The Economic Effect of Hosting Mega Sports Events in Developing Countries

Countries all over the world want to host mega-sports events for the benefit of their economies, especially developing countries. Hosting such events can be extremely expensive. However, it can result in a positive effect on the economy of the host government. Some researchers state that this positive effect on the host economy is short-lived, while others say it has its long-term effects. Several countries flourish and see a return on their investment from hosting the mega events, while others pile on debt that may take decades to pay. The Olympic Games have been hosted by developing countries twice, in Mexico (Mexico City) and South Korea (Seoul) in 1968 and 1988 respectively.

The games were attended by 112 countries and represented by almost 5,500 athletes in each of the above-mentioned countries. By hosting the Olympic Games, countries can see an increase in trade which leads to foreign investment. An upgrade in communication and transportation systems, buildings, infrastructure and housing can also be seen. Several countries grow and gain a return on their investment from hosting the Olympics, while some are overburdened with debt that can take years to pay. If we take a look at South Korea, it invested 3,296 million U.S dollars to host the Olympic Games in 1988. The amount of direct investment was 1,534 million U.S dollars, while indirect was 1,763 million U.S dollars.  The investment in holding the Olympic Games started in 1982. The Seoul 1988 Olympic Games pushed Korea into one of the newly industrialized countries (NICs) from developing countries. This shows us that the Olympic Games in 1988 helped Korea become a developed nation, whereas initially, it was a developing country.

Holding the Olympic Games stimulated 7 billion U.S dollars of production, and 2.7 billion U.S dollars of national income from 1981 to 1988. The growth rate of GDP and gross investment kept expanding and climbed up to 18.8% and 23.3%, respectively in Games-year. However, the growth rate of GDP plummeted to 12.2% in 1989 after the Olympic Games. The games also brought employment of 336 thousand workers. Employment had increased by 153 thousand. The Seoul 1988 Olympic Games also faced a loss in budget of about 800 million U.S dollars. In spite of that, Korea has managed to become an industrialized country from a developing country.

The 1968 Olympic Games in Mexico City were the most politically charged Olympics. Tensions had been brewing since the announcement that the Olympics were to be held in the capital. Ten days prior to the Opening Ceremony, students protested against the government’s financial prioritization of the Games rather than the social programs for the students, which resulted in the death of around two-hundred protesters at the hands of the army.

In 2010, South Africa held the FIFA World Cup, successfully showing their ability to hold the sport’s mega event. South America is a developing country, ranking 109th on the Human Development Index, the 7th highest on the continent. Their GDP per capita is approximately $10,000 per year, half of the population is suffering from poverty, which was measured a decade before the event, and the unemployment rate is 24%. South Africa became the first African country to host the FIFA World Cup. The government spent a total of $3.12 billion on transportation, telecommunication and stadia. Although the investment was high, it provided great organizational lessons for the developing country, such as how to budget, manage and implement new mega projects and to improve communication between different spheres of the government. It was also reported by the national government that the 2010 World Cup had a positive economic impact: it contributed $509 million to the 2010 real GDP. Moreover, it created $769 million in benefits for households, of which $228 million was designated for low-income families. The event also had a direct impact on labor: 130,000 jobs were created through construction of stadia and infrastructure and hospitality.

The hosting countries of mega-sports events can take advantage of such events as an urban development aspect. Sports mega events are not only a way of developing sports facilities and transportation but also of changing the urban planning designed by local councils. Holding a FIFA World Cup has positive effects on GDP, which is a significant indicator of economic growth. Statistically, holding a sports mega event has a positive impact on the economic growth of the host country. However, host countries must be aware of the harmful economic conditions if they misestimate their budget.

Alternatively, hosting mega sports events has a downside as well. Many facilities built for the Olympics or the FIFA World Cup can never be fully utilized again. E.g. an 80,000 athletic stadium will rarely ever be full outside of the Olympics. These newly built resources would not be fully utilized outside of any mega-sporting event. Another disadvantage of hosting mega-sports events in developing nations is that some cities have seen an increase in tax post games to finance a loss of putting on the sporting event. The burden of taxes falls on the locals of the city. When a country hosts the FIFA World Cup, many foreigners come to the country, which promotes tourism. In turn, the company may neglect its citizens in the provision of some services in pursuit of making sure that the foreigners are comfortable.

In short, mega-sports events should not be hosted in developing countries. All in all, developing countries should not even be allowed to bid for hosting such mega events. I feel the reason is that developing countries should prioritize other means which are necessary for a developing country, such as education, health etc. These priorities should be put in line first, rather than hosting a mega event. A country’s economy should be stable and it must first evolve into a well-developed nation. Although hosting such events gives a short-lived boost to the economy of the host government, yet long-term benefits hold a greater importance.

Ayesha Shafiq is a student at National Defence University, Islamabad, pursuing a BS degree in the Department of Governance and Public Policy,

SAKHRI Mohamed
SAKHRI Mohamed

I hold a bachelor's degree in political science and international relations as well as a Master's degree in international security studies, alongside a passion for web development. During my studies, I gained a strong understanding of key political concepts, theories in international relations, security and strategic studies, as well as the tools and research methods used in these fields.

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