But is the stadium worth it?
Stabroek News
April 9, 2004
It would be almost sacrilegious to suggest that Guyana should not bid to host World Cup cricket matches in 2007. But from an economic standpoint, a new stadium and all the attendant costs may actually work out to be a burden.
According to a paper by economists Robert Baade and Victor Matheson, "Mega Sporting events in Developing nations: Playing the way to prosperity?" in most cases such events "are an even worse investment for developing countries than for industrialised countries."
First it is not clear whether Guyana will actually get to host any matches even if it does build what could amount to a US$35M stadium (plus other infrastructure) at Providence in time for 2007.
If it does not build the stadium, then no matches will be played here if you listen to Chris Dehring, head of Windies World Cup 2007, who says the facilities at Bourda are simply not up to snuff.
Aside from pride, the main argument for building the new stadium is the economic boost it could give to the country both while it is being constructed and in the number of tourists, teams and media who would then come here for the games and spend their money.
Dehring has maintained that the World Cup could inject as much as US$500M into the economies of participating Caribbean territories over a period of six weeks in 2007. It is not clear how this figure was arrived at but politicians, fearful they may miss the opportunity to grab some of it, are falling over themselves to get a piece of the action.
Taking the construction, which would undoubtedly create numerous jobs, the first question is the opportunity cost. Guyana is to get a US$6M grant from India and a $14M soft loan from India to help build it but if it does cost about US$20M (taking away the grant) that represents about 6% of this year's budget. And this does not include all the other infrastructure that would be needed to meet the ICC stipulations, including upgrading the airport and roads. (Guyana has to compete against such countries as Bermuda which can handle 750 passengers per hour and 6,000 passengers per day at its airport.)
And in looking specifically at developing nations the paper states that the expenditure required for infrastructure is likely to be much higher and with that come issues of value for money in the light of other pressing issues such as poverty.
"From an economic point of view, the cost of building a new stadium is not best described by the amount of money needed to build the facility but rather the value to society from the same amount of capital spent on the next best public project.
"Nigeria's government recently spent $330 million on a new national soccer stadium, more than the annual national government expenditures on health or education."
They also suggest that "the extent to which newly constructed sports facilities represent a good public investment depends not only on the immediate economic impact of the mega-event but also on the usage of the facility after the event. As sports and entertainment is a luxury good, the demand for sports infrastructure...will likely be lower in developing nations than in developed countries."
Here in Guyana it is probable that the economic impact of the proposed stadium after the event would be minimal and could even be a drag on the economy in that it would need to be maintained.
Inter-county and even regional cricket games do not attract crowds of more than a few thousand, while Test matches and one-day internationals are limited to maybe three or four every year. What happens to Bourda, the oldest cricket ground in the Caribbean, once the stadium is built is another issue.
Can a minimum investment of say US$25M be justified on such a project given how that money could be used on housing, water, education, with tangible benefits for the poor? Even spending that money on a marketing campaign aimed at US and European tourists might have more benefits for the tourism sector.
And while a spanking new stadium might satisfy the World Cup committee will it bring the tourists given that crime and adequate infrastructure are major influences? As it stands both the United States and the United Kingdom have advisories out warning visitors to Guyana of the crime situation.
The economists do say that major sporting events spur politicians into making general infrastructure im-provements and this would be the case in Guyana, what with a new East Bank road.
But they add that there is "no reason to believe that general infrastructure improvements necessarily increase economic growth," something that flies in the face of the 2004 budget.
They also address security arrangements which in the light of world terrorism are especially burdensome. They note that "Salt Lake City spent in excess of $300M on security alone for the 2002 Winter Olympics in addition to $1.7 billion in other operating costs.
"The specialised infrastructure and operating expenses required to host these events, however, can be extremely costly, and it is not at all clear that either the long or short-term benefits of the games are anywhere nearly large enough to cover these costs."
Exaggerated benefits
The actual direct benefit of the sporting event can also be exaggerated for three important reasons.
First because direct spending is often estimated by adding all receipts associated with the event. "The fact that the gross-spending approach fails to account for decreased spending directly attributable to the event represents a major theoretical and practical shortcoming." In other words a local family, which has purchased tickets for a World Cup match, might then forgo a trip to a local resort or hold off on other purchases to pay for it.
Then there is the displacement of spending that might well occur because of an influx of tourists for the event. Perhaps that same family might have wanted to go to Le Meridien for dinner or to a local resort for a weekend, but thought better of it because of the crowds, or simply that the facilities were booked up.
This could also be the case for tourists genuinely interested in Guyana who might defer or be unable to book a trip during the World Cup. These kinds of tourists might well spend far more on extended trips to the interior than cricket fans taking a side trip to Kaieteur Falls on a spare day. And there is also no reason to believe that cricket fans are the target audience that Guyana's niche eco-adventure tourism product is trying to attract.
To get an idea of the amount of money involved, in South Africa in 2003, 626,845 spectators watched 52 matches and the opening ceremony, 76 per cent of total capacity. Total gate income was US$10M, or an average of $192,000 per match. Obviously knockout round matches saw higher attendance rates.
As for the actual multiplier effect ("based on the notion that direct spending increases induce additional rounds of spending due to increased incomes"), the economists note that typical studies "estimate direct expenditures as a result of foreign visitors and then apply an economic multiplier which usually doubles the final impact numbers."
However, they also state that there can be leakages "from the circular flow of payments."
They say that if hotels "experience higher than normal occupancy rates during a mega-event, then the question must be raised about the fraction of increased earnings that remain in the community if the hotel is a nationally or internationally owned chain." In other words it is unlikely that after the World Cup the windfalls hotels may or may not receive would be invested back into the economy in more rooms. In fact the main problem many hotels may have is what to do with the spare capacity. Part of the criteria for a winning bid relates to the number of hotel rooms available. Speak to any of the established local hotels and their rooms are very rarely full except when there is international cricket or some major conference. Encourag-ing hotels to be built by giving incentives could be considered a misallocation of the country's resources.
Another significant leakage would come from payments to the organisers flowing from gate receipts and other concessions, which would leave the country.
The US$500M that Dehring is touting would more go towards the bottom lines of international hotels and airlines than pockets of craftsmen and taxi drivers. Tourism is not seen as an industry that distributes wealth very well as it mostly creates low skilled and low paying service jobs.
Baade and Matheson's conclusion is that "Cities would be well advised to more thoroughly evaluate booster promises of a financial windfall from hosting a sports mega-event... before committing substantial public resources...Indeed, hosting these premier events may be more of a burden than an honour."
Of course the idea of Guyana not hosting a World Cup game is almost inconceivable given the country's rich cricket history and its contributions to West Indian teams. It is a matter of pride that World Cup 2004 come here, but what price to put on that?