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The United Arab Emirates (UAE) began construction Feb. 10 on Masdar City, a new economic city (NEC) in Abu Dhabi, near the international airport there. Gulf states — flush with cash and a desire to diversify their economies — will be building a host of NECs over the next decade, with backing from multinational enterprises. Saudi Arabia has six such NECs (defined here generally as cities built from scratch with the purpose of spurring technological innovation and advancing a nation’s industrial capabilities) in the works — most notably the $26 billion megaproject King Abdullah Economic City. Kuwait plans to begin construction on its $77 billion “City of Silk” — the largest real estate development in the Middle East — by the end of the year. Kuwait hopes this city will rival Dubai as the Middle East’s financial and commercial capital.
All of these cities will be jaw-dropping and perhaps the most futuristic-looking cities the world has seen to date (if they materialize according to plan). These and other likely future cities in the Gulf (and similar but smaller new cities in China and East Asia) will be sources of innovation, both technological and financial, and competitive commercial centers. They will also likely influence future urban development around the world. They will certainly be spectacles, but they alone will not fundamentally transform their nations’ economies or resolve looming unemployment problems, particularly in Saudi Arabia. In fact, betting on these cities for future economic prosperity is a very risky prospect, as their creation is not due to natural economic and geographic forces that bring investment and labor together to form long-lasting cities; rather, it is due to an excess supply of capital that is not particularly demanding on its investment.
Employment and Innovation
These new economic cities are very similar to the special economic zones (SEZs) that have popped up in developing nations over the last 30 years. Each SEZ has its own regulatory and investment rules, but generally their regulations are considerably more liberal than those found in the rest of the country. SEZs often incorporate government partnerships with the international private sector to get set up. They can also include cities developed from scratch or existing cities that create specific business-friendly regulatory regimes. The overriding goal of each SEZ is to attract foreign direct investment to a developing nation to jumpstart industry that would not have existed in the country without the SEZ’s incentives.
In the 1960s and 1970s, China created four SEZs — the most famous being Shenzhen, widely considered the most successful SEZ in the world. Within 20 years, Shenzhen — located adjacent to Hong Kong — grew from a village of a few thousand to a manufacturing center with a population of 10 million and an annual gross domestic product (GDP) growth that reached 32 percent at times.
Traditional SEZs have been mostly aimed at providing industrial employment for large numbers of rural workers to allow developing nations to catch up with the industrialized world. In China, they have helped bring millions into an industrialized consumerist lifestyle and fuel the country’s export sector. As SEZs brought together clusters of engineers and scientists, centers such as Shenzhen have gradually developed their own manufacturing and technology sectors independent of foreign investment.
The new economic cities in the Gulf follow the same general scheme as SEZs, but incorporate several new designs that could have important implications not only for their host countries, but for industrialized nations as well. Most notably, their design is planned from beginning to finish, with almost every detail accounted for. While most SEZs definitely incorporate planning, they generally use a more laissez-faire approach to urban development which, while perhaps less specifically tailored for each corporation, might ultimately be less restricting.
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