Fifa corruption: Doing good should be part of any bid to host the World Cup

Fifa’s reputation is in tatters and the future of the World Cup tournament hangs in the balance. As the investigations against Fifa officials and members of host-country governments unfold, so does any notion that Fifa is an organisation that is fit for purpose. The key issue is not simply the alleged nefarious wrongdoings of Sepp Blatter and his associates, important though that is. The investigations are shedding further light on a much wider and systemic problem. The business model that underpins the World Cup is fundamentally exploitative and dysfunctional.

Take the 2010 World Cup in South Africa as an example. Direct costs to the country of hosting the event totalled $4.9bn, while Fifa’s own accounts claim it earned $2.35bn from the event (2010 exchange rates). Five years later, South African taxpayers are still footing the bill for the Fifa-bestowed honour of hosting the event. What’s left behind are 10 white elephant stadiums whose final construction costs came in almost 1,000 per cent over budget, cost up to R70m a year each to maintain and are never likely to generate enough revenue to service their annual maintenance costs, never mind what it took to build them in the first place. Sadly, the same pattern is emerging in Brazil after the 2014 World Cup.

The tragedy is that the story of host countries being left with the bill for financing underutilised sporting infrastructure is not confined to South Africa, Brazil or even to the World Cup tournament. Recent history is littered with examples of what is becoming known as the winner’s curse, the legacy costs of hosting a mega-event. These include the 2008 Beijing Olympic Stadium, the venues for the Athens 2004 Olympic Games and the 2004 Uefa stadiums in Portugal. Perhaps the most infamous example is the “Big Owe” Montreal Olympic Stadium which took Canadian taxpayers 30 years to pay off and was not built in time for the 1976 Olympic Games.

These large-scale and often spectacular sports venues have become monuments to the poor planning, overoptimistic forecasting, weak governance, corruption, collusion and lack of accountability in the business of major sporting events. Simply replacing a handful of officials in Fifa is not going to make the problem go away. As Albert Einstein put it: “We can’t solve problems by using the same kind of thinking we used when we created them.”

Weighing up the costs and benefits to host countries of staging a mega-event like the Fifa World Cup or Olympic Games is tricky because the list of expected benefits usually includes a mix of both tangible and intangible effects. The espoused justifications for bidding for the events are that they act as a catalyst for much-needed infrastructure development and provide an economic booster in otherwise deprived areas, that they create employment, attract tourism and showcase the region to the world as a desirable place to do business.

Despite this persistent assumption, a growing body of research evidence shows that, more often than not, mega-events have no discernible positive economic impact on the development objectives of the host country, the cities that stage the events or even the stadiums and venues as businesses in their own right.

The supply-side “field of dreams” belief that “if we build it they will come” has failed, over and over again. Building sporting venues does not stimulate demand from ticket-buying spectators. Interpreting the immediate buzz generated by great sporting events as a long-term demand signal has turned out to be a costly mistake for taxpayers in developed and less developed economies alike.

Does this dismal track record mean that countries can never benefit from the World Cup? On the contrary. Our research suggests there is tremendous potential for Fifa to help with development. Following the events of last week, Fifa has the perfect opportunity to break with its past, reposition its strategy, restructure its organisation and align its incentives to promote and develop football globally as a force for positive change.

To do so, apart from the obvious changes in personnel, it needs to switch the beneficence to the developing world (as claimed, rightly or wrongly, by Blatter’s supporters) from being a happy by-product, a bonus tacked on to Zurich’s gravy train, to being an explicit goal. Perhaps these events could target specific development goals of the host nation, like healthcare, education or whatever. Fifa should thus position itself as a trustworthy partner organisation to host countries.

At the bid stage, this means it needs to support potential host countries in making financially sound and realistic bids, especially with regard to the real costs of constructing venues and estimating future revenue generation. Fifa has the knowledge and expertise to adopt such a role. This will happen only if it also becomes more transparent about its financial arrangements, and puts in place processes to monitor and evaluate the long-term value of the benefits of its disbursements.

Not all the responsibility rests with Fifa, however. Future World Cup hosts should also consider establishing a World Cup Delivery Authority that has overall, end-to-end responsibility for delivering infrastructure and venues. This would need to be distinguished from Local Organising Committees, which would be much like the London 2012’s Olympic Delivery Authority, an idea that originated in Sydney for the 2000 Olympics. Such an authority would be able to ensure that the realistic cost-and-benefit estimates remained on track and as such would also prevent the scope creep, cost escalation and opportunities for corruption and collusion that result from a fragmented, locally driven strategy.

As the world’s future major sporting events are set to take place in developing economies more often, it is increasingly vital that the potential benefits such events could generate are fully realised, in the long run, by those who need it the most.

There’s a place on the team for Fifa in delivering development goals, but it has a lot of work to do to prove it’s match fit.

Professor Eamonn Molloy is tutorial fellow in management studies at Pembroke College, and associate fellow of Saïd Business School, University of Oxford