Image Source: Ministry of Culture, Sports and Tourism, Heo Manjin
Hosting the 2022 FIFA World Cup was one of Qatar’s biggest achievements of the past decade. However, instead of being able to make the most of the potential benefits, the country was left scrambling to fulfill the obligations of a post that ultimately made it worse off than when it first made its bid in 2010.
By Ananya Mittal
In 2010, Qatar made history by becoming the first Middle Eastern country to host the FIFA World Cup in 2022. It further went on to set another new record; it invested approximately $220 billion to make preparations for this event, far exceeding the $15 billion spent by Russia in the 2018 edition of the tournament, making it the most expensive World Cup in history. It’s no surprise why Qatar took such measures; hosting such a mega-scale event brings with it a multitude of benefits including increased tourism, employment and trade among others that many countries hope to gain much from. However, whether Qatar will be able to reap these rewards or not is an entirely different story.
Expectation: Large-scale spending will lead to the growth of the infrastructure sector and attract domestic and foreign investment.
When Qatar won the bid to host the World Cup, it had neither the stadiums required to host matches nor the housing and transport facilities to host the millions of fans who would come to watch said matches. It is no surprise, thus, that it undertook large infrastructural projects to meet the requirements to host this competition. Usually when such projects are involved, local companies and foreign investors get involved because of their long-term profitability. Hence, the World Cup is said to lead to the development of infrastructure and increased investment, that according to economic theory, also leads to GDP growth in the short term and long term.
However, Qatar is far from realizing such benefits for a variety of reasons. The first stems from the fact that several of its proposed projects, such as diplomatic disputes and the pandemic, have not materialized in the context of ongoing issues. For example, the nation claimed that there would be 12 stadiums when it bid to host the tournament, a plan that was soon modified to a reduced number of eight stadiums instead. Additionally, several transportation proposals like high-speed trains connecting Doha with Bahrain and Saudi Arabia or an underground tunnel linking the commercial center to the airport did not come to fruition.
Alternatively, some of the plans that were successful were either extraneous or have contributed very little to Qatar’s long-term development. For example, a metro or highway that connects two stadiums on either side of Doha might ease transit during games, but does not significantly expand Doha’s existing public transportation in a manner that might increase productivity in a meaningful way. Furthermore, the stadiums and other buildings that were built solely for the World Cup will occupy valuable real estate and serve little purpose after the tournament ends. Instead, they will present as idle and redundant structures, requiring millions of dollars in operations and upkeep for a country that has only 300,000 permanent residents and little to no soccer history. Even while considering infrastructure that will contribute to Qatar’s economy such as the upgrade of its airport, a light railway, increased hotel capacity and so forth, much of this was already being developed before and independent of its winning the right to hold the tournament. Simply put, investment related to the World Cup will increase Qatar’s investment over the next 10 years by a maximum of 4%, which for an investor, isn’t worth much. Hence, infrastructure built specifically for the World Cup threatens Qatar from achieving substantial economic growth and making the most out of hosting the World Cup.
Expectation: A large influx of migrant workers and tourists will increase available housing space and occupancy rates leading to stronger cash flow generation
One of the most important provisions that a country needs to ensure is available when deciding to hold such a mega-scale event is enough housing to accommodate all the arriving workers, tourists and fans. Qatar was no exception, with the supply of new residential units speeding up as compared to previous years. For instance, Ezdan, one of the biggest real-estate companies in Qatar, planned to release over 4,000 new residential units in 2022, bringing its total rented units to about 29,000, which coupled with higher occupancy rates and augmented rental demand and rates, would generate increased cash flow in the economy.
However, supplying sufficient housing to match heightened consumer demand proved to be a tall order for Qatar. In fact, Farouk Soussa, Citibank’s chief economist for the Middle East, claimed that the country would have had to increase hotel occupancy 15-fold to accomplish a 70% average occupancy rate for the World Cup, a task that raised a plethora of issues for Qatar. For example, many fans found their accommodations in containers that were hastily set up in a dirt field near the airport, forming a sea of colorful metal boxes that resembled “a one-story Lego town.” Others paid exorbitant prices for hotels, apartments, cruise ships or desert camps to stay at, a move that increased rent so much that many local tenants were driven out of their houses. Even still, Dubai and nearby locations had to carry much burden to house foreign visitors who weren’t able to find accommodation in Qatar. Hence, without being able to reach expected rental space and occupancy rates, Qatar missed out on increasing cash flow for its businesses and the economy as a whole.
Expectation: Hosting the World Cup significantly reduces unemployment figures for the host country
With the need for new and improved infrastructure and other service demands, projects undertaken for such mega-scale events usually lead to additional employment, once again resulting in both short-term and long-term economic growth. In fact, Qatar predicted that hosting the FIFA World Cup will create more than 1.5 million additional jobs, especially in sectors like hospitality, real estate and construction. To make these jobs more attractive to workers, the government introduced measures to improve the safety and living conditions of workers, including regulations restricting the hours workers worked in the heat of the summer and new labor laws ensuring minimum wages.
However, this proved insufficient with evidence proving that workers still face exploitation and a litany of abuses of their rights including retaliation by employers when trying to leave the job, non-payment of wages, a lack of a regulatory system that punishes employers committing crimes against their workers, and in worst cases, worker deaths. Furthermore, over 2 million migrants work in Qatar, many of whom only came to the country because it won the right to host the World Cup. It can only be assumed, then, that they will return back to their countries of origin upon the completion of the tournament. Thus, with this decrease in available jobs and workers, the short-term inflated labor force participation and employment numbers will decrease, showing little to no improvement from the situation before Qatar was awarded the right to host the World Cup.
Expectation: Qatar’s decision to ban alcohol sales from stadium perimeters will harm tourism prospects and negatively impact the economy
One of the major sources of revenue for host countries arises from the influx of fans whose spending would boost the growth of the country’s transport, hospitality and tourism sectors. One industry that particularly booms within this period is the alcohol industry due to high consumer demand from the fans. It came to the chagrin of many, however, when FIFA announced that alcohol would not be sold at match venues, with the exception of some high-end luxury suites and specially licensed restaurants and bars. “It’s terrible news. It’s part of the environment of the stadium, the beer” said a fan named Diego Anbric, reflecting the sentiments of many traveling to watch the World Cup.
However, while the 2022 World Cup would have normally seen fewer fans under such a restrictive regime, the release of the announcement just two days before the commencement of the event, a step that was harshly condemned by many around the world, was deemed to be too late to influence fans’ decisions. Thus, Qatar retained its inflow of tourists, even attracting more than 2.45 million people during the first 48 matches of the World Cup. Even when considering the impact of the announcement on Qatar’s alcohol industry, the country is hardly a key market for any alcohol brand, with the public consumption of alcohol being an offense that brings up to six months in prison and a fine of more than $800. This mitigates any potential impact that this decision could have, since alcohol is a negligible component of Qatar’s economy due to cultural and political reasons. On the other hand, such a move portrays Qatar’s determination in maintaining its constrictive laws, which may not be attractive for tourists looking to visit the country even after the end of the World Cup. This could diminish the future inflow of tourists and migrant workers, harming Qatar’s economy in the long run.
Qatar’s World Cup-related decisions and actions have had varying degrees of economic outcomes, ranging from harmful to negligible consequences. However, from these arguments, it is apparent that many of the theoretical and expected advantages that a host country of a mega-scale event such as the World Cup enjoys are not applicable to Qatar. This, coupled with the contentious controversies involving violations of human rights that the country is embroiled in, makes it very hard for Qatar to gain anything significant from hosting the FIFA World Cup. In fact, it could be a decision whose repercussions the country’s economy will have to face in the years to come.