International sport events are increasingly seen as occasions that go beyond being mere athletic events but also opportunities  to showcase the prowess of the host country.  Thanks to the success of the Seoul Olympics in 1988 and the World Cup in 2002, interest in international sport events has grown among Koreans. In response to this increase in interest, local governments have competitively entered bids to host similar events in the future, both in the name of burnishing the their region’s brand and providing stimulus to the local economy.

There are indeed positive effects brought on by hosting international sport events; namely, an increase in sport facilities and the improvement of social overhead capital which often lead to development of the local community and also a more vibrant local economy. However, issues arise when local governments do not engage in a due diligence procedure to thoroughly review the sport event in question, or when the national government financially supports, out of sympathy, the local government that had succeeded in winning the bid. The hosting of an international sport event calls for a massive amount of financial investment in building sports arenas, expanding transport networks and roads, as well as maintaining and managing the facilities post-event. As a result, high hopes that an international sport event would contribute to the growth in the local community often get crushed, only to leave the local governments heavily burdened with high costs. In some cases it even leads to a financial burden on the national government, which in turn gets passed onto the people of an entire nation. Therefore, the decision as to whether an international sport event should be hosted, and the manner in which the question of  how the plan should be established and managed both require thorough review from an economic, and social welfare point of view.

   This report seeks to analyze the issues involving major international sport events for which preparations are being made or for which bids are currently being placed, assesses the results of such events, and aims to identify measures for improvement. The report can be summarized as follows.

   First, financial waste that result in reckless bidding wars from the very beginning need to be reduced. To this end, the national government should develop evaluation metrics such as ones to measure economic benefits that might result from the hosting of international sport events. Information on the results should be systemized and provided to local governments that are interested in hosting similar international sport events. At present, local governments intending to host an international sport event are required to undergo review by the national government prior to bidding. However, because the review is carried out in absolute terms, there is a tendency for politics, unfair lobbying and sympathetic, favorable evaluation to often undermine objectivity. In some extreme cases such as the recent case involving Formula One, an international race car competition, international sport event was won by an organization in the private sector without having undergone a review by the national government and later be turned into a national initiative in order to gain financial support from the central government. This is testament to the fact that the capabilities of the review process in preventing reckless bidding for international sport events are severely limited. To improve the situation, there is a need to establish an objective and quantitative assessment criteria  for the reviewing of plans for hosting international sport events.

   Second, a universal standard should be established for feasibility studies carried out by local governments, so as to ensure consistency and objectivity in the studies. At present the feasibility study report does not serve as a practical reference material for determining whether or not to approve the hosting but operates as more of a formality.  There are also no unique analysis frameworks to serve as a basis for feasibility studies. This has led to the economic feasibility of an international sport event, and its attendant, prospective economic benefits be greatly exaggerated in the reports. Moreover, the assumptions and methodologies used in the studies vary from research institute to research institute.  An overhaul of the feasibility study system so as to ensure that the study actually serves as a tool to determine the feasibility of an event and not merely as a tool to justify the hosting of the event is urgently required.

   Third, review criteria for the facilities plan need to be established and strictly applied to prevent reckless investment in sport facilities and to ensure a thorough strategy and plan are in place for a successful hosting of the event. When a local government plans to host an international sport event, an enormous amount of financial resources are poured into building and expanding social overhead capital, including roads and sports arenas. Such infrastructure can indeed trigger urban redevelopment and stoke vibrancy in the local economy. However, should there be a very limited demand for such facilities after the international event, it would only lead to a significant financial burden on the government’s budget to maintain and manage them. Cases in point are the railway construction project for the Wonju-Ganneung route that was greenlighted under the pretext that it would be required to host an international sport event, or the project to build a sports arena for the Incheon Asia Championship that had been granted approval as a private sector project but later converted into a public sector project in order to request government subsidies. Such cases should not be repeated.

   Fourth, a preliminary feasibility study should be applied to projects for the construction of social overhead capital or sports arenas that have a small likelihood of being used actively after the international event and lack the economic grounds, yet are still approved as exemptions. At present, most large-scale international sport events are promoted by law or as part of a national government policy and therefore are exempt from undergoing a preliminary feasibility study. In order to rein in the reckless bidding for and hosting  of international sport events by local governments and to prevent such events from being used as an excuse to push forward local development projects, such a requirement is needed. The fact that preliminary feasibility study results are used as grounds for justifying the hosting of an event, and that a second feasibility study carried out by the KDI Public investment Management Center hardly affects the decisions made about the project is another reason for putting in place such a requirement. The requirement for a preliminary feasibility study will help verify the appropriateness of the project, the feasibility both economically as well as from a policy perspective, and whether or not sufficient  financial resources are available. This, in turn, will lead to a more prudent decision regarding the hosting of international sport events and an increased efficiency in financial investment.

   Lastly, local governments intending to host an international sport event should establish a project plan that takes a long-term perspective and links the event with development in the local economy. To do this, local governments need to proactively make use of existing sports facilities and minimize construction of new ones. Only when a strict preliminary feasibility study that also looks at the post-event usage of the sport facilities gives a green light should a construction of a new facility be considered. If, given the demographics of the neighboring areas, the facility is unlikely to be used much afterwards, options to build a temporary building should be looked into, in order to eliminate any factors that may lead to financial burden resulting from maintenance costs. In this light, the Incheon Asian Games are focused too much on building new facilities, while Pyeongchang Winter Olympics does not take into account the usage of the facilities after the event. As for the Incheon Asian Games, despite the fact that existing facilities for badminton, table tennis, boxing, hockey, rugby can be used, more than 1 trillion Won is being funneled into the construction of new facilities. In the case of Pyeongchang Winter Olympics, the number 1 and number 2 ice hockey rinks were first built in Gangneung, after which an additional 63.3 billion won was spent to move the number 1 rink to Wonju,  while the number 2 rink is being added a layer of wooden plank to be moved to the gym at Gwandong University. Given that there will be six new ice sport facilities after the Olympics, an overhaul of the project plan is called for, including an adjustment of layout and dispersion of sport facilities by region and measures to ensure the facilities are not inefficiently run.

   Going forward, the bidding for international sport events should be thoroughly reviewed in advance with special consideration given to the economic feasibility of the project. Once the bid is won, efforts should be made to make the most of the sport facilities post-event. Costs to improve existing facilities should also be minimized, while taking advantage of the sport event as an opportunity to improve the image of the region and nation while bringing about practical economic benefits.