Is hosting the Olympics worth it?
As Korea is up next to host an Olympic event, the 2018 PyeongChang Winter Games, discussion of the event’s economic impact is once again at the forefront.
“Construction of infrastructure for the Olympics calls for massive employment and consumption, boosting the regional economy,” said Kim Hyung-joo, a researcher at LG Economic Research Institute. “And the built infrastructure can be useful even after the Games depending on how the local government decides to utilize it.”
The Brazilian government is expecting roughly 60 trillion won ($54 billion) in economic benefits from a string of sporting events held in the country that dates back to the 2014 FIFA World Cup. Considering the country has been suffering from high unemployment and economic polarization, Brazil is betting on the international sporting events to help revive the economy.
The basic source of revenue when hosting such an event comes from visiting athletes and fans spending on food and accommodations. Selling tickets and broadcasting rights to media companies worldwide also brings in substantial profits.
Aside from the direct cash coming into the country, new infrastructure such as stadiums, accommodations, airports and rail lines comes with new jobs and a better environment for business.
However, some are voicing concerns about the so-called Olympics curse, which refers to the Games incurring more loss than profit and ending up more as a burden for the host country.
The International Olympic Committee, the nonprofit organization in charge of the Games, has imposed a set of requirements on the host country that includes at least 40,000 hotel rooms and an Olympic village able to accommodate 15,000 athletes. Brazil had to build 15,000 more hotel rooms to host the Games in Rio de Janeiro.
While the construction may create jobs and the facilities may act as a cash cow for the month during the Games, worries abound over the use of these facilities after the Games end.
Andrew Zimbalist, an American economist and author of “Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup,” says hosting the Games is an economic loss for the host country.
“The cost of hosting the Summer Olympics these days runs from $15 billion to $20 billion, including venue construction and renovation, operations and security, and additional infrastructure,” Zimbalist wrote in a Project Syndicate column last Wednesday. “The total revenue for the host city from its share of international television contracts (roughly 25 percent, with the other 75 percent going to the IOC), international and domestic sponsorships, ticket sales and memorabilia is $3.5 to 4.5 billion.”
According to his calculations, the costs incurred comfortably exceed revenue by $10 billion.
Trade credit insurance company Euler Hermes released a report earlier this month predicting that “while the Olympic Games will generate minor short-term growth and employment in Brazil, the net impact of the Games will be negative for the host country,” adding that “increased investment projects and tourism linked to the Olympics will add only 0.05 percentage points in real growth to Brazil’s GDP.”
This leaves a lot for Korea to consider as it gears up to host the 2018 Winter Games. Already, there is criticism that the event is eating up excessive cash. The budget set for the games has increased by 47 percent during the course of its planning from 8.8 trillion won to 13 trillion won. Whether the 122.6 billion won invested in the stadium for the opening and closing ceremony will remain worthwhile in the long run is still in question.
Experts advise that the country needs to build on practical long-term plans so that newly-built infrastructure and facilities in Gangwon can be fully utilized even after the Olympic Games.
BY CHO DEUK-JIN, KIM JEE-HEE [firstname.lastname@example.org]