Kleptocrats prefer dictatorships to democracies!

FIFA World Cup 2018 and 2022 and its effect on FDI

‘Kleptocrats prefer dictatorships to democracies’ was how a cynical analyst blogged, branding FIFA’s 22-man executive committee’s selection of Russia and Qatar as hosts for the 2018 and 2022 Football World Cup by secret ballot.

Of FIFA’s 28 national football associations, only 22 on the executive committee voted; the balance were disenfranchised.

Let’s initially get into some definitions: Kleptomania is defined in the Oxford Advanced Learners Dictionary 8th edition as ‘A mental illness which causes the subject to have a strong desire to steal things, which they cannot control.’ Corrupt states have been branded as ‘kleptocracies’ and corrupt leaders in those states as ‘kleptocrats’ – a word play on democracy, democrats and bureaucrats.

Alleged skulduggery

British and international news media have in the recent past repeatedly run stories of alleged skulduggery within FIFA Headquarters in pristine Zurich, one of the world’s financial capitals, in all sorts of deals, in payoffs for FIFA functionaries for contracts, ticket sales and supporting countries to host the world cup, etc. It is said that a handful of FIFA members are under suspension presently on such charges.

FIFA in 2010 took the unprecedented step of suspending six of its members, Adamu, Temarii, senior figures and also country representatives Bhamjee of Botswana, Diakite of Mali, Fusimalohi of Tonga and Alolou of Tunisia. So the reference to ‘Kleptocrats’ by the cynical blogger must refer to the FIFA hierarchy.

In 2006 Andrew Jennings in his book ‘Foul! The Secret World of FIFA, Bribes, Vote-Rigging and Ticket Scandals’ alleged international cash for contracts scandals and allegations on FIFA President Sepp Blatter’s re-election.

Also in 2006, BBC’s Panorama screened a programme in which it alleged that Blatter was being investigated by Swiss Police over his role in a secret deal to repay more than one million sterling pounds worth of bribes pocketed by football officials.

In 2010 too Panorama made fresh allegations and the London Sunday Times alleged that FIFA officials were involved in corrupt acts regarding the 2018 and 2022 World Cup venues and allegations on a longstanding publicity contract with a leading PR firm in Zurich.

FIFA chose the dictators

A dictator is a ‘ruler who has complete power over country’. In Russia, President Medvedev and Prime Minister Putin are well into the process of rebuilding the autocracy that the Communist Party imposed in Soviet days.

Qatar is an Emirate, a part of the UAE. Democratic norms and human rights do not carry much weight in either nation. Russia defeated England, combined bids from Belgium and the Dutch, and Spain and Portugal by an absolute majority. Qatar defeated the USA, Australia, Japan and South Korea by 14 votes to 8.

The defeated nations are certainly not dictatorships, but democracies – in plain language as the dictionary says they have ‘a system of government in which all the people can vote to elect their representatives’ and also have other safeguards protecting the citizens right from abuse from the state, such as rules of good governance, a free media and the rule of law.

The latest releases of US State Department cables from WikiLeaks has also stoked fears of criminality in Russia, of protection rackets, corruption in the Kremlin and the power of the mafias. FIFA chose the dictators.

Qatar

WikiLeaks US diplomatic cables also express fears that Qatar is not doing enough to combat financing of al Qaeda. The cable also highlights Qatar as the worst in the region for counter terrorism corporation.

It also states that the Taliban and Lakshar-e-Taiba, which was behind the Mumbai terror attack, ‘exploit Qatar as a fund raising locale’. Qatar is one of the most ambitious emirates, with a population of just 1.4 million.

In June and July, when the World Cup will be held, temperatures soar and stifling humidity kicks in. It has the world’s third largest gas reserves and in that sense estimated to be the world’s richest country. It has pledged to invest tens of billions of dollars in infrastructure and solar powered cooling technology to bring the temperature in the stadium to below 27 degrees centigrade. No World Cup stadium will be more than an hour’s drive from another, Qatar is small.

But as Hassan al-Thawadi, Chief Executive of Qatar 2022 has said: “The FIFA World Cup is not about the limitations of today, it is about the potential of the future. If you look at what we have today in terms of how we have developed over the past 12 years… it tells you that in 12 years time nothing is impossible.”

East vs. West

Qatar was considered one of the more ‘liberal’ of the Emirates. But recently in a Friday sermon at Doha’s Omar bin Al Khattab Mosque, Sheik Yusef al-Qaradawi, arguably the world’s leading scholar of Sunni Islam, preached that “I was for the possibility of bridging the gap between the East and West but recently I have changed my mind on this issue, especially since the West wants to impose its values and traditions on us.”

Echoing Rudyard Kipling’s famous words “East is East and West is West and never the twain shall meet,” the Sheikh said: “West is West and East is East. They do not recognise or follow our traditions and customs, so we should not follow theirs.”

WikiLeaks also disclosed that the US Embassy in Doha thinks that the Government of Qatar uses the TV channel Al Jazeera, based in Doha, as leverage in relations with other nations. One wonders whether FIFA would have factored in these issues into their decision-making process.

To be fair, there may be many other reasons to justify the selection. It is said that the presentations made by Russia and Qatar were of superior quality. But Blatter had described England’s presentation as ‘excellent and remarkable’.

While Russia had only the Deputy Prime Minister, England had a Royal, Prince William, and the Prime Minister and David Beckham. Qatar had the Emir, while the US had ex-President Bill Clinton.

After taking a risk with South Africa for the 2010 World Cup, FIFA would have been justifiably emboldened to think out of the box. Further, they are going to Brazil in 2014 for the next world cup.

In anticipation Brazil is sending its security forces into Rio de Janeiro’s favelas (slums) to clear out the drug gangs. But Brazil is a FIFA world cup winner, while Russia and Qatar are minnows at international football.

Rampant anarchy in New Delhi

The chaotic build up to the 2010 Commonwealth Games in New Delhi, must have also scared the FIFA and indeed all other similar organisations, off multi-party democracies with a free press.

It was rampant anarchy in New Delhi, until the Indian Government took over and put its top bureaucrat in charge. Media were putting out new stories alleging corruption by the hour! Nations threatened a boycott, and corruption charges flew far and wide. Members of the organising committee have now been arrested on corruption charges.

There are grounds for assuming that such a vibrant open democratic system with a free press is not an environment that FIFA, with all its alleged problems of being a kleptocracy, would be comfortable in.

On the contrary, FIFA would have been salivating on how smoothly the Olympic Games in Beijing and the Asian Games in Guangzhou were run by the Communist Party of China.

Of course, the small matter that a scandalous story which broke on baby milk formula being purposely contaminated with melamine, resulting in death and serious illness of babies, being suppressed so that China would not get a bad name while the Olympics were on would not have entered the equation!

The trauma of having to go through what the Commonwealth Sports Federation had to undergo in India’s open society, or for that matter what is going on in India’s democracy just now, is not something that any international body will voluntary undertake to undergo.

Environment

In fact, as analogy, in a somewhat similar stand to what FIFA is claimed to have done, many Foreign Direct Investors (FDI), flippantly referred to as ‘Robber Barons’ in the past, too have said that they are ‘unfortunately’ not overtly concerned with the internal democratic standards in place in countries where they invest.

They only need a secure environment to make their initial investment, earn a return on the investment and move on. Tax concessions, tariff concessions and relaxation of labour covenants are really the matters which worry them, to maximise their competitiveness and profitability.

This, it has been said, is somewhat similar to what an international NGO organising an international sporting event would look for; security and stability to go in to hold the event, make their money and get out in a short timeframe.

Openness, democracy, rule of law, etc. may not always be a useful factor for an investor in a hurry to recover his investment, exploit local cheap labour and raw materials and then move his capital on to the next big deal at the next attractive location offering investors concessions; nor would these issues be of primary value to an international NGO in the sports arena.

This may be a reason for China and Vietnam to attract FDI far in excess than India for example. But again, if lack of democratic rights and suppression of human rights were the only factor to attract FDI, then North Korea, Cuba and Venezuela should in reality be drowning in FDI!

Balance of many factors

It is probably a balance of many factors which, in reality, attracts FDI, and international sporting events such as the FIFA World Cup, political stability for a reasonable timeframe, a ‘controlled’ labour situation, reasonable security without excesses by the security forces, economic fundamentals holding steady, reasonable consistency in policy by the executive authority, with no sudden flip flops, without the regime being repressive and subverting the rule of law, while the investor in turn being confident that his legal rights and investment will be protected by due judicial process and a reasonable international reputation for the country, etc.

International pariah failed states do not attract FDI; nor should they attract international sporting events. On the contrary the international community punishes them with sanctions, which brought the apartheid regime in South Africa to its knees and provided the space for that icon of democracy, Nelson Mandela, to emerge and change the course of history.

Similar considerations would or should apply to hosting international sporting events such as the FIFA World Cup, the Cricket World Cup, the Olympics, the Asian Games or the Commonwealth Games, etc.

New frontiers

Blatter, the President of FIFA, has said the decisions as to hosting the Word Cup in 2018 and 2022 were in keeping with FIFA’s desire to take the world’s most-watched sporting event to new frontiers. The decision is consistent with FIFA’s philosophy of developing world football, especially in regions of the world where this development is needed.

Oliver Holt writing in London’s Daily Mirror on 3 December said that “the decision to award the 2018 and 2022 World Cups to Russia and Qatar respectively justified at a stroke everything that Panorama and the Sunday Times were trying to do. They were victories for good old fashioned venality. There is, quite frankly, no other way to explain them because they defy all logic. Both yesterday’s votes stank. To high heaven. People don’t play football in Qatar in July. That’s because if they go outside, they melt in the scorching heat. England did not lose the right to host the 2018 World Cup because of British media. It lost it precisely because of the corruption the British media has been fighting against. The sad truth is that many senior people within England’s 2018 bid were convinced that Russian money would be a decisive factor when it came to a vote as long as a year ago.”

Transparency

Andy Anson leader of England’s 2018 World Cup bid had earlier criticised British media for being ‘unpatriotic’ when they made allegations against FIFA corruption. However, at Zurich at a press conference after the decision, Anson said: “I still find it hard to understand what happened. When you have the best technical bid, fantastic inspection visits, the best economic report, and from what people told us the best presentation, it’s quite hard to stomach that all that seemed to count for absolutely nothing. I would say right now, don’t bother bidding unless you know the process is going to change. You got to open it up to all the member associations. You’ve got to widen the electorate. For me, you should have transparency and open voting so that everyone knows who voted for whom, because I don’t believe that the secret ballot actually helps transparency at all it leads to the situation we had on Thursday where people promise you something and don’t deliver.”

Still the risks are there. While Qatar with its humongous oil and gas wealth, mostly South Asian work force, and international project management capacity will most probably be able to deliver the facilities on time, facilities which in their presentation they claimed would be constructed from pre fabricated components so that they can be dismantled and installed in deserving poor countries after the World Cup is over. African, Arabian and South Asian fans will flock to Qatar for the tournament.

Russia

Russia, however, is another kettle of fish. McKinsey the consultants which evaluated the bidding nations for FIFA has said that in generating revenue from the tournament, Russia was likely to be the least effective of the bidding nations. Given the internal law and order situation, if it does not improve, foreign visitors may be nervous.

The Black Sea resort of Sochi has won the 2014 Winter Olympics, the cost has skyrocketed to 950 billion rubles compared to the original estimate of 316 billion rubles. A top Russian businessman has revealed earlier this year that he had paid four million sterling pounds to a senior official in the Kremlin to secure a lucrative construction contract for the Sochi games. The matter is being investigated.

Esquire magazine has reported that the price tag for an Olympic road was a staggering 4.9 billion sterling pounds. For that money it says the road could be coated with a 21.9 cms layer of foie gras or a six cms layer of truffles!

But Gregory Cherdanstev on his blog argues, “Yes, there is thieving and swindling because this has been going on in Russia since time immemorial and will probably go on forever, but the idea that we shouldn’t have the World Cup because all the money will be stolen doesn’t stand up. If it did, it would mean that we should never be given anything and just left to disappear in the tundra. Even though a chunk of the estimated pounds sterling 31.6 billion the estimate cost of the World Cup in Russia might disappear into corrupt officials pockets, it would be impossible for them to steal everything ; the stadiums and other infrastructure will be built on time.”

We have heard this kind of talk before, about the Commonwealth Games in Delhi, for example. Russia plans to host the World Cup in 16 stadiums in 13 cities, spread out over its vast landmass; 14 of the 16 are nowhere near ready, some exist only on paper.

In Nizhny Novgorod, a city 250 miles south east of Moscow, a bare land jutting into the Volga River is the only thing found where the stadium should be. The Region’s Deputy Governor Svatkovskly, a former Olympic pentathlon champion, admits that right now the stadium is not there, “but we have eight years, we will build it”.

The Russians claim that everything is on track for the Sochi Winter Olympics in 2014 as per schedule and that they have not broken a single undertaking given to the International Olympic Committee to date.

Dr. Yuri Felshtinsky, historian and co-author of ‘Blowing up Russia,’ comments: “We know from looking at the preparations for the Olympic Games at Sochi what will happen (in the World Cup). Money will be allotted from the budget for the construction of stadiums and other infrastructure. The budget will be then plundered and they’ll have to come up with a new budget. It is no secret that money will be stolen. Corrupt officials, dishonest businessmen and the mafia will all have a field day.”

Sri Lanka

South Asia and Sri Lanka are hosting the 50 Over World Cup Tournament very soon and preparations are underway. Sri Lanka intends to bid for the 2018 Commonwealth Games, at which we have declared that we will win 50 gold medals. (This has been said by no lesser person than the head of the monetary authority; he should know about gold, gold is at top dollar just now, but about sports?)

Our conduct of the bid, performance and such rhetoric in the lead up to the CWG will be scrutinised closely by the international community, including investors. Sri Lanka, which is anticipating a veritable FDI tsunami after terrorism was defeated, would do well to study FIFA’s thinking, the international community’s reaction and formulate a realistic strategy to attract sustainable FDI and also international sporting events.

(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)