Could special economic zones be a win-win for refugees and host countries alike?
In 1980, the Chinese city of Shenzhen was a railroad stop with a population of 30,000. Flash forward 40 years, and it was home to 12 million.
Why such massive growth? The Chinese government declared Shenzhen a “special economic zone” with more-liberal tax and business rules than the rest of the country. Coupled with its proximity to the financial hub of Hong Kong, the special status turned Shenzhen into a global economic powerhouse.
Now, an attorney who has developed special economic zones in over a dozen countries thinks that the model can be applied to the world’s refugee crisis. Calling his proposal Refugee Cities, former World Bank consultant Michael R. Castle Miller imagines a political solution with an economic rationale to solve the desperate plight of refugees, from Syrians crowding boats in the Mediterranean to Central Americans braving a harsh desert border crossing.
The crux of Castle Miller’s proposal — and so far, that’s all it remains — is that more often than not, refugees can work, whether high skilled or low skilled, but their uncertain status in host countries means that they can’t get an appropriate job. Whether the lack of a work permit shunts someone into the informal sector or incompatible education systems lead a PhD holder to drive a taxi, the refugee crisis has created a labour imbalance.
But if a national government were to delineate a refugee city using the legal tools of special economic zones, those migrants could work legally for companies with both an economic and corporate social responsibility incentive to hire them. Then, when the famine, civil war or other unrest subsides, most of the migrants could return home, alleviating the host country of permanent resettlement while generating economic activity.
Citiscope’s Gregory Scruggs spoke with Castle Miller about this idea earlier this year. This interview has been edited for length and clarity.
Gregory Scruggs: Why should leaders apply the “special economic zone” model to the world’s migrant crisis?
Michael R. Castle Miller: It’s the second-best solution. The ideal scenario in my mind is for more nations to welcome more refugees into the formal economies nationwide. But the sad reality is that’s just not going to happen for the vast majority of refugees. Less than 1 percent of refugees are resettled to third countries, and those that flee to neighbouring countries to a conflict are normally confined to camps, where they aren’t given access to formal labour markets, are not legally allowed to work and are not legally allowed to start their own businesses, except in rare circumstances.
So what are we going to do for those people? The U. N. and other refugee advocacy organizations are pursuing things on one front, trying to urge nations to include more refugees into their nationwide economies, and that’s great — we need to keep doing that. But we’re not going to make it, especially with the current political climate. What are we going to do for people now?
Michael R. Castle Miller
So a work programme is a middle-ground solution. Something that is more politically acceptable for countries than either Western countries resettling people or countries of first asylum — like Jordan, Lebanon, Egypt, other places — letting refugees work anywhere in the country. And most economists will tell you that it’s in the countries’ best interest to allow refugees to work.
It also is a politically desirable solution, especially if the refugee city is built in an area where there’s no economic activity happening, or very little. In that case, it counteracts the argument of refugees “stealing” jobs from nationals in the country. You take an area that’s currently unoccupied, where there’s no businesses, and you build a refugee city, and a bunch of investment comes in and starts creating jobs — then you can point to that and say the refugees didn’t steal jobs, they brought those jobs. And they brought them not just for the refugees but for host-country nationals. And of course, the refugees will start their own businesses and employ other refugees and host-country nationals, as well.
Q: What does this actually look like as a practical matter? Will a refugee city resemble the massive encampment in Dadaab, Kenya?
A: You could call places like Dadaab or Mae Sot, on the border of Myanmar and Thailand, refugee cities, but I would prefer not to for my purposes, because these places are a mess. Part of the reason is that the countries that they’re in are not including them in the formal economy. So most of the businesses that operate in places like that are illegal. They’re not licensed there, and therefore those businesses can’t have access to formal sources of financing. They’ve got to go to loan sharks, or reselling aid.
These are all things that people do to respond to their circumstances. Anytime people come up with solutions to address their own problems, it’s a creative activity. And that’s often very good. So what we want to do is create a platform that facilitates good, constructive, creative activity. In other words, it doesn’t relegate it to the black market as the informal economy but allows it to flourish as formal economic activity — so that the businesses are legal, and people are able to access input to production processes legally and employ people legally.
Q: Do you imagine building a new town, like a planned community, but populated by refugees?
A: One model is to have a “quick start” refugee city that would begin with a some basic master planning for the area. We’re thinking of it as a refugee camp but a little bit more city-like. And that would [include] hiring an architecture planning firm to draw up a master plan for an area where they parcel out pieces of the property. They build some basic infrastructure, have a basic road layout. They have some basic utilities, like water, sanitation — which is actually way more than most refugee camps. And then supplying modular homes that are quick and cheap to assemble, and laying them out according to the spatial plan that they’ve developed. Also, setting aside some facilities for businesses to operate in.
That’s a quick option, because that allows you to bring in a whole bunch of refugees really quickly. Then you’d also set up basic institutional structure, where there’d be some type of governing authority over the area and a major service provider. So we’d have the developer, a service provider, as well as security.
Q: In that case you wouldn’t charter your own municipal waste company. Rather, you would try to have all this done by third-party contractors?
A: What I’ve described is the “quick start” project. But then there’s the “best practices” version, which is a bit more like what you have in special economic areas today, especially in big special economic areas in city-like areas. There we do a lot more planning, first to study where the greatest opportunities for a refugee city lie, in terms of delivering the most positive economic impact for the host country, in terms where is going to attract the most investments for businesses to employ people.
And then we would have a concession agreement with the government, which would basically be the government either selling or leasing the land to a development company — maybe under a long-term lease, maybe 40 years. And that would give the developer the right to lease that property and the land to businesses and to residents and begin to make back all its initial development costs.
Q: But you’ve got refugees arriving with just the clothes on their backs. How do you anticipate that they would even be able to afford a nominal rent on these prefab homes?
A: There is still a role for aid, for governments and for donor organizations like the U. N. to be channeling aid money, but it’s under a very different model. It’s under a model that provides a pathway for refugees to become self-sufficient. So you’d have initial cash assistance for refugees that can’t afford to pay rents or can’t afford to pay their water bill or electricity bill. You could still even deliver food to people, and clothing. You could still provide free dental care, just like they do in refugee camps now. Except the alternative is, first of all we have the infrastructure to deliver all the same much more efficiently — for instance, water and sanitation infrastructure. The temporary measures that they use now are much more expensive.
Also, it’s on a model where there are opportunities for refugees to become self-sufficient, so they can gradually earn more and more money for themselves and they can begin paying rent themselves. That way, the developer, rather than basically receiving indirect subsidies from the aid that is being provided by humanitarian organizations, will end up collecting revenue from residents.
But initially the developers’ revenue isn’t just going to come from either the residents or from the aid that channels through them, but it will also be collecting revenue from the businesses that rent properties. In fact, that might be the largest source of its revenue — marketing the area in order to attract, especially early on, major anchor tenants. Major anchor tenants are businesses with a really strong corporate-social-responsibility reputation that can come and employ large numbers of people.
Q: What kind of businesses do you think would benefit from employing presumably low-wage unskilled labour?
A: First of all, that’s one of the things that’s different about refugees from most migrants: A lot of refugees have very significant skills. When a conflict happens, it drives out a huge cross-section of the country, from high-skilled people to low-skilled people. So there probably will be a lot of high-skilled people that are there available to be employed.
But even if not, or we can’t attract the type of employers that would employ them, there’s still huge markets out there for low-skilled labour, too. In places like northern Africa and the Middle East, they’re importing construction materials, for instance, from places like Europe and other places. Garment manufacturing has become the classic example of an industry that is able to employ large numbers of low-skilled workers.
That’s really where the feasibility studies come into play, because the ultimate answer to your question is going to depend heavily on the particular context. What is the labour market like of the refugees and the-host country nationals living in the area? What are their skills levels, or what have they done in the past? Are you located near a port, or how far is it from a major consumption market like Europe?
Q: Do you anticipate building refugee cities along the lines of a Shenzhen that is just over the border with a financial capital like a Hong Kong?
A: When we’re looking at the best opportunities for a refugee city, it’s the same thing with special economics zones: It’s always best to have it located near existing economic activity. The more economic activity, the better. Another factor is near existing infrastructure access, especially when you think about major ports, seaports, major airports and other transportation connections. It’s not necessarily crucial for the success of a refugee city, but it certainly helps.
Q: Are you concerned that planning for a refugee city’s permanence could undercut the quality of the city to begin with?
A: For a lot of the Middle East and North Africa, there’s a need for new cities in these areas, for new urban space. So worst-case scenario is the refugee city gets built, there’s a lot of money invested in the infrastructure and buildings, and a lot of the refugees end up going back home when the conflict ends. In that case, the city is getting a whole bunch of great, high-quality infrastructure and buildings for free, or whatever they negotiated with the developer. Worst-case scenario, they’ve got a new city.