Penned by- Srishti Gupta
To say that football fans or not, we had all been drenched in the FIFA fever would be an understatement. It is not just humans but economies too that are massively impacted by international tournaments like FIFA. The oil-rich middle-eastern nation of Qatar hosted FIFA 2022, and speculation abounds on whether the nation, which spent over $220 billion in hosting the most expensive games till date, will see positive returns on this investment or not.
This week’s Macroscan analyses how Qatar stands to lose and gain from a financial standpoint. We hope you have a delightful read!
Hope for Qatar’s Economy?
An astounding $220 billion has reportedly been spent by the nation since 2010. This is fifteen times what Russia spent on the competition in 2018. The infrastructure has been upgraded with more than $300 billion in public spending. Financial analysts predict that the World Cup will cause Qatar’s GDP to increase by 4.1% by the end of this year. The area’s GDP will grow by an average of 3.2% between 2022 and 2030. According to reports, Qatar’s economy will benefit by more than $20 billion from the 2022 FIFA World Cup. All of this also entails rising financial expenditures. Compared to the last World Cup, the region’s soccer enthusiasts will spend more on dining out and socialising. During the busiest match days, this is reportedly 80 times more than usual. $4 billion of foreign investment entered the nation in the first ten months of the year.
In the months leading up to the major athletic event, the Qatar Stock Exchange (QSE) beat its rivals. The QSE Index, which tracks the 20 largest and most liquid equities listed on the market, increased by as much as 24.7% from the start of the year through April 2022.
The MSME sector in the region will experience significant growth in addition to the regional economy’s effects and the expansion of larger businesses. The sector has, in fact, been one of Qatar’s main economic drivers for the past 10 years, according to a panel discussion at GWC Forum 2022 in November.
The World Cup is also drawing a lot of interest from the local startups. Arvex, a software business with a Doha presence, provides virtual reality 360-degree tours of the Khalifa International Stadium. The region has invested heavily in the Qatari startup sKora in an effort to provide the most advanced technologies to the World Cup. The sKora platform’s artificial intelligence (AI) will assist in spotting talent and preparing athletes based on insightful data. The athletes’ distinctive characteristics, abilities, and performances will be evaluated by sKora’s systems to produce AI-backed data and insights, which will then help them chart the best career path. The World Cup provides a means for Qatar to promote and develop additional regional industries and break free from its reliance on oil and gas. Challenge22, the Supreme Committee for Delivery and Legacy of Qatar, had given guidance, funding, and training for start-ups and concepts that may help the country’s World Cup preparations. Grants were given to a group of all-female Saudi engineers who built the stadium’s seats out of date palm debris.
Expenses by Qatar, Gains for FIFA
The World Cup and the Olympics are both promoted as key economic drivers for the host nations. But it’s not always the case. For example, the 2016 Rio Olympics suffered a $2 billion loss, and Greece’s massive Olympic debt from the 2004 Athens Games hastened its bankruptcy. The real economic result can be severely negative, neutral, or marginally favourable depending on the event and the host city or nation.
FIFA is anticipated to make a $3 billion profit after paying the $1.7 billion in operating expenses set aside for the competition’s one-month duration as well as the $4.7 billion in anticipated revenue from corporate sponsorships, tickets, and international television. With a GDP projected to be over $180 billion in 2022, Qatar has spent at least $220 billion on hosting the World Cup, including the cost of the bid, the building or renovation of eight stadiums, and infrastructure for transportation, hospitality, telecommunications, and security. So, on average, since Qatar was given the World Cup in 2010, it has spent more than 10% of its GDP annually. If significant existing facilities can be utilised, as Germany was able to during the 2006 World Cup, it is unquestionably useful. But in the majority of cases, expensive, large-scale facilities have to be constructed. However, thereafter, the stadiums sometimes become “white elephants,” necessitating enormous upkeep costs.
There are legitimate concerns about Qatar’s infrastructure’s long-term usefulness given that there are around three million permanent people there. Several Qatar stadium locations will be repurposed, and a portion of the arena will be donated to a developing country to aid in the construction of sporting venues. However, the majority of the recently constructed infrastructures, including as hotels, the metro, new highways, a bridge between Doha and Bahrain, increased hotel capacity, etc., will ultimately fail to improve the nation’s economy and standard of living.
The World Cup is expected to boost Qatar’s economy by 3.4% in 2022, but by 2024, that growth will decrease to 1.7%, according to the IMF. As a result, Qatar may anticipate earning up to $1.5 billion in income from hosting the World Cup, which is predicted to draw 1.2 million tourists. However, since 90% of Qatar’s workforce is made up of foreigners, Qatar will not gain much from the creation of new jobs.
Developing “soft power” in order to play a larger geopolitical role should undoubtedly be another objective for Qatar in hosting the World Cup. However, there are other concerns surrounding Qatar’s receipt of hosting rights, including its human rights violations, LGBTQ+ difficulties, and so forth. Instead, the World Cup might have raised awareness of Qatar’s human rights record, particularly with regard to the mistreatment of migrant workers. Overall, calculating Qatar’s World Cup advantage could be challenging and could ultimately produce a
highly unfavourable result.
It is true that in many nations around the world, playing games is the primary source of entertainment. The game also brings great pride and fame to the host nation. This does not, however, account for the substantial financial outlays required to host the World Cup. As a result of hosting the World Cup, several nations have found themselves in debt traps. The 2010 Football World Cup was staged in South Africa, as an illustration.
In the case of Qatar too, hosting the FIFA World Cup, does not seem like a profitable venture. However, it is a rich country with vast oil deposits so, there is a negligible risk of debt traps. The reasons for these losses can be summarized as follows.
The sale of television rights to the event, along with ticket sales, provide for the lion’s share of World Cup tournament income. No portion of these proceeds are given to the host nation. Only products from FIFA’s sponsors are permitted to be sold inside and outside the stadium, taking away opportunities from local businesses. One of the most frequently mentioned advantages of hosting the FIFA World Cup is tourism. However, it should be remembered that the increase in tourism is merely a passing phenomenon. After the World Cup is gone, tourism returns to its pre-World Cup levels. Finally, FIFA does not pay taxes on and of the revenue it receives during the World Cup. FIFA, however, is in a position to make such unfair agreements with foreign nations because of its monopoly strength. The issue with FIFA World Cups is that the poorest people end up footing the bill. Spending on stadium construction causes the infrastructure that would have benefited the poor to be put off.