28 July 2016

“Start-up cities” for refugees: a long-term solution to the migration crisis?


Much has been written about how to deal with the current refugee and migration crisis, but an actual comprehensive solution hasn’t been provided. According to some estimates, one year ago, there were around 60 million refugees in the world. In 2015, around one million of these 60 million entered Europe by sea, which already caused a massive political crisis. Even those who’re keen to allow more migration should realise that even tripling the numbers allowed in last year would only provide solace to a tiny part of those in need. There is a more structural and comprehensive solution however. It combines the idea of “start-up cities” with simple historical precedents: to create a new city, very similar to Hong Kong, to welcome refugees.

The example of Hong Kong

What was Hong Kong other than a city governed by Western officials and populated largely by refugees from Maoist China? If it was possible for the British to provide a safe home for millions of people on the run in much more challenging times, why wouldn’t it be possible for the whole of the developed world – not just Western countries – to give any refugee the most precious thing the developed world can offer them: the protection of the rule of law, which has propelled the US, Canada, Europe, Japan, and parts of East and Southeast Asia to the levels of wealth they enjoy today.

I propose to create what I call “free havens”, which really are newly created cities, governed by officials from countries with a high level of rule of law, and where any refugee could go to. This idea is very similar to the concept of “startup cities” or “private cities”, whereby cities would be created by private investors from scratch in a bid to create a much nicer place to live than in existing cities and to provide a more beneficial investment climate by offering a much stronger protection of property rights than elsewhere. A territory should be rented from a state, similar to how the British leased Hong Kong from China for 100 years, but this time a fair price should obviously be paid to the landlord.


Where would this be located? It could be anywhere really where nobody lives, given that only around three percent of the world is urbanised. A similar proposal was made by Egyptian businessman Naguib Sawiris, one of the richest men in Africa, who has offered to buy an island off Italy or Greece in order to rehouse hundreds of thousands of refugees. He has identified 23 uninhabited islands which could buy to host refugees, but the Greek government wasn’t interested. Other alternatives would be to create it inside Syria or Libya after liberating an area from terrorist groups. Perhaps an offshore territory owned by Britain or France could be suitable, for example one of the two areas in Cyprus which currently host British military bases. If no state would agree, a more ambitious variety of the plan could be to locate these cities on newly created islands.

Politically unrealistic?

Does this proposal sound politically unrealistic? Less than one would think. A similar campaign to create a “refugee nation” was started by American entrepreneur Jason Buzi, and many other prominent people have endorsed the idea, including Bob Pleysier, who headed the Belgian government’s asylum department for a long time and knows the ins and outs of the problem. The more people realise this challenge can’t be dealt with by tampering in the margins, the more they are warming to the idea.

Both in Australia in 2013 and in Europe in 2016, the so-called “Australian solution” of border control was implemented when the pressure on the external border really became too massive.

This solution involves telling anyone who tries to enter illegally to await their asylum application in refugee shelters near the border or off-shore, so they no longer have a terrible incentive to risk their lives but still retain the right to apply for asylum.

In Australia, this effectively brought down the recorded number of people drowning in Australian waters to near-zero from at least 1000 in the 13 years before . To realise this, Australia created off-shore shelters in Papua New Guinea.

In March 2016, Europe’s politicians decided to try a whole new approach in Greece, in desperation to avoid another Summer of discontent, following a strong increase in the popularity of right wing populists across Europe. Since then, only five people would have died in trying to make it from Turkey to Greece, a sharp decrease from the 805 who died last year in Greek-Turkish waters. This coincided with a sharp 95% drop in asylum seekers arriving in Greece from Turkey.

In implementing something like the “Australian” approach, Greece prevented asylum seekers from continuing their journey from the Greek islands close to Turkey to mainland Greece, while before they could make it to Greece’s mainland and then on to the Balkan and Germany very easily. However, despite the success of cutting the number of deaths-at-sea, just as in Australia’s case, the conditions in Greece’s so-called “hot spots”, where people are detained, are very troubling. The same must be said of Australia’s off-shore shelters.

Apart from this EU-induced policy change in Greece, two other major factors contributed to a sharp drop in drownings between Turkey and Greece. Firstly, there was the closure of the so-called “Balkan route”, with countries from Austria all the way to Macedonia implementing border controls, thereby preventing asylum seekers from making it to Germany and Sweden, where many desire to go. Secondly, there was the “EU-Turkey deal”, whereby Turkey promised to crack down on human smugglers and accept to “take back” both irregular migrants and asylum seekers, with Greece declaring Turkey a “safe country” so this would be legally possible. The implementation has been fraught with problems, but both factors did disincentive people from risking their lives.

How different this is from the situation in the water between Libya and Italy, where an increasing number of people are trying to make the risky journey, with many drowning as a result. There, on the “Central Mediterranean Route”, almost 2.900 refugees died in 2015 and already 2.606 in the first half of 2016 alone.

So far, coordinated military actions to save the lives of those trying to make it and combat human smugglers have largely failed to stop human smuggling. More problematically, they have served to convince more people to risk their lives at sea. A well-intended operation to save lives is seen by many as a ferry for migrants keen to cross the Mediterranean. The House of Lords has acknowledged there is some validity in claims that these operations “act as a magnet to migrants and ease the task of smugglers”. Also the Libyan coastguard explicitly warned, to no avail, that the EU’s “Operation Sophia” boosts migrant smuggling, explaining that “people, when they get rescued, call their friends to tell them that there are EU vessels only 20 miles from Libyan waters to save them.”

To have a deal with chaos-ridden Libya is much harder still than it is with Turkey, so eventually also Italy will be forced to consider what Greece has done: to tell those applying for asylum that they need to await their asylum claim somewhere.

If the EU created more temporary refugee shelters where asylum seekers are told to await their asylum claim, the pressure to provide decent standards would increase. Some people will be granted asylum, but others won’t. If the numbers remain as big as they are today, these kind of temporary refugee shelters may be overwhelmed and people may be forced to stay there for longer periods.

According to a top UN official, Europe must prepare for the arrival of millions more refugees from the Middle East and Africa as “young people all have cellphones and they can see what’s happening in other parts of the world, and that acts as a magnet.”

Given the pressure which can be expected in the new few decades, with Africa’s population expected to more than double in 40 years, creating an actual city with law enforcement will then seem much less like an overambitious, costly plan than welcoming lots and lots of people in dodgy off-shore shelters where they have no prospects. Hence, events on the ground may drive policy makers to this solution.

What would such a “startup city” for refugees look like?

Would companies invest in such a “startup city” for refugees? Certainly. When facing the choice between Ethiopia, Pakistan, or a place run by countries with a high level of rule of law, the likes of Ikea, Nestle, Coca Cola or Apple might consider moving production capacity over there.

When wondering how to run such a place most efficiently, Hong Kong springs to mind. Sir John James Cowperthwaite was the British civil servant who acted as Financial Secretary of Hong Kong after World War II. He’s considered the architect of its economic success. Having watched Chinese refugees arriving, he concluded they seemed to be getting along fine if left to themselves, so he made it the crux of his policy for the government not to do much to help refugees, beyond giving them freedom, security, the rule of law and a hard currency. His administration did provide public housing, but not much more. This policy of positive non-interventionism has been extremely successful despite later developments of more intervention. That some Chinese capital had moved to Hong Kong did play a role in the Crown colony’s success, but the fact that the Chinese border was closed meant the city experienced an economic miracle in the decades following World War II against all odds. The Economist described it in 1977 as follows: “A businessman setting up shop in Hong Kong finds low taxes, no foolish government interferences…a government leaning over to encourage him to make as much money as he can. He finds, blessed discovery, no politics.”

Crucial for the success of the development of Hong Kong was of course the fact that it could rely on British rule of law. This is also what proponents of “startup cities” want: to enable people living in corrupt jurisdictions to somehow enjoy the benefits of a higher quality of legal protection.

One example is a project to develop so-called “LEAP-zones”, something which Honduras allowed, under the name “ZEDE”. These are semi-autonomous zones on the territory of a certain state, with distinct legal, economic, administrative, and political (LEAP) protection for job creators. There, investors can count on the protection of US rule of law, which makes the project different from more traditional schemes to boost investment through reduced regulations or lower tax rates. The LEAP-zone project in Honduras may however not be a roaring success yet, given reports that it seems to be struggling with disputes over who owns the land identified for it.

This is reminiscent of prominent development economist Paul Romer’s project to develop a foreign-run “charter city” in Madagasca, opening up the hub both to migrants from nearby countries as well as to locals. Regretfully, the project collapsed in 2009 after the country experienced a coup, apparently partly triggered due to anger towards projects like this which were denounced as treason.

The lesson of these two experiments is obvious: such projects can only work if they are being developed on land which isn’t claimed by anyone and if they enjoy the same level of rock-solid independence from foreign intervention of Hong Kong.

Who would take the lead?

The European Union may not be perfect, but it does has some experience with “rule of law”-missions. Part of its EULEX-mission in Kosovo was to administer justice in the most delicate sectors over there. There have been major problems with the implementation, but at least Kosovo has known some kind of stability. Either way a crucial difference between free havens and the mission in Kosovo or historical Western “colonies” would be that anyone moving to such a place would do so voluntarily.

Of course, it’s clear that if the whole thing would be a private venture, things may be run much more efficiently, given that it’s not weak taxpayers but assertive shareholders of companies keen to see return on their investment that would be monitoring the project. Still, as Paul Romer’s experience in Madagascar teaches us: this is such a massive project that recognition by State actors in any way or another will be vital for its success.

What about the cost?

The Belgian State’s police and justice system costs around 3 billion euro per year, to serve 11 million people. Obviously a lot more would be needed to provide basic infrastructure, but to find funding, the EU’s 130 billion euro budget could be used. Anyone dealing with it knows massive spending improvements could be made. More than 270 billion euros are still being transferred to the already plentiful pockets of agricultural landowners, including the Queen of England, between 2014 and 2020. With Brexit, a major reform of the EU Budget is needed and given how the EU’s agricultural policies have been hurting developing countries for decades, it wouldn’t be such a bad idea to start looking there.

In any case, the refugee crisis has so far proven to impose a very high cost anyway. Germany’s IFO institute has estimated the cost for Germany to be about 20 billion euro per year, although many other economists have claimed that to the extent these people can be integrated they’ll prove an economic boost.

Why would such a “Free haven” offer standards of justice and safety that are sufficiently high to make such a project succeed, so people would actually voluntarily want to go there, and companies would actually want to invest, thereby freeing up the resources needed to compensate the host State to actually allow such a Free haven to exist on its territory?

The answer is simple: For this project to be a success, it needs to become more safe than the most unsafe place in the world and its investment climate should beat the most horrible place on earth to do business, to attract those fellow human beings who actually have to survive there at the moment. Surely that shouldn’t be too much of a challenge. Would it really be so hard to do better than North Korea, Syria or Congo? Either way, the modest solutions have failed.

Pieter Cleppe represents independent think tank Open Europe in Brussels, and is writing here in a personal capacity,