Mad move or masterstroke? The decision to award the rights to host football's 2018 and 2022 FIFA World Cups to Russia and Qatar, respectively, may have been controversial, but the governing body’s move to break into new frontiers could provide huge opportunities for infrastructure development in these nations.
Upgrade for Russia
Pundits backing Russia’s hosting of the 2018 event believe the impact will be greatest in stadium construction (16 stadia in 13 cities are scheduled for refurbishment or construction at a projected cost of $3.8bn), as well as in airport, transport and hotel upgrades.
After the country's successful bid was announced, one of its largest stock exchanges, the Micex Index, rose as investors speculated on companies such as Severstal and Novolipetsk Steel, which stand to benefit from any decisions to build infrastructure for the event.
But nothing should be taken for granted. “[Russian prime minister] Vladimir Putin said that the budget will pay about Rbs300bn ($10bn) for preparation, which includes infrastructure,” says Dr Alexei Deviatov, chief economist at Russian investment and brokerage company Uralsib Capital. “This represents 0.6% of GDP, which will be paid out over several years.” He adds that the government’s spending on roads will be Rbs386.6bn in 2011, Rbs347.2bn in 2012 and Rbs395.2bn in 2013. On transport, it will spend Rbs212.3bn in 2011, Rbs163.1bn in 2012 and Rbs158.1bn in 2013. On sport, the government will spend Rbs42.5bn in 2011, Rbs28.8bn in 2012 and Rbs25.9bn in 2013.
“The government hopes to attract private investment in infrastructure, yet given that there’s a pretty bad investment climate in the country, it is not clear if it will manage to do so,” says Mr Deviatov.
Russia’s planned spend for 2018 will inevitably bring comparisons with the estimates it gave in its 2014 bid to hold the Winter Olympics in Sochi. “The biggest challenge is efficiency of government spending,” says Mr Deviatov. “The initial estimate of the cost to host the Sochi Olympics was Rbs316bn, which has now increased to Rbs950bn.”
Qatar aims to silence the critics
Critics of Qatar’s successful bid to host the 2022 World Cup point to the country’s small size, lack of suitable infrastructure and scorching temperatures.
But with 11 years until kick off, it has time to prepare itself, developing facilities from the ground up. Ambitious plans have already been outlined, with many infrastructure construction projects already well under way, including a $25bn rail and metro network and the completion of the $10bn international airport in 2012.
“While we believe Qatar was committed to close to $100bn in infrastructure-related investments regardless of the World Cup, winning the bid strengthened its commitment and accelerated project schedules as Qatar needed to prove to FIFA it could meet its commitment to infrastructure readiness,” says Shady Shaher, Standard Chartered’s economist for Middle East and north Africa global markets.
Qatar’s World Cup preparations include the construction of nine new stadia and the refurbishment of another three. The proposed 86,000-capacity Luail Stadium is earmarked for completion by 2019, and a new metro connecting each stadium should be in place by 2017.
Solar-powered air-conditioning systems will also be installed and more than 90,000 hotel rooms will be added to the country's current stock of 50,000 by 2022.
Qatar’s win could also boost its GDP. “This is likely to be bigger than the boost in previous World Cups as infrastructure spending is much higher and the economy is much smaller – Qatar will be the smallest country ever to have hosted the tournament,” says Yousuf Al Jaidah, director for strategic development responsible for asset management and banking at Qatar Financial Centre Authority. “Additional benefits could come from extra consumer expenditure, mainly as a result of increased tourism... 400,000 people travelled to South Africa for the last World Cup, equivalent to one quarter of the Qatari population, giving a massive short-term boost.”