DOHA: Qatar’s economic trajectory over the next decade will be profoundly influenced by the investments and other activities linked to hosting of the FlFA World Cup in 2022, says the General Secretariat of Development Planning (GSDP).
The scale of planned spending relative to the size of the host economy and population is unprecedented for a global sporting event. The actual profile of impacts will depend on decisions about the design, sequencing, synchronisation and management of projects, GSDP said in its ‘Qatar Economic Outlook 2011-12’.
Until 2012-end, however, tournament-related spending is expected to make little economic impression, and most of the 2011 projects, such as new stadiums or other facilities, are unlikely to move far from the drawing board.
Over the longer term, and well beyond 2022, hosting the World Cup will leave an indelible imprint on Qatar’s economy and its broader development.
Total investment spending tied to the event will make significant claims not just on public financial resources but also on Qatar’s scarce land, its environmental resources, and its institutions and people.
Estimates of planned spending vary enormously. Base outlays on stadiums and facilities are put at $9bn. Including broader development projects within the scope of activities generates much larger spending numbers, ranging from $45bn upward.
These broader projects, including Lusail City development and the Doha Metro, were conceived independently of the World Cup and would have proceeded in any case. Few global sporting events or mega investment projects come close to costing what the plans outlined initially. Data from the National Audit Office of the United Kingdom suggest that actual spending on the London Olympics in 2012 may be at least three times the value of the bid made in Singapore in 2005—partly due to an expanded project scope.
Elsewhere, mega sporting events have left costly debt in their wake, with no obvious legacy benefits, such as Athens’ hosting of the Olympics in 2004.
In contrast, Barcelona’s hosting of the Olympic Games in 1988 is widely seen as catalysing a beneficial transformation of that city.
The impact of the 2022 World Cup on Qatar cannot—and should not—be reduced to a single statistic, such as the expected change in real GDP over a given period. Impacts will be multi-dimensional and differentiated over time. Critically, outcomes are not predetermined.
The choices that Qatar makes about how to deliver its commitments and the way in which it leverages new opportunities will matter.
In economic terms, the impacts of the World Cup will register at three important levels.
Macro-economic impact: In the short and medium run (that is, during the building phase of projects) impacts on output and income will be felt primarily through the “multiplier impacts” of project spending and of induced changes in other components of demand.
The stimulus retained within Qatar’s economy will, however, be diluted by the high import content of materials and capital equipment, and by high levels of outward remittances of workers’ wages and company profits.
GSDP’s estimates suggest that, in the short run—notwithstanding the stream of benefits that would flow from assets in the long term—an additional dollar of investment may generate only 30-50cents of additional income that will stay in the economy.
Chokepoints in infrastructure, as in the past in Qatar, could spur inflation, as could the effect of spill-over demands (from the influx of workers induced by the preparations for the world Cup) on the non-traded goods and services sector, where supply responses might be slow. And, in that funding of new investments expands domestic liquidity, it will add to upward pressures on prices.
Fiscal impacts will depend on the share of investments funded directly by the state, and on the structure of that funding. Given the size of programmed spending relative to the economy—as well as the transitory nature of the event and linked development activities—careful investment coordination, fiscal planning and coherent debt and liquidity management will be needed to attenuate macro-economic stresses and risks.
Structural impact: Almost all economic activity linked to the event will be outside the hydrocarbon sector and will thus present opportunities for diversifying and developing private activity.
But outcomes will depend on how successfully Qatar leverages its advantages and acquires new capabilities. Areas of opportunity include engineering, construction, leisure services and media, as well as urban services such as transport.
Mechanisms to capture and enlarge the benefits could include strategic joint ventures of local entities with foreign partners; procurement policies that favour small domestic enterprises; focused training and secondment programmes for Qatari citizens; and direct investment in and acquisition of promising technologies, such as solar cooling systems.
Institutional and human impact: As well as the hardware investments, a successful World Cup will require Qatar to strengthen its institutional and human capabilities—public and private.
Planning and delivering new infrastructure in ways that provide value for money and that contribute to the long-run development of the nation will require tighter coordination within and between sectors, improved tools for regulation and decision-making as well as the removal of barriers to business investment. The World Cup presents myriad opportunities to help strengthen Qatar’s embryonic small and medium-sized enterprise sector.
Qatar’s commitment to deliver a successful FIFA World Cup in 2022 will entail challenges on multiple fronts but will also create many opportunities. A durable legacy requires Qatar to use the event to catalyse new areas of economic strength that will create durable value and wealth, the GSDP said in the ‘Qatar Economic Outlook 2011-12’.
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