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Warwick Knowles

Corruption, FIFA, and the Beautiful Game of Football

by Warwick Knowles | Dun & Bradstreet Editor

June 11, 2015 | No Comments »

FIFA-Sepp-Blatter-Soccer_shutterstock_13096054_1100px-01After years of inertia by global law enforcement agencies, the decision by US prosecutors to go after corruption within FIFA could return the beautiful game of football to its long-suffering fans. As a football supporter who can travel up to 12 hours one-way to watch my Elgin City team from Scotland play, I am happy that at last FIFA is under investigation and hopefully will be cleaned up. However, the outcome of the investigation could have broader implications in the football world as well as in the Middle East, which includes my favorite holiday destination — Jordan.

Though FIFA has enabled World Cup football to blossom in countries outside its traditional regions, diversity has come at a cost. Between 1930 and 1990, the finals of the World Cup were always held in either Europe or Latin America. That changed in 1994, when the finals were played in the US. South Korea and Japan hosted the games in 2002 and South Africa in 2010.

The South Africa bid is at the heart of the current corruption investigation. Though South African soccer officials have denied paying bribes to get the games, US prosecutors claim that $10 million was paid to former FIFA officials by South Africans before the vote.

Also part of the US investigation is the 2010 decision by FIFA to award the 2018 and 2022 World Cups to Russia and Qatar, respectively. While a football case can be made for the Russian award, many factors weighed against Qatar, a small country with a population of 2.3 million, of which around 80% are temporary migrants.

Furthermore, the country has blistering high temperatures in the summer months when the World Cup is traditionally played (to avoid clashing with the European domestic season). Temperatures even at night in the summer rarely fall below 40° Celsius (104° Fahrenheit), which could make playing the games virtually impossible. In addition, Qatar has been strongly criticized by human rights groups for treatment of its migrant population.

What no one has raised concerns about is whether the hydrocarbon-rich country could fund the construction of the stadia and infrastructure needed to accommodate the thousands of fans, players, and officials who would converge on the country for the month of the finals.

Over the past decade Qatar has built an international reputation far beyond its size, using “soft power.” The country has used a multipronged approach that includes mediating international disputes, hosting international conferences and sporting events, and sponsoring sports events such as football in Europe as well as in Africa.

Prior to the US investigation of FIFA, Qatar largely brushed off allegations of corruption and human rights violations. However, the game has changed significantly with the possibility that Qatar could lose the rights to host the 2022 World Cup. Moving the games would not only undermine Qatar’s international credibility and reduce its ability to play the role of the neutral arbiter in regional disputes, it also would significantly impact the country’s economic growth.

At present, based on Qatar keeping the games, Dun & Bradstreet forecasts annual real GDP growth of 6%-7.5% over the next decade, primarily driven by government spending on the necessary infrastructure projects. This forecast is high but still relatively subdued compared to the average 16.3% growth experienced between 2004 and 2011 as Qatar expanded its natural gas sector. Losing the World Cup could see growth rates cut by two to three percentage points per year.

However, the impact would not be limited to Qatar. In a globalized world, the effects would ripple throughout the Middle East. Cross-border trade and investment opportunities would be impacted, while the inflows of migrant labor would be reversed. Manual labor opportunities would be cut, impacting remittance flows to Jordan, Egypt, the Philippines, and India — and adding pressure to the labor markets in these countries.

In addition, professional positions, often filled by Western Europeans, involving project implementation and business services, would be threatened. In all likelihood, wages in these sectors would be reduced across the neighboring Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates).

Finally, reduced economic growth in Qatar would impact economies of the oil-importing Arab countries, such as Jordan. Not only would trade and jobs be curtailed, investment, tourism, and economic assistance would suffer as well.

While I celebrate the FIFA investigation, I’ll keep my fingers crossed for Jordan.

Dr. Warwick Knowles is the Deputy Chief Economist on D&B’s Global Data, Insight & Analytics team. Based in Marlow, UK, he covers global issues and the Middle East and North Africa for D&B Macro Market/Country Insight Products. Previously he taught Middle East politics and political economy for almost a decade at both Newcastle and Durham Universities and has published widely on regional issues and the hydrocarbon sector.

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