The Business of Asian Games and other major sporting events

The 18th edition of the Asian Games which is currently ongoing and co-hosted by the cities of Jakarta and Palembang, is arguably the largest multi-sports event in the world. Over 11,000 athletes from 46 countries are taking part in 40 sports. India has sent a contingent of 570 athletes who have done well in wrestling, rowing, tennis and shooting. Unfortunately, cricket was cut from the Games when the number of sports was whittled down from 42 to 40 to help the organisers contain costs.

The last summer Olympic Games in Rio saw more than 11,000 participants from 205 countries in 28 sports.

Based on a University of Oxford study by Flyvbjerg & Stewart, since 1960, debt and massive cost overruns have characterised hosting of major games. This is with the exception of the Los Angeles Games of 1984 where the re-use of existing facilities and an unexpected spike in broadcast revenue - up almost four-fold from Moscow in 1980 - helped turn in a profit.

Montreal took 30 years to repay its debt from the Games of 1976 and the costs from hosting Athens 2004 contributed to Greece's bankruptcy. The two most expensive games ever hosted are the Beijing summer games of 2008 at USD 45 billion and the USD 50 billion Sochi winter games of 2014. In contrast, revenues were a meagre USD 3.6 billion and USD 1.6 billion, respectively.

Due to the huge capacity of some of the sports venues and stadia as well as specialised nature of some of the facilities, these are mostly left unused and dilapidated once the games are over. In some cases, saddling the host city with millions of dollars to maintain the mostly underutilised facilities. Sydney spends USD 30 million a year maintaining its Olympic Stadium, Beijing spends USD 10 million to maintain the "Bird's Nest" stadium and Rio has yet to find buyers for the four thousand apartments which made up the games village, struggling to auction off venues to private owners leaving the city with a USD 14 million annual maintenance bill.

There's also the social and opportunity cost of hosting such events. Money which could have been spent on social programmes, health and education, priorities especially for emerging economies.

India itself was not spared. Amid allegations of corruption and mismanagement, India's budget for hosting the 2010 Commonwealth Games in New Delhi spiralled up to USD 1.7 billion from an initial projection of USD 240 million and the final figure was somewhere between USD 4 billion to USD 10 billion, depending on which report one believes. Many facilities have been left either unused or underutilised since.

So, why are countries still so keen to host these money-draining sporting extravaganzas? Will Indonesia benefit from hosting these Games?

Jakarta and Palembang were not among the cities that bided for the Asian Games. Hanoi won the bid from Surabaya and Dubai in 2012. However, just about 18 months later, Hanoi had a change of heart. Citing economic woes and a lack of funds and preparedness, they withdrew from hosting the event which left the Olympic Council of Asia (OCA) in a lurch. They sent out an SOS which Indonesia answered. India fleetingly considered putting its hand up but lack of governmental support, probably due to the legacy of 2010, put paid to the idea.

Jakarta and Palembang had the advantage of having facilities leftover from co-hosting the smaller Southeast Asian Games of 2011. Palembang is more than 500 kilometres from Jakarta, and on the island of Sumatra whereas Jakarta, the capital city is on Java. Palembang is hosting 10 sports and Jakarta 30. Due to the lack of time, Jakarta-Palembang, which had less than four years to prepare due to the sudden withdrawal of Hanoi, wisely chose to use mostly refurbished facilities instead of building new. For example, the main Gelora Bung Karno (GBK) Stadium was first used the last time Jakarta hosted the Asian Games in 1962.

However, the athletes are being housed in a spanking new apartment complex in Kemayoran (Northeast of central Jakarta) consisting of 10 towers of over 30 storeys, each consisting of 7,426 units and which can house over 20,000 people. This will be sold as apartments to the public after the Games. In Palembang, the 3,000 athletes and officials are being housed in Jakabaring Sports City where the events are being held.

As a result of the re-use of most facilities, it is unsurprising then that although estimated to cost US 700 million, the cost at the moment is estimated to be around USD 350 million by the Indonesian authorities. Underspending is highly unusual for a major sporting event.
Regardless, USD 350 million is still a lot of money especially for a developing country where the Asian Development Bank (2015) estimates that 47% of its 250 million people live below the poverty line which is drawn at an expenditure of USD 25 per month.

So how does Indonesia go about justifying spending this much money on the Games?
The government estimates that hosting the games will benefit the host cities to the tune of USD 2.8 billion. The Jakarta Tourism and Cultural Office expects half a million additional visitors for the Games and is also hoping that positive word of mouth will result in meeting their target of 3 million visitors in 2019. Besides padding the revenue of the recreation and entertainment, hotel, food and beverage industries, Head of Indonesia's National Development Planning Board, Bambang Brodjonegoro, says that hosting the games will indirectly benefit job opportunities, improve income and help economic growth.

The Games also benefitted residents as the cities were spruced up and infrastructure projects including mass rapid transit systems were brought forward. Indonesia also has the ambition of possibly bidding for the 2032 Olympic Games and a successful Asian Games will bolster their credentials. In other words, it will help Indonesia announce its arrival on the world stage, very much like China in 2008 and Russia in 2014.

Whether these benefits will be realised remains to be seen. Past studies have shown that jobs created are usually temporary, tourism benefits are debatable as some avoid the city as a result of over-crowding during the games and there is, in most cases, no long-term positive impact on the economy or the GDP of a country.

(ANI)