Kuwait Financial Centre “Markaz” recently published the executive summary of its report on analyzing the implication of hosting FIFA World Cup 2022 in Qatar. In this research note, Markaz identifies FIFA specific investments and projects in Qatar and tracks their progress status; and attempts to determine its impact on the regional economies in general and on Qatar in particular.
Qatar won the honors for hosting one of the biggest sporting events in the world, when the country won the bid against five countries including the US to host 2022 edition of FIFA World Cup. Qatar will hog the limelight during the event and would represent an Arab world that stands for well-developed, modern, diversified, capable and futuristic group. Qatar has hosted FIFA Under-20 World Cup in 1995, Asian Games in 2006, and Gulf Cup of Nations in 1992 and 2004 where it eventually won the cup too. Apart from these, it has hosted several other regional and International sporting events and would like the opportunity to showcase its prowess to host large scale international events.
The event is expected to draw over half a million visitors to the country, which accounts for almost a third of its current population. The huge influx of people and the associated needs is expected to have a direct impact on the Hospitality and Infrastructure sectors and indirectly on the Financial, Communication and Power sectors. In this report, we intend to assess the magnitude of change that this event will drive into Qatari economy and in the neighboring GCC states.
Prior to winning the FIFA bid, Qatari Government, under National Vision 2030, had announced ambitious spending plans to boost the infrastructure of the country as part of diversification away from hydrocarbon driven economy in line with other GCC peers. Hosting the world cup would instill a sense of urgency and provide an additional incentive to attain the National Vision 2030. Select projects were also launched to specifically address the issue of hosting a successful world cup.
Ambitious and large scale infrastructure plans and the associated spending levels will have implications on the financial sector. Government of Qatar has already made moves to deepen the debt market and it intends to issue three and five-year domestic government bonds to build sovereign yield curve. Banks would have ample opportunities to increase their loan book size and generate income fees. As of September 2012, credit to private sector has grown by 14.5% (YoY basis) while credit to public sector registered a growth rate of 44.3% (YoY basis).
GCC firms are actively expected to pursue the diverse opportunities in Qatar. Intra-regional trade would receive a major boost as most of the raw materials involved in the construction of many projects would be sourced from neighboring countries. Large regional financial institutions would stand to benefit by offering financial services to the large number of projects.
However, there remains certain risks; such as: cost overrun for event specific investments which are likely to be redundant for Qatar as it has a very small population base and limited means to put them to use after the event, inherent implementation risk for large scale projects which have high tendency to be delayed, and risk of hosting the event during the hottest months of the year in June/July. Additionally, post FIFA World Cup event there is likely to be a huge legacy cost in terms of excess hotel room capacity, dismantling of newly built stadiums to be given away to other developing nations, and extended metro lines.
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Kuwait Financial Centre 'Markaz', with total assets under management of over KD888 million as of March 31, 2012, was established in 1974 has become one of the leading asset management and investment banking institutions in the Arabian Gulf Region. Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.