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FIFA World Cup 2022 Award - An impetus to Qatar Economy

Global Investment House -Qatar has won the rights to host "The Cup" and the Middle East is poised to go the "world" way. Soccer World cup 2022 has been awarded to Qatar and appears to be fraught with opportunities - for Qatar, the GCC and the Middle East. The 2006 Asian Games made a huge difference to the country and the region as a whole. The 2022 FIFA World Cup will also do wonders to the country and to the region.

How they did it

Qatar has promised to spend $50 billion on infrastructure upgrades and $4 billion to build nine stadiums and renovate three others. As per the proposed plan, no stadium is expected to require more than one hour of commuting time. The unique offering is that that it has been proposed that solar power will be used for air-cooled stadiums, and to build modular stadia that would be later dismantled and donated to developing countries. Qatar led in the 2022 ballot on each of the four rounds, obtaining 14 votes against eight to the US in the final round.

What it means for the Qatar and the region

The scale of such an achievement cannot not be under estimated, the World Cup is the biggest sporting event globally with estimates of television audiences for the 2010 FIFA World Cup final exceeding 700mn. Given the central location of Qatar, 82 percent of the world's time zones will be able to receive Qatar 2022 games live in prime time, with a potential match day peak audience of 3.2 billion viewers; this has the potential to create an enhanced rights value for FIFA. Also, Middle East proximity to European and Asian markets is likely to enhance the commercial value of hospitality rights compared to South Africa 2010. This provides Qatar with a unique opportunity to showcase itself and the region effectively and to alleviate any doubts about the region and to confirm the belief that the GCC is a fast-developing part of the world economy with advanced capabilities and the ability to stand amongst the leading economies of the world. Qatar is a booming sporting, art, cultural and tourist destination and with the traction provided by this win, it has the potential to attract lots of visitors in spite of the weather conditions. Perhaps one of the most significant expectations from this award is that it will get the world closer to the Middle East and create multi-cultural ties across the region with the world.

Qatar Economy - A snapshot

Qatar's overall GDP growth has averaged 17% over the past decade. Even during the crisis in 2009 when most of the world economies retreated, Qatar - with the world's 3^rd largest gas reserves and second largest GDP per capita - posted an overall real GDP growth of 8.6%, underpinned mainly by expansion in the production of liquefied gas (LNG) and condensates, and a relatively strong performance in the non-hydrocarbon sector. Even in the near term, as per IMF estimates, the growth is likely to continue with Qatar's overall real GDP projected to grow by 16.0% in 2010 and 18.6% in 2011, which is among the highest in the world - driven mainly by large expansion in natural gas production and public investment expenditures. The global turmoil and the Dubai debt crisis have had a limited impact on the banking system. Preemptive equity injections and asset purchases by the authorities have helped to further improve the resilience of the Qatari economy.

How the economy will benefit - infrastructure, tourism, banking, real estate and construction

The vision of HH the Emir, Sheikh Hamad bin Khalifa al-Thani, and HH Sheikha Mozah Nasser al-Misnad has brought Qatar to a high prospective internationally and what the 2022 bid presents to the world is exceptional from all aspects. Qatar can develop adequate infrastructure to accommodate the 2022 events, and these are going to benefit future generations and bidding for other events like the Olympics. The massive renovation and new construction is likely to boost all sectors. Looking at numbers, a report by UBS Investment Research (from February 2010) estimated that preparation for the FIFA World Cup - which commenced four years ago - has added between 0.5% and 2.2% to South African GDP (depending on which infrastructure projects one considers); and overall had created in excess of 300,000 jobs since 2006 - a 2.7% contribution to employment figures. UBS research also indicated that the three previous World Cup hosting-countries saw their GDP grow by 1.8% on average during the year of the tournament - although determining how much of the growth was associated with the tournament itself is very difficult to ascertain and likely falls well below this number.

Undoubtedly, Qatar needs to undertake massive development activity in order to deliver what they have proposed. However, most of this is in-line with the already articulated Qatar National Plan. Also, Qatar's experience in successfully hosting the 2006 Doha Asian Games will help in the planning and implementation of the 2022 event. The impact of Qatar winning its bid for the 2022 FIFA World Cup would be profound for the state, its people and the region. In addition to creating thousands of jobs across primary and ancillary industries, it will provide the acceleration for ideas that are at the moment just sketches and drawings but will give them the push to become realities.

Construction boom: To bring the facilities enhancement to fruition, construction activity in Qatar is expected to witness a significant surge. This will catalyze a lot of infrastructure projects that have been progressing slowly or waiting in the wings. Commercial and semi-residential construction is likely to see the highest increase ahead of 2022 in order to meet the expected demand. Real estate prices are also likely to see movements in line with the venues with demand rising in certain areas more than others. It is also inevitable that regional and international players will actively enter the Qatar market which is currently dominated by local and GCC operators. Commercial tie-ups and innovative business sharing agreements are likely to emerge in what is currently considered a plain-vanilla market.

Facilities enhancement: A total of 12 state-of-the-art stadiums will be made available which includes the renovation and refurbishment of three existing stadiums. In addition, the hospitality and real estate sectors are expected to see a significant boost. Given the geographic advantages that Qatar has over South Africa, the number of tourists expected to visit the 2022 World Cup is likely to increase. This implies a need for new hotels across class categories as well as serviced apartments and other short term residential options. Additionally, it is also expected that the food and beverage industry will see a surge of investments ahead of the games.

Transportation infrastructure: A fully air-conditioned rapid mass transportation system is likely to be built to connect not only all venues but also public placed. In addition to this, a second international airport is due to open in 2012 - a decade before the first match of the 2022 World Cup kicks off - with the capacity to handle 50m passengers a year.

Financing arrangements: In order to be able to meet all the above business demands, the banking sector is expected to play the most pivotal role. The availability of liquidity in the system will be imperative and the banking sector is likely to see an increase in activity across its verticals. Commercial and construction loans with innovative structures are a possibility since it is likely that most banks will want a bigger share of the pie of revenue which will be made available. Another aspect of the financial market which could see an increase is the insurance segment and especially logistics related insurance and property insurance. The banking sector is also likely to play a very important role in allowing international participation by proving funding to new entrants into the Qatar market.

Conclusion

Hosting the tournament is undoubtedly a source of pride and honor among the entire region. It is expected to raise awareness of Qatar and the region and change perceptions about this area amongst those who have yet to experience it first-hand. It is also likely to ensure a level of pre-eminence for Qatar as the tournament host and the only Middle Eastern country to have hosted a World Cup and demonstrate that Qatar and other countries in the region can, with vision and ambition, overcome the challenges associated with holding major sporting events in the summer and are credible hosts for other major events.

On a more subtle level, the new understandings that will be a consequence of the coming together of fans from different cultural backgrounds will have a positive impact during the event and when visitors return home with their experiences and memories from the first FIFA World Cup held in the Gulf Region. The massive economic boom that is likely as a consequence of the numerous new projects coming up will be unique to the region. The Middle East/Arab world has now also received a chance to show its capabilities in hosting major events and Qatar is the best as it has successfully hosted the 2006 Asian Games. There are many foreign companies that came to Qatar as a result of the Asian Games and continue to thrive in the country long after the Games were finished, and this will be the same with the World Cup but on a much larger scale.

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© Press Release 2010