Qatar’s $229-billion bet on itself

Whether you cheered for Argentina, France or any qualifying team in the recently concluded FIFA World Cup, no one can deny that Qatar gave us the most sensational spectacle of 2022.

The scale of Qatar’s coming-out party was unprecedented. The petroleum-rich emirate went all out, building new stadiums, a new train line, a network of highways and countless hotels. The price tag? An eye watering $229 billion, the most any country spent for a sporting event, by far. For context, former FIFA host Russia spent $16 billion in 2018. Brazil spent $19.7 billion in 2014 and South Africa spent $7.2 billion in 2010.

Hosting the FIFA games is never profitable for the host country. This is because all significant revenues, such as ticket sales and TV rights, go directly to FIFA. It is estimated that Qatar realized revenues of only $20 billion on the event proper, with residual revenues generated through tourism.

In many instances, the stadiums built for global games are so massive that they lose their usefulness after the event. Case in point, the stadiums built by Montreal, Beijing, Athens and Rio for the summer Olympiad are now white elephants. Qatar built not one but seven mammoth stadiums for its FIFA outing. With its population of only 2.5 million people, these stadiums will likely become white elephants as well.

So why did Qatar spend so lavishly for an event that lasted only 29 days? To answer this question, we must understand Qatar’s three vulnerabilities.

Its first vulnerability is its dependence on petroleum. While Qatar is one of the richest countries in the world in terms of per capita income, 70 percent of its national revenues are derived from oil and gas. Problem is, the world’s largest petroleum consuming countries have committed to net zero carbon emissions by the year 2050. Smaller countries have also committed to shift from fossil fuel power sources to renewable sources, all of which have become more affordable to build.  For Qatar, this means a 71-percent drop in petro profits by 2050.

That said, Qatar needs to diversify its economy and fast! It is behind the curve, relative to Dubai, which has successfully morphed into a financial and tourist hub. For its part,  Qatar wants to be a center for knowledge and technology but is hard-pressed to attract  foreign  investors.

Qatar’s second vulnerability is its geographical location. The country is surrounded by hostile neighbors – the UAE, Saudi Arabia, Egypt and Bahrain, all of whom have intentions of subsuming the small but rich emirate. Qatar’s military is relatively weak with only 22,000 men in its force. The only reason why it is not attacked is because of its long-standing security guarantee from the Unites States.

Qatar needs to remain relevant to the US for this  security guarantee to hold. With petroleum becoming less important, Qatari leaders worry that the United States may not see the value to stand in Qatar’s defense should it be attacked. Thus, it hopes to maintain its relevance by becoming an economic and geopolitical powerhouse, in the likes of Singapore.

The third vulnerability is its global image. Despite its wealth, Qatar has gained global notoriety for its atrocious human rights record, specifically in the treatment of migrant workers and the LGBT community. It is also linked to funding renegade groups involved in terrorist activities.

“Sports washing” solves these vulnerabilities.

Sports washing is a public relations tool meant to clean up an image of a country. It is deployed to break stereotypes, sanitize negative perceptions and transform a country’s image to one curated by its planners.

Hosting the FIFA World Cup was meant to re-package Qatar from a desert country ruled by an outdated monarchy into a progressive, first-world capitalist state that is also a responsible member of the global community. With this, it hopes to attract investors to accelerate its economic diversification and growth. Qatari leaders aspire to achieve enough economic and geopolitical gravitas within the next decade to remain America’s indispensable non-NATO ally in the gulf, even without petroleum in the equation.

But did Qatar have to spend $229 billion for its sports washing expedition? Couldn’t it have achieved the same result with more modest spending?

It’s all about attracting investors. When an economy commits to spend hundreds of billions in infrastructure, they require an army of architects, engineers, designers, contractors, service providers, management staff, software developers, accountants, blue and white collar workers, etc. The sheer size of the projects attracts foreign companies to set up temporary offices in the country if only to get a piece of the multi-billion projects.

Mega-projects attract capital, talent, expertise and new productive capacities to the host country. In one fell swoop, it enables its economy to diversify. From only oil and gas, Qatar leverages on lavish infrastructure spending to become specialists in urban planning, architecture, civil engineering, mechanical engineering, sanitary engineering, construction, hospitality, financial services and a host of others. A whole new ecosystem of diversified industries is created.

But Qatar must provide reason for foreign companies and their employees to stay even after the projects are completed. This is why one mega-project is followed by another. In the next ten years, Qatar is expected to build several multibillion-dollar projects including the 10-kilometer Sharq crossing bridge, a 300-kilometer metro train system, a new seaport, etc. Investors who’ve set up shop in Qatar to build FIFA’s infrastructure now have reason to stay and make Qatar its permanent domicile. This is the economics of building big.

Qatar has made a courageous bet on itself. We can’t help but admire the Qatari leadership for their vision, courage and determination to achieve its national objectives.

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Email: [email protected]. Follow him on Twitter @aj_masigan