Weekend Argus (Saturday Edition)
No longer a race to host sporting events
Developing countries are willing to bear hefty costs, risks in attempt to improve global positioning
IT USED to be that hosting a major sporting event like the Olympic Games and the Fifa World Cup would carry significant prestige.
It was an honour that would help to shape a country or city, as well as be a moment of national symbolism and economic transformation.
Why, then, have many advanced Western economies decided not to bid for such events, and even withdrawn their proposals?
Hosting a prominent sporting event boosts tourism, and helps to rebuild or develop infrastructure. However, it requires an immense financial commitment and risk.
The 2014 Fifa World Cup cost Brazil $15 billion to host, making it the most expensive in the federation’s history. The cost of the 2016 Rio Summer Olympics has been estimated at $4.58bn.
Those kinds of costs have become difficult to justify. A lack of candidates willing to host the 2022 Winter Olympics saw the event awarded to Beijing – a city not renowned as a winter sports hub.
Away from the Olympics, London made a last- minute decision to withdraw from hosting the start of the 2017 Tour de France; less-fashionable Düsseldorf stepped in.
Emerging economies like Brazil, as well as Russia and Qatar, who will host the Fifa World Cups in 2018 and 2022, respectively, do not have the same economic rationale to consider.
For those nations, hosting sporting events are an investment in their global positions; the cost overruns and apparent losses are the price they are willing to pay.
The Olympics and Fifa World Cups are attracting fewer bids. There had been a spike in bids for the 2022 Winter Olympics but most candidates withdrew, leaving Beijing and Almaty in Kazakhstan as the only bidders.
All four Fifa World Cups from 2010 to 2022 will be hosted by a developing nation. However, the next three summer Olympics will take place in major cities with developed economies – Tokyo, Paris and Los Angeles.
One explanation is that the International Olympic Committee (IOC) has been handing out concessions. It changed its competitive process, and named the hosts for two consecutive Olympics to give bidders more preparation time.
It allowed Paris and Los Angeles to decide the exact timing, and offered $1.8bn to the LA organising committee.
The IOC understood the declining appeal of hosting the Games. It was why it delivered the Olympics Agenda 2020, a plan intended to provide cost-saving measures and reduce the complexity of the bidding process.
Is it worthwhile hosting major sporting events? Looking at the Olympics, a study conducted by the University of Oxford found that the average cost overrun for all Games is 156%.
Not many major projects have an unchangeable deadline for completion, which can ramp up costs as the opening ceremony approaches and money gets thrown at any remaining problems.
The same study established that the 2012 London Summer Olympics has been the most costly Games in history – $15bn.
The 1976 Montreal Summer Olympics showed the highest cost overrun at 720%.
The table above illustrates that the Games from 1968 to 2016 (summer and winter) have all encountered significant cost overruns.
The decline in enthusiasm for hosting mega- events has several driving factors. The fragility of economies due to global financial crises is a significant one, along with a growing inequality in the distribution of wealth and income.
It contributes to an increased cynicism around major sporting projects which need vast funding, and this is true when there is no genuine guarantee of substantial or discernible benefits for taxpayers.
It used to be that everyone was playing the same game; countries would compete for the bragging rights and pay little attention to economic rationality or infrastructure legacy.
But now, the countries that can most easily justify the risk are those with the most to gain on the world stage, rather than those with the deepest pockets.
Russia and Qatar do not need to turn a profit, but they do want a stronger voice in global affairs.
For developing economies, mega-event hosting is motivated by globalisation and soft power.
China and South Africa have recently shown that it can be an exceptional opportunity to devise a new identity to both their local citizenry and global audience.
The updating of your global image, however, can hit some obstacles. Russia and Qatar are hoping they will end up projecting an image of modern and advancing nation-states.
But, for now, they are saddled with the negative impression created by corruption and bribery accusations. – The Conversation
● John Varano is a researcher at the University of Oxford.