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Private Cities: A Critical Look

Private Cities: A Critical Look
Imagine a system in which a private company as a “government service provider” offers you protection of life, liberty and property.

This service includes internal and external security, a legal and regulatory framework, and independent dispute resolution. You pay a fixed fee per contract for these services per year. The government service provider, as the operator of the community, cannot unilaterally change this “citizen contract” with you later.

As a “citizen contract”, you have a legal claim for performance and a claim for damages in case of poor performance. You take care of everything else yourself but you can also do whatever you want, limited only by the rights of others and the other moderate rules of living together. This includes teaming up with others for all kinds of purposes.

Disputes between you and the government service provider are heard in independent arbitration tribunals, as is customary in international commercial law. If the operator ignores the arbitration awards or otherwise abuses its power, its customers leave and it declares bankruptcy. It therefore has an economic risk and therefore an incentive to treat its customers well and in accordance with the contract.

In this article I offer a critical look at three of them: Eko Atlantic in Nigeria, Lavasa in India, and King Abdullah Economic City in Saudi Arabia, as well as a discussion of the Employment and Economic Development Zones (EEDZs) in Honduras.

From understanding these cases, lessons can be drawn for future private cities.

Lavasa, India

Lavasa is a private and planned city built near Pune. It is stylistically based on the Italian city of Portofino , with a street and several buildings named after that city.

A 25,000 acre (100 km2 ) or 8,000 acre (32 km2 ) project being developed by HCC , this still incomplete city has been controversial for multiple reasons.

In late 2010, India’s Ministry of Forests and Environment ordered a halt to construction because the project violated environmental laws. In late 2011, this order was rescinded. However, the scale of the project may have been reduced and an IPO may not have taken place.

Lavasa has established a pattern of promoting planned partnerships with prestigious foreign institutions that ultimately do not materialize. The University of Oxford at one point partnered with the project, but other branding plans involving future sports facilities have not yet been officially canceled.

Lavasa has won several awards for its plans and designs. In 2005, Lavasa’s village of Dasve won awards from the New Urbanism Congress and the American Society of Landscape Architects. In 2009, the St. Louis chapter of the American Society of Landscape Architects recognized Lavasa’s master landscape plan with an award of merit.

Eko Atlantic, Nigeria

Eko Atlantic City or African Dubai is the name of the luxury mega-project that the construction company South Energyx Ltd and the state government of Lagos have in their hands to turn the Nigerian island of Victoria into a future city for billionaires. With 10 kilometers of land, tons of sand have been extracted from the Atlantic Ocean to receive 250,000 residents and satisfy the financial, commercial, residential, and tourist accommodation needs of this new elite metropolis.
This urban development has a positive environmental impact since one of the objectives is to stop the erosion of the Lagos coast due to flooding and climate change.
However, many local residents are already criticizing the consequences. The project has caused flooding, knocked down power poles, and forced residents to relocate.

King Abdullah Economic City, Saudi Arabia

The most promising private city is the King Abdullah Economic City in Saudi Arabia, which CNBC defined as “the first city to be publicly quoted on the stock exchange”. Saudi Arabia understands that creating a new city is more than just a big construction project. Attracting entrepreneurs requires offering them a fair and transparent legal system, and this is where King Abdullah Economic City shows real potential.

A “business-friendly environment” is one of the pillars on which Saudi Arabia is building the city. King Abdullah Economic City will have a “business-friendly regulatory environment that will be competitive with other free zones around the globe.

ZEDE, Honduras

Although not as advanced as the projects mentioned above, the ZEDE in Honduras has great potential. Regions in Honduras can disengage from the country’s civil and commercial laws and import legal and administrative systems of their choice. These will allow them to follow the mechanisms already proven to stimulate economic growth as in Hong Kong and Singapore.

If a private city is to succeed, it must be better than the existing alternatives. One way to do this is to provide better public services. But providing property rights, the rule of law, and encouraging entrepreneurship will attract even more investment.

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