More than a million refugees have already left Ukraine, and this number could easily double. He says happy In this column , Thibaut Cerle has the concept of a refugee city that can help these people, he explains, seeing more than the mouth they need to be fed. Can these cities help refugees escape? Yes, he said, if he succeeds...

Photo credit: UN Women in Europe and Central Asia – Flickr | DC BY NC 2.0

Can special economic zones help Ukrainian refugees?

Tibo Searle

More than one million refugees have already left Ukraine . Experts warn that number could double if the conflict escalates further. Fortunately, there is a refugee city concept that can help people fleeing conflict.

The idea is to first create a special economic zone (SEZ) near the refugee camp. To facilitate SEZ trading, tax incentives, less restrictive labor laws, exchange control exemptions, etc. will have incentives such as. The aim would be to encourage businesses to hire refugees and stimulate economic growth through more economic freedoms.

The most famous advocate for refugee cities is Dr. , a respected SEZ legal advisor who helped create many of the most famous SEZ structures in the world. Michael Castle is a miller. He is the director of the Refugee Cities Foundation, which originated the concept.

International support for refugee cities is increasing. The World Bank has launched a $2 billion fund to help refugee countries. The new European think tank Solidarity Cities is also working to strengthen individual cities and offer incentives for companies that employ refugees.

There are a number of world-famous success stories, such as the Kigali Free Zone in Rwanda or Shenzhen in China , where special economic zones have been used to promote economic freedom and have achieved incredible results.

However, it is important to note that future government support may augment the central planning effort by destroying the basic principles of economic freedom necessary for such a project to succeed. The third SEZs which are not financed by the State are already functioning well. According to a 2008 study by the International Labor Organization and the World Bank , more than half of global production is produced in SEZs. The same study found that privately run private zones had fewer vacancies, were less corrupt and were more efficient.

For example, the Jordanian government has already set up a special economic zone to create jobs for Syrian refugees . The program has received significant support from the international community, with financial institutions contributing more than $1.7 billion. The Jordanian government announced in 2016 that it expected the SEZ to create jobs for 200,000 refugees by 2021; but only 80,000 jobs will be created by 2022. That's still more than 80,000 more than it otherwise would have been.

However, critics argue that infrastructure in refugee areas is generally weak, incentives don't go far enough, and areas without adequate job training programs can only function as low-wage camps. A reviewer said:

Even when job fairs were announced, few Syrians took on this role. Part of the problem is that the jobs available in these industrial parks are often in the garment and related industries, typically low-skilled, low-paying jobs that employ women. Many Syrians do not want this work: they prefer to work in the informal sector, where they are paid and enjoy better conditions.

The problem does not seem to be with the concept, but with the general level and nature of investment in Jordan itself and the “institutional” reasons why it is so limited.

Although not yet officially launched, Ethiopia is considering a similar program.

Refugee towns can help Ukrainians... if done right

With better institutional support: more secure property rights, more effective contract laws, etc. freeing them to help themselves.

SEZs also have a major geopolitical advantage for refugees: neutral states that do not want to side, such as Switzerland, can create them without fear of violating their neutrality.

In order not to repeat Jordan's mistakes in trying to create an SEZ for Syrian refugees, they must ensure:

• Refugee/SEZ towns have adequate infrastructure
• Employers use strong incentives (tax breaks, labor law exemptions, etc.)
• There is adequate coordination with global development finance institutions (World Bank, UNHCR and ERDC).
• Emphasis was on creative work in the private sector rather than government-led growth
• Are refugees able to return to Ukraine after the war?

The problem with previous attempts to create special economic zones or cities for refugees is that they have not promoted economic freedom. If refugee cities strengthen their freedoms instead of violating the freedoms of investors and refugees, they will thrive. More government money is likely to backfire, and these projects will have worse consequences for the people they are trying to help.

The SEZ only needs to do three things to improve its economy, increase freedom, and better support long-term refugees:

1. It is funded and operated entirely at its own expense
2. Market-acquired land that has not been confiscated as a result of privatization of land from informal owners
3. If the situation is not conducive to the development of certain areas, it fails

Areas that follow these three rules will succeed or fail depending on whether there is market demand for what entrepreneurs can deliver. They won't be bloated state-funded giants that survive year after year despite high vacancy rates. Only when the zones are truly subject to market forces will they begin to do what they must and quietly promote freedom.

I hope there will be peace in Ukraine soon. But if the war continues, it is hoped that the refugee towns can help alleviate some of the human suffering in that direction.

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Thibaut Cerle is Director of Research at Adrianople Group , a business intelligence firm focused on special economic zones and developed cities. He is also the architect of the Open Zone Map , the largest SEZ database in the world. He is an advisor to Pronomos , a venture capital fund that invests in new urban projects, and a co-founder of the Startup Society Network , the chartered city's think tank. He often writes about the SEZ, economic history, and the open data movement.

A version of this story was previously published in the Economic Education Foundation .

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