ANALYSIS: How will FIFA ruling affect Qatar projects?
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The bribery scandal that erupted recently over Qatar landing the FIFA 2022 World Cup has raised the question of whether the Gulf state could be stripped of its status as tournament host.
FIFA’s in-house ethics committee has launched a probe into the award of both the 2018 World Cup to Russia and the 2022 World Cup to Qatar following ongoing bribery allegations.
The investigation, which is being led by US-based lawyer Michael Garcia, will publish its findings to the organisation’s Adjudicatory Chamber in September. There is a threat that, if bribery allegations are proven, a re-vote would be ordered that could lead to the country losing its right to host the event.
Estimates on how much Qatar is spending to get itself ready for the tournament have varied, but figures of up to $250bn have been suggested once all infrastructure and stadium works are accounted for.
Around $42.9bn has been dedicated to a national railway network, while $7.4bn and $15.5bn have been spent on a deep water seaport and Doha International Airport respectively. Real estate, too, has been a focus, with The Pearl-Qatar project alone said to be worth $14bn.
Some of this work (such as the airport) is already complete, and other elements (including the port and The Pearl-Qatar) are so far advanced as to be bullet-proof, but the loss of other projects could be bad news for contractors.
“If Qatar were to lose the World Cup, there would likely be near-term consequences as certain projects are re-evaluated and potentially scratched, reducing projected growth in the real estate and construction industries,” said Middle East economist at Citigroup in London, Farouk Soussa.
But from a macro-economic, long-term perspective, experts are not so sure that Qatar losing the tournament would be a bad thing. While the country would take a significant hit in terms of prestige, the development it had planned had already become an economic burden.
In 2013, Citi published a controversial report claiming that even with huge oil and gas revenues, Qatar could not afford all of the building and infrastructure it had planned. As a result, the loss of the tournament may be a blessing in disguise.
“If hosting the World Cup risked long-term pain for short term gain, losing it risks short-term pain but long-term gain,” Soussa commented.
Others, however, believe that the impact of Qatar being stripped of the tournament has been overplayed.
Although the loss of the first World Cup to be awarded to a Middle East nation would be a blow to prestige, a recent analysis undertaken by a Bank of America Merrill Lynch economist estimated that the likely cost would only be around $16bn, with the bulk of this related to cancelled stadium and hotel projects.
The bank’s MENA economist, Jean Michel Saliba, said that the sum was equivalent to around 7.5% of Qatar’s annual GDP, or 1- 1.5% per year for each year in the run-up to the tournament.
However, the annual drag on Qatar’s real GDP growth is only likely to be around 0.5%, as much of the capital expenditure would have gone on importing goods from overseas or paying salaries that would then be largely expatriated.
Saliba argued that the larger infrastructure spend is set to continue, as the roads, rail and other major projects are all likely to continue under the Qatar 2030 Vision programme.
He estimates that Qatar is likely to spend around $100bn over the next five years on capital expenditure programmes, which could represent a third of its total investments. Without a World Cup to aim for, such schemes could “lose execution focus and face potential delays”, but were still likely to go ahead.
“Infrastructure projects, central to Qatar’s transformation vision, form the bulk of it and a number of mega-projects such as Lusail City, the metro, railway or seaport, were planned independently of the World Cup.”
Like Dubai, Qatar has big ideas about turning itself into a commercial hub for the wider region. Therefore, projects such as the railways, roads, bridges and major real estate schemes will continue without the tournament.