The Strategist

Budget of the 2020 Olympics in Tokyo will not exceed $ 17 billion

12/21/2016 - 13:49

Summer Olympics in Tokyo, to be held in 2020, will cost the country $ 15 billion to $ 16.8 billion, said organizers of the Olympics.

The initial expected cost was approximately $ 2.4 billion in the past year, then the amount rose to $ 15 billion. Not so long ago, experts expressed concern that the expenses might exceed 3 trillion yen ($ 25.5 billion). Tokyo’s authorities promised to cut costs and avoid excessive consumption of resources.

Of this amount, which is not yet final, $ 6.3 billion will be spent on construction of various facilities, $ 7.7 billion on provision of services, and $ 1 billion to $ 2.8 billion are budgeted for unforeseen situations.

Budget of the Olympic Games in Rio de Janeiro, which took place in 2016, amounted to just over $ 3.5 billion, and London spent $ 13 billion on competitions in 2012. Record-holder in terms of Olympics spending are Russians: winter Olympics in Sochi in 2014 took away $ 51 billion from the country’s budget.

Tokyo received the right to host the Olympics in 2020 three years ago, beating Madrid and Istanbul. The Japanese capital lured the International Olympic Committee (IOC) with the fact that its application was compact (85% of all sports facilities will be located no farther than 8 km from the Olympic Village), and quite inexpensive. The whole process of preparation should have been worth $ 7.25 billion. This is not that much, especially for Tokyo. The budget was doubtful even then. After all, the Tokyo government immediately declared that they could not cover the costs with current revenue and would be forced to withdraw $ 4.5 billion from the city’s reserve fund. 

Finally, Tokyo boasted with the fact that the city has a wealth of experience in hosting major international tournaments. Anyway, Japan reputedly is quite an effective country. With regard to the Olympic Games, the organizers promised an economic impact of $ 29 billion and creation of 150 thousand new jobs.

Now, however, it appears that Tokyo cannot meet the assumed financial parameters, according to a commission set up at initiative of Governor of Tokyo, Yuriko Koike. Immediately after taking office in July this year, he said that the city should reconsider the Olympic budget. After analyzing state of affairs, the committee members came to a conclusion that total cost of preparations would greatly exceed the initially planned budget, and easily rise beyond $ 30 billion. "I'm very serious about conclusion of experts - said Governor Koike. - We will discuss the report with the organizing committee, and then I will decide. I will be guided by the fact that it is unacceptable to shift cost of organizing to the city’s residents". 

The situation with preparation for the 2020 Olympics is quite strained now. However, it’s not an individual problem. After all, almost all Olympics were accompanied by exactly the same story. This is evidenced in a study conducted by experts at Oxford University, and led by Professor Bent Flyvbjerg.

They analyzed financial performance of the Games, starting with the 1960 Winter Olympics in Squaw Valley and ending with the 2016 Games in Rio de Janeiro. So, it turned out that the organizers have never failed to meet the announced budget. The 2008 Olympics in Beijing are the closest since their cost overruns amounted to only 2%. 

However, it’s commonplace that overspend amounts to tens and even hundreds of percent. Median Olympic cost overruns is 83% for the Summer Games, and 118% - for Winter. The champion is the 1976 Olympics in Montreal, which rose 720% more than planned. The city paid the debt, incurred under the Games, only 30 years later. 

It is not surprising that increasingly more experts are suggesting giving up practice of holding the Games in different cities around the world, let alone competition between bidders. Some experts say, for example, that same summer Olympics could be held in its birthplace, Athens. Idea of sharing different competition between several countries is also very popular. By the way, the European Football Championship 2020 will be held in 13 countries at once according to this scheme.