250% return over 3 years on the $10 billion price tag, and in fact much more if you count in intangible benefits which improve Russia's business image around the world.
This post first appeared on Russia Insider
This World Cup is turning into a massive win for Russia.
Full transcript of the video below:
The FIFA World Cup isn't just about sports, but also about huge investments into the economy. We'll discuss it with the president of the Russian Free Economic Society and the International Union of Economists professor Sergey Bodrunov.
— Good morning, Mr. Bodrunov.
— How much did it cost Russia to organize FIFA World Cup? And when will the costs be repaid?
Sergey Bodrunov, president of the Russian Free Economic Society: Like everybody, I'm a soccer fan, and yesterday I lost my voice rooting for our team. As an economist, I can tell you that it's a big investment and, primarily, an infrastructure project.
When Russia gained the right to host the World Cup, many of my colleagues were skeptical about it, claiming that it was difficult, very costly and would never be repaid. To date, some data has already been made public. Our expenses have been thoroughly calculated.
— Let's hear it. We've spent 678 billion Ruble ($10 billion). The sum was mostly allocated from the federal budget, about $6.2 billion. Over $1.4 billion was allocated from regional budgets. The final $3.1 billion was invested by businesses. So, in total it's about $10 billion.
Now let's look at what we've gained. A billion dollars was given by FIFA. We got money from selling tickets and receiving guests, which was about $10-11 billion.
Moreover, we capitalized on advertising, media space, licensing and so on, earning $10 billion via the media and $5 billion on sponsorships.
— Including merchandise?
— Yes, including merchandise, which is estimated to total $100-150 million. It's not as much as the sponsorships. That is, the total income is about $26-28 billion, which is great business.
Our President is actually a good entrepreneur, if not a perfect one. I, for one, would be glad to invest in a project that would bring a 250% return.
— Within what period?
— We've invested most of the money recently, that is, several years ahead of the World Cup. Since the first stage was more about designing, investment has mostly come over the recent years. It's quickly being repaid during the World Cup.
— So, the World Cup will repay before it finishes, won't it?
— It will.
— So, if compared to concessions, which is quite a trendy word now…
— It brings more profit.
— If a businessman builds a toll road for a municipality, bypassing a road crossing, what's the average period of concession repayment for a toll road?
— Up to 20-30 years.
— 20-30 years?
— Yes, but an infrastructure project such as the World Cup has a continual effect. That's what peculiar about it. It's like if you throw a stone into the sea, where the stone is the big investment and infrastructure project, the first wave is the first benefit. But more waves will follow, you know. That's what "continual effect" means. Stadiums will continue to work. But we've spent the money on other facilities that will work as well. Not only did we build 12 stadiums, but also created the infrastructure around them, including spaces near the stadiums, streets, other facilities, railroads. 1,200 miles of railroad have been built.
— Not to mention roads…
— As much as 5,000 miles of road have been built. That's what the World Cup means. All of the expenses are covered by the said sum.
30 railway stations have been built, rebuilt, or modernized. 500 junctions have been constructed. And so on and so forth.
And don't forget about the airports. There is also communication and information infrastructure, specific centers that will continue to work.
According to Moody's estimates, the stadiums will bring in $1-2 billion annually. while the communication infrastructure will bring about $3-5 billion annually, which actually adds 0.3-0.4% to our GDP.
— Mr. Bodrunov, what about another long-term effect? It's an open secret that few foreigners are eager to come to Russia for a number of reasons, including visa issues, propaganda in what I call the European countries of the near abroad, not to mention Latin America. After foreigners saw Russia as it is, what will be the effect on our tourism?
— It's the so-called third wave of the investment effect on Russia.
What's our weak point now? Investors avoid us, we're being vilified, a negative media information field is forming around us. It affects businesses.
And I don't mean only the direct sanctions. Why invest there if only God knows what can happen there? They either know nothing, or nothing good, about our country.
This World Cup is an opportunity to discover Russia from a different perspective, to explore this great country with good people and businesses, sustainable infrastructure, and so on.
As a former entrepreneur, I'd invest in a country with a sustainable and reliable economy. Credibility and economy are said to be different matters. They actually aren't. Credibility is the biggest non-economic factor of the economic development.
Enhancing the country's credibility is the third economic effect, that is, an additional continual economic effect.
Good organization of such an event, where they treat guests as warmly as Russians do now, works for the benefit of the third wave. It can hardly be evaluated in rubles or dollars. It's hard to estimate it at all.
Obviously, it will be profitable, improving our investment prospects.
— Have the sanctions imposed on Russia four years ago by the US and the EU decreased our potential earnings from the World Cup?
—You know, I think they have, to some extent.
Take the hottest topic: British fans. Some claim they'd have taken their wives or girlfriends at the World Cup, but Russia is allegedly known for bears walking in the streets and bullying everyone, so, it was scary to come here.
It means that Britain lost about 30-40 thousand fans, while we lost their money. Anyway, each of them would have spent some thousands of dollars or euros in our country. These are direct losses we're suffering.
If it were not for the sanctions, I think we'd enjoy more ads and investment and earn more money because the advertising companies mind the conditions of the markets they're working with, so, I think, we do suffer some losses.
But, in any case, I think that the current state of affairs in Russia allow us to host the World Cup, by which we get the better of those who wish things were much worse here. No dice. We're fine.
— I agree with you on this point. Because unlike the Sochi Olympics, where fans could appreciate only a tiny part of Russia, only the Olympic facilities, now they can explore the whole of our country.
— That's the difference between the World Cup and the Olympics. It's great that the former shows all of Russia.
— Thanks a lot. As for the British fans, they won't eat any cheese these days due to the food embargo, but at least they'll have enough British beer.
Thank you very much, that was the president of the Russian Free Economic Society and the International Union of Economists, professor Sergey Bodrunov.
This post first appeared on Russia Insider
Anyone is free to republish, copy, and redistribute the text in this content (but not the images or videos) in any medium or format, with the right to remix, transform, and build upon it, even commercially, as long as they provide a backlink and credit to Russia Insider. It is not necessary to notify Russia Insider. Licensed Creative Commons