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Why mega-events are not worth the risk for developing countries

September 23, 2010 - Travel Wire Asia

As JF Beck and Bala Murali Krishna point out, the Delhi Commonwealth Games are on shaky ground right now. In case anyone is wondering how it might have come to this, there are some clues sprinkled in this article, notably:

“The IOA also rejected Fennell’s proposal of forming a technical review panel to oversee preparations for the October 2010 games.”

However, of much broader importance is how governments come to make decisions to hold mega-events in the first place. As I wrote back in July:

“There are two kinds of studies into the economic benefits of large sporting events: studies paid for by Government departments before the event which show they will be a good thing, and independent studies carried out later that show they were not.”

Somewhere or other – though  not anywhere on the internet that I could find – there is a PriceWaterhouse Cooper study that reportedly shows the Delhi Commonwealth Games would generate US$6 billion in business for India. As this article explains over-excitedly…

“But the real revenue will come from the surge in tourism that the Games are expected to catalyze. According to one estimate, more than 2 million foreign tourists and 4.5 million domestic tourists are likely to arrive in Delhi due to interest promoted by the Games. “

Now in South Africa, it turns out the locals were disappointed by the turn-out for the World Cup, as demonstrated by the empty seats at some games.

So how about the Delhi Commonwealth Games? Turns out that the early hype about 2 million tourists was just a little optimistic:

‘A few years ago, it was estimated that 100,000 visitors would visit the country during the Games. But now, the estimate is a meagre 10,000,’ said Rajji Rai, president of TAAI, on the sidelines of a function here last week.”

An even more sober assessment of the value of mega events in developing countries can be found in this study by Vinnayak Uppal:

“… though the benefits of hosting these events are dubious at best, the factors seem to work expressly against developing nations. The experience that a developing nation faces is vastly different from that of a developed nation. This is especially pertinent in the Indian context as we prepare to host the 2010 Commonwealth Games, and make a push to host the 2014 Asian Games, and the 2016 Olympic Games.

 

… There are very good reasons for why developing nations are more adversely impacted by such events. They can be listed as:

 

1. High infrastructure development costs.

2. Under utilization of facilities post event

3. High opportunity cost of capital

4. Unable to attract large numbers of spectators.”

Uppal notes that some nations appear to be getting more reckless with their spending on sport, with this alarming example:

Nigeria’s government recently spent $330 million on a new national soccer stadium, more than the annual national government expenditures on health or education. In developing nations the opportunity cost of developing sports infrastructure is very high, as the money can be used for more pressing needs.

 

Now let’s hope that India can prove us all wrong and salvage something from these Games. However the lesson here is that hosting mega events is like gambling with public funds – and people from developing nations are both least able to afford it, and the least likely to win.

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