There are debates as to whether a nation hosting the World Cup benefits economically. It helps to dovetail planning of the tournament with wider economic regeneration.
Qatar is undoubtedly receiving a huge boost to its international profile as it hosts the 2022 World Cup. But does being the tournament host help the nation’s economy?
There has been research, and debate, on this issue for decades. Economic impact is difficult to assess. There is a challenge in assessing the long-term economic impact because the scale of the World Cup has grown. By the time long-term data is available, you are not comparing like with like. One study into the effect of West Germany hosting the tournament in 1974 was that there was no benefit to employment levels over a 30-year period, but the tournament was much smaller in scale nearly 50 years ago.
While the revenues have grown, so have the costs. FIFA, the organising body, requires that a host nation has at least eight stadiums with capacity for at least 40,000 fans, and around 80,000 for the final. Standards on safety, environmental impact, transport and security have to be high.
Economic studies have considered both revenues and capital investments. On the revenue side, the undoubted boost for hotels and restaurants in host cities is balanced by what are known as substitution and crowding out effects – some expenditure may be transferred from other parts of the economy, and those who dislike football and the crowds may leave. Much of the revenue from tickets, sponsorship and TV rights goes to FIFA, not the host nation.
On the investment side, the high standards expected of modern stadiums may imply considerable investment by the host nation. This has meant that developed nations tend to experience more positive economic impact, or at least lower losses, because the stadiums are more likely to have a long future use as the home ground of a top-division side, able to attract 30-40,000 fans or more each fortnight of the season for a home game.
A study comparing the economic impact of the World Cup respectively for Germany, hosting in 2006, and Brazil in 2014, indicated more economic losses for Brazil, while reporting potential intangible benefits for the nations.
In the history of both the Olympic Games and the World Cup, however, nations have been learning. Expecting a positive return, or even keeping losses to a minimum, is unrealistic if the balance sheet compares the aggregate investment in preparation with the economic takings in the four or five weeks of the tournament.
Accordingly, it makes sense to combine preparation for the competition with wider economic development. So the strategy becomes: Let’s modernise our sporting, transport and other infrastructure, together with other investments to attract and nurture business hubs, and while doing so, let’s apply to host the World Cup or other global sporting event.
This has been the approach in Qatar. So the observation that $200bn investment in infrastructure in the past ten years makes it the most expensive World Cup to date is misleading: The economic life of the vast majority of the facilities constructed will be far longer than the tournament, and covering many more sectors than sport.
In addition, research has found that the intangible, ‘feel-good’ factor associated with hosting the games – increased local pride, enhanced image of the nation globally – can be substantial and can lead indirectly to social and economic benefits. There’s more to the World Cup than football.
In my next article, I will provide a breakdown of the $200bn capital expenditure, and discuss the benefits for Qatar.
* The author is a Qatari banker, with many years of experience in the banking sector in senior positions.
