Free Private Cities – the final development of SEZs?

In the 1960s there were only a handful free zones, which we call today Special Economic Zones (SEZs). Thereof, the former Shannon Airport in Ireland is probably the best known. Today it is assumed that there are over 4500 SEZs in the world. Despite the fact that not all of them are really operative, this is an impressive number. There’s obviously a trend towards areas with a regulation different from the home country. One could also argue, that each SEZ is a confession of the state, that its laws are obviously not ideal, at least not for businesses.

Today, successful SEZs are not only trying to attract businesses, but also qualified individuals. And there’s another trend emerging. The Dubai International financial Centre was the first SEZ to have their own court system, based on their own legislation. The idea was to create confidence for investors and it worked. The SEZ Abu Dhabi Global Markets followed and today several countries are adopting this model, amongst others Kazakhstan, Azerbaijan and Georgia. If this development continues, the final evolution of SEZs could be so-called Free Private Cities. Here’s why:

According to polls in Western countries, 80 per cent of citizens are dissatisfied with how they are governed, no matter who is in charge. More and more people feel that aside from casting their vote every few years, they don’t have a say in what is going on – or what their tax money is spent on.

The global tax burden is growing, while simultaneously the services tax pays for are perceived as insufficient – be it security, education or infrastructure. Citizens in allegedly free societies are afraid to speak out on controversial issues, the number of which is growing daily. A wrong opinion can damage your career. As if that wasn’t enough, laws (and thereby the social contract) are changed constantly.

Unforeseeable changes in regulation make it difficult for businesses and individuals alike to plan for the long term. What is allowed today may be forbidden tomorrow.

Can we create a different relationship with the state for individuals and groups that is safer, freer, functions better, delivers the best services and brings prosperity?

The answer is yes. In truth, government is a service like any other. We expect something from it, especially the protection of life, liberty and property, and we are willing to pay in exchange. And if the service provider gets involved in other activities that we have not mandated and then expects us to pay for it, this is a cause for dissatisfaction.

In most countries the relationship of the citizen to the government resembles the car purchasing process. However, the car dealer insists that he will choose the model, the colour, the size of the motor and the price you have to pay. And you must buy. Not really an attractive deal, is it?

In contrast, imagine a system in which the government, as a private company, offers you protection of life, liberty and property. This service is clearly defined and includes security, a legal and regulatory framework, and independent dispute resolution. You pay a contractually fixed amount per year for these services, so there is a real social contract, not a fictional one. You take care of everything else yourself, but you can also do as you please, limited only by the rights of others and the contractually agreed rules of coexistence.

Furthermore, this “government service provider” as the operator of the community cannot unilaterally change this “citizen’s contract” with you at a later date. Disputes between you as “contract citizen” and the government service provider will be heard before own independent arbitration tribunals, as is customary in international commercial law.

Further development of the agreed regulations is carried out by judicial case law, the success of which has been evidenced in common-law jurisdictions for centuries. If the operator ignores the arbitral awards or abuses their power in any other way, customers leave and the operator goes bankrupt. It has its own economic risk and therefore an incentive to treat customers well, in accordance with the contract. This model is called a Free Private City.

Most people want to make their own choices. Most people prefer privacy over mass surveillance. Most people do not want to pay for things they have not ordered. Most people do not want to be subjugated under regulations and agreements they have not given consent to. Most people want to have the right to be left alone if they do no harm to others. Free Private Cities respect these wishes.

That is why they will exist. Because eventually, people will go where they are treated best.

Titus Gebel is a German entrepreneur with a PhD in international law and an extensive worldwide network. He founded Frankfurt-listed mining company Deutsche Rohstoff AG, among others. In 2015, he retired as CEO to focus on Free Private Cities with the aim of creating an entirely new product in the “market of living together”. Titus has written a book, Free Private Cities – Making Governments Compete For You, where he states the theoretical and practical groundwork. He recently became co-founder and CEO of FEMAC Ltd., which is giving professional support for the SEZ industry.

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