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Last time, I wrote about the design ideals of utopian cities. This time, I looked into the business model and factors that contributed to the success of some of the newer cities of the world, namely, ones that were built in special economic zones.
Special economic zone (SEZ) — an area in which the business and trade laws are different from the rest of the country, intended to function as zones of rapid economic growth by using tax and business incentives to attract foreign investment and technology.
The cities of Dubai and Shenzhen have become such household names that we often don't realize that these cities as we know today only came into existence rather recently at the turn of the 21st century, built within a span of 30 years. Benefiting from the differential policies of the SEZs, they’ve grown from fishing villages to some of the strongest economic capitals of the world.
In the past, there were only village houses, today skyscrapers can be seen everywhere. Chen Zonghao goes to the same location almost every year to capture the changing Shenzhen in panoramic photos from the same perspective (Chen Zonghao, CGTN).
The success story of Shenzhen
Growing up in China in the 1990s, the term "改革开放" (“reform and open”) echoed in my ears. Its effects materialized in a city like Shenzhen, now a global metropolis known as the Silicon Valley of China.
Shenzhen used to be a small 3 km2 rural village on the Pearl River Delta with a population of 20,000 in 1978. Following the repercussions of the Great Leap Forward, China decided to open its doors to the outside world. Deng Xiaoping's economic reform established special economic zones (SEZ); Shenzhen (深圳经济特区) thus became Deng's boldest experiment in free-market capitalism with its designation as one of the first SEZs in 1979 (along with Zhuhai, Shantou, and Xiamen).
Some of the policies that attracted foreign and domestic businesses and talents include special tax incentives, privatization of real estate, a degree of independence from the central government and bureaucratic regulations, and the utilization of foreign capitals with the establishment of joint ventures. They adopted a spirit of learning and experimentation. For example, in 1988, a team translated and studied 2,000,000 characters of foreign stock market regulations. They then adapted them into bylaws and in 1990, Shenzhen established the first stock exchange in China.
In addition, several specialized zones within Shenzhen were established, including an 11.5 km2 Shenzhen High-tech Industrial Development Zone specifically for industries such as electronics, R&D, and production.
Deng Xiaoping visits Shenzhen in January 1992 (top); Shenzhen’s GDP surpassing other SEZs and most cities in China (bottom) (Nikkei Asia)
For the first time in a long time, economic activities were driven by market forces, "foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing"; the city grew exponentially. In 2010, Shenzhen had expanded to 1,997 km2. As of today, Shenzhen is home to 12.59 million (World Population Review, 2021), along with major Chinese corporations including Huawei, Tencent, BYD, DJI, and ZTE. The city presented itself as a land of opportunity for young people in China and had become a cultural melting pot. A term known as "Shenzhen speed" meant quick changes, a competitive yet open-minded culture, and high efficiency.
One of the reasons that contributed to Shenzhen’s economic success above other SEZs is its proximity to its neighboring global financial hub, Hong Kong. 56% of all registered foreign enterprises in Shenzhen were from Hong Kong (2018); many relocated factories to Shenzhen to take advantage of lower labor costs.
It took about $31.5 billion of foreign capital to build Shenzhen (by the end of 2002). The policies of the SEZ resulted in a global technology-oriented city. Shenzhen's GDP has recently surpassed that of Hong Kong and Guangzhou, just behind Shanghai and Beijing.
Songdo, a smart city
Once ocean, Songdo is built on 1,500 acres of reclaimed land, an area 30 km (19 mi) from Seoul. It used to be the Songdo Recreation Area, a popular waterfront park built in 1963 where visitors swam, BBQed, and rode duck boats. The park was shut down, replaced by a new smart city known as the Songdo International Business District (Songdo IBD) estimated to cost $40 billion.
The former site of Songdo: Songdo Recreation Area (Arirang TV)
Similar to Shenzhen, Songdo is part of the Incheon Free Economic Zone (IFEZ). The IFEZ was established in August of 2003 by the Korean government to open its market to foreign businesses, promote the knowledge information sector, and create an international city with incentives including reductions in income and property tax as well as rent reduction for businesses.
Songdo began development in 1994 with a planned population of 252,000. In addition to schools, hospitals, and office buildings, the city took inspiration from the world, including a 101-acre park modeled after NYC's Central Park and waterways that resemble Venice. These elements in turn create value to the buildings around them. The city is also known as an aerotropolis — meaning a city built around its airport. It is connected to the Incheon International Airport via a highway bridge, allowing expats to have close air access to major cities in Asia. In some ways, "if it weren’t for the airport, Songdo would not be here."
Songdo is meant to be a smart city designed around technology. Security cameras are installed on motorways and back alleys to monitor crimes and accidents, as well as to check all vehicles entering the city from the bridge. Individual homes not only have electronic keys, but also a central house management system that allows residents to control different appliances remotely. From a sustainability and convenience standpoint, each home has a smart trash chute that is connected underground to a central collection point for efficient waste management.
Central Park inspired urban planning, designed so that every resident can walk to work in the business district, covered by 32% of green space (top, EIAS, The Korea Times); waste collection system using pneumatic tubes where trash thrown into a bin at home or on the street is transported directly to a central sorting and disposal facility (bottom, Gale)
A city is generally built on 20-30 year timelines. Around the 15 year mark, the project was less than 1/2 built and struggled to bring in companies and investors. Population growth is taking longer than originally planned perhaps because of some design flaws including its modernist wide boulevards appropriate for cars than for pedestrians. As a result, “there’s a ton of people living here, but you don’t really see them.”
However, Songdo is slowly gaining momentum (now more than 380 companies have relocated to Songdo). As of November 2018, the population exceeded 130,000. The city seems to be gradually approaching a critical mass. Now new buildings pop up one after another.
Foreign investments contributed to the growth of Songdo. (Arirang TV)
A resident of Songdo expressed, “it's exciting to live in Songdo. Every day I look forward to seeing how District 8 would transform next year and the year after that, or how District 3 or 4 will develop from empty areas"(2018).
Sometimes, when one finds themselves on a more narrow street, suddenly Songdo comes alive. It takes some time for the "social ecosystem" to be created and for people to call it their city. But just as seen in China, "people eventually come."
A look into Dubai's modern history
Just 50 years ago, Dubai was covered by sand. Today, metropolitan Dubai covers an area of 35 km2with 3.4 million people.
The story of Dubai started with aviation. While the discovery of oil in the region in the 1960s benefited the UAE, only 4% of GDP in Dubai came from oil. To thrive, Dubai turned to other solutions including tourism, namely, building the best airline in the world. The success of Emirates Airlines was the turning point that revived Dubai's economy. Global travelers would make a 2-4 day stop in Dubai during their connecting flights for the top restaurants and shopping experience of the world. Year after year, tourist attractions (that somewhat go against nature to demonstrate what is possible) were built, including Burj Khalifa (tallest building in the world est. 2010), Palm Islands (man-made geographical wonders that can be seen from space), and the Dubai Miracle Garden.
In addition to tourism, another factor that drove Dubai's economic growth was its special economic zones (SEZ) that attracted businesses. While mainland Dubai (outside of SEZs) follows the Sharia law, the SEZ established the Common law which protects the rights of the businesses, allows for 100% of ownership, giving many foreign businesses peace of mind. Often, the zones enabled innovation when they attracted sectors that would otherwise be difficult to be built elsewhere, including hardware innovation such as vertical take-off and landing, autonomous vehicles, and government services on the blockchain.
Similar to the success stories of other new cities, Dubai took advantage of its business-friendly policies of the economic zones. Unlike Shenzhen and Songdo, the free trade zones of Dubai are less like cities but resemble more business parks. A brief look at the free trade zones in Dubai, we find not only the Dubai International Financial Centre (DIFC) and the Dubai Airport Freezone Authority (DAFZA) that offer tax exemptions and fast processing of paperwork for businesses, but also more specialized zones including Dubai Internet City, Dubai Design District, Dubai Silicon Oasis, Dubai Knowledge Village, and many more.
The 30+ economic zones compete with each other on pricing and capital requirements in order to attract more residents. In a sense, these small regions function like startups because they adopt an agile framework and move fast. In Dubai, the notion of "voting by foot" truly applies; the region that attracts the most residents wins.
Lastly, an important factor that contributed to the success of Dubai is the continuity of leadership with its hundred-year plan and 2071 will mark Dubai's 100-year birthday. With consistent leadership, there is a degree of consistency to the plan, as opposed to a system that changes every 4-8 years.
Building a city is one of the many ways a country can spark economic growth. An SEZ status attracts foreign capital; the business-friendly policies convince relocation of large companies which in turn creates job opportunities in the region.
What signals the true success of a city, however, is the culture; it is when people start to move there after realizing that it’s not just the economic benefits but also a preferred way of life. A city is sustainable when it empowers and offers conditions for its residents to build the ideal version of their home, along with a strong sense of community and identity.
We are moving towards a world that is more mobile, as people gain the freedom to work remotely. Perhaps “voting by foot” will be a standard way of life for the internet citizens of the future.
New cities signal new possibilities. In a similar vein, a city is the most exciting when we see cranes and new buildings popping up one after another. I visited Beijing about 15 times in the past 20 years. Every year, a new district, shopping center, entertainment, or residential zone comes into existence and it’s what makes me proud to say that the city is my hometown.
I spent the past month in Miami. From conversations with locals and those who recently made a move to the city, one of the most important aspects they love about Miami is seeing the changes that the city is going through in recent years. Construction and dynamism contribute to the energy we see in Miami, in Beijing. It means movement, housing affordability, more people coming into town, new places to go and restaurants to try, and ever more exchange of ideas.
Most recently, I’ve been thinking through the future of cities while helping to build Talent City. Let’s chat!
Always thinking and reading about future of living,
Further exploration —
Additional cities in China impacted by the economic reform: "Open Coastal Cities" (沿海开放城市)
I went to the Shanghai World Expo in 2010 and it more or less changed my worldview. Planning on visiting Dubai later this year for Expo 2020. Let’s meet there! :)