World Cup Economics: Qatar’s Record Spending Is Unlikely to Pay Off

Today’s guest columnist is Andrew Zimbalist, professor of economics at Smith College.

What will be the economic impact on Qatar from hosting the World Cup? Available data and past experience suggest a decidedly negative outcome is likely. Consider the evidence.

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FIFA asserts that it will take care of all operating costs during the one month of competition. The single largest cost is $440 million in prize money that will be paid out, with $42 million going to the winning team. All teams that do not emerge from the group stage will receive $9 million each. It is notable and deplorable that in the last women’s World Cup in 2019, the total payout in prize money was a mere $30 million, approximately 1/16th the men’s payout.

The other major operating cost items include $247 million for TV operations, $326 million for costs of the competing clubs and $207 million for workforce management. The total operating costs are budgeted at $1.7 billion, which FIFA will cover, but FIFA does not share any of the revenue from international television, tickets, hospitality and corporate sponsorships. These revenues are projected to total $4.7 billion.

While it remains nebulous, it appears that Qatar will have to pick up a healthy share of the security costs (which could easily exceed $1 billion) as well as a variety of operating costs.

The bottom line for FIFA is $4.7 billion in revenues and $1.7 billion in costs, for a net gain of $3 billion.  FIFA will take approximately 10% of this for its own operations and will distribute the balance to the 200-plus national soccer associations across the globe to promote the sport’s development.

What is the bottom line for Qatar? Media accounts indicate Qatar has spent at least $220 billion on hosting the World Cup. Less than $10 billion of this is on the seven stadiums Qatar built for the games and the one stadium they renovated. The rest 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, inter alia.

To put the $220 billion in context, Qatar’s GDP is approximately $180 billion in 2022. They were awarded the World Cup back in 2010, so they have averaged spending $18.3 billion a year, or over 10% of their GDP. This would be the equivalent of the U.S. spending $2.3 trillion a year for 12 years. The point being, this was a massive commitment by Qatar.

Of course, while the $220 billion investment was connected to the World Cup, some of this investment makes a long-term contribution to Qatar’s development, and some of it is either extraneous to this development or of very low priority. For instance, a metro or highway that connects two stadiums on either side of Doha might make a very important contribution to transit convenience during the games, but represents next to no contribution to Qatar’s economy.

It is also important to observe that the costs of hosting will continue to increase after the competition is over. Parts of some stadiums are scheduled to be dismantled and shipped elsewhere. Stadiums and other buildings that remain will require millions of dollars annually in operations and maintenance expenditures. (Never mind that Qatar has only 300,000 permanent residents and little soccer history.) These structures will continue to occupy valuable real estate, foreclosing other potential uses. Hotels built to house World Cup visitors will lie largely idle. Guest workers will be evicted.

All the above is on the cost side of the ledger. What about the revenue side? Qatar states that it is expecting 1.3 million World Cup visitors. Let us assume that on average each visitor stays four days and spends $300/day. Let us also assume that normal tourist and business travel is not negatively affected by the anticipated congestion, higher prices and security concerns. Under these assumptions, Qatar would reap $1.56 billion in revenue from hosting.

Of course, Qatar is hoping for other benefits. There’s the standard claim that this mega event will be watched by billions of people worldwide, and it will put Qatar on the proverbial world map, eventually boosting tourism, foreign trade and investment. Perhaps it will also give Qatar a more significant 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 a two-way street. Qatar is getting a lot of publicity, but most of it is not positive. It bribed its way into getting hosting rights. It imported tens of thousands of foreign workers and subjected them to its oppressive kafala labor system, reportedly leading to several thousand deaths. Its torrid temperatures forced the movement of the games from the summer to November/December. Its uncompleted investment projects will be widely visible. Its eviction of the foreign workers from their housing to accommodate soccer fans and eventually from the country, among other embarrassments, are unlikely to build positive soft power for Qatar.

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

Zimbalist is the author of numerous books on the economics of sports, including Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup.

 

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