|Global Knowledge Gateway||
Lasting Legacy or Long-Term Liability? Is It Only a Numbers Game When Hosting Major International Tournaments?
by Christopher Arnold, Technical Manager, SME & SMP Affairs, IFAC | July 9, 2014 | 1
As Brazil’s dream of winning the World Cup ends, with yesterday’s dramatic defeat, the inquest of the team’s performance and how successful the tournament has been for the host nation begins. This World Cup has delivered a number of shocks, from Spain’s early exit as the current World Cup holder and top-ranked team (see FIFA rankings), to Costa Rica’s (ranked 28th) advancement to the quarter finals, and now the heaviest semi-final defeat in World Cup history. All of which has had statisticians reaching for the record books, while providing a clear indication that statistics alone cannot be used to predict football results, and the beautiful game can be full of surprises.
Similarly, statistics alone cannot be used as the basis for considering the financial, environmental, and social costs and benefits of hosting a major international tournament, such as the World Cup or Olympic Games. A range of figures, as well as many qualitative factors, can be used to highlight both the positive and negative consequences of winning one of the coveted bids. So, does hosting result in significant economic gains and a long-lasting sporting legacy, or does it create a long-term liability of debt and resentment due to perceived misdirection of government spending?
Assessing the economic impact of hosting a major international tournament involves a wide range of factors. It includes the costs, such as construction projects and transport upgrades, versus revenue, such as increased tourism, trade, and inward investment. For example, research has indicated that trade is around 30% higher for countries that have hosted the Olympics. Construction projects also create new jobs and can greatly impact urban regeneration and transform local areas.
The London 2012 Olympics is reported to have boosted the UK economy by GBP 9.9bn ($18.83bn). However, these figures have been disputed and even dubbed “creative accounting” because it can be difficult to accurately measure what proportion of economic activity is attributed to the games themselves.
The costs of hosting are high and countries need to provide substantial resources in order to make the event a success. In many instances, the costs exceed original expectations and highlight the importance of sound budgeting, monitoring, and financial management. For example, it has been reported that the costs of the London Olympic Games reached GBP8.77bn ($14.9bn), far higher than the original budget of GBP 2.4bn ($4.08bn). The Beijing 2008 Olympic Games are reportedly the most expensive ever, costing about $40 billion. It has also been argued that Greece’s economy collapsed partly due to the level of debt they owed for hosting the Olympics in 2004.
There is a need to consider the environmental and wider social impact of hosting these events. The World Cup lasts 32 days and summer Olympic Games just 17 days. These events capture the public imagination and media attention for a period of time, but it can be questioned whether the money spent in the run-up to hosting these events really delivers long-term benefits for the country. Could society gain far more if the equivalent amount of money was spent on local infrastructure, health, or education? One of the major criticisms of the host countries of these one-off mega-events has been the amount of money spent on building new or converting existing stadiums, which some claim have become “white elephants,” as the costs have far exceeded their everyday usefulness.
The Bird’s Nest, Water Cube, and Velodrome built for the Olympics in Beijing are examples of fantastic sporting stadiums that are now reportedly largely unused and have high maintenance costs. For example, the Bird’s Nest cost $423 million and has an annual upkeep of $11 million. Other hosts have suffered similar problems with the Olympic Stadium in Sydney reportedly costing $30 million a year to operate, and 21 of the 22 stadiums constructed for the 2004 Olympics in Athens being unoccupied and left derelict.
There are stadiums built specially for the World Cup in both South Africa (2010) and Japan (2002), which are reportedly mainly unused and operating with financial losses. In Brazil, there is a risk the new stadiums may have a similar fate. For example, the stadium in Manaus reportedly cost $300 million and accommodates 42,000 people, but was built for just four World Cup matches and a team currently playing in the fourth tier of Brazilian football.
Statistics can again be used to praise or disparage the environmental efforts in Brazil. The new stadium in Manaus contains energy-efficient heating and cooling systems, but with one in four houses in the area reportedly without access to running water, it can be questioned if this is money well-spent. Likewise, carbon credits have been donated by companies in exchange for “green seal” sponsorship deals, but these barely make a dent in offsetting the total estimated carbon emissions from the travel and accommodation of players and fans moving between 12 stadiums in such a large country.
The 2014 World Cup in Brazil is the first to have a comprehensive sustainability strategy, which includes waste management in stadiums, an international forum on social development through football, and a carbon offsetting program. After the World Cup, FIFA also intends to publish an externally assured sustainability report utilizing the guidelines of the Global Reporting Initiative (GRI). Such commitments are laudable, and it is clear that these key issues are receiving greater prominence in the bidding process. However, with the 2022 World Cup host Qatar already facing criticism for exploitative labor practices and allegations of corruption, it is questionable how strong the commitment really is.
On the other hand, there have been some success stories. The London Olympic stadium will now be rented by West Ham football club and the London Aquatics Centre has been converted and opened for community use. However, these transformations come at additional cost and there is a clear need for long-term planning and consideration of multiple sustainable stadium “exit strategies.”
Assessing a country’s sporting legacy as the result of hosting an international tournament is particuarly difficult, especially in knowing when and how it should be measured. There are many intangible benefits associated with winning and hosting these events, including the “feel-good” factor and boost to national pride, that the figures alone will fail to recognize.
In addition, there can be wider social impacts on the local community. In the lead-up to the Olympic Games, certain sports may receive additional funding, which improves facilities and equipment. Hosting a successful event may also increase the sporting activity of a nation and inspire younger generations to follow in their stars’ footsteps, thus improving its citizens’ general health and wellbeing.
A comprehensive post-event evaluation of the economic, environmental, and social impacts of hosting an international tournament is essential and should be undertaken as a matter of best practice to enable future host cities to effectively assess the implications.
The decision to bid and host one of these events can be a high-risk strategy as public opinion can be quick to waiver, particularly given the time-gap between winning and hosting an event. The International Olympic Committee reported that public support for the Japan 2020 Olympics is currently around 70% in Tokyo. However, early protests in Brazil suggest that not everyone supports the decision to host these tournaments, with overall public support in Brazil likely to decline further with its team’s failure to reach and win the World Cup final. The latest defeat may also greatly impact public opinion around hosting the Olympic Games in 2016.
What do you think? Would you be in favor of your country hosting a major international tournament?
Help IFAC improve the Global Knowledge Gateway.
Click to recommend this article.
December 12, 2014 - Accounting Today
December 11, 2014 - Association of Chartered Certified Accountants
December 4, 2014 - Accounting Today
November 21, 2014 - Financial Times
December 10, 2014 - Association of Chartered Certified Accountants
December 4, 2014 - CGMA Magazine
December 4, 2014 - American Institute of CPAs
November 18, 2014 - Public Finance International
November 13, 2014 - Fédération des Experts-comptables Européens – Federation of European Accountants
October 30, 2014 - Fédération des Experts-comptables Européens – Federation of European Accountants
Suggest a Resource, News Item, Event, or Discussion Topic