Thursday, December 2, 2010

FIFA follows Oil Money in 2018 & 2022

The big wins for Russia and Qatar - securing the right to host the 2018 and 2022 FIFA World Cups - mirror the monumental shift from slow-growth, budget-choked developed economies to fast-growing, often resource-rich nations with deep global ambitions.

Thursday's awarding of the coveted hosting prize is not just an embarrassment for such traditional sports hosts as England and the United States, which trotted out Prince William and Bill Clinton, respectively, to jazz up their cause.

It's a reflection of the tilting of the world's power base into zippier emerging markets, as shown by the recent hosting of major events by China, South Africa and India, continuing with Brazil's hosting of the 2016 Olympics and World Cup in 2014, and now, on to Russia and Qatar.

This new world order as reflected by global sporting events would have been tough to imagine a decade or two ago, when most spectacles Ping-Ponged between Western Europe and North America. Economists have touted this shift for years, and now, it seems, the sports community is catching on.

The decision has huge symbolism, and benefits, on the geopolitical stage. No Eastern European or Middle Eastern country has hosted this kind of event before. For Russia, roiled by WikiLeaks allegations this week calling it a "virtual mafia state," the announcement could not have come at a better time. Qatar's surprise win, meantime, is expected to boost the profile of the whole region.
"If Qatar can pull it off, it can show the rest of the world that the Gulf region is about more than just the traditional image of very conservative, oil-rich countries where there's nothing but sand and a few high-rise buildings," said Jacob Kirkegaard, research fellow, economist and soccer fan at the Washington-based Peterson Institute for International Economics. "It's the branding of the broader Middle East."

Qatar is, indeed, trying to establish itself as a more moderate cultural force in a part of the world that, as WikiLeaks underscored, is replete with tension. And in the heated regional race for dominance against Dubai, "Qatar's probably feeling pretty smug today."

Several factors nudged the decision in favour of Russia and Qatar. One, FIFA is trying to shift the World Cup into new markets, moving away from traditional venues. As FIFA president Sepp Blatter said after the vote, "We go to new lands."

And two - setting both countries apart from their rivals - they had 100-per-cent government support, backed by gobs of cash, Mr. Kirkegaard points out. It's a contrast to most G8 countries, where governments are seriously distracted by deficit-cutting austerity measures.

Oil plays a big, if murky role in the next three successful bids. Brazil, Russia and Qatar are all hefty oil exporters, and that wealth, in good part, is helping them write the cheques. Brazil is spending $2.8-billion (U.S.) and Russia $3.82-billion. Tiny Qatar (population: 1.7 million, though expected to have the world's fastest-growing economy this year) is spending $3-billion for air-conditioned, zero-emissions stadiums - and is set to invest an eye-watering $100-billion in infrastructure in the next few years.

The announcement came amid plenty of fireworks, before and after. Last month, FIFA officials suspended and fined two executive committee members for voting on the 2018 and 2022 hosting amid allegations they had offered to sell their votes. On Thursday, meantime, the announcement of Qatar's victory over the mighty U.S. shocked many observers.

Yet the decisions are a reflection of the post-recession world. The BRIC term - for Brazil, Russia, India and China - coined by Goldman Sachs in 2001, has now entered the mainstream lexicon. With good reason - in the past decade, the four countries alone have contributed more than a third of global GDP growth, and now account for nearly a quarter of the world economy from one sixth, according to Goldman. It thinks that trend will get even more pronounced in the coming decade.

Now, the race is on to create a nifty new term. Goldman has identified the Next Eleven, 11 countries it figures have the potential to be among the world's largest economies, along with the BRICs - Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam.

Not to be outdone, the global bank HSBC has coined the CIVETS - not cats, but rather six countries poised to blast off in the next decade: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.

Not everyone's so sure that the BRIC acronym is still apt. A growing number of economists say Russia, blighted by corruption woes and a declining population, should be thrown out in favour of younger, thriving Indonesia (though, the term just doesn't have the same ring - BICI? ICIB?).
For now, victory is sweet for Russia, given many of the recent unsavoury headlines on bribery and organized crime. "A day for rejoicing," said Prime Minister Vladimir Putin.

"We are building a new Russia ...we can achieve this better and quicker with your help," said First Deputy Prime Minister Igor Shuvalov.

As for Qatar, citizens danced in the streets and blew vuvuzelas last night. The Emir of Qatar, Sheik Hamad bin Khalifa Al Thani, thanked FIFA for "believing in change."

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