Vilyen Pidgornyy, Worldwide News Ukraine
It has always been prestigious to be associated with major sports events such as Olympics, World Cup or UEFA Championships. The right to host such an event comes with civic pride, psychological satisfaction and great responsibility as well as a hefty price tag.
A host country is responsible for creating favorable conditions to accommodate all the participants, their crews and guests. In some cases, when the event takes place in a developing country, there is a need to rebuild or even create an appropriate infrastructure from scratch, thus imposing a great deal of burden on the state budget. When Athens hosted the 2004 games its original budget amounted to USD 1.6 billion. The estimated final public cost was reported by Fortune to reach USD 14 billion – almost nine times the planned amount. The 2010 FIFA World Cup in South Africa cost around USD 3.7 billion. EURO 2012 in Ukraine reportedly required over USD 5 billion of public investment. Of course, private investors are welcome to participate, but the return on investment in infrastructure development, may not be as lucrative as, for example, in the trade or services sector.
Many say it is not worth it, neither economically, nor image wise. But is it really so? Doesn’t infrastructure development hit multiple triggers simultaneously and open doors of opportunities for everyone?
Let’s have a look at the improvements the hosting cities have to come up with.
Usually the hosts have to make sure that they satisfy the requirement on capacity and safety of sports facilities, quality and capacity of the roads, accommodation availability, passenger capacity of airport terminals, availability and ease of use of public transportation networks, as well as availability of simplified border control procedures. These and other issues are becoming the priority for the host country.
Let’s take a closer look at how Greece, South Africa and Ukraine prepared to host the world’s main sports competitions.
In 2004, the capital of Greece – Athens – hosted the summer Olympics. It got a new metro network, built a new airport, and launched a tram and light railway network, along with a bypass highway. It also connected the ancient sites in Athens’ city center with a cobblestone walkway. The initial budget increased almost nine-fold (from USD 1.6 billion to USD 14 billion) before it was all done and put to work for the participants, guests and the locals to enjoy. Was it prudent?
In his 2010 interview with AP Nassos Alevras, the lead Greek government official for Olympic projects, insisted that, overall, the games carried a net gain including a tourism boost. He, nevertheless, admitted that “the issue of venue use is a sad story… Plans for post-Olympic use were later ignored”.
South Africa spent almost USD 4 billion on developing and improving its infrastructure: renovating five stadiums in addition to the five new ones that have been built already, expanding three major SA’s air gateways: Johannesburg, Cape Town, and Durban as well as seven smaller airports, developing its transportation system (both commuter rail and roads), constructing 25 new hotels, designing the new tap water supply and purification system, launching the Gautrain, constructing several peak power stations as well as expanding the broadcast and telecommunication system.
In his speech on July 22, 2010, the Finance Minister of South Africa Pravin Gordhan quoted one economist who said that the “benefits to South Africa, and the rest of Africa of the World Cup, weren’t so much about the new infrastructure, the tourist and credit-card spending, but more about changing perceptions about South Africa and, indeed, the rest of Africa.”
In preparation for the largest continental football championship Ukraine renovated airports in all EURO 2012 host cities – Donetsk, Kharkiv, Kyiv and Lviv, increasing their channel capacity and improving the runway and infrastructure. The country has built and modernized four major stadiums – the National Sports Complex Olimpiyskyi in Kyiv (hosted EURO 2012 final), Donbass Arena in Donetsk, Arena Lviv in Lviv, and Metalist Stadium (nicknamed Spider) in Kharkiv.
Furthermore, in preparation to EURO 2012 Ukraine obtained 3,455 kilometers of new or renewed roads, 1,700 kilometers of railroads and 902 new vehicles of public transport. Ukrainian citizens now enjoy 21 new or renewed hospitals, 290 hotels, and even 44 electricity generating stations, noted the Erste Group Research report. “The investments in infrastructure were neither excessive, nor overdone,” indicates the report.
And yet the time has to pass before we can see whether these investments have been, in fact, excessive and whether Ukraine has benefited from one of the major football events of 2012.
Granted, all of the above countries came across another serious problem – the underutilized sports facilities that cost a lot to build and a lot to maintain. There is even an idiom – white elephant – a valuable but burdensome possession of which its owner cannot dispose and whose cost (particularly cost of upkeep) is out of proportion to its usefulness or worth. It is not uncommon in the media to use this term in reference to neglected sports facilities in those countries which hosted major sporting events.
There are many pros and cons both tangible and intangible associated with hosting a sports event of the world caliber. The proponents talk about the improved image of the country in general and about the huge dividends that may come in the form of hard cash spent by the international fans. And yet economists are convinced that the expense far exceeds the earnings. The organizers of the Beijing Olympics claimed the profit of a mere USD 150 million out of USD 3 billion in revenue, whereas the total tab on the event amounted to USD 43 billion, reported Fortune.
Another disappointment in terms of long-term economic development is the fall of economic activity during the event. The example has been provided by Victor Matheson, associate professor of economics at the College of the Holy Cross in Worcester, Mass. He wrote that Salt Lake City’s hotels and restaurants were packed during the 2002 Winter Games, while other businesses not directly related to the event, like department stores, suffered significant losses in sales.
So, if economic benefit is insignificant, why would the countries be eager to compete to become the next major event’s host. According to Victor Matheson the 1992 Summer Olympics served to put Barcelona on the map as a world class tourist destination and the city has experienced a surge in visitors over the past two decades. At the same time studies of the 2006 World Cup in Germany showed that the country experienced little in the way of improvements in income or employment figures as well as suffered collective depression, social divisions and low consumer confidence. However, surveys revealed a noticeable improvement in residents’ self-reported levels of happiness following the event. In the end, Germany was able to increase its tourism bookings by one third, decrease unemployment by more than 20%, and push investor confidence to an all-time high, according to Sam Ross’s quote of lbid.
So, is this whole thing of spending billions of hard cash all about creating a positive image and provide citizens with sense of pride and satisfaction?
Many would agree that hosting a World Cup an UEFA championship or the Olympics has other intangible benefits. It may even include a boost to the national pride that comes with realization that “we can do it”. The tournament may undoubtedly boost the country’s standing internationally, showcasing its capabilities in delivering world-class infrastructure on time.
The indirect benefits of infrastructure improvements are probably more important: ensuring that roads are clean and safe, that there is clean drinking water in the taps, that people and goods can move around the country efficiently, that airports can now accept more airliners filled with tourists who would be greeted by hospitable border guards, that the country has more hotels to host almost any international event without additional considerable allocation of funding.
It is evident that hosting major sporting events acts as a catalyst for expanding a country’s infrastructure base, skills development, employment creation, and economic growth. The vivid example is the March 2012 statement of UEFA President Michel Platini, who said that in preparations for EURO 2012 Ukraine leaped forward 30 years in its development.
What about the maintenance cost, one might ask. May be that’s the price of the national pride and improved image?