Games were great but maybe not economically
Thirty years later, Korea’s hosting of the Winter Games in Pyeongchang is believed to have boosted domestic consumption and investment in the run-up and during the competitions. But the long-term economic impact and benefits to corporate sponsors are still being calculated.
The PyeongChang 2018 Olympics generated 0.2 percent growth in gross domestic product (GDP) or 1.4 trillion won ($1.3 billion) in domestic consumption for the first quarter, the Blue House said on Sunday, quoting an estimate by the Bank of Korea and the Ministry of Strategy and Finance.
On an annual basis, the effect could translate into the addition of 0.05 percent to the national GDP.
“For this year’s first three months, the government spent 900 billion won to hold the event while local consumption related to the Olympics amounts to 300 billion won and foreigners’ consumption 200 billion won,” said a source from the Bank of Korea’s statistics division.
The spending will likely help a trend of tepid private consumption. The quarterly growth of private consumption remained below the 1 percent range until the third quarter of last year, though it rebounded to 1 percent in the final quarter.
As for employment, the Olympics created jobs for 140,000 people, especially in tourism and construction since 2011, when Pyeongchang was picked as host city.
On the corporate side, however, it’s hard to say that companies will get the most out of the 1 trillion won they donated for the mega sports festival, as many sponsors got cold feet about identifying with the event following the influence-peddling scandal that led to the impeachment of former president Park Geun-hye. Choi Soon-sil, a confidante of Park, is convicted of forcing businesses, including Samsung and SK, to donate tens of billions won to two nonprofit foundations controlled by Choi, one of them sports-related.
Major Korean corporate sponsors - especially Samsung affiliates - kept a low profile throughout the Games and refrained from churning out products or commercials tied to the Olympics, afraid the public was still upset over the sports-related scandal.
“We don’t have any specific promotion nor service or product related to the PyeongChang Olympics mainly because of the scandal,” said a source at Samsung Life Insurance.
Samsung Life Insurance, which is at the center of the group’s complex corporate governance structure, is an official sponsor of the Olympic Games, a status given to the companies donating more than 15 billion won.
SK Group, an official partner, echoed a similar sentiment.
“We’ve donated money as one of the sponsors, but didn’t lead viral promotions,” said a source at SK Group.
Another focus is whether the Games will ever recoup the total spending and investments of around 14 trillion won, although that could take years to assess.
The prospect is mixed according to the estimations released so far.
The cost of operating the Olympics is set at 2.8 trillion won, according to a financial report that was submitted to the National Assembly earlier this month.
The organizing committee stated that income including ticket sales stood at 2.733 trillion won, which signifies some 60 billion won in losses.
And since the host region lacked venues and transportation infrastructure for hosting the Games, the vast majority, or 10.3 trillion won, was spent to improve access to Pyeongchang from Seoul as well as on sporting facilities such as ice rinks and ski slopes.
To make ends meet, a significant influx of tourists and the use of the venues in the future remain critical in the long run.
The Hyundai Research Institute offered an optimistic view, saying that the income from tourism will reach 32 trillion won in the next 10 years.
But others say that estimate is inflated because the report assumes that 1 million tourists will be added annually purely because of the hosting of the Winter Games.
Recent Olympics host cities such as Russia’s Sochi and Brazil’s Rio de Janeiro suffered budget crises as the governments’ promises of long-term tourism effects often prove wrong.
The reuse of Olympic venues will also determine the financial record of the PyeongChang Olympics.
The organizing committee has not yet decided how the country will use three out of 12 stadiums.
BY PARK EUN-JEE [firstname.lastname@example.org]
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