Honduras envisions building a Caribbean 'Hong Kong'

A poor Central American country, Honduras, is pondering creating a new semi-independent 'charter city' that would play by different rules and become an engine for economic growth.

Picture this: a nearly independent city-state – a Hong Kong in one of the Western Hemisphere’s poorest countries.

Sound far-fetched? Maybe so, but one country has high hopes for a changing urban future.

According to the Economist, Honduras wants to outsource development of a new city. The idea is to create a ‘charter city:’ a semi-autonomous zone with everything from governance to a separate currency managed independently and overseen by experts outside of the Honduran government.

But Honduras faces the question of whether a ‘clean slate’ of separate rules and management can spur economic growth that has been largely elusive in the region.

The political wheels are rolling, but the road to a charter city is long and uncertain.

The national legislature recently legalized the creation of “special development regions,” although the ensuing steps are taking longer than anticipated. In December, Honduran President Porfirio Lobo began appointing a "transparency commission" to oversee the project, despite mixed opinions of the initiative held by other government officials.

Yet charter city supporters remain enthusiastic about the steps taken so far and optimistic about the direction of the project.

According to Paul Romer, an economics professor at New York University who proposed the concept, charter cities represent a “new type of special reform zone,” building on the idea of a special economic zone by “increasing its size and expanding the scope of its reforms.” His idea is to create internal start-ups, akin to the way that businesses often set up new divisions free to operate outside of old rules. Mr. Romer believes that the clean slate will allow government authorities to experiment with laws and governance.

“What types of mechanisms will allow developing countries to copy the rules that work well in the rest of the world?” he asked The Economist.

And people in developing countries like Honduras, Mr. Romer says, will respond to the initiative by embracing opportunities in charter cities. “The worldʼs poor know that better rules prevail elsewhere,” he says, citing the Gallup report that 630 million people would like to move permanently to another country.

Charter cities, Romer claims, should also be of interest to rich countries, such as the United States, struggling with illegal immigration, as they offer an alternative to residents of poorer countries seeking to migrate.

“The new entity’s open door gives the huddled masses an alternative," Romer told The Economist. "Instead of risking their lives on perilous journeys to cross borders illegally, they can move legally to a charter city.”

But many do not agree with Romer’s plan for building cities from scratch in the world’s poorest nations and outsourcing their design and government to rich countries. Duncan Green of Oxfam has been critical of Romer’s idea for several years, and writes that “the underlying motive seems to be to liberate development from the supposedly dead hand of dysfunctional and corrupt states, transferring it instead into the hands of benign and honest technocrats” in Honduras.

As Green points out, the Trujillo charter city proposal is incomplete at best. Even with significant outside investment and oversight, charter cities would likely suck talent and resources away from their surrounding nation-states. And even with private security forces protecting the land of new development and investment, the presence of a wealthy, employment-generating city could create huge slums outside its borders.

The allure of a Central American Hong Kong may sound appealing to some, but officials must address many questions. After all, Hong Kong was a longtime colonial outpost before becoming a semi-autonomous economic zone. Is that really what Honduras wants? Or can Trujillo skip the colonial stage?

Honduran officials have a long road ahead to bring change to the Caribbean coast. But Mr. Romer’s vision has people talking. And for Honduras, it may just have a promising direction in store.

• This article originally appeared at Global Envision, a blog published by Mercy Corps.