Economic Strategies Used By the BRIC Economies

While there exist vast literature exploring the positive economic effects of mega-events, little is known about the financial ramifications of hosting such events. It is of paramount importance to put into consideration the implicit costs, including the opportunity cost of public spending that could have been spent on other priorities. Consequently, the objectives of the dissertation were to: determine economic strategies used by hosting countries in preparation for the Mega –events; evaluate the extent that unpractical strategy leads to the long-term effect that deteriorates the economy, and analyzes how the existing strategy is changed to have a positive impact on the hosting country. The study was primarily a systematic review and analysis of the secondary data. Study findings show that most of the countries that host the major events have a range of measures for economic development.

3 Research Question 6 Chapter 2: Methodology 7 2. 1 Research design 7 2. 2 Procedures for Data Collection 7 2. 3 Data Analysis 8 Chapter 3: Literature Review 9 Chapter 4: Results and Discussions 12 4. 1 Economic Strategies Used by Hosting Countries in Mega-events Preparation 12 4. Initially, the staging of world cups and Olympics Games represented a manageable burden for the host countries and specifically because they were held in the already developed countries. The hosting nations did not anticipate making a profit. In its place, the mega-events were publically sponsored, with these developed countries better placed to stand the costs due to the superior economies and more progressive infrastructure. In the twenty-first century, the countries that are perceived to be the most ambitious and expensive planners have been privileged to host the mega-events. As a result, there has been an increasing bids going to various countries such as China, South Africa, Brazil, and Russia (Zimbalist, 2016).

  The bidding processes involved in the selection of the host counties stimulates wasteful spending, by favoring potential hosts who demonstrate the most ambitious plans. The countries incur a higher cost of bidding and struggles with the rigidity of utilizing the already- subsisting sports facilities. The need to impress the IOC and FIFA to win them all the time more intense competition to host the mega-events is an accepted part of the process (Swantje & Wolfgang, 2009). As bidding cost surges, payoffs, material excesses, and an inclination to pay unduly to host have a higher verisimilitude to occur. This research aims to show that facility construction extravagance is one but one aspect of the excesses promoted while preparing for mega-events. The review aimed at identifying and appraising the available evidence showing the economic strategies used in the preparation of the mega-events.

2 Procedures for Data Collection The collection of data was largely based on materials like bidding book and hosting policies, reviews and media information that are readily available online and free to download. To supplement these sources, the researcher integrated the subsisting academic literature. These formed the foundation for extracting the economic strategies used in preparation for the mega-events (Allmers & Maennig, 2009). The government publications indicating the plans and after use of the mega-facilities was used to assess the failures of the current strategies. Kaplanidou et. al (2011) state that India is a blatant example of the nations that hosted super events but choked its budget colossally. Initially, the state estimated that the Commonwealth Wealth Games would cost approximately USD $ 50 Million while the actual cost translated to USD $ 54 Million.

He argues that most countries underestimate the cost of the mega-events because they have a fixed deadline and thus postponing preparations is not an option. As such, the event organizers in the hosting country are forced to hire additional workers or incorporate night shifts, and especially when the preparations fall behind schedule. This usually leads to stiff competition for the utilization of the limited lands in the heavily populous areas. In the case of Russia Winter Olympics 2014, as the event neared the national budgets were pressed and sports-related facilities dominated over the wider development of the city. Stadia, athlete accommodation centers, media houses an extension of the airports all were borne by the event organizers. These funds deviated from the original plans of improving accommodation, public amenities or transport, and subsequently deflating lasting development plans of the city as well as public preferences.

Buildings are developed around the venue of the event, and this aggravates the complications of a large infrastructure. The opportunities are diverse and impressive. For example, London 2012 Olympics Games planners developed a supply chain and procurement initiative known as CompeteFor (The Organization for Economic Cooperation and Development [OECD] & Local Economic and Employment Development [LEED], 2010). The initiative aimed at enabling the regional and local firms in the area to gain from the Games and Olympics preparation. However, for the case of London 2012 Olympics, the already existing infrastructure development plans were affected. For instance, the Lower Lee Valley experienced less planning, and the broader economic development stagnated in the East London as the development was mainly focused on the Olympics. However, the purposes of the plan were difficult to achieve since they relied on the radical transformation of the patterns of housing in London, significant adjustment in the labor market of the residents, and improvement of the school performance of the boroughs that were considered inferior.

Consequently, the success of the districts was based on a comprehensive understanding of the interventions hence calling for other policies and goals to be addressed at the same time thus failed to meet the target. However, the boroughs made a significant improvement in the educational sector hence increasing the participation rates in the labor market. However, the East London boroughs experienced some additional challenges relating to unemployment rates. Firstly, the skills-set of the locals could not match the requirements at the Olympics of 2012. Again new businesses start during preparation for Mega-Events as the existing industries reposition, new business sectors are developed and launched, and new business opportunities arise. Furthermore, the host countries also put strategies to access additional revenue through development of higher value real estate, new residential districts, new businesses and taxation (Müller, 2017).

Another approach that the hosts put in place includes an increase of employment opportunities, training opportunities in diverse domains, and development of new entrepreneurial skills. Similar effects can be seen in the BRIC countries. 1 World Cup 2010 The host of the World Cup 2010 was not the winner economically, but FIFA gained significantly. 8 percent decrease in the unemployment rate during the period of FIFA World Cup compared to the rest of the municipalities (Oosterbaan, 2014). However, significant changes were experienced after the event with the rate of unemployment increasing by 24. 5 percent in the host municipalities. That is, unemployment in South Africa declined significantly during the construction phase of the Event and the actual event. On the contrary, post the game, unemployment is expected to increase since the jobs were short-term and the rural immigrants had entered the hosting municipalities for survival.

The expected economic and tourism impact was about $107 billion were $5. 5 billion respectively (De la Cerda et al. Brazil also expected to have about 710,000 new jobs as it prepared to host the World Cup in 2014. Even though there were stunning predictions that the event would boost the economy of the country, the past shows that the mega-events are overrated when it comes to economic benefits. Some of the common mistakes that are conducted during economic estimation of mega-events include: overestimating the leisure budgets of the consumers, ignorance of the patterns of economic activities of the residents that do not attend the event and ignoring the truth that the regular tourists tend to avoid popular areas. 5 percent of the total funding hence making an Olympic Games record.

However, the benefits of the high costs came with some limitations. For instance, there was no given comprehensive plan for the use of venues and infrastructures constructed after the event while several investors decided to default loans that were backed by the states. Again, there were hotel overcapacities due to the extensive constructions hence making the Olympics a burden to the nation. That is, the country incurred costs related to certain interest and tax revenue; maintenance; and operating expenses of about $1. On the other hand, the revenue of the Beijing Olympics was about RMB19. 54 billion in 2008 and later updated to RMB20. 5 billion. However, the numbers have had several inconsistencies, and the profit margin has been shown to be about RMB1 billion.

The Beijing Olympic Games improved the economic growth of China. The estimated number of tourist for the Olympics was 1 million, and significant investment was made in the infrastructure and public transport. Rio invested in a public-private partnership to finance the facilities needed for the Olympics. Consequently, several innovation hubs, conventions, and business were scheduled as post-event activities to avoid the mega-event hangover as witnessed in other cities that hosted the same. During the time, Brazil was struggling with serious economic and political issues that sought to ensure proper function of its domestic economy and democracy. The estimated and final costs of hosting of the Rio Olympics of 2016 are as shown in figure 2. The primary methods for mega-events in the world are Fédération Internationale de Football Association, and International Olympic Committee abbreviated as FIFA and IOC respectively.

The system has seen Olympic Games, and World Cup be characterized with a bidding process that is extensively competitive in which the potential hosts compete for the right to host the event (Humphrey, 2010). The costs of the bids approximately several million dollars as the bids are considered based on the promises of new extravagant stadiums and lavish hotels for the officials and capable fans. The public often incurs most of the costs of the bidding process and the event preparation. Therefore, a bidding process is a scheme of rent extraction that aims to tax the locals for the progress of the systems such as FIFA and IOC. Again, such practices negatively affect the social life of the host nation as people have to migrate to new places that are relatively cheap courtesy of inflation in the hosting cities.

Most of the global sports events are linked with inflation that directly affects the expenditure of the local population negatively. In long-term, the high inflation rates affect local and international tourism consequently minimizing the expenditure of the foreign visitors. Hosting a major event has a significant on-site and off-site impact cost. The on-site costs are the costs that are put in place such as time, labor, supplies, and equipment that are linked to hosting a major event. Even though the sports fans might be attracted to the occurrence of the mega-events, some of the high-end travelers might prefer to avoid the populated areas. Consequently, the gross domestic product gained through tourism will be minimized as the potential tourist avoid the cities due to over-population caused by the event.

In long-term, the mega-events damage the conventional tourism industry of the host country (Gong, 2012). Consequently, voices supporting the conventional tourism industry have been against the hosting of mega-events. People are also pessimistic to host mega-events due to high inflation rates that block the intention of travelers and fear of disruptions associated with crowds. The city feared that it would lose more visitors hence significant economic impact in the long run. Both London and Beijing boast of the developed and mature tourism market. Again, the towns have saturated tourists market compared to the rest of the cities thus a sudden mega event cannot positively improve their tourism industry. Instead, it might have negative impacts that would cause severe economic implications in the long run.

For example, as in the case of London Olympics, the significant numbers of the hotel rooms that are blocked or overpriced significantly interrupted the businesses of the tourist operators. However, after the event, the venues became vacant, and the planned parks were never completed for the benefit of the locals. Again the additional transportation infrastructure developed led to new challenges such as increased traffic and flooding. Consequently, the legacy shortcoming after the event was more compared to the benefits of hosting the event. The host countries should not develop new stadia if they can refurbish the existing ones to avoid wastage after the event. For example, the Beijing Bird’s Nest is one of the main stadia developed during the 2008 Summer Olympic Games.

The management of the significant events also needs to share the revenues generated by the host countries to support sustainable development. The bidding process for the mega-events also needs to be free from corruption. For example, the International Olympic Committee has always been accused of corruption during the selection process of its members. The leadership of such events has seen bribery scandals characterize the occasions as witnessed in the case of 2002 Salt Lake City and 1998 Nagano games (McBride, 2018). Again, the committee of the Rio Olympics was charged with corruption in 2017. Economic outcome of mega-events can be achieved through the planning of the positive legacy. The preparation, planning, and impacts of the event should be taken into consideration during the development phase.

It is essential that the strategy focuses on a long-term view that focuses on the development before and after the event (Hartman & Zandberg, 2015). That is, events need to be organized before, during and after the mega event. The event can also be used to encourage young people to engage in sports for the redevelopment of the urban areas and enhancement of infrastructure. Firstly, the mega-events need to have clear accountability and governance rules and can include the development of development cooperation. However, such cooperation should not be used to impede the local electorate from participating in the decision-making process. Secondly, there is a need for a robust partnership that enhances the development of a body that managed the programs. For instance, there is need of an institution that mitigates or avoids the negative influencing factors to allow positive stimulating during the project cycle.

Such practice has been done before and includes London Legacy Development Cooperation and Legacy Barbados Inc. Again, countries hosting the mega-events should have a future-oriented vision to determine new sources of businesses and jobs for the locals post the events. For instance, during London Olympics of 2012, the open market in the country saw the repatriates compete for the low paying jobs against the locals thus affecting the economic development of the locals as the low skilled individuals could not get an opportunity. Therefore, it is important that hosting countries do not circumvent systematic preparation procedures. Instead, it ought to remain active even if the static deadlines escalate time pressure. Cities should avoid trying far-reaching enlargement projects to super-events. Explicitly, making temporary infrastructure is much cheaper that establishing permanent ones.

However, this will require the event organizers to weight the cost and benefits as well (Dennis & Craig, 2009). References Allmers, S. , & Maennig, W. Economic impacts of the FIFA soccer World Cups in France 1998, Germany 2006, and outlook for South Africa 2010. doi:10. 750072 De la Cerda, V. , Fernandes, M. , Huebner, D. , Madanes, C. doi:10. 1057/eej. 29 Fermeglia, M. The Show Must Be Green: Hosting Mega-Sporting Events in the Climate Change Context.  Carbon & Climate Law Review, 11(2), 100-109. com/brazil-the-economics-of-the-rio-olympics/ Hartman, S. , & Zandberg, T. The future of mega sport events: examining the “Dutch Approach” to legacy planning.  Journal of Tourism Futures, 1(2), 108-116. Humphrey, B. , Geldenhuys, S. , & Coetzee, W. Quality of Life, Event Impacts, and Mega-Event Support among South African Residents before and after the 2010 FIFA World Cup.  Journal Of Travel Research, 52(5), 631-645.