FIFA : An economic gain for the host country?
FIFA : An organisation which aims at making football truly global, and to develop football everywhere so that there are at least 50 national teams and 50 clubs from all continents that can contend at a globally competitive level.
Forums like FIFA, the Olympics and the Commonwealth games are always under the eye of the media. Every minute aspect of these tournaments is under scrutiny. One of the key aspects is the country hosting these world championships. It is seen that everytime these championships are declared the host country attracts a great deal of attention, not just for being the host of the sports event but also for its economic, political and social performance as a player/ potential player at the global level. The attention is not just restricted to media, it is much more than that; media is just a tool that gains the country recognition at a global level. Usually the attention gives the country opportunities to develop. So, whether or not this recognition is beneficial for the host country is the main focus of this article.
Recently FIFA concluded its 22nd edition of the Men’s World Cup which was held in Qatar. And since the start of the tournament the country has been under the limelight. Qatar’s economy has been almost exclusively based on its petroleum and natural gas industries, a dependence which began in 1940. Qatar is the leading exporter of liquefied natural gas. In 2012, it was estimated that Qatar would invest over $120 billion in the energy sector in the next 10 years. As of 2016, Qatar has the fourth highest per capita GDP in the world, according to the International Monetary Fund. Several reports suggest that the economy’s GDP will rise by 4.1% and the 2022 FIFA World Cup has contributed over $20 billion to Qatar’s economy. It relies heavily on foreign labour to grow its economy, to the extent that migrant workers compose 86% of the population and 94% of the workforce. In early 2017, Qatar’s total population was 2.6 million, with foreigners making up a vast majority of Qatar’s population. Only 313,000 of the population (12%) were Qatari citizens, while the remaining 2.3 million (88%) were expatriates.
Opportunities knocking the the door:
- A boom in the equity market: Historically, equity markets of FIFA World Cup hosts have outperformed peers. Same was the case with Qatar. With more than $4bn of foreign inflows in the first 10 months of this year alone, equity market experts say that Qatar’s stock market, like most previous World Cup host markets, has outperformed peers in the run-up to the mega contest and is expected to continue along similar lines in the year after the tournament.
- Developed Qatar : Since 2010, when Qatar won the rights to host the World Cup, the state has spent more than $300bn to upgrade its infrastructure, including the Doha Metro, thousands of kilometres of local roads and highways, a new port, a new airport, and even a new city, as well as boosting its oil and gas facilities. “This is really pulling forward a lot of medium-term development projects the state had and in many cases, a lot of projects that would have been completed over a decade are already finished to show off a developed Qatar during the World Cup,” said Akber Khan, senior director of asset management at Doha-based Al Rayan Investment. This development has led to a significant rise in the standard of living in Qatar which results from an increase in job security and social security.
- Significant growth in MSME sector: Apart from the economic impact and the growth of larger companies, the MSME sector in the region will also see significant growth. The sector has, in fact, been one of the largest economic drivers in Qatar for the last 10 years. Qatar 2022 CEO Nasser al-Khater expects that the FIFA World Cup will contribute $17bn to Qatar’s economy during the event, down from an initial estimate of $20bn. While the primary beneficiaries will be the hospitality industry, including hotels, malls, shops and retail, Al Rayan Investment’s Khan said several listed small and mid-cap companies that won government contracts as suppliers to larger firms over the last several years will equally benefit.
- Tourism: The projects initiated by the Qatar government will result in a more developed Qatar which will attract tourists, making Qatar as attractive a tourist destination as any other in the world. The tourist inflow for the World Cup itself was the onset of upcoming growth of tourism in Qatar. Doha is a city with one of the fastest-growing hotel and hospitality markets in the world. According to the latest government figures, 80% of the world’s population is within a six-hour flight from Qatar. Over 150 new hotels have been built for the FIFA World Cup, and all of these expect to welcome tourists for years to come.
- Financial markets: When it comes to the financial growth of the economy, more lasting consequences on the economy and financial markets in the country could be recorded. The widely followed event could draw attention from individuals and companies alike to Qatar as a tourism spot and as an investment destination, boosting inflows of capital. There’s the standard claim that this mega event will be watched by billions of people worldwide, and it will put Qatar on the proverbial world map, eventually boosting tourism, foreign trade and investment. Perhaps it will also give Qatar a more significant role in geopolitics.
But all these come with a cost or consequence. When analysing the opportunities it is important to analyse the costs as well.
Cost of the opportunities:
- Cost of hosting the world cup: Media accounts indicate Qatar has spent at least $220 billion- a visibly huge commitment by Qatar for hosting the World cup- since 2010 (when they were granted the hosting rights). Less than $10 billion of this is on the seven stadiums Qatar built for the games and the one stadium they renovated. The rest was spent on transportation, hospitality, telecommunications and security infrastructure, including $36 billion on a metro system for greater Doha, a new airport, extensive road construction, and over 100 hotels, inter alia. To put the $220 billion in context, Qatar’s GDP is approximately $180 billion in 2022. Of course, while the $220 billion investment was connected to the World Cup, some of this investment makes a long-term contribution to Qatar’s development, and some of it is either extraneous to this development or of very low priority. It is also important to observe that the costs of hosting will continue to increase after the competition is over. Parts of some stadiums are scheduled to be dismantled and shipped elsewhere. Stadiums and other buildings that remain will require millions of dollars annually in operations and maintenance expenditures.
- Negative Media coverage: The problem with these claims of growing “soft power” and long-term economic benefits is that the historical evidence is not favourable. Being on the world stage is a two-way street. Qatar is getting a lot of publicity, but most of it is not positive. Prime reasons for the negative publicity:
- Speculations regarding the hosting rights: The decision to award Qatar hosting rights for the 2022 World Cup has been marred by controversy, including allegations of corruption and human rights violations, since it was first announced 12 years ago. It bribed its way into getting hosting rights. These allegations also state that Qatar’s torrid temperatures in June and July, which forced the movement of the games from the summer to November/December and has led to a short and delayed World Cup despite the executive being aware of these facts in 2010 still Qatar was given the hosting rights.
- Malpractices: It first imported tens of thousands of foreign workers to complete investment projects and subjected them to its oppressive kafala labour system, reportedly leading to several thousand deaths. Its eviction of the foreign workers first from their housing to accommodate soccer fans and eventually from the country, among other embarrassments, are unlikely to build positive soft power for Qatar.
The aim was to point out the economic impact of the large-scale championships like the FIFA World cup on the host country and its economic operations. These events bring a lot of recognition, fame and opportunities for the host country but along with a huge cost. The media coverage may bring negative publicity sometimes which can be another con of organising such an event. If not planned and implemented properly the cons of hosting this event may outweigh the pros. In the case of Qatar we can infer an acute imbalance between the costs and revenues which likely will have a negative impact on Qatar’s economy. There are short term benefits for Qatar but it is unlikely that they will benefit from the World Cup in the long term considering global economic conditions and socio-economic conditions of Qatar .