Urban development

Lazika and Economy of New Cities


The number of urban residents increases worldwide year after year. The McKinsey Global Institute estimates that half of the world’s population today lives in cities and generates more than 60% of global GDP. The global urban population is now increasing by more than one million people each week – an amount sufficient to add seven new Chicago-size cities to the world every year until 2025.

Georgia, in ten years’ time, may also see the emergence of a new city. An ambitious and optimistic plan put forth by the Georgian President calls for the creation of a new, trade-commercial-tourist seaport city with an estimated population of a half-million people. The new city called Lazika is expected to be built in the territory between Anaklia, a town on the Black Sea coast near the administrative border with Abkhazia, and the Kulevi village on the eastern Black Sea coast. The President’s initiative to attract Georgian residents to a new and thriving metropolis near Abkhazia may prove to be a politically astute move. First, however, the government needs to formulate a methodical plan with accurate estimates of the time and money needed to construct and to inhabit that new city – and a clear picture of at what and whose expense that will be accomplished.

When Chicago was incorporated as a town in 1833, it counted only two hundred residents. It took forty-seven years for Chicago to increase its population to a half-million people and another ten years after that to bring the population up to the originally projected one-million people. Between 1883 and 1890, the population of the whole United States increased on average by 20.7%. The GDP of the United States in the Nineteenth Century grew by an average of 40.6% every ten years while per capita income during that same period increased on average by 67.2%, according to data compiled by Angus Maddison, the noted British economist and world scholar on issues of economic growth and development. By comparison, data of the National Statistics Office of Georgia show that during the past ten years the population of Georgia has increased on average by 1.5% and the GDP has grown on average by 6.4%.

The U.S. Central Intelligence Agency (CIA) World Factbook reports that the urban population of the world increased by 1.98% during the period from 2005 to 2010. The highest growth rate of urban populations during that time period was observed in Burundi, Laos, Afghanistan, Maldives and Malawi. The average growth in the urban populations was 5.66% in those five countries, where GDP increased by an average of 6.63% in the same period. Among those countries, the highest urban population growth was seen in Afghanistan (10.27%) and the lowest rate of growth in Burundi (3.4%). Income per capita in the five countries stood on average at 1,457 USD and their total population increased on average by 3.2%. By comparison, the population of Georgia decreased by 0.4%, on average, and per capita income in Georgia totaled 2,260 USD during that same time.

Since the 1960s, construction of new cities has intensified around the world. Several thousand new cities have been built in some fifty countries of Africa, Asia, Europe and the Pacific region in the past half century, according to various sources. Six hundred new cities were built in the United States alone during that period. Each of these new cities reflects, first of all, a political decision. They were planned in detail for the purpose of populating uninhabited areas.

The City and Regional Planning Department of California Polytechnic (Cal Poly) State University has closely examined the common properties and problems of newly built cities. Its research confirms that building a new city must be planned thoroughly if it is to succeed. Of utmost importance is the new city’s location: it must be somewhere in close proximity to a bigger city with a developed infrastructure that the new settlement can utilize until the settlement develops its own independent infrastructure. Persuading people to settle in a new city is the biggest challenge, according to Cal Poly research findings. The new location must offer a wide variety of housing options for its potential residents. Ideally, the new city will attract different types of people who will encourage the development of different markets there. A competitive advantage of a new city is the opportunity to plan in advance what the population of that city may need. If a new city is designed to attract a population that is too homogenous, the city will face the threat of stagnation and its existence will either have no effect on the country’s economy or it will become a burden for it. The potential population needs to be projected in advance. In a region with high economic growth, the construction of a new city stands the best chance for success if it is properly planned.

Even with careful planning, there are still inherent risks in building new cities. Research conducted by the International New Town Institute (INTI) has shown that new towns that are developed all at once on a wide scale often prove unjustifiable. There are two main reasons for that: First, the construction of a city needs to be strictly controlled, but project planners swept away with enthusiastic imagination during the initial planning stage often create ambitious city designs that do not accommodate the needs of local residents at all. Second, as a rule, much time passes from the initial stage of designing a project to the stage of commencing construction due to a host of external and internal variables. This frequently results in modification of the original plan and changes that can add substantially to the cost of the project. If a state does not have sufficient funds or the project does not have a stable, long-term financier, the construction of a new city can damage the economy of a country.

The idea of stimulating economic growth by having government step in and invest in infrastructure projects originated with John Maynard Keynes. The renowned British economist believed that large-scale government investment in infrastructure exponentially increases the spending potential of the population. The theory is that that will, in turn, stimulate production and private investment and will lead to higher income and spending, and so on and so forth, in cycles. In reality, private investment becomes more limited. That is because money spent by the government for the construction of a new city must first be secured from somewhere – by increasing taxes, or taking on more debt, or minting new money. The end result is a decrease in private investment and an increase in inflation. The same holds true for employment – jobs created by government-financed projects that are aimed at stimulating the economy are offset by the number of jobs lost as a result of the decrease in private investment.

New cities are built less frequently in developed countries than in less-developed ones. The new-city trend has now shifted toward developing, namely Asian, countries. Construction of new cities is an especially topical issue in China. Because of poor planning, more than half of the newly built cities in China now stand empty; they have become virtual ghost cities. One example is Kangbashi, a newly built Chinese city designed for a population of one-and-a-half-million people. Kangbashi was built within a short time span of five years. The city developed under strict conditions of central planning; private investments were limited while prices on real estate increased. As a result, monies invested by the Chinese government in the new city’s administrative buildings, museums, sports halls and office skyscrapers did not yield any return – Kangbashi is unpopulated to this day.

In the case of Lazika, nothing has been determined yet – not the cost of construction or potential financiers of the project, not exact population projections or the tempo of construction. The precise location of the new city has yet to be identified too. No one can say at this time from where the new city will draw its population or whether construction of the new city will first require draining Kolkheti wetlands and, if so, whether international environmental conventions will be violated and how that will affect Georgia. For now, the President’s Administration, the Ministries of Economy, Finance and Environmental Protection, and the Samegrelo-Zemo Svaneti Governor’s Office all have just one response: Planning of Lazika is about to start; no details are known yet.

This article first appeared in Tabula Georgian Issue # 86, published 6 February 2012.



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