George Mason University. He holds a BA in economics from the University of Maryland and an MA in economics from George Mason University. His writing has been featured in publications including City Journal, Works in Progress, Investment Monitor, Quartz Africa, and The American Mind.

What’s covered in EP234

  • Introduction. (0:00)
  • Honduran ZEDEs: zones for employment and economic development. (4:12)
  • Honduran ZEDEs and impacts on local communities. (9:41)
  • Investor-state dispute settlement mechanisms. (15:15)
  • Charter cities and their potential to improve governance and economic growth. (20:37)
  • Charter cities and urban development in Zanzibar. (26:15)
  • Affordable housing development in Zanzibar, Tanzania. (30:56)
  • Urban development and new city projects. (39:27)

Takeaways

  1. The controversy surrounding Prospera in Honduras highlights the risks and uncertainties involved in charter city projects.
  2. The concept of charter cities is evolving, with a growing emphasis on affordability, local engagement, and sustainable development to ensure their long-term success.
  3. Legal and political stability, along with government partnerships, are crucial for the success of charter cities, as demonstrated by the contrasting experiences of Prospera and the Zanzibar project, Fumba Town, that Charter Cities Institute is involved in.

Links relevant to the conversation

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Transcript: What’s the Future for Charter Cities after the Honduras ZEDE controversy? w/ Jeffrey Mason, Charter Cities Institute  – EP234

N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Jeff Mason  00:03

When you’re not adding in that governance component, right, it’s essentially it’s a real estate project. And that’s, you know, that’s all well and fine. But if you’re going to be doing a large scale, something that is truly city scale that’s going to be home to 10s, or hundreds of 1000s, or, or maybe even millions. And when that the grandest scale, it actually makes a lot of sense to pair that type of development with some sort of effort to improve governance.

Gene Tunny  00:35

Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. One story that’s caught my attention recently is the controversy over the Prospera charter city in Honduras. It was inspired by libertarian principles and is adopted Bitcoin as legal tender and as a unit of account, but it’s in a big legal dispute with the current Honduran government. I was alerted to this by a report from Ryan Grim at the intercept on juris ratchets up battle with crypto libertarian investors, rejects World Bank caught me talked about this story on his counterpoints YouTube show. It’s a crazy story and I wanted to talk with someone knowledgeable about it. So I reached out to the charter cities Institute. I’ve previously spoken with the head of CCI Curtis Lockhart, and I’m grateful that he recommended I speak with his colleague Jeffrey Mason. Jeff is Head of Research at the charter cities Institute and he really helped clarify the issues for me. Is the Honduran charter city an exceptional case? Or is there a fundamental problem with the charter city model? Jeff helped me figure out what’s going on. And he reminded me that the charter cities Institute is doing things differently. And he talks about a fascinating development on Zanzibar that it’s involved with. There are some more details on CCI as approach to charter cities in the episode that I recorded with Curtis lockout two years ago. So I’ll put a link to that in the show notes, so you can check it out if you’re interested. This episode of economics explored is brought to you by Lumo coffee, which is three times the healthy antioxidants of regular coffee. It’s seriously healthy, organic coffee, where my coffee offers a 20% discount for economics explore listeners until the 30th of April 2020. For details are in the show notes. Right, I would better get into it. I hope you enjoy the episode. Jeffrey Mason from charter cities Institute, welcome to the programme.

Jeff Mason  03:06

Adrian, thanks for having me.

Gene Tunny  03:08

It’s a pleasure. It’s good to reconnect with the charter cities Institute because I had Curtis Lockhart on the show a couple of years ago to talk about charter cities. And it’s certainly been of of interest to me for quite a while that the whole idea of I mean, initially they’ll talk there was talk about special economic zones. And there’s this concept of charter cities came about. And I was reminded of it recently because this has been really crazy news story in Honduras about these so called crypto libertarian investors who have been suing the Honduran government for removing the legislative underpinnings of, of I think it’s Prospera, is it the charter city? That’s on an island in Honduras? And yeah, it’s just as really bizarre story. Are you older? What’s your take? Jeffrey, on what actually went wrong in Honduras?

Jeff Mason  04:12

Sure. It’s yeah, it’s a little a little messy, a little complicated. So maybe a little bit of backstory is probably in order. Some of your listeners may know this story, be familiar with with prosper, and some of the other day some, some may not. So back in the late 2000, around 2009 ish. Paul Romer, who had who was sort of the original guy who came up with the idea of charter cities, he connected with some folks in the Honduran government who had sort of independently been interested in some similar ideas. And they came together passed a law in Honduras that would have essentially created charter cities. That law was repealed because of some some constitutional concerns and then later a new law that rectified some of those concerns was was put through due to some sort of disputes Rome or departed. And then there was sort of some some constitutional disputes about Supreme Court rulings on that law and the previous public government that did come to power and pushed out the other one. Right. It’s it’s it’s kind of messy, but the law as of like 2012 2013. authorising Zetas zones for economic development and employment are in place. A few years went by with not much happening. The government hadn’t hadn’t really taken action to sort of appoint the necessary people to the oversight body. And then I believe 2019 What would become prosperous? Was was established as the first of what is now three Zetas. So prosper, as as some folks may know, it’s on the island of Roatan on the Caribbean side of Honduras. And it’s being developed as this jurisdiction sort of focused on emerging technologies, biomedical innovation, crypto and financial services, and has some really interesting and really novel approaches to governance, in terms of how folks who choose to live or do business there, can sort of select how they’re given options about how they’re regulated. And it’s a really sort of fascinating project, just sort of looking at pushing the frontier of governance. There’s a second set A, that folks, some folks may be familiar with it, it’s not quite as high profile called ciudad and what is on so this one is on the mainland, near the cities of Jalama, in San Pedro Sula, kind of in Honduras is main manufacturing region. So this one is sort of focused on creating very affordable housing, and good jobs in light industry, logistics, manufacturing, that sort of thing. And then there’s a third in the south of the country that’s focused on agriculture, agro processing, greenhouse agriculture, that sort of thing. And so in the last few years, the government’s change change parties, and the government came in was was very, very opposed to the that regime, and had been critical of it of it for years. And so when they came into power, you know, Goal, goal number one for them was was to rollback because that is. And so what they ended up doing was, they eventually pass a repeal of the xFA law. But for it to sort of be fully completed, it needed to be not just passed, but also ratified. And within the sort of legislative calendar of when the initial repeal went through. The repeal was never ratified. So we ended up in this weird sort of legal limbo, where the government is trying to repeal the law, but it’s not quite repealed. And even though the way they’re going about it, is being argued by prosper and others, that it’s in violation of some of these different trade treaties and other things that would have essentially locked the law in place. Even if you wanted to go ahead with the repeal, there would be this sort of much longer, sort of off ramp period and certain sort of investor rights guaranteed and this sort of thing. And so now prosper is suing the government of Honduras and international arbitration for damages. Or they’ve either secured or, or have pledged over $100 million in investment. So that’s that’s obviously quite a big deal. That’s sort of been disrupted. And so now prosper is seeking damages from the Honduran governments. And then earlier this year, as that has sort of developed, the government of Honduras has now said they are going to pull out of the investor state dispute settlement process that’s run by the Royal Bank. So so quite quite a messy tumultuous couple of years, but but the Zetas as they exist now, you know, under quite some some hardship, obviously, for the for the time being, they are continuing, right.

Gene Tunny  09:33

So the zeros themselves are continuing, is that the actual zone so they’re still operational? Right. Okay.

Jeff Mason  09:39

They’re still they’re still doing business. Right. Okay. So

Gene Tunny  09:41

there are a couple of things you’re interested in, following up here. So you’ve got this change of government, and is it the case that it will assist you president is it Castro and was it she just the shoes of the left so as she objected into the Zed A’s because it’s against her government’s general economic philosophy? Or is it because of concerns about impacts on indigenous people? I recall that the United Nations or I saw that the United Nations had some things to say about potential impacts on indigenous communities. Do you know what the what was the problem that the government had with the Zed A’s? Sure.

Jeff Mason  10:23

So there’s, there’s a couple pieces to it. One, I think it is, is partly political, and sort of a matter of philosophy and right, how they, how they feel about free markets and those kinds of things. The concerns about indigenous groups have been raised since the 70s, first came into existence. But to my knowledge, nothing in terms of those groups, or their land or anything like that has has ever actually been sort of touched by by any other three days in any way. And then it also just goes back, I think, to the essentially coup in 2009, that pushed out that party’s previous presidents and sort of long standing issues with the president who who wasn’t charged who had originally champion this that a regime who, right ended up being extradited to the US related to drug trafficking. So there’s, there’s a, there’s a political there’s, there’s a, you know, philosophical difference. And then there’s also some of the politics of it as well. Right.

Gene Tunny  11:32

And so from the government’s perspective, so if I’m sitting in the finance ministry, in Honduras, what am I seeing, am I seeing we’ve got this special economic zone, or Zed A, and we’ve got these foreign coal corporations operating there. And they’re generating income, but we’re not able to tax them, or are there any subsidies? What’s the deal? What the financial arrangements are? What how does it? You know, what’s the what’s the finance ministry seen in Honduras?

Jeff Mason  12:04

Sure. So in that regard, it’s it’s there’s there is a it’s a fairly disconnected system in the sense that these entities are kind of able to do what they want. And in terms of of generating revenue, I think there are there are some some guidelines about about, you know, taxes and that sort of thing. But But generally, they’re they’re kind of able to do what they want. In terms of policy, and there’s not much in the way of it’s not like maybe sort of your what you might think of traditionally with an SEC, where maybe the industrial zone collects some sort of revenues, and they’re sort of a stream of, of transfers. Back to the government. I think the in the case of this, that is I think the sort of more macro level impact is is just more about the economic effect that they can bring to the regions that are located and that’ll have some, some knock on effects. Right.

Gene Tunny  13:04

Okay. But, I mean, so they’ve, they’re pulled out the underpinning, or they’ve ended the legislative support for these days. So they don’t want this to get in, continue. So they want to regulate these areas as if they’re part of Honduras. So they don’t see to them. They don’t think these this Zedd a or these days creating the economic benefits that were originally suggested for them. Do you have any views on that? I mean, is it? How has that? How has prospera performed? Has it lived up to expectations? Sure.

Jeff Mason  13:41

So in terms of prosper? I know there’s I don’t know how much of that right 100 million investment has been fully invested. Right. I know, they actually there are buildings and then properties under construction, there are a number of companies that are registered, operated, doing business there, I think most of those are sort of in the in the FinTech space, or the biotech space. And they, I don’t know, exact numbers of residents, but there is, you know, an active active community there. I know with Verizon, for example. I think especially colleagues were there in the past month, there’s upwards of maybe 100 200 families or people living there something like that. So some employment, some people living there. And I know there’s like I said, the greenhouse and that type of thing, those types of operations and the other and from what I understand locals who are working there have been quite defensive about it. In the sense of, you know, please these are these are good jobs we didn’t have before don’t don’t end this for us.

Gene Tunny  14:49

Yeah, okay. It’s an interesting little development this prosphora so it’s adopted Bitcoin as a unit of account as a currency and the investors and apparently some of them are connected with Peter Thiel. So one of the PayPal founders and a very famous man, very major player in in US business. And they’re suing Honduran, the Honduran government for 11 billion. But now Honduras has pulled out of that world bank tribunal. And I mean, given that 11 billion if I, if I’ve done the numbers, right, that’s about a third of the GDP of Honduras. You could imagine why they would I mean, it’s a it’s a massive, a massive lawsuit. What’s your take on the on the merits of the case? Do you have any thoughts, Jeffery, on whether they, they’re, you know, they have a case to sue Honduras? I mean, I’ve been legally and ethically morally?

Jeff Mason  15:55

Sure. So, you know, disclaimer, not not not an attorney or trade attorney, anything like that. But from some briefs and things that I’ve read, you know, I do think they have some kind of standing. There are some clauses in the original law, talking to talk about what sort of an off ramp procedure could look like, of not being less than 10 years. And then beyond that, right, the the the main, the main treaties that there’s there’s a Kuwait based treaty, that Honduras was party to that that’s part of their legal argument. And there’s also another one called CAFTA. Dr. Which is, since I’m from Central American countries, Dominican Republic, some others that to do with investor protections. So, you know, without without being, you know, a lawyer who focuses on these areas, I would, I would think they do. Does that mean, the full, you know, 11 billion is right, is that justified? I don’t I don’t I don’t have enough expertise in that domain to say, I get the sense that I think would have been probably best for all involved is some kind of negotiated settlements, for for some kind of some sort of agreements, what that could exactly be something that maybe allows this phase to continue in some form, but but allows the government say, you know, we’ve, we’ve rolled this back in some way, you know, I don’t know exactly what that could look like. And now it’s there in Honduras leaving to the arbitration house at the World Bank. I really actually, I’m actually not sure I’ve tried to find this. See, with some articles, I have found an article that actually says, like, what happens to the lawsuit now? So I’m not I’m not actually sure what happens next. I’m sure anybody is.

Gene Tunny  17:52

No, no. I mean, it’s it’s a bold move what they’ve done it. I mean, it’s consistent there is this growing concern worldwide about these investor state? dispute or settlement in dispute mechanisms. So you know, as part of that, that broader movement is pull out, and I see that they’ve had 80 or So economists sign a letter in support, and I’ll have to try and dig that up and see who they are. Yeah, it’s just, this is something I’ve just found out about the last few days. This is, this is quite a crazy story. And then I remember the conversation I had with Curtis, which makes me wonder, like, is this a I guess, you know, being in the charter cities Institute and promoting charter cities? Is this something that is a cause of concern? Does this set your agenda back in terms of providing charter cities?

Jeff Mason  18:48

So I don’t, I don’t really view it as a setback for CCI. And some of the projects were working with. I think Honduras is a useful cautionary tale for these projects. In that it shows I think, the importance of having legal and political stability, if your legal regime that allows a charter city or something like a charter city, is is you know, is only an election away from being repealed at anytime. Right. That’s a pretty that’s a pretty shaky foundation. And I think another A second important lesson is that for these types of projects to succeed, I don’t think it has to be the case that a project necessarily needs to involve the government’s right, I think you could have a fully, fully private project. That’s, that’s great and successful. But I think one of the ways to ensure sort of longer term stability and government buy in is actively partnering with with government in some way and whether that’s the sort of formal public private partnership agreement or for Ruby, it may be something less formal, but The government is still involved in some way. And a lot of the projects that we’re working with, but most of which are in Africa that the vast majority of CCIs work is in Sub Saharan Africa. A lot of those projects in one form or another, are actively working with the government. And so I’m, you know, forget to put put the financials and those kind of things aside for a second, just from a legal regime, legal stability standpoint, I’m much more optimistic about those than I am about, you know, the kind of structure that was built in, in Honduras.

Gene Tunny  20:33

Rod, yeah, we might not ask you about those in a minute. Could you just remind us, please, Jeff, what, what is the difference? So what is the special sauce of the charter city versus what we think of as or when we think of as special economic zones or free trade zones, free ports, etc?

Jeff Mason  20:54

Sure, so there’s a couple pieces. So one, is that the city component matters. So we’re talking about building new cities from from scratch, that can take a number of forms. So some some projects that we’ve seen or observed are sort of what you can describe as a satellite city. You know, there’s somewhere within within the growth path of an existing city. Others are a little bit more true Greenfield. But the idea is given the pace of urbanisation, in Sub Saharan Africa, and places like India, and others, as well, just the sheer number of people who are moving to cities, every year, year on year, adds up really quickly. And so it’s hard for existing cities and their, their economies, their governments to manage that. And so we think there’s, you know, there’s, there’s, there’s a value actual value in capturing some of that urbanisation in new cities, which are better, better equipped to handle rapid expansion. So that’s, that’s the city piece. And then the charter piece, is the idea kind of drawing on this tradition from special economic zones. That, right, if you could just, you know, snap your finger, and, okay, all our institutions work great, our policy is perfect across the whole country. Right, you would do that and or there would be, you know, 15% growth, and everything would be great. But national level reforms are and improving governance, or, you know, they’re, they’re difficult things to do. And so, one of the strategies that special economic zones sort of paved the way with is that you can devolve some level of authority to special jurisdiction over a limited geographic area, we’re okay, we’re willing to relax certain rules or allow certain policies to be determined locally, within this area. And right that that’s kind of the story of the Chinese as the Z’s that pioneer their growth. But zones in some form or another have been tried all over the world. And most are, you know, a legal regime. That’s things like tax incentives, customs clearances, one stop shops, you know, blight or regulatory touch these these kinds of things. But you can take that a step further, and say, Well, look, if you know, let’s, let’s concentrate in this one area, and say, maybe it’s not just here’s a prescribed list of privileges you get for doing business in the zone. But instead, let’s think about empowering that jurisdiction to figure out what policies work best. From the ground under this is really the sort of Chinese story, it wasn’t just right, Beijing said, Okay, we’re gonna have some economic zones, and here’s what they can do. But it was local officials on the ground in figuring out what worked. And right China’s a unique time and he in a unique place, where we think those lessons are broadly applicable. And when we talk to policymakers, most seems to find a pretty intuitive that, yeah, we’ve been doing social economic zones in one form or another to varying degrees of success or failure. But I think I think they appreciate the logic of, okay, we’ve done you know, SCC is generation 1.0. That’s an industrial park. Why shouldn’t we pair that with deeper governance reforms and with, with housing, with with with mixed use, with retail commercial uses, not not just industry. And the thing is, a lot of these new city projects are happening with or without that governance component. When you don’t, when you’re not adding in that governance component, right. It’s essentially it’s a real estate project. And that’s, you know, that’s all well and fine. But if you’re going to be doing us large scale, something that is truly city scale that’s going to be home to 10s, or hundreds of 1000s or maybe even millions, even at the ground. Under scale, it actually makes a lot of sense to pair that type of development with with some sort of effort to improve governance. And so while a lot of the projects are, you know, you might get a push point towards an ideal, okay, here’s, here’s what the ideal charter city could look like. And it might have authority over, you know, these these 15 things. Right, in practice, most of the projects that we are either actively working with or know of, are trying to get authority over certain things, or maybe scale over time. Okay, well, we’ll start with revising the economic zone law to include a few more things. And, you know, we can we can try to revise that and continually revise that and, and scale it up and change those those regulations over time. So we’re seeing a push now to, you know, when zoning laws are being reformed, pushing them in the direction of, you know, recognise that there, there’s an urban component here, and pushing the city projects in the direction of, you know, okay, there’s governance is actually important for the success of this project. And so we’re trying to impress that the importance of that synthesis on on governments and and the projects that we we interact with raw

Gene Tunny  26:13

add, okay. Yeah, I mean, it’s great idea. I mean, I think it’s, it could promote experiments in design of cities, different policy settings, which is great. What do you mean by governance? Exactly, you’re talking about, we want to make sure it’s democratic, is transparent. There’s accountability, there’s no corruption? Is that the sort of thing you’re talking about? So

Jeff Mason  26:36

yeah, I think part of it is the sort of governance in terms of the day to day functioning, how well does does you know a particular officer or ministry? How well does that actually function at executing its mission? And then I think there’s also the actual literal policy dimension of what what is the policy? What would what a more optimal policy look like?

Gene Tunny  27:02

Okay, we’ll take a short break here for a word from our sponsor.

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Gene Tunny  27:37

Now back to the show. Yes, to sort of wrap this up. What are some of the charter cities or the the examples of this in practice around the world that that CCI or you yourself are involved in?

Jeff Mason  27:57

Sure. So the the project that we’re spending most of our time on right now, at CCI, is located in Zanzibar. Tanzania, so there’s a project there called Simba town. So this is a new development. It’s it’s being created by a developer called CPS, sort of south of what’s called Stone Town. It’s kind of the main main main city in Zanzibar. So we were introduced to them a few years ago, there started out and started out as a residential development, they’ve they built about 600 700 units. But they’re looking to expand their the jurisdiction the area under under their control to build this out into something that’s more like a city. And so we’re working with them on plans for the expansion of from the town. And that includes bringing the African School of Economics, which is sort of one of the premier African universities, was founded by one of TCAS board members, Leonard Washington, he says he’s a Princeton Professor of Economics, found that in his State of Guinean, and so they’re looking to expand out of West Africa, they have a couple campuses, and in between Cote d’Ivoire, and Nigeria, and they want to expand to East Africa. And so we’re working with the photon and with ASC to bring them and their first East African campus to Zanzibar. So helping get that set up curriculum development. We’re working on establishing an African urban lab there, which is supposed to be sort of a research and teaching hospital, if you will, for present and future urban practitioners and, and policymakers in Africa and trying to bring the skills and the people needed to sort of build a real hub for talent in East Africa, independently of ASC, IIT, Madras, sort of India’s MIT also set up a campus Just down the road from from Buster, there’s sort of real potential here to build a hub of of talented, talented people and build out an ecosystem in technology and services will also bring the investment. Investment needed in other areas like tourism, blue economy, industry, light industry, manufacturing these these kinds of things. Right. And so we’re working, working with them, and also with the the investment promotion authority there. Tomba is currently in sec, it’s one of these sort of fairly basic regimes. And so we’re looking at ways in which FUBA town can be in terms of of its of its legal powers can be scaled up over time to create an actual proper municipal government, that this that’s something in directionally, like a charter city, and then scale that up over time.

Gene Tunny  30:56

Right. And at what stage is the development? It sounds like there’s some development there already. Do you know the population? Is there a business centre of CBD? Yeah,

Jeff Mason  31:06

so it’s it’s a date, they’ve completed about 600 units, some of which are occupied, some of which are for sale, as well as some some restaurants, shops, office space, that kind of thing. But some of our staff have have relocated there, as well. So I think it’s an A lot, a lot of what’s been built so far is residential. In the next phase, I think a lot of that, including the ASE campus will will be more of that. Office commercial retail type space to support the expansion. Right.

Gene Tunny  31:44

And you know, has it been pitched dad? Is it? Is it being pitched it? Is it primarily of local or regional interest? Or is it being pitched to? I don’t know crypto bros or digital nomads worldwide? I don’t know. But I know that this is something that does appeal to the the the libertarians, the people who who are excited about crypto, I wasn’t using that pejoratively. I was just using that as a term that seems to be the popular term now. So yeah, they’re getting interest from foreign investors from major corporations. Do you have any idea who’s interested in this? Sure.

Jeff Mason  32:26

So I actually just had a conversation for CCI zone podcasts with the head of the architecture firm responsible for a lot of what’s being built and filmed when we talked about part of the strategy. So initially, a lot of the what’s being built is at a price point that’s more for wealthy Tanzanians. And then folks abroad are interested. But they want to use that investment to then build as part of this expansion, much more affordable, much more affordable housing, so that it becomes viable for the local population to buy in. And right, you can’t really actually expand one of these types of projects to to any kind of meaningful scale, if you’re not targeting locals, and making it affordable for locals and creating jobs that are accessible to locals. So obviously, the focus is multifaceted. But they’re very keen on figuring out, you know, what can we do in terms of creating, actually creating, you know, a proper mortgage market, these kind of things doesn’t really exist in a meaningful way. They’re, how can we create the financial tools, also from a construction engineering materials side, but looking at all facets of what can we do to drive drive the price point of housing down, and some of our partners on other city projects have done a really great job elsewhere of figuring out how to do that one of our partners in Malawi called Small Farm cities, they’ve basically been able to drive the house, the price, the price point for new housing down to where someone who’s making a family that’s making 7500 US dollars a month can afford a decent home and actually have a mortgage that they can afford that’s titled it’s it’s it’s it’s it’s Douse them with some property rights, they actually own it. It’s not in formal, like most housing in Africa. So there’s a lot of people working on this question of how do you how do you bring affordability to these projects? And I think that’s because I think it’s important, especially because that’s one of the criticisms and often rightfully so, that gets levied. At a lot of these a lot of these projects, right? There’s just these, you know, glossy shiny renderings and you know, that’s all well and good, but there’s no actuals and a lot of these projects there’s there’s no real viable strategy behind Creating a functional economy that makes sense. And in that location, folks, I think of, you know, a Colin was going to do a city where the currency was going to be a coin. And right, yeah, sure you can have whatever opinions you want about that. At I think it was Senegal, but Right, that’s that’s not what that’s not what the average person in Senegal needs or can really take advantage of. So there’s a real deliberate effort here to try to solve this problem. Yeah,

Gene Tunny  35:34

yeah. That what you mentioned about Malawi is, is interesting. Do you know that off the top of your head, what the name of that development is?

Jeff Mason  35:42

Yeah, so it’s a company called Small Farm city, small farm, and it’s, and it’s run by one of CCI advisors, John Van and Whoville so they have a, their first community was was for about 100 people, and sort of focused on greenhouse agriculture, fish farming, that kind of thing. And now they’re looking to expand. They have, they’re starting construction on development for 1000 plus people adjacent to a new titanium mine that’s opening. And they’re going to continue with some of that greenhouse that agriculture. But they also want to start operating in some of the input industries input sectors that’ll feed into that, that mining business as well, in a way that’s modular and scalable so that they can go from, you know, 1000 100 person starter to this 1000. Person city started that they’re working on to give it 10,000 and higher as they grow. Yeah,

Gene Tunny  36:37

that’s impressive that that unit cost you mentioned for housing. That’s extraordinary. We need that in Australia. I mean, we’ve got a housing crisis. We need it in DC. I mentioned you do. Okay. Although there are a couple other things. Yeah. This Boombah towns fascinating. And Zanzibar is an island. So it’s a, you know, got a storied history. It’s got a really rich history. What currency are they using? Do you know, in Colombia town?

Jeff Mason  37:09

I think just that the Tanzanian shilling raw there, they have a lot of it’s actually a pretty unique jurisdiction for this type of project in that the government of Zanzibar has a pretty significant, not totally but a significant degree of autonomy within the broader union. So in that regard, it’s actually a kind of almost ideal location from from a legal regime point of view to pilot one of these projects. Gotcha.

Gene Tunny  37:34

And what about the tax, right? So if I go, so if I go to a former town, and I, I pay less tax than if I’m elsewhere, on Zanzibar, or elsewhere in Tanzania? So

Jeff Mason  37:47

I think under the current zoning regime, I think it would just be the standard income tax, I don’t think, if I remember correctly, income taxes isn’t part of that. As it currently exists, it’s kind of an industrial park type model. So you would just be paying regular at the moment, regular Zanzibari. And intensity and taxes, Rod, okay.

Gene Tunny  38:09

But there are other benefits that so in your view, there are other benefits that would make this attractive to investors and to people to locate there other than taxes? Yeah, so

Jeff Mason  38:20

Well, I think on on the point about taxes and governance, I think that that’s part of what we’re working on over the last couple of years months is going to the Investment Promotion Authority, and to the government and saying, you know, you have, you know, this this, this, this law that governs Economic Zones, here are some changes that you think could be think could make this much stronger regime, and here’s how it could be paired with the investment that’s being made in from the town. And so things, you know, a starting point could be things like visas, taxes, sort of functions of municipal government, these these sorts of things. And then presumably, over time, you know, if a government, you know, is agreeable, right, that you could scale that up to, you know, other different regulatory domains, that kind of thing. But yeah, taxes for all these projects, things like taxes, local municipal services, visas, business registration, these sort of very bedrock issues are a good place to start for a sort of iterative, legal regime that changes over time

Gene Tunny  39:27

raw. And in your view. You mentioned this before you think that this is a there’s a stable government or there’s a or you can trust the the legal system there because I mean, one of the risks, of course, and you alluded to this before is that, you know, policies can change and, and particularly in if you’ve got foreign investment, and it’s very easy for local demagogues to you know, accuse the foreign investors of exploitation and then we have expert appropriation we have governments taking over the foreign investment. I mean, that’s happened throughout history. It’s just such a it’s it’s a recurring thing. So yeah, but but in your view is this this is a project where that risk is pretty minimal.

Jeff Mason  40:16

Yeah, that’s that’s something that we’re, we’re particularly concerned about. And I think folks in government there can look around in the neighbourhood. Kenya has a number of new city projects, folks may have heard of Tatu city. It’s the flagship projects of Endeavour, which is Africa’s largest urban developer, built on the outskirts of Nairobi. And so there, there’s every other week, they’re making a new invest new announcement about some some new firm that’s, that’s investing there. So I think there’s positive examples in the neighbourhood. To point to as well,

Gene Tunny  40:54

terrific, well, Jeff has been fascinating. I’ve learned a lot. I’m going to look into this small farms, cities and also into the, in the former town, and yeah, learn a bit more about it. Here, particularly how they’re constructing housing. So cheap. I mean, a part of it’s, of course, going to be labour costs, but there’s probably some other things that they’re doing much more efficiently relative to practices elsewhere. So I’m definitely going to look at that. Anything else before we wrap up?

Jeff Mason  41:28

Thanks for having me on. And yeah, I encourage folks to check out and check out these projects. What they’re doing is fascinating. And just to learn more about the sort of broader charter cities in new cities ecosystem, there’s a lot of really dynamic, interesting projects that often fly under the radar that we’re trying to share more about. Today, please take take some time to explore. Absolutely.

Gene Tunny  41:51

And definitely check out shadow cities Institute’s work, I’ll put a link in the show notes, and you’ve got a podcast up Jeff, your charter cities Institute’s got a podcast.

Jeff Mason  42:00

Yeah, we do. Try to we provide weekly, with entrepreneurs, scholars, other folks who are working broadly on issues of city’s economic development, and the like. And also just briefly mentioned, in the last year, we launched a project called the new cities map. So this has every masterplan city in the world built since 1945, mapped with with detailed information about each entry. So if you want to learn more about charter cities and new city projects, that might be a great place for folks to start grind.

Gene Tunny  42:36

I’m gonna have to check that out. That sounds interesting. Yeah, definitely. Because we’ve got, well, one of the big ones in in well, I guess it’s in our region, although it’s still, you know, seven hour or eight hour flight away is in Indonesia. They’re building a new capital city and Oh, I forgot, is it is it on Borneo? Or maybe I got the island wrong. But yeah, building. Yeah,

Jeff Mason  43:00

I think I think you’re right. Yeah, it’s, yeah, that

Gene Tunny  43:03

looks pretty extraordinary. So yeah, I’ll definitely check out the new cities map. Right. Oh, very good. Jeffrey Mason from charter cities institute. Thanks so much for your time. I really enjoyed the conversation. And yeah, I really learned a lot. So yeah, again, thanks and keep up the good work. Thanks, you. Appreciate ya rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics explore.com Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.

44:10

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Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.