Shanker Singham, whose entire career has been related to enabling transitions away from command economies towards open markets economies, developed a model in 2014 for tackling some of the primary barriers for free enterprise and its wealth creation potential to take hold in the underdeveloped world.

This concept is known as the Enterprise City or Prosperity Zone.

The motivation for creating Enterprise Cities (E-Cities) is to alleviate poverty in the developing sector, although there are also applications of this approach in the developed world. (See attached box.)

The broader context for the promotion of Enterprise Cities is the modern mega-trend of urbanization through mass-migration out of rural areas. Cities, and in particular, new cities could be an opportunity for addressing poverty, but not without diagnosing the legal and other impediments which dominate these nations.

E-Cities: A Way Out

In examination of the commonplace regulatory and legal frameworks, what dominates are protections of politically favoured local business interests (“crony capitalism”).

Government leaders and their politically allied crony business interests impose anticompetitive market distortions, usually to damage the ability of new entrants to succeed. Such stifling of competition within the border rewards these powerful internal vested interests, while discouraging outside investment thereby inhibiting internal innovation. Consumers, who are supposed to benefit from economic development, suffer as a result of these corrupt systems.

The creation of special zones for circumventing such corrupt practices becomes a clear path for demonstrating the effectiveness of liberalized trade, competition within the borders, and property rights protection. (The Three Pillars of Economic Development.) Thus, when sweeping large-scale political-economic reforms liberalising nations’ economies is not feasible, there is a pathway circumventing those problems on a small scale.

Furthermore, there are multiple benefits to the host country and its people for establishing such a zone. 

This includes the potential for local entrepreneurs to launch establishments such as restaurants, and other service-sector businesses. The local population will benefit from increased job opportunities, and the local economy will see multiple positive spin-off profits.

The host nation as a whole would also benefit through improvements in infrastructure which spill over to the host country, and steady tax revenue stream for the host.

Shanker Singham’s Role

The Competere Foundation’s President, Shanker Singham, has been in the forefront of negotiating such zones, and has also pioneered the concepts and policy framework for the successful adoption of this approach.

In 2014-2015, Shanker led the “Competitiveness and Enterprise Development Project” of Babson Global, where he promoted Enterprise Cities and negotiated MOUs for the establishment of such cities around the world.

At the same time, Shanker’s entire career led him inexorably to the realisation that this was the only way that development could be carried forward in developing countries where the political forces are too strong to be countervailed.

In the 1990s, Shanker worked on the privatisation of the UK electricity market, the transition of the Soviet, Central and Eastern European economies and the Apertura in Latin America. He has worked on the accession of Poland and Hungary to the EU, the WTO accessions of a number of countries, including China and Russia. He built the Latin American trade practice of Steel Hector & Davis in Miami and led the market access/WTO practices of Steel Hector & Davis in Miami, and Squire Patton Boggs in Washington, DC.

Steps for Setting Up E-Cities

The first step in establishing such a city would be the agreement of the national government, recognizing their own limitations, to create an autonomous zone where existing laws and regulations could be refined to be more pro-competitive. The government can choose how extensive this refinement can be, although it should be noted that the less a government is prepared to do, the less economic activity will be generated.

A combination of developers, investors, experts and landowners would come together to develop these e-cities. There are general principles for the preliminary negotiations, however each E-City would not be identical as local conditions would vary. The general principles would include adopting competition-based regulation, strong property-rights protections, including for intellectual property and other laws which would prohibit favoritism and foster competition, including international competition through open trade regimes. Foreign direct investment must be protected in order to create a stable investment environment to attract these interests to invest in the zone. An agreed dispute settlement mechanism involving arbitration would be used to ensure compliance.

Why would such a nation be interested in setting up such a zone?

First, these vested interests would not feel threatened since the market- distortions which guarantee their profits will not be impacted elsewhere. There will be a substantial revenue stream between the zone and the host nation, and that will benefit all.

What are the pre-requisites for getting such an E-City up and running?

Shanker Singham has identified conditions for success. 1)  A committed developer 2) Land that can be used for the project 3) The necessary infrastructure connecting the E-City to the hosting country 4) a government that recognizes the benefits to its reform agenda and to its own economic plan of such a designation of regulatory autonomy and is willing to confront its own challenges by thinking “outside the box.”

Finally, the success of an E-City would provide a proven track-record for any domestic political interest to successfully wage the fight to apply such liberal measures throughout the nation.

In conclusion, if we can succeed in establishing such this stable, business and trade friendly environment – the Enterprise City, we can bring together the tremendous need for this investment in the developing sector and the potential for significant rates of profit, with the vast amounts of available investment capital seeking out such opportunities.

The Competere Foundation is seeking collaboration for the realization of this vision for Enterprise Cities. Any interested parties should contact the Foundation for collaboration in this project.