Playing Host To The World

The impact major events have brought to the development, economy and brand value of host nations

Issue: Sep 2010

World Cup
The Soccer City Stadium in South Africa: Hosting world events have not only rung in benefits in monetary terms but a boost in infrastructure, jobs and global standing as well

The world has seen a series of major events in recent months, ranging from the recently concluded World Cup in South Africa, to the ongoing World Expo in Shanghai and the inaugural Youth Olympic Games held in Singapore. There’s no doubt that the successful hosting of such large-scale world events would put the host nation or city on the world map, greatly increasing the brand value and recognition of the host nation/city. Besides the intangible rewards, the economic spin-offs from hosting major world-class events are also tremendous. The immense investments in preparing the event venues and upgrading of infrastructure to cope with the surge of visitors have often helped to rejuvenate entire regions. The creation of tens of thousands of new jobs associated with the organization and execution of the event temporarily boosts income levels. Last but not least, the surge in the number of foreign visitors helps to generate extra tourism revenue for the host nation’s economy.

Of course, the level of positive spillovers for a host country depends on many factors. One of which is the actual dollar amount of expenditure incurred by the host countries, from the preparatory stage to its conclusion. The boost to the economy will of course be expected to be greater given a higher amount of spending. The level of development of the host country will also play a part; a developing country hosting a major event should reap more benefits from the expansion or upgrading of its urban infrastructure than a host that is more advanced on the development scale. But looking beyond the quantifiable aspects, hosting mega events have also provided many intangible benefits that may even surpass their direct economic contributions in significance.

FIFA World Cup

Let us start off with the World Cup, a major sporting (and commercial) event that is held every four years, with the most recent one held in South Africa having concluded in July. Over the years, football has evolved into a global sport, with legions of fans all over the world. The recent 2010 Final match-up between Spain and the Netherlands was estimated to have surpassed the 2006 version in terms of viewership, with more than 700 million viewers tuning in to watch the match.

The ever-growing popularity of football has helped to transform the sport into an entire industry that brings benefits in terms of infrastructural development (construction of stadium and transport network), tourism, consumption as well as revenue from advertising, sponsorship, licensing and TV rights.

A report by UBS Investment Research earlier this year estimated that the 4-year preparation for the World Cup has added between 0.5 per cent and 2.2 per cent to the GDP of South Africa (depending on which infrastructure projects one considers). Overall it had helped to create more than 300,000 jobs since 2006 – a 2.7 per cent contribution to employment figures as well. It was also reported that on average, the three previous World Cup hosts recorded an additional growth of 1.8 per cent during the year of the tournament compared to a year before.

Besides the direct economic benefits, the platform to showcase the progress that South Africa has made 16 years after the end of Apartheid may prove to be even more meaningful if more foreign investments can be attracted as a result of its increased international recognition brought about by the World Cup.

Olympic Games

The 2008 Olympic Games hosted by Beijing was widely perceived as the ‘coming-of-age’ party for China, as its economic heft has increased its global influence over the years. The impressiveness with which the Chinese hosted the Games was a big boon to China’s international profile as a major world power.

The large scale efforts in preparation for the games have helped to rejuvenate Beijing’s cityscape and infrastructure with the addition of structures like the new passenger terminal at Beijing’s main airport, new subway lines and, not to mention, the architectural marvels like the ‘Bird’s Nest’ Stadium and the new national theatre. The transformation of Beijing due to the Olympic Games has helped to raise the Chinese capital’s global standing. Just as important is the fact that the authorities appear to have long-term objectives in mind, as most of the infrastructural outlay in preparation for the Games will provide returns for the city for many years to come.

The Bund
Thanks to the World Expo, Shanghai has been given a spruced-up look

World Expo

Organizers of the World Expo in Shanghai have put in a lot of effort into sprucing up Shanghai in preparation for the event. Again, as with the Beijing Olympics, a major portion of the outlay for staging the Expo is spent with the city’s future growth in mind as the local authorities added a new airport terminal, new metro lines, roads, parks and public areas.

With the magnificent Chinese Pavilion incorporating the use of renewable energy and the wide application of green technology at the event, the Shanghai Expo not only demonstrates the pride and ambition of the entire country but also a message of innovation, social change and environmental awareness.

F1 Grand Prix

The first-ever night race held in the history of Formula One generated a lot of excitement as the city racetrack helped introduce many famous landmarks of Singapore to the rest of the world. Clinching the rights to host the F1 was a major milestone for Singapore as it is arguably the third-most followed sporting event in the world after the World Cup and Olympic Games, with an average viewership of 160 million per race.

Singapore F1 Night
Singapore will be hosting its third F1 night race this month
Photo credit: Singapore Grand Prix

As is the case with the major events mentioned above, the worldwide publicity that the race is able to generate for Singapore’s image as an exciting, vibrant and advanced financial centre and tourist destination far outweighs the costs of staging the race.

Not Just Dollars and Cents

To be fair, hosting a major event brings with it attendant costs and sacrifices. There are, of course, instances where the host countries have had to cope with high costs even after the conclusion of the events - for example, the 1978 Montreal Olympics and 2000 Athens Olympic. But as the above examples have shown, if a long-term vision of development is incorporated into the planning of such mega events, the benefits to be reaped are likely to be immense.

Besides bringing in economic benefits, major events can help to unite the people of the host country, foster national pride and raise the host country’s global standing. So, from that point of view, their importance to the host countries’ development is difficult to overstate. While many people would naturally judge the usefulness of hosting such mega events from an economic perspective, focusing solely on the dollars and cents somehow misses the point when we consider the intangible, but no less significant, impact of staging them as well.

Article contributed by Andre Lim and Terence Yap of the CapitaLand Economics Unit

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