Indonesia bets big on the 2018 Asian Games

This aerial picture taken from a helicopter shows a general view of the sport facilities at the Gelora Bung Karno stadium (C) and other fields and venues for the upcoming 2018 Asian Games in Jakarta. (AFP Photo/Adek Berry)

This August, Indonesia is set to host Asia’s biggest sporting event, the Asian Games. The multi-sport event is scheduled to be held from 18 August to 2 September, 2018. This will be the first time the Asian games will be hosted in two cities, Jakarta and Palembang. This is also Indonesia’s first time hosting the games since 1962.

Ever since being selected as host for the games, Indonesia has spent massive amounts of money on new sporting venues, upgrading existing sports infrastructures, and building other infrastructure to support the games. According to Indonesia’s National Development Planning Agency (Bappenas) a total of US$2.4 billion will be spent on infrastructure development surrounding the 2018 Asian games.

In fact, it was the high cost that comes with hosting these games that made Indonesia the hosts. In 2012, Hanoi, Vietnam was selected to be the host after they won the bid. Hanoi won the bid after gaining 29 votes against Surabaya’s 14. Then two years later in April 2014, Vietnam officially announced its withdrawal from hosting the games. Then Vietnamese Prime Minister, Nguyen Tan Dung said that Vietnam was unprepared and could not afford the construction of new facilities and infrastructure. Furthermore, former Chairman of the Vietnam Olympic Committee, Ha Quang Du also claimed that hosting the Asian Games would not drive tourism up in Vietnam. Prior to the withdrawal, concerns were raised whether the US$150 million budget was viable. There were also reports that Vietnam would end up spending over US$300 million as hosts of the games. So, after Hanoi pulled out as hosts, the Olympic Council of Asia selected Jakarta and Palembang as the hosts of the 2018 Asian Games. Among the reasons Jakarta was chosen as the host was because it already has sports facilities, adequate transportation networks and lodging for guests and participants.

Reaping the rewards of hosting a major sporting event

With large amounts of money spent on the games, one question comes to the fore - is it worth it? While hosting international sporting events may raise the profile and prestige of the host country, it can be extremely costly to the economy. Rio de Janeiro is still facing the after effects from being hosts of the Olympics in 2016. Venues and stadiums have become white elephants as the economy there faces problems and the city’s citizens are faced with continuous economic hardships. Perhaps Vietnam made a wise choice deciding against hosting the games.

Bappenas claims that Indonesia will spend US$2.4 billion on infrastructure for the games, but the cost of the Asian Games as a whole is estimated to cost the Indonesian economy somewhere in the region of US$3.2 billion. Among the projects for the games include a light rail transit (LRT) connecting the Palembang airport to the Jakabaring Stadium Complex. This LRT project is said to cost US$676 million. In addition to that, 15 venues have been renovated to prepare for the games including the Gelora Bung Karno Stadium that will host the opening and closing ceremonies. Indonesia has also constructed the biggest equestrian facility in the region for the games.

The Indonesian government hopes that these expenses will pay off when visitors come to the country for the games. It is expected that the 2018 Asian Games will bring in visitors that would spend up to a total of US$245 million during their stay.

However, whether all these investments will bring any benefits in the long-run to Jakarta and Palembang remains to be seen. There are also concerns whether the expensive upgrades to all the various sporting venues will be fully utilized in the future.

Spending this much on the Asian Games also brings into question Indonesia’s fiscal sense. While the economy is growing, Indonesia is facing problems funding its other infrastructure projects. President Jokowi has ambitious plans to develop the country’s infrastructure, and the government is targeting to spend US$45.7 billion from 2015 to 2019. Spending billions for the Asian Games could take away meaningful investment from more important infrastructure projects.