THE ECONOMICS OF FIFA – GOAL OR PENALTY?

about 1 year ago
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By Ruma Dubey

Goal!

Finally a new word will replace ‘Out’ and the cricket mania.

Football mania seems to have gripped the entire world, with all gearing up to wake up at eerie hours watch matches with bleary eyes and yet go through the other routines of life. Right from restaurants to clothing, even birthday parties, cakes, everything is themed around FIFA. Names of Dhoni, Kohli, Unadkat, Willamson will be replaced by Messi, Ronaldo, Neymar, Salah,  David de Gea, Eden Hazard and many more.

Now that’s a good thing – getting a break from cricket and the whole world getting united for four weeks under one sport- football.  Like cricket its very big  money – right from the fat paychecks of the players to the host country spending on putting up this huge sporting event, the costs have only gone up manifold. Brazil, the host of the 2014 FIFA had its share of controversies over financial irregularities and graft. This time around the host is Russia and one could not help but wonder how Putin pulled this off. In fact Russia and Qatar being selected as hosts surprised the entire world but then when decisions are ruled by politics and money power, anything would do!

In Russia there is nothing like protesting or agitating but there is unrest over precious money being put into hosting this event. The tab for hosting this world event is staggering. Brazil’s total tab came to around $15 billion. We never get any numbers from Russia, officially. But the calculation on the back of the envelope puts it around $11-12 billion. And not to mention the fact that cronies of Putin got all the lucrative and big Govt contracts. The funding of the event comes predominantly from Russia’s federal budget, which makes up 57.6% of the sum. Another 28.8% is being raised by private and state-run companies and a further 13.6% is derived from regional government budgets.

All this when the country, as we all know is reeling under poverty and mass scale human rights violations. Thus this diversion of funds comes at the cost of poor healthcare, lack of sanitation, clean drinking water, poverty and poor education system.  And then the big question –what happens after four weeks? What would be the use of these massive stadiums? They too will turn in to veritable ghost towns, catching rust and decay as the years roll by. It will stand for what Russia built but that’s about it.

Many will argue that hosting such a mega world event creates jobs, helps build infrastructure and brings economic prosperity. But these benefits are neither perpetual nor sustainable – the moment the event is over, jobs are gone and the infra build of stadiums stands out like a sore thumb. The economic benefits are for that year – later the Govt and the people are left paying up for this four week long extravagant party. If the same money, $12 billion had been invested in the economy and business, more permanent jobs and economic benefits would have been created.

Take a look at South Africa today, which hosted the FIFA in 2010. Its $600 million stadium in Cape Town stands forlorn and empty, now available for private functions, birthdays, marriages, anniversaries and yes, a place for the tourists to go to for a fee of $4/head. There is an occasional Justin Beiber concert  but its simply not enough to recover costs and like a white elephant , it now eats away $6 to 10 million every year. Residents feel that it should be demolished and save some money. Economically, there has been no major benefit, not even in the year in which FIFA was hosted.

Germany’s Commerzbank has done a study on this and stated categorically that apart from pride of being a host, there is no strong economic case for holding the tournament. The German bank scrutinized the GDP of host countries, two years before and two years after the event and found that there was no obvious economic benefit for hosting FIFA.

You check out any country which has hosted such events, Olympics and FIFA and you will see that it has been more of a drain rather than a benefit.  One cannot help but wonder why the Govt’s work towards subsidizing these events when these clubs and sporting companies can fund these themselves, more so with MNCs sponsoring such events.

There is no doubt that developing countries simply should not pick up such massive events, pushing themselves into fiscal turmoil. It is the citizens who suffer as Govt’s spend billions of dollars on entertainment, for that one brief flash-in-the-pan coverage.

The Olympics IOC or the FIFA does not care how much the host country pays as they make truck loads of money from selling TV and merchandising rights; for them keeping costs low has no meaning.

Does that mean that the world should not have large sporting events like Olympics or FIFA? There are many who actually think so but that does not make sense – we cannot remove all the fun out of life. But at the same time, do we need such events merely to build infrastructure?

A look at the following few suggestions:

  • Hold events in stadiums/ locations which are already built
  • Build stadiums which can be dismantled
  • With all these events being major TV events, why build such large stadiums?
  • Make the IOC and the FIFA pay for development – see how costs will come down.
  • Share the TV and merchandising rights with the host country
  • No subsidizing of such sporting events – why burden people for providing world entertainment?
  • IOC and FIFA should reform the bidding process
  • Cost of hosting has become unsustainable – bring that down first to make these events leaner, smaller and smarter.

And yes, India after the Common Wealth Games can neither afford such events nor do we have the space for this. Not to mention, the loss of face.

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