Why do governments favour building new cities?

With the Kingdom of Saudi Arabia’s NEOM megaproject, Egypt’s New Administrative Capital, the UK’s New Towns, and the relocation of Indonesia’s capital to Nusantara, interest in new urban developments is back and more exciting than ever. The 20th century was rife with such developments, ranging from the establishment of new capital cities, such as Brazil’s Brasilia and Australia’s Canberra, to the construction of new urban spaces to better manage population growth, such as Milton Keynes in the UK and Chandigarh in India. These new cities have allowed countries to reinvent themselves by putting a lid on political discontent, enabling opportunity to spread beyond legacy centres, and creating growth zones designed to meet the industrial challenges of the modern age.

So, given their clear appeal, how do new cities of the past perform today? Well, actually, very well. An analysis of nine newly developed cities from the recent past shows that each significantly outperforms the national average in total productivity (Chart 1). In fact, two of the more recent examples of new cities—Nigeria’s capital, Abuja, and Myanmar’s capital, Naypyidaw—had to be left off the chart below because their performance was so off the scale. For example, Abuja has a productivity rate almost 10 times that of Nigeria as a whole, while Naypyidaw’s is over three times that of Myanmar. As productivity is a key element of living standards, very similar trends to those seen in Chart 1 can be seen for household income across these cities.

Chart 1: New cities outperform their national average across key economic indicators such as productivity

Chart 2: Growth prospects across the majority of new cities are strong and point to continued economic success

And it isn’t just administrative capitals like Islamabad that are profiting. Each new city clearly benefits from a blank slate on which to base development off, with issues relating to property rights and local opposition to development having a much more limited impact than if one was to simply regenerate or expand an existing city. Each of the new cities perform well in terms of infrastructure, transport, and housing delivery, enabling them to leapfrog some of the challenges facing older cities in their country, such as ageing infrastructure, overcrowding, and existing poverty traps. This can be seen in the Global Cities Index, where most new cities perform stronger in the rankings than their in-country peers, particularly against environmental and quality of life indicators.

Overall, new cities are often hubs of prosperity and opportunity within their countries, characterised by high productivity and income levels, and above-average GVA growth. A key driver of this success is substantial capital deepening early in their development, with transformational investments in infrastructure—such as well-planned housing and integrated transport systems—significantly boosting output. Many new cities are also built around targeted industrial strategies: for example, Shenzhen on China’s south coast has centred its growth on electronics exports, while Milton Keynes has leveraged its strategic location to become a hub for logistics and technology. Other cities, like Abuja and Astana (Kazakhstan), serve primarily administrative functions, benefitting from clusters of high-productivity public sector jobs and the private firms that emerge around them.

What is clear is that, after a period of rapid productivity growth, employment and population levels increase significantly—putting downward pressure on productivity levels but substantially boosting economic growth rates as the infrastructure is increasingly utilised by larger numbers of people. These new cities offer hope for the ambitions of many policymakers across the globe today. But remember, these are the cities that were delivered—spiralling costs, lack of realism, and environmental hurdles meant that many others were not so fortunate.