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Did Brazil benchmark China on staging the Olympic Games?


Comments / {{hitsCtrl.values.hits}} Views / Tuesday, 9 August 2016 00:01


  • Lesson for Sri Lanka

The Organising Committees of the Olympic Games (OCOGs) always highlights that every city that has hosted the Olympics since 1984 has broken even. However, the problem is that the OCOG budgets refer only to the operating costs, not the capital costs. Those capital costs (the stadiums, the Olympic village, the media centre, infrastructure, etc.) represent the greatest expenses but are not included in the OCOG reports which is what everybody forgets. 

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Rio Olympic Games will costs $ 18 billion; a country in recession can have severe ramifications with such expenditure unless the Beijing model is followed



Past Olympics

The 2008 Beijing Olympics total budget exceeded $ 40 billion. The London (2012), the cost initially was estimated at $4 billion but the final number exceeded $ 20 billion. South Africa spent almost $ 12 billion to host the 2010 World Cup, while Merrill Lynch estimates that Qatar will spend over $ 65 billion to prepare for the 2022 world soccer competition. So far we have not received the final evaluation documents if any of the above events actually covered the costs.

 

"The Chinese, being the catalyst of the new world order of today, had scientifically evaluated all development for a time horizon of 100 years from now so that the dream of ‘New Beijing and Great Olympics’ can be sustained. Apparently, there had been numerous simulations done to determine what shape Beijing will take form when the urban population grows to 1,000 million from the current 570 million. The Olympics was used to fast-track the overall urbanisation process. Let’s see how Brazil shapes up in the $ 18 billion investment given that the Brazilian economy is in recession"

 



Rio Games $ 18 billion?

Brazil’s projected a budget for hosting the World Cup at $ 13.3 billion and $ 18 billion for the Olympics. The problem is that based on recent games, the World Cup generates approximately $ 3.5 billion in revenue (with most going to FIFA) and the Summer Olympics generate around $ 5 billion (with most going to the IOC).

Simple arithmetic says that the games will be net losers for the host country unless the host makes up the difference with increased income from tourism and investment during the games or—as a result of the games—in the future. 

The other way to make up for the cost is if the physical legacy from the games (sports venues and infrastructure) can be turned 16-01around to produce a future stream of benefits. This is what China beautifully architectured the ‘Beijing Games’ which the world is awaiting to see if Brazil had captured in the 2016 Olympics. 



China’s $ 40 billion deep dive

The Beijing Olympics had apparently cost China 40 billion dollars. Some speculated that the final number would have exceeded 60 billion dollars with all indirect cost added. History revealed that the 2004 Greek Olympics had cost the country only 12.5 billion dollars but had shaved off almost two percentage points off the GDP that year and had even dented the EU’s economy and some say that it triggered the financial collapse of the Greek economy that extended to the EU.

A point to note is that the Rio Olympic Games will cost $ 18 billion to Brazil. A country in recession can have severe ramifications not only for Brazil but the region is what analysts are worried about.



China’s problem before the Olympics

If we go to the details on China, the country had a problem identified by the technocrats early as 15 years before the Beijing games. The urban population has increased from 191 million seen in the 1980s to 570 million in 2005, which demanded a massive investment in the transport, infrastructure, water management, waste management and the environment so that the quality of life of a Chinese national in the urban areas could be maintained. If this was not done, China was heading into a crisis on the quality of life that can have serious ramifications to the country.

To cater to this rapid growth in industrialisation, China pushed to host the Olympic Games in 2008. China, knowing that Olympics was an absolute disaster financially, made sure that the Beijing Games was not an accident but they carefully orchestrated the games. What they did was that they conceptualised the Olympics into the Chinese growth agenda given the need for urbanisation.



Beijing Olympics as a strategy

In this backdrop China made sure they won the coveted award of hosting the greatest sporting event of the word – the Olympic Games – in 2008. The crafty policymakers in China did not allow a tactic to dominate the strategy but instead used the Olympics to fit into the overall strategy of urbanisation. 

It was a hand-in-glove strategic fit. It was very clear that the policymakers were aware of the economic debacle that took place due to the Greek Olympics in 2004 and were determined not to let that happen to China.

With this strategic thought in mind, China embarked on one of the most passionate and aggressive development agendas of the world. Almost 90% of the cranes in the world were in China between 2004 and 2008. The Chinese Government pumped in a colossal $ 40 billion into the developmental agenda of the Olympics, powering an economic drive at blistering pace that even made the economy overheat with a GDP growth above 11%. It was for sure a ‘One World One Dream’ theme for the people of China. The vision set out by the Chinese policymakers made up a happy marriage – a new Beijing and great Olympics.



The five-year City Plan

The brilliance of the master plan was such that the Beijing Olympics infrastructure was crafted in such way that it fit the five-year plan. From the 40 billion dollars that was invested in the Beijing Olympics, almost 26 billion dollars was spent on improving transportation. $ 10 billion dollars was pumped into energy and Infrastructure which included improvements on housing conditions, relocation of construction sites and development of commercial sites as per the overall five-year master plan. Another $ 10 billion was investment on infrastructure included a sewage treatment facility, 12,700 sports facility areas, 67 theatres and 72 places for performances that sure catered to the urbanisation strategy that China was driving towards.



Olympics used to fast-track development 

The Chinese, being the catalyst of the new world order of today, had scientifically evaluated all development for a time horizon of 100 years from now so that the dream of ‘New Beijing and Great Olympics’ can be sustained. Apparently, there had been numerous simulations done to determine what shape Beijing will take form when the urban population grows to 1,000 million from the current 570 million. The Olympics was used to fast-track the overall urbanisation process. Let’s see how Brazil shapes up in the $ 18 billion investment given that the Brazilian economy is in recession. 



Sri Lanka?

Whilst Sri Lanka is grappling to keep the home fires burning today, given the debt trap it is up against, may be one day we can emulate the Chinese model in hosting a top global event. 

(The author is a multiple award winning marketer and business leader. The thoughts expressed are his personal views. Rohantha has a double degree in Marketing, an MBA and a doctorate in business.)

 


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