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What
I’m not talking about the usual sort of charter cities (a roughly legal, constitutional term), but rather Stanford economist Paul Romer’s conception of a charter city.

I first bumped into it on a TED video, and eventually grew into it. The concept is simple, as explained by the FAQs:

The two prerequisites for a charter city are uninhabited land and a charter granted and enforced by an existing government or collection of governments. With the right rules, a city will naturally grow as residents arrive, employers start firms, and investors build infrastructure and buildings.

Why
The broad reasons why Malaysia needs charter cities is that we are at a policy nadir. There is significant political inertia to adopt good policies that work better (things like good and low regulation, non-discrimination, a hard currency, free trade and freer immigration). All these will be compounded, not minimize, as Malaysia gets more “democratic” and divided politically – UMNO has to go back to the base and rally support, while Malaysia’s authoritarianism means there is little incentive for the rise of centrists in government.

The de facto unitary nature of Malaysia further compounds this problem. We have states without meaningful power, and local governments subservient to the federal and state governments, rather the local populations. Not only this means policy is less responsive to local issues, there is very limited policy competition. Charter cities provide this opportunity to experiment with policy, administrative and planning ideas – things like public transport and pedestrian-centric urban development, instead of the sprawl-prone, car-centric cities Malaysia has.

The second broad reason is the urban concentration in Malaysia is situated in Klang Valley – the primate city of Malaysia. The reason this happen was simply because post-independence industrialization and trade policy focused heavily on this region – other regions, with little autonomy, could hardly compete. Charter cities in Malaya’s east coast and in Borneo will even out the development inbalances, benefiting the hinterland in those regions.

How (i.e. feasibility)
Malaysia already has experience in charter cities. The Straits Settlements of Penang and Singapore were developed that way – the colonial version of the charter city. In Selangor, Kuala Lumpur was started when the Sultan gave tin mining and settlement rights to the Chinese – the frontier city of Kuala Lumpur, developed by the Chinese kapitans, soon grew rapidly into Selangor’s largest city, and eventually, its capital. In Sarawak, Kuching and other older Sarawakian towns grew rapidly under the White Rajah rule, as the Brook family took over large swathes of land from a inefficient and disinterested Brunei sultanate.

A charter city today will work for the same reason why hinterland-less Singapore became Southeast Asia’s richest country (on a per capita basis): good governance and free trade. This is a given because a charter city has to compete to survive: if they cannot attract workers, traders and investors, it would go bust. Therefore they will have the incentive to pursue policies that may not be populist (like free trade and immigration) but essential for economic growth and vibrancy. Furthermore, starting out with a low population and little built environment gives policymakers a chance to experiment.

Where
For a good chance to succeed, I’d say somewhere accessible to the sea (so it wouldn’t be dependent on other cities to trade with the rest of the world). I’d say the size of a charter city should be around the same as Malacca (which is slightly larger than New York City).

The key part of it is that there should be minimal existing human settlement under the charter city. When the British took over Singapore and Hong Kong, the local settlement was a bunch of villages. Seeing this hitch, I’d say the three most feasible states are Pahang, Sabah and Sarawak. My personal preference is for the Rajang delta region (I have a romantic perception of the Netherlands). It is sparsely inhabited by aborigines. Its potentially fertile ground, making early settlement easier. And it is downriver from Sibu and Sarikei, making such a city a viable, local entrepôt. Such a region, with abundant freshwater, will be less dependent on neighbouring states for basic utilities.

When
I predict, due to the low economic liberty and poor governance in Malaysia, growth will be rapid. Many of the world’s major cities have grown rapidly (Kuala Lumpur, Singapore, Los Angeles, Chicago and New York comes to mind) for good reason. Such cities grew rapidly to fill a gap where existing cities either did not exist or poorly fit the bill. Beyond economic competition, in the east coast and Borneo, such a gap (a strong economic centre) remains.

P.S. I’m not opposed to a socialistic charter city. In fact, it will set it up for an interesting policy competition – one I expect a liberal charter city to win.

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