Qatar has eyes on bigger prize than Fifa World Cup
The new English Premier League football season, which opens on Saturday, will throw up its usual raft of scandal and shock but it is the 2022 Fifa World Cup that is proving contentious for Qatar.
Swiss prosecutors recently opened an inquiry into the awarding of rights to host the 2018 and 2022 tournaments after a US-led investigation focused on alleged corruption in earlier venue decisions. Qatar has denied any wrongdoing and says it will host the tournament as planned. Should the claims be proven and Qatar is stripped of the World Cup as a result, some say it could prove highly damaging financially.
However, any such concerns are probably baseless.
Qatar is poised to follow through with a multibillion-dollar spending spree on roads, rail and even a new city regardless of whether it hosts the world’s most watched sporting event, according to Moody’s Investors Service.
“The bulk of Qatar’s sizeable spending plans to 2022 are in core infrastructure projects that will continue and add value regardless of the event,” says Khalid Howladar, the global head of Islamic finance at Moody’s in Dubai. The country’s growth “will increase the need for more long-term funding” he adds.
While Qatari borrowers have not sold sukuk in 18 months, Qatar International Islamic Bank is seeking shareholder approval to raise up to 3 billion Qatari riyals (Dh3.03bn) through a capital-boosting sukuk issue, it was reported last month.
Qatar Islamic Bank and Masraf Al Rayan are also said to be preparing Sharia-compliant bonds. Shareholders of Qatar’s Barwa Bank approved plans for a $2bn senior unsecured sukuk programme that could be issued in various currencies, the lender said in early June.
The country’s banks plan to borrow at least $6bn in part to help finance construction through 2022.
The World Cup in Qatar is expected to require a total investment of US$4.83bn specifically for stadiums and other football facilities, according to the building information specialists MEED. So far, $1.23bn of that budget has been awarded.
But with planned spending on general infrastructure of some US$222 billion, the World Cup is not a matter of life and death for Qatar, it is much less important than that.
“Qatar is far more than the World Cup,” says Nicholas Wilson, the chairman of the London-listed Qatar Investment Fund, which primarily targets stocks in the country. Infrastructure spending related to the World Cup including stadiums is about $25bn, he says.
Losing the event would not stop banks financing infrastructure projects, Mr Wilson says.
The largest World Cup contracts awarded to date are packages two and four on the Al Bayt Al Khor Stadium, which are worth $848 million and have been given to a joint venture of Cimolai, Salini and Galfar Al Misnad, according to MEED.
The next largest contract, it says, is package one on the Al Bayt Al Khor Stadium, which has been awarded to Bin Omran and valued at $251m by MEED.
Many of the contracts have gone to joint ventures between Middle East groups and local subsidiaries of contractors from further afield. Cimolai and Salini are both Italian companies. The contractor charged with upgrading the Khalifa Stadium into a 40,000-seat venue for 2022 is a joint venture between Midmac Contracting and Six Construct, a subsidiary of the Belgian group Besix.
The redevelopment of the Khalifa International Stadium, which was originally built in 1976, was unveiled in November last year and was the third 2022 stadium confirmed after the Al Wakrah Stadium in November 2013 and Al Bayt-Al Khor City Stadium in June 2014. Regardless of any concerns over Qatar’s long-term role as hosts, work continues and plans for the fifth venue, the 40,000-seat Al Rayyan Stadium, were unveiled in April 2015.
In June 2015, after the FBI made raids and arrests in Zurich prior to the re-election of Sepp Blatter as the Fifa president, a Bloomberg report warned many of Europe’s other major contractors, such as VINCI and Thales from France and Hochtief of Germany, would suffer if Qatar lost the World Cup.
AECOM, an engineering design and services firm, which is working on the Al Wakrah Stadium and Precinct project, in association with Zaha Hadid Architects, might also be at risk alongside the UK-based Al Rayyan Stadium designers Ramboll and Pattern.
And there is some evidence of reticence. MEED says about $430m worth of building and civil engineering work has been cancelled or put on hold.
With contracts for only a quarter of the overall $4.83bn World Cup budget awarded so far, a decision to remove the finals from Qatar could stifle a significant amount of sports-related building and civil engineering work.
If Doha is stripped of the tournament, the question for those companies involved in the World Cup investment programme would be what to do next: sue for compensation over loss of earnings on cancelled projects, or grin and bear it?
The country still offers vast opportunities elsewhere and any legal action by the firms involved would surely damage their prospects of further work there. The economy is expected to grow 6.1 per cent next year, the fastest in the GCC region, according to economist estimates compiled by Bloomberg
After the raids and arrests in Zurich, media reports quickly followed that property owners in Qatar would also get burnt by the Fifa scandal.
But Edd Brookes, a senior director at DTZ Middle East, a property services company in Doha, dismisses such reports, saying it is business as usual.
“The only people buying in Qatar at the moment are Qataris and GCC citizens, so [it’s] basically a local market.
“Frankly, land prices are where they were back in 2010,” he says.
Mr Brookes also dismisses Bloomberg’s claim that the $19bn Lusail City development – which is expected to house 200,000 people – is for World Cup tourists.
He says the project had been planned in 2003, years before the bid was secured in 2010.
As for the new infrastructure – the railway, the Doha metro, the port and a network of roads – it is all part of the Qatar National Vision 2030 strategy announced in 2008, he points out.
“[The media] are lumping the whole construction industry [together] to [focus] on a global event,” says Steven Humphrey, the director and head of the cost consultancy programme at AECOM in Doha.
“The government departments we have contact with are still pushing on strategy, which is not to do with one event but [with] the National Vision, a bigger philosophy.
“Perhaps the only impact of the [Fifa] rumours, if true, is [slower] time frames and relaxed deadlines, which would actually be a benefit.
“A couple of stadium replacements will still go ahead, so I’d say if something happens in the next few months, [Qatar may] lose perhaps a few stadiums, but the rest will stay as required for existing football clubs,” says Mr Humphrey.
On the other hand, Qatar could simply continue building all the new stadiums anyway, even if it does not have the home fan base to fill them.
In March 2013, The Times newspaper revealed plans for a Dream Football League featuring the world’s biggest clubs to be staged in Qatar biennially during the European off-season.
The story turned out to be a hoax but if Doha lost the World Cup and was left with unfilled world-class football grounds, the idea might not seem so absurd after all.
Updated: August 6, 2015 04:00 AM