World Cup economy: Qatar’s record spending unlikely to pay off

Today’s guest columnist is Andrew Zimbalist, Professor of Economics at Smith College.

What economic impact will hosting the World Cup have on Qatar? Available data and past experience suggest that a pronounced negative outcome is likely. Look at the evidence.

FIFA assures that it will cover all operational costs during the one month of competition. The largest single cost is $440 million in prize money to be paid out, with $42 million going to the winning team. All teams that fail to advance through the group stage will each receive $9 million. It is notable and unfortunate that at the last Women’s World Cup in 2019, the total prize money payout was a mere $30 million, about 1/16th of the men’s payout.

The other key operating expense items include $247 million for TV operations, $326 million for competing club costs and $207 million for human resource management. Total operating costs are estimated at US$1.7 billion, which FIFA will cover, but FIFA does not share in the revenue from international television, tickets, hospitality and corporate sponsorships. These revenues are estimated to total $4.7 billion.

While it remains nebulous, it appears Qatar will have to shoulder a healthy share of security costs (which could easily top $1 billion) as well as a host of operational costs.

The bottom line for FIFA is $4.7 billion in revenue and $1.7 billion in expenses, for a net profit of $3 billion. FIFA will use around 10% of this for its own operations and distribute the rest to the 200+ national football associations around the world to help develop the sport.

What is the bottom line for Qatar? According to media reports, Qatar has spent at least US$220 billion to host the World Cup. Less than $10 billion of that goes to the seven stadiums Qatar built for the Games and the one stadium they renovated. The remainder 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.

To put the $220 billion in context, Qatar’s GDP is about $180 billion in 2022. They were awarded the World Cup back in 2010, so they’re averaging $18.3 billion a year or more 10% of their GDP spent. This would be equivalent to US spending of $2.3 trillion per year for 12 years. The point is that this was a massive commitment from Qatar.

Of course, although the $220 billion investment was linked to the World Cup, some of that investment makes a long-term contribution to Qatar’s development, and some of it is either alien to that development or of very low priority. For example, a subway or highway connecting two stadiums on either side of Doha could make a very important contribution to transportation convenience during the Games, but make almost no contribution to Qatar’s economy.

It is also important to note that hosting costs will continue to increase after the competition ends. Parts of some stadiums are to be dismantled and shipped to another location. Stadiums and other buildings that remain will require millions of dollars in operating and maintenance expenses annually. (Never mind that Qatar has only 300,000 permanent residents and little football history.) These structures will continue to occupy valuable real estate and foreclose other potential uses. Hotels built for World Cup visitors will largely lie idle. Guest workers are expelled.

All of this is on the expense side of the ledger. What about the revenue side? Qatar says it expects 1.3 million World Cup visitors. Let’s say each visitor stays an average of four days and spends $300/day. Let’s also assume that the expected congestion, higher prices and security concerns will not affect normal travel and business traffic. Under these assumptions, Qatar would generate $1.56 billion in hosting revenue.

Of course, Qatar is hoping for more advantages. There is a usual claim that this mega-event will be watched by billions of people worldwide and will put Qatar on the proverbial world map, which will eventually boost tourism, foreign trade and investment. Perhaps this will also give Qatar a more prominent role in geopolitics.

The problem with these claims of growing “soft power” and long-term economic benefits is that the historical evidence is not favorable. Being on the world stage is not a one-way street. Qatar gets a lot of publicity but most of it is not positive. It bribed its way to get hosting rights. It imported tens of thousands of foreign workers and subjected them to its repressive kafala labor system, reportedly resulting in several thousand deaths. Its hot temperatures forced the games to be postponed from summer to November/December. His unfinished investment projects will be widely visible. The expulsion of foreign workers from their shelters to house football fans and eventually from the country, among other embarrassments, is unlikely to build positive soft power for Qatar.

When all is said and done, Qatar will have spent three or four times more than any other country to host a sporting mega-event. The acute imbalance of costs and revenues in hosting the 2022 World Cup could only arise in an undemocratic country.

Zimbalist is the author of numerous books on the economics of sport, including: Circus Maximus: The economic gamble behind hosting the Olympics and World Cup.

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