x Abu Dhabi, UAESunday 21 January 2018

Has Indian groom blown his dowry on fruitless Games?

With criticism of shaky preparations, corruption and expenses that could have benefited its multitudes of poor, India might have spent $6bn more wisely.

Whether India’s $6 billion investment in the Commonwealth Games will reap rewards remains in question.
Whether India’s $6 billion investment in the Commonwealth Games will reap rewards remains in question.

It was like a perfect Indian wedding: dazzling, colourful and full of bling. And mercifully, this time nothing collapsed.

India pulled out all stops to use the opening ceremony of the Commonwealth Games as a marquee event for a full-throated announcement of its economic ascent.

It was also an antidote to months of bad press over ramshackle preparation and corruption allegations. But at what cost?

This Indian wedding was big and fat. The bill for the opening ceremony bloated to US$100 million (Dh367.2m), while the total cost for hosting the Games will be $6 billion.

Indians have debated endlessly whether it is unconscionable for their country to hide its beggars and tom-tom about its growth when 77 per cent of the country’s 1.2 billion people survive on less than 20 rupees (Dh1.65) a day.

They have also joked endlessly about how India is fooling itself into thinking it is a rich country.

But one issue has received very little attention: do the Games make any business sense?

If you were a businessman investing $6bn in a venture the first thing you’d want to ask yourself is what the returns would be.

The Games are not just a showcase event. Such a major international sporting event is meant to promote infrastructural development and boost investment in Asia’s third-largest economy.

Sadly, these Games may do neither. Moody’s Analytics, the research arm of the ratings agency Moody’s Investors Service, said late last month the negative press surrounding the Games’ preparation is expected to scare away foreign investors and give multinational companies already doing business in India a reason to “think twice”.

“Confidence in India’s infrastructure, its capacity to organise large events and its reputation as a tourist destination have all been brought into question,” said Matt Robinson, a senior economist with Moody’s.

The remark by Mike Fenner, the chief executive of the Commonwealth Games Federation, that the Games Village housing 8,000 athletes was “filthy” may have unfair commercial consequences for its developer, Emaar-MGF.

Emaar-MGF, a joint venture between Emaar Properties of Dubai and MGF Development of India, won the contract to build the village in 2007 and now finds itself caught up in the fiasco about the cleanliness of the village, for which it was not responsible.

After the Games, the apartments, featuring marbled bathrooms and expensive kitchen fittings, will become private residences.

It has been a profitable venture for Emaar-MGF. Two-bedroom apartments in the village fetched 19.1m rupees, while a five-bedroom flat went for 49.2m rupees.

It isn’t clear if the buyers are rethinking their purchase but Emaar-MGF would be hoping to purge the cleanliness issue as soon as possible.

At the end of last month, for reasons unknown, the group more than halved the size of its proposed initial public offering with the Indian market regulator to 16bn rupees.

Anuj Puri, the chairman and country head of Jones Lang LaSalle Meghraj, a global property services firm in India, estimates residential property prices in and around the Games Village have climbed steadily for more than a year, reaching appreciation levels of between 10 and 15 per cent.

The Games have only boosted infrastructure in the immediate vicinity of the village. India’s abysmal infrastructure – choked ports, shoddy airports, roads and highways with bone-jarring potholes – easily shaves off 1 or 2 per cent from its GDP.

The country is a long way off its target of building 20km of road a day. In the current fiscal year it will build only up to 13km a day, Kamal Nath, the minister for road transport and highways, said in April.

Mr Nath estimated that building 3,000km of roads annually would require an investment of $45bn.

Rather than the Games, that’s where a savvy investor might place his $6bn.