FIFA grins and bears it

By bne IntelliNews December 2, 2010

bne -

Football governing body FIFA's announcement December 2 that Russia has won the rights to host the 2018 World Cup will kick off what one fund manager describes as, "one of the largest spending sprees on infrastructure over the next five years the world has ever seen."

With the 2014 Winter Olympics in the bag and a Formula 1 Grand Prix to pull up at the starting grid the same year, Russia has now scored a hat-trick of international sporting events over the last few years. However, this latest victory heavily outguns the others, being second only to the Summer Olympics in terms of prestige and international attention.

Hosting the competition is not just a pep pill for Russian football, but will offer a huge boost to the country's crumbling infrastructure, as the government has made huge commitments in the bid to upgrade transport and tourism facilities, as well as the 15 world-class stadiums it needs to build in the next eight years.

"Roads, bridges, rail, airports, ports and sports facilities will all be brought up to world-class standards," says Plamen Monovski, chief investment officer of Renaissance Asset Managers. "This will increase substantially productivity, employment and elevate trend growth. Historically, large infrastructure spending has tended to add a 1-2% non-cyclical layer to trend growth. On the back of this and high commodity prices, Russia can re-join the club of the high-growth countries in the world."

Chris Weafer of Uralsib agrees: "No doubt about it, while the cost could likely run into the tens of billions, World Cup 2018 would inject a great deal more urgency - and a stricter time line - into the government's modernisation programme."

At the same time, as recent hosts of other major events have found, the non-monetary benefits can be huge, and Russia could certainly do with the PR that a successful World Cup would offer. In 2006, host Germany transformed its image from somewhat dour and overly-serious into a nation of smiling hosts welcoming the world to party-packed streets. "Think of the Beijing Olympics and the World Cup in South Africa. In all these cases, international opinion toward the host nation has changed for the better," says Monovski. " One can't help but make parallels with the Moscow Olympics in 1986, which coincided with the beginning of perestroika."

The government has already promised free visas and heavily subsidised transport for fans travelling the huge distances between the host cities, which are divided into five hubs in European Russia, with Yekatrinberg the only venue across the Urals.

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