Indonesia hopes for an Asian Games economic bonanza
While Jakarta and Palembang will be the event's centres when it starts on Saturday, opinions are divided on what the benefits for the country will be
The last time the Asian Games were staged in Indonesia was in 1962 during the reign of President Sukarno and 1,500 athletes from 17 nations competed in Jakarta.
This year, up to 11,000 athletes from 45 nations will descend on twin hosts Jakarta and Palembang for the latest Games, which start on August 18 and is the biggest regional multi-sports event in Asia.
The UAE party consists of 217, including 138 athletes who will participate across 23 different sporting disciplines including team sports such as basketball; football and rugby sevens.
Indonesia’s vice president Jusuf Kalla said that the games “will measure our capabilities and our nation dignity” and a survey published earlier this year by the country's National Development Planning Agency, Bappenas, says the Asian Games will be worth Indonesian rupees (IDR) 45.1 trillion (Dh11.75 billion) to the domestic economy.
However, opinions differ on the extent of the economic impact of the Games and the legacy
“The impact on the macro-economy of Indonesia is very modest,” says Richard van der Schaar, managing director of Jakarta-based Indonesia Investments.
Mr van der Schaar argues that while there will be increases in tourists and domestic consumption, the main lasting impact will come from infrastructure projects. “Long term, the impact only involves the infrastructure projects that have been sped up due to the Games. These projects can cause the multiplier effect as they encourage other investment, for example property development," he says.
“We have seen many infrastructure projects in Indonesia being delayed and eventually cancelled because of various reasons, such as land acquisition problems and legal uncertainty. So, these Games have helped to realise a few projects because the central and local governments are eager to complete them before the start of the Games.”
The cost of staging the Asian Games is dwarfed by hosting an Olympics but still significant.
Research published last year by AP put the cost of staging the 2016 Olympic Games in Rio de Janeiro at $13.1bn, while Bappenas estimates that the cost of infrastructure projects for the Asian Games is $2.4bn.
Infrastructure projects for the Asian Games include a revamp of Jakarta’s Gelora Bung Karno Stadium and a light rail transit scheme connecting Sultan Mahmud Badaruddin II International Airport to the Jakabaring Stadium complex in Palembang costing $676 million.
“The Asian games are quite big and a challenge for each economy," says Holger Preuss, professor of Sport Economics and Sport Sociology at the Johannes Gutenberg-University at Mainz in Germany. "It depends very much on the existing facilities and how many foreign tourists can be expected.”
Bappenas predicts that foreign visitors will spend $245m on accommodation, transport and medals but an influx of spending by locals is also expected.
The state is footing most of the bill, but the role of the private sector and sponsors is still important. In March 2017, Puan Maharani, Indonesia’s Human Development and Culture Minister responsible for the Asian Games, told the Jakarta Post that $150m was still needed in sponsorship.
According to sports research specialist Nielsen, over 5 billion people are expected to watch the Games, which will be screened on BEIN Sports in the UAE. This makes sponsorship attractive and, if correct, would top the London 2012 Olympics at more than 3.6 billion, according to World Atlas estimates.
The most watched sporting events in the world
Global TV audience reach (in billions) as of July 3, 2018
1 London 2012 Olympic Games 3.6
2 Beijing 2008 Olympic Games 3.5
3 South Africa 2010 Fifa World Cup 3.2
4 Brazil 2014 Fifa World Cup 3.2
5 Rio 2016 Olympic Games 3.2
6 Germany 2006 Fifa World Cup 3.0
7 Sochi 2014 Winter Olympic Games 2.1
8 Uefa Euro 2016 France 2.0
9 Vancouver 2010 Winter Olympic Games 1.8
Source: World Atlas
Documents circulated last year by the Games organisers claimed that a package including 150 1 metre by 3 metre banners in Jakarta and Palembang, shared logos at the gate entrance and a trio of 3 metre by 3 metre booths in both cities would generate "below the line" value to sponsors of $18.5m.
Nielsen’s research shows that 70 companies have signed up, and a swathe of deals agreed in December 2017 were worth $57m, according to the Netral News website.
Sponsors signed up in that tranche included a number of local brands such as taxi hailing service Grab Indonesia, convenience store chain Alfamart and Indonesian food manufacturer Indofood Sukses Makmur looking to cash in on increased local interest.
“Domestic consumption is expected to rise amid the Games,” says Mr van der Schaar.
“Part of the Indonesian public will go visit the events, implying they will need to spend on transportation, perhaps also a hotel, food and drinks. It is also possible that they will watch it at home with friends/family and therefore buy snacks and drinks to consume while watching.
“So it is interesting for companies to advertise on TV amid the Games, thus ad revenue rises.”
There has also been sponsorship from elsewhere in Asia. South Korean tech company Samsung is a sponsor and there has been significant interest from China.
Chinese sportswear brand 361° came on board in June 2017 and will supply equipment such as sports shoes and apparel. Three more Chinese companies – car retailer Biau Bang, construction materials group Beautiful Tomorrow and biotech specialist New Energy – followed in November last year.
Some sponsors are returning to the event, such as 361°, which first sponsored an Asian Games at Guangzhou, China, in 2010 and renewed the deal for the 2014 event in Inchon, South Korea. These deals are not just about activating sponsorship and increasing brand awareness but also looking to the future.
“For the 2018 Games, sponsorship sales are strong and it is clear that organisers have worked hard to bring in a large number of international as well as local sponsors,” says David Lucas, head of international federations at research group Nielsen Sports.
“In total, there are 70 brands associated with these Games ranging from official prestige partners to official licensees. The Asian Games organisers have done a great job commercially speaking, not just in terms of maximising the number of partners for this event, but also by laying the foundations for future events, in Japan and China.”
In four years time, the Games return to Hangzhou. The 2026 event will be staged at Nagoya in Japan and in January this year Japanese imaging giant Canon also agreed to sponsor the 2018 Asian Games for the first time since the Beijing Games in 1990.
Canon says the decision was intended to “strengthen our branding and marketing activities in Asia”. A spokesperson adds: “As an event with high TV viewership across Asia, we are aiming to increase Canon’s brand value. Additionally, we expect this sponsorship to invigorate our sales activities in Asia.”
Although the Asian Games costs far less than an Olympics, the number of athletes coming to Indonesia is similar to the 2016 Olympics, while the number of sports contested is larger.
Unlike the Olympics, the Asian Games have embraced e-sports and six video games will be contested as demonstration events this year, such as Arena of Valor and Starcraft II, before a move up to a medal event in 2022.
In total, there will be 40 sports contested as medal events compared to 28 in Rio de Janeiro four years ago, which means a different legacy.
“The Asian Games represents a very different event than the Olympics or the World Cup as it involves so many different sports, so you have very different legacies. It’s in two different cities so it distributes the legacy to different places and there will be a range of different experiences.
“If we look at the sports perspective, the Asian Games will be a boost as they represent the ultimate level where athletes can compete on a level playing field.
“For most Asian countries, the Asian Games are the ultimate event that allows them to sustain their sports.
“The fact we have 40 different sports means that well established sports in Indonesia will benefit most. Unless national governing bodies have the capacity to grow their membership their legacy will be minimal.”
However, the legacy for Indonesia could also extend beyond business and sport.
“Legacy is the key point for mega-events and not hard infrastructure but soft legacies,” adds Prof Preuss.
Part of that 'soft legacy' will be boosting the role of Indonesia on the world stage.
The country is already looking to take a greater part in world affairs and, as part of that, the annual meeting of International Monetary Fund and World Bank Group will be staged on the Indonesian island of Bali from October 12-14.
“It’s useful to take a broader view and look at the place of the Asian Games in the broader development of the country,” adds Mr Girginov. “Indonesia has been trying to insert itself as a bigger player in the Muslim world. That will be a positive impact.”
Like many other nations, a major sports event is helping Indonesia gain soft power on the world stage and the country looks unlikely to have to wait another 56 years before staging the Asian games again.
Updated: August 15, 2018 06:31 PM