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Could World Cup 2022 result in economic own goal for Qatar?

From Leone Lakhani, CNN
updated 10:37 PM EDT, Thu June 12, 2014
A published report claims UEFA president Michel Platini was gifted a Picasso painting in return for support for the Russia 2018 World Cup bid. Platini strenuously denies the allegation. A published report claims UEFA president Michel Platini was gifted a Picasso painting in return for support for the Russia 2018 World Cup bid. Platini strenuously denies the allegation.
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  • Corruption allegations have been made regarding Qatar's successful bid to host the 2022 World Cup
  • Reports claim Qatari official paid more than $5 million to secure support for his country's bid
  • Experts say claims could damage Qatar's image but economy should remain strong

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(CNN) -- When Qatar won the bid to host the 2022 FIFA World Cup there was much pomp and pageantry in the tiny Persian Gulf state.

Ever since then, however, the successful bid has been dogged by controversy.

Issues relating to the feasibility of playing in scorching summer temperatures, the conditions of migrant workers building World Cup infrastructure and allegations of bribery and corruption have all been raised.

The latest are reports from the UK's Sunday Times newspaper claiming a Qatari official paid more than $5 million to secure support for his country's bid.

That prompted some of FIFA's main partners -- who are believed to pay around $180 million in sponsorships -- like Adidas and Sony to voice their concerns.

"We expect these allegations to be investigated appropriately, and continue to expect FIFA to adhere to its principles of integrity, ethics and fair play across all aspects of its operations," Sony said in a statement.

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An independent FIFA investigator is looking into the claims and his findings are expected in July. Qatar says they are cooperating in the probe and that it won the bid fairly.

But the debate has now raised questions about whether Qatar could lose the 2022 tournament.

Some like UEFA boss, Michel Platini, believe a re-vote is necessary if corruption accusations are proven.

As a result, doubt has been cast on whether the country should continue its preparations.

Work on the first stadium has already begun and the government has earmarked much of this year's $62 billion budget for World Cup infrastructure spending.

Without the tournament, some building plans could slow down.

"The decline in construction activities is going to have an impact on overall GDP growth," said Farouk Soussa, chief economist for the Middle East at Citigroup Global Markets. "If you look long term, the bigger risk is the loss of brand Qatar."

"Qatar has ambitions to be the regional hub for congress, finance, tourism, etc. The world cup was an integral part of that plan," Soussa added.

But Qatari officials say plans will go ahead.

"First we are confident that the world cup will be in Qatar in 2022. Second nothing will stop, everything will go forward in fast steps," said Rashid bin Ali Al-Mansoori, CEO of the Qatar Stock Exchange.

"As we saw in Qatar there are so many projects that started even before the announcement of winning the World Cup ... the hospital, the metro, the stadium, the airports, the new ports, the Lusail cities."

"All these are, you know, for the generations to come. It's not only for one event," Al-Mansoori added.

Still, the uncertainty sent jitters through Qatar's financial markets after the initial Sunday Times report emerged.

Roughly $5 billion was wiped off the main stock exchange in the first two days, although some of those losses were later made back.

Yet despite the significant impact of these financial shocks, economists point out the country still has its enormous gas wealth to fall back on.

It remains the world largest exporter of liquefied natural gas, a fact that's not expected to change any time soon.

"Qatar's cost of extraction is much, much lower than all these new emerging sources are so Qatar always has a cost advantage in terms of providing gas to the market," said Soussa.

"The other thing is that of course Qatar has long term contracts in place that are very aggressive in tying in 20, 30 year contracts, so Its market share is relatively stable," he added.

Whether this could change for better or worse if the Gulf state loses the right to host the 2022 World Cup, however, remains to be seen.

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