OLYMPICS - ECONOMIC IMPACT

By Ruma Dubey

‘Olympics’ is a world event and its purpose, as signified by the five rings, symbolizes the coming together of the world, represented by five continents then. It is THE MEGA  EVENT and yet, in India, it remains smaller than the Cricket World Cup or even the IPL matches.

The Games start today at London and all the work, which the country had undertaken for the past seven years, since the time it won the mandate to hold it, has reached culmination. Brazil, which will hold the next Olympics, in 2016, will watch these Olympics ever so carefully, so that it can outdo London when it plays the host.

Olympics is great for the economy of the country hosting the event. The build of infrastructure, the influx of tourists, the brand building; all collectively helps the host country recover some money. But it is just some money, not all of it. But after the Games are over, the image of ghost towns, gigantic structures lying in decay and ruins; somehow this is what first comes to mind. The Commonwealth Games and Asiad where India played host have shown us just that. Yes, the country will have new roads, new bridges, new railway connections, more flights, new stadiums, new Games villages or housing, new employment opportunities; simply like a swanky new city taking shape.

But the big question is – does hosting Olympics really boost the economy? First let us look at the benefits. This is segregated into three sections  - before the Games, during the Games and after the Games.  Before the Games will obviously be the benefit of building the infrastructure as mentioned earlier. But here, one needs to see how much infra was built because of the Games and how much was already scheduled and it just got bundled with the Olympics. This helps give a cost of the Games. UK is spending a quarter of what China allocated for the last games in Beijing. Britain has allocated 9.3 billion pounds or US $14.6 billion of public money to host the 17-day spectacle, compared with China’s $70 billion outlay on the Beijing Olympics. And this spend at a time when, on 25th July, The Office for National Statistics stated that Britain’s GDP fell 0.7% from the first quarter, when it dropped 0.3%.

Then comes ‘during the Games’ phase. This is the time when all the money spent will bring forth fruits. The economic benefit from the arrival of thousands of visitors in the form of spectators, sponsors, athletes, media helps add to the coffers. But if the country is small then the arrival of guests adds notable benefits to the economy.  Last and the most difficult is the ‘after the Games’ phase. How does one quantify the productivity due to new roads and bridges into the GDP? What would be the benefits of the Games Villages, the giant stadiums and athletic facilities?

Pricewaterhouse Cooper had conducted a study of the economic benefits of hosting the Olympics between 1984 and 2000. And it has stated that all the hosting cities had a positive economic benefit from hosting the Olympics. In terms of GDP, Barcelona had an estimated economic benefit of 0.03% of regional GDP, Sydney had an estimated economic benefit of 2.78% of regional GDP, Atlanta had 2.41% of regional GDP, Seoul had 1.4% of national GDP, and Los Angeles of 0.47% of regional GDP. 

The short term benefits are immense but long term? That is the big question. The one very big positive of this Games is that the Olympic stadium, which later stands like a forlorn and lone sore thumb, like Beijing's spectacular Bird's Nest, which these days hosts winter sledding events and not much else, the 2012 London stadium can be downsized and remade for a different future use. So this stadium, which will seat 55,000 now will later be brought down to 25,000 seats, only permanent seats being built in the stadium.

Another positive is that the Games city, in East London, has come up on industrial, polluted wasteland, now transformed into modern, tech-savvy metropolis, which the country hopes will become the creative and technology hub of Europe after the two-week games are over. This was an area which did not exist before and thus could become a huge revenue generator.  The Govt expects East London to generate around two billion pounds of tourism revenue and development of 11,000 new homes and 8,000 employment opportunities. Major part of the cost has been spent on revamping the age old public transport system of London and this will have a long-lasting impact.   

Well, London is aware of the risks of the aftermath of the Olympics and it is taking corrective steps. We have to see if this pays off in the long run, which will then become a new benchmark for hosting the games, instead of being just a money drainer.