When pride wears the mask of economics

The head of the football organising committee met his friend at a bar in Doha. "You spent US $300 billion on the world cup. What are the returns on investment? "he demanded. The chairman replied, "When you purchased your Ferrari, did you consider fuel efficiency?"

They laughed, hugged, and partied all night; Qatar had successfully hosted the world cup.

Qatar must be complimented for pulling up a massive world cup. It overcame a crippling blockade imposed by the Saudis and the UAE in 2017. Covid put a literal spanner in the works, but they braved to execute the project with the help of immigrant workers. Considering the challenges they encountered, I was sure that protests against human rights abuses and labour conditions would have very little consequence. Most protesters were Europeans who had no problem when their country conducted business with Qatar!

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A nation of 2.5 million people managed 1.2 million visitors between the first whistle on November 20 and the final whistle on December 18.

Ingredients of the costliest world cup ever

The world cup cost them a cool $220 billion across 12 years. The word cool, let me assure readers, has no reference to the huge costs of air conditioning in the stadiums or for imported turf that had to be kept cool.

It included infrastructure investments in the metro, roadways, and construction. It also included a payout of $230 million to David Beckham over a period of 10 years to be the ambassador of Qatar.

Qatar, with a GDP of $180 billion, spent 16 times more than the previous host Russia. South Africa spent $3.6 billion in 2010, and South Korea and Japan spent $7 billion in 2002. Of course, the article won't venture into the costs of the first world cup in the 1930s. But the drift is that the costs of the world cup have kept increasing.

End of innocence, beginning of economics

The earliest editions of large sporting events such as Football world cups and the Olympics probably had very few commercial dimensions such as sponsorships, telecast rights, etc. Hence the onus of conducting such games fell on large cities. Newer stadiums and game villages were always built, but they were in addition to the existing infrastructure.

Hosting large games was touted as a matter of pride more than anything else. Citizens rally to support the organisers of such sporting events. I am told Sydney Olympics was almost run by volunteers.

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Globalisation ensured the trend of large cities and rich countries hosting large sporting events ended. By the late 90s, countries that found prosperity started to bid and successfully host the games. Many of them built infrastructure from scratch.

Telecast rights, advertising, tourism opportunities, and investments flowing into infrastructure made it seem that the hosting of these games was a gold rush. This combination of pride and economic opportunities makes businessmen and politicians happy.
Olympics and Football world cups have fast-approaching deadlines. When these deadlines combine with the pride of conducting the biggest and largest spectacle, things become inscrutable. Spends tend to go out of control, and corruption rears its head.

Politicians running the games award contracts to people they know, especially under the garb of a fast-approaching deadline. This particularly happens if you are developing an economy. The commonwealth games in India and the Brazilian world cup are examples of this phenomenon.

Fools gold or gold rush

Hassan Al Thawadi, Secretary-General of the Committee for Delivery and Legacy, anticipates that the world cup will contribute about $20 billion to the economy. Indeed the forecast is that the economy will grow by 3.4 per cent in 2022 -2023 but dip down to 1.7 per cent in 2024.

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Will the football world cup spurt the economic growth of Qatar? Is it really a gold rush? Qatar hopes for a three-fold increase in the number of tourists from 2 million to 6 million by 2030.

Of course, the world cup has increased the awareness of Qatar. However, people in the tourism business point out that Qatar ranks a low 41 (out of 140) in terms of the tourism competitiveness index. The index is a combination of its natural and cultural resources. Besides, the surroundings are considered by western standards as a region with economic turmoil.

In terms of business investments, Qatar has put a step in the right direction by announcing Qatar National Vision (2030). These include a string of liberalisation measures in terms of FDI to attract investments and become the business hub. I wish Doha well, but neighbouring Dubai took a few decades to become what you aspire to be in 8 years.

Dribbling across research papers

There are extensive studies that have explored the economic growth of countries that have hosted these large sporting events. While dribbling across research papers written by Mello, Robert Baade & Victor Matheson, there seems to be no correlation between economic growth and large sporting events. Gains, if any, are only temporary and never long-term.

Apparently, Montreal managed to clear its debts for the Olympics it conducted in 1972, only thirty years after it was held. The story is the same for nations that conducted the football world cup or Olympics except for Barcelona.

As per Mello's studies, countries that win the world cup show more positive economic effects than the countries that hosted the cup. A noted economist from the UK, Andrew Zimbalist, ratifies that from past instances. It looks unlikely that Qatar is unlikely to gain anything politically or economically in the long term.

Costly signalling

Solitaires, luxury cars, and yachts are never bought for the utility they are purchased to announce that the people who have purchased it have arrived in life. Perhaps the government of Qatar wanted to announce its arrival. The return on investment is just a mask on the pride that comes with hosting an expensive event.

Apparently, the football stadium Mane Garrincha Stadium in Brasilia is used as a bus depot. Likewise, the citizens of Qatar can use the football stadiums can use empty stadiums to pray to God and ask him to keep the prices of LNG high.

The real winner of the world cup is FIFA. It earned US$ 7 billion from the 2022 world cup. It's the highest ever income. Some of its largest sponsors are Qatari companies.

(The writer is a Bengaluru-based management professional interested in films, society and politics.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.