Should a country stage the Olympic Games?



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Sri Lanka must be careful when committing to
global events in building the country’s Image


 


By Rohantha N.A. Athukorala


At the CIMA annual conference I had the opportunity of being part of the panel discussion with the Queen of England’s honours celebrity Sandie Darwe, who was incidentally part of the team with the great Sebastian Coe that won the Olympic bid to stage the games in London in 2012.


The one question that I asked her was, when a country is running a fiscal deficit of 12% plus will the staging of the Olympics wreck a country. The answer I got was that UK is looking at a private-public partnership approach to reduce the burden on the country but I knew that this will not fly as, end of the day basic infrastructure needs to be attended by the government of a country. Private partnerships will come in only if there is a commercial sense to a project. Given that sports are a daily routine in my life and the Olympics is something that I follow very closely I wanted understand this better. The findings beneath the surface was interesting.


Once in a life opportunity


Apparently staging an Olympic Games is a once in a life time opportunity that a country gets and its associated with delivering a legacy of new sports facilities thousands of jobs, new businesses and a step change in the nations imagery like what the world saw in Beijing, Greece and Sydney in the recent past. However, it has been proven that the moneys invested for this greatest show on earth has created financial chaos not only in the country but in the region. The million dollar question asked by many is should the modern world stage the Olympic Games or should there be an alternate business model to make this project a viable business proposition. Lets me throw more light from the last two Olympic games and see if a new business model is emerging.


2004 Greek Olympiad – $12.5 bn


The Greek Olympics that was staged in 2004 was initially estimated to cost US $ 5.6 Billion. Then it was upped due to $ 8.3 Billion and finally the figure exceeded US $ 12.5 Billion due to the extra security that was required given the threat of terrorist attacks. Even though ticket sales had exceeded $5.3 Million and even after adding the moneys collected through sponsorships the P&L was under pressure. The final verdict was that the Olympics had shaved off 2% points of the GDP and some even say it triggered today’s financial crisis in the whole of Europe.


2012 London Games -$14.3 bn


From the reports coming in The London Games planned for 2012 is no better. At the time of approval of the bid the budget was 2.4 billion pounds and now the budget has reached 9.35 million pounds taking into account contingency funding and taxes that has to be paid. In dollar terms it is a colossal 14.3 billion. I feel this is a massive burden on a country already riddled with a fiscal deficit of twelve percent plus. Recent reports from industry think tanks state that there is little evidence that hosting this event at this cost will have any substantial impact financially. The logic being almost 70% of the benefit comes through tourism and as at end June 2010 the number tourist arrivals into UK is below 2% as against last year. One can argue that benefits from the rebranding impact post the games come in after four years but the challenge is that the UK’s economy cannot hold ground for that long given its fiscal deficit.


UK – Tourism Impact from Olympics


China’ problem in 2008


If we examine the Beijing games the situation was somewhat different. China’s industrialization had begun in 1980’s and the urban population was at 19.6% of the country’s total population. With the accelerated development drive by the end of 2005, China had recorded an urban population of 42.9 percent beating India (23.1%), Pakistan (28.1%) and Indonesia (22.1%).


Hence it was clear that China had a problem. The urban population had increased from 191 million seen in the 1980’s to 570 million in 2005 which demanded an massive investment in the transport, Infrastructure, water management, waste management and the environment so that the quality of life of a Chinese in the urban areas can be maintained. If this was not done China was heading into a crisis on the quality of life of this new generation Chinese that would have had serious ramifications.


New Olympics model


In this backdrop China bid for the coveted award of hosting the Olympic Games. The crafty policy makers in China did not allow a tactic to dominate the strategy but instead used the Olympics to fit into the overall strategy of urbanization. It was a hand in glove strategic fit. This to my mind could be the new Olympic model that a country can adopt.


China went on to embark on one of the most passionate and aggressive development agenda’s of the world.


Almost ninety percent of the cranes in the world were in China between 2004-2008. The Chinese government pumped in a colossal 40 billion dollars in to the developmental agenda of the Olympics, powering an economic drive at blistering pace that even made the economy overheat with a GDP growth above 11percent.


Beijing Games 2008 – new Olympic model


The brilliance of the master plan was such that the Beijing Olympics infrastructure was crafted in such way that it fitted the 5 year City Plan and was no way done to just cater to the short term Olympics requirements. On the 40 billion dollars that was invested almost a 26 billion dollars was spent on improving the Transportation. The transportation improvements included railway hubs and new railway lines, improvements on the Beijing subway, Tianjin expressway being upgraded so that interaction with the outside world was easier and it also stimulates economic growth based on the principle of connectivity.


The strategic objective being that all regions linked to the express way. In addition to this developmental strategy airports express lines were set up, Olympic extensions were crafted so that the end objective was that the urbanization agenda took centre stage on the development pathway. One key point stressed by the policy makers were that post games utilization of all infrastructure was at its maximum. Hence the world saw how the Olympics could be used as a vehicle to drive aggressive development but on the bigger game plan that has been conceptualized. I guess this should be strategy that UK must also adopt in 2012.


The Olympic spirit resulted in the speed of project implementation taking place at blistering pace. The Chinese government injected another 10 billion into Energy and Infrastructure which included improvements on housing conditions, relocation of construction sites and development of commercial sites as per the overall 5 year master plan. Five new transformer stations were constructed that can generate 220 kilovolts of power. Nine garbage treatment centers were built. The latest technology was used in all construction which has been scientifically assed by the top scientists of the world. The 10 billion investment on Infrastructure included, a sewage treatment facility, 12,700 sports facility areas, 67 theaters and 72 places for performances that sure catered to the urbanization strategy that China was driving towards. Once again a master stroke from the specialists of the new age world. Another 2.3 billion dollars was invested for water resource management that included 11 water treatment plants which can increase productivity to 525,000 cubic meters per day of clean water which was once again on the five year city plan. Another 2.5 billion was set aside to the development of the Urban Environment. Currently the forestation in the city is as 51.6% so that every 500 meters a green park is accessible to a new age Chinese. This will facilitate cleaner air.


But the classic to my mind was that the 1.9 billion dollars invested on the Olympic venues which were designed in a way so that 6 of them were erected on the Beijing University area it-self which explains the strategic thinking that was in play.


Benefits to a country


The Chinese being the catalyst of the new world order has architecture a new business model in my view if a country wishes to stage the Olympics. In fact the development agenda in Beijing was for a time horizon of 100 years, which is exactly what UK should do in planning for the 2012 games.


Latest research reveals that the strategic objective of the 5 year city master plan was to enhance the quality of life so that the dream of a New Beijing will become a reality. The reality was that per capita income of the rural people had increased to $3234 up from the $1406 registered in 2002. The developmental programme increased income of the rural residencies by 9.1%and the urban residencies by 11.5% which mirrors the master plan drawn up.


We also saw that the Olympics was used to fast track the overall urbanization process with over 2.63 million people securing employment. The un-employment rate reduced to a marginal 2.3%. Overall housing conditions have improved and the convenience of transport has helped improve productivity. There has also been an improvement on the cultural side of life.


I guess this is the new business model that 2012 London Olympics games must adopt. I only hope it is not too late as we are just two years away from the games.


Next steps- London 2012


With this new business model that the Chinese have crafted, I guess if one wants to make the 2012 London Games a success the following will have to be done.


1) Develop a 5 year master plan for London and its outskirts specifically East of English on the urbanization architecture.


2) Set a clear target on the urbanization and specific requirements on basic infrastructure requirements.


3) Develop a strong communication campaign so that Britain will be seen as a vibrant and youthful destination for travel than the current educational and traditional platform that it is perceived.


4) Integrate the 5 year master plan into the Olympic infrastructure requirements for 2012.


5) East of England is said to attract the business for construction which is currently estimated at 100 million pounds. Hence, this area should be developed as an industrial hub in the future after the games.


6) The Olympic must be used for capacity development targeting employment in construction, logistics, culture, media, creative industries, hospitality, languages, sports, leisure, security as well as project management.


7) Use the London games as a catalyst for greater interest in cultural events that will also include regional cultural events as almost 55% of the tourists only visit London. This can help break this barrier.


8) Market the sports venues that are being built post 2012 for other events such as conferences and conventions so that occupancy will be guaranteed rather than these venues becoming white elephants.


Conclusion


Whilst we see that financially staging the Olympic Games can become challenging, from a spirit of humanity the lessons to the world cannot be quantified and its priceless in my view. For instance when Micahel Phelps ran up to his mum and gave her a bear hug after winning the 1st Olympic Gold and the truth emerged subsequently that Michael was diagnosed with attention deficit disorder at the age of 9 but his mum single handedly, made him outgrow this weakness. Michael today is the greatest athlete the world has ever seen securing 8 Gold medals in one Game.


Hence my conclusion is that rather than trying to quantify financially an Olympic Games, what is required is more a strategic perspective by a host country.



The author is a corporate personality, sports enthusiast, Business Strategist, a saught after speaker and a key policy maker in the Government of Sri Lanka. He frequently shares his thoughts in the local and global media on business and trade. Mr.Athukorala serves the United Nations(UNOPS) as the Head of National Portfolio Development for Sri Lanka & Maldives based in Sri Lanka.
 
 
 
 
 
 
 
 
 
 
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