Written by Brandon Croarkin, GEI Associate
World Cups and Olympics are famed for their ability to boost the national economy of the host country.
Past World Cups
Take South Africa, for example.
The 2010 World Cup in South Africa helped enhance foreign trade, investment and tourism in a country traditionally viewed as dangerous and politically unstable.
The total expenditure in South Africa by tourists who came specifically for the 2010 FIFA World Cup was R3.64 billion (US$340 million). But the total cost for facilities and infrastructure came to R40 billion (US$3.79 billion) so the "return on investment" was very low in a direct sense. However, total awareness of South Africa as a leisure destination increased by 9% following the event.
But what happens when you bring a World Cup to the country that boasts the highest GDP per capita in the world?
GDP per capita compares GDP on a purchasing power basis divided by population. It is a measure of the wealth of individuals in a country. Qatar tops this list with a GDP per capita of $102,100. To put this in perspective, Liechtenstein is 2nd at $89,400 and the US is 14th at $52,800.
The biggest economic impact of the World Cup comes from an improvement of public relations.
Over four billion television viewers tune in for the World Cup. The wealth of Qatar will be seen on a world stage. This will lead to increased tourism and investment in the country.
The infrastructure needed to host the World Cup will also lead to a more efficient economy. In addition to a subway system, numerous roads are being built. After the World Cup is over, these new roads and a subway system will result in time-savings benefits that will boost productivity and increase economic growth in the region.
In order to put together a World Cup in a country without the infrastructure currently in place, a large number of workers are needed. However, in a country with the richest citizens it is hard to find those willing to perform this labor. As a result, massive numbers of poor workers have been imported from foreign countries to build the roads, stadiums and the subway system necessary to host the World Cup.
This means that Qatar won't see the same job creation benefits of hosting a World Cup. As soon as the World Cup is over the laborers will return to their respective countries along with much of their wages.
The new stadiums built will also serve little purpose after the World Cup is over. Annual operation and maintenance of a modern outdoor sports facility can cost over $10 million in the U.S., which suggests that the continued cost of the new stadiums in Qatar could be quite large.
Will Qatar be able to recoup the massive investments needed to host a World Cup? Likely not.
The investments in Qatar's infrastructure will cause short-term increases in GDP, but after the World Cup is over little effects will be seen. The capital created won't produce returns large enough to recoup the investments and boosts in tourism won't substantially affect the GDP of a country that is based on petroleum.
Not all World Cups are economic successes.