Bilingual maps are sprouting up all over Kyiv, making life easier for tourists and giving the city a more European flavor.
They are some of the final touches of an unprecedented campaign to modernize the country ahead of the Euro 2012 football championship, which is being co-hosted along with neighboring Poland.
Over the past five years Ukraine spent over $13 billion, or 9 percent of gross domestic product, to prepare for the football tournament, according to a report by Austria’s Erste Bank.
Billons of dollars have been pumped into revamping dilapidated Soviet infrastructure.
Five new European-standard airport terminals have been built in four host cities: Donetsk, Kharkiv, Kyiv and Lviv. Nearly 300 new hotels and 192,953 seats have popped up at new or reconstructed stadiums.
A handful of modern passenger trains imported from South Korea are already rolling, making rides on Ukraine’s Soviet-built railways more comfortable, for foreigners and locals alike.
The expensive projects, some brand new, others renovations, have provided the nation with a noticeable facelift.
But the question on many people’s minds, in addition to who profited from reportedly inflated construction contracts and other alleged corruption, is whether these investments will pay off for Ukraine’s economy and its citizens.
Experience shows that hosting major sports events usually leads to big losses. Increased tourism revenues often disappoint while extravagant stadiums stand empty and bear down on state coffers for years.
After investing close to $15 billion for the 2004 Olympic Games, Athens was left with an annual bill of $500 million just to maintain the venues, precipitating its subsequent debt debacle.
In Ukraine’s case, however, the prospects may be more positive. The Erste Bank report notes that three-quarters of the investments were rightly poured into developing the country’s roads, railways and airports.
“Changes to transport and sports infrastructure were long overdue and can hardly be seen as creating overcapacity just for the wellbeing of tourists,” the report reads.
According to some estimates, almost half the tab was picked up by private investors, oftentimes football-crazed oligarchs trying to curry favor among local populations.
Touted as one of the best stadiums in Europe, the Donbas Arena soccer stadium in the eastern city of Donetsk was built at a price tag of about $400 million. The hefty investment was made by Ukraine’s richest man, Rinat Akhmetov.
But will the country’s economy benefit?
According to Capital Economics, a London-based economics research center, Euro 2012 is the exception to the rule that sporting events do not stimulate growth. However, the bulk of this boost has already taken place, the think tank’s study shows.
Indeed, this additional growth has come through three main channels: higher investment, greater employment, and increased tourist spending. The findings are confirmed by the Ertse Bank analysis, which found that Euro 2012 preparations gave jobs to almost 70,000 workers in Ukraine.
Yet most of this investment has already been made and the benefits reaped, with tourism revenues as the only big source of income left looking forward. Official estimates in this regard, however, are overly optimistic, experts say.
At a recent press conference, Deputy Prime Minister Borys Kolesnikov estimated revenues from the championship, which runs from June 8 to July 1, at $1.3-1.5 billion.
That’s too high, according to independent sources. While the government expects up to one million additional visitors to come see the events, the Erste Bank study forecasts half that number.
Likewise, expectations that each tourist would leave around $1,241 (or $800 million in all) in Ukraine are optimistic. The study puts the number $992, providing for total spending of around $496 million.
Nonetheless, the tourism spending could amount to 0.6 percent of gross domestic product in Ukraine, considerably higher than the 0.07 increase Germany experienced when it hosted the 2006 World Cup, according to the Capital Economics study.
The overall effect is hard to measure, though, as Ukraine’s economy is extremely volatile, said Maryan Zablotsky, an analyst at Erste Bank. This contrasts to Poland, which spent around $25 billion (just over 5 percent of gross domestic product), and is expected to see GDP growth boosted by around 2 percent.
In any case, the gains will be unevenly spread.
According to Zablotsky, the transport industry is poised to reap the greatest benefits, with airline travel as a strong second.
“Airline travel may see one of biggest developments as it has seen the greatest infrastructure change. Hopefully new low cost carriers will enter Ukraine,” Zablotsky said.
It’s hard to say if the additional debt incurred to finance preparations will be worth it. While the investments in transport are likely to outweigh their costs, Ukraine remains in a fragile financial position in terms of its ability to refinance and roll over credits as capital markets dry up.
The country is also banking on better name recognition.
“Don’t forget the point of hosting the event – it is great promotion for the country,” Kolesnikov said.
With some 150 million television viewers estimated to tune in to sports coverage, Ukraine will have a chance to show itself off on the international stage. This, according to Erste Bank’s analysts, is one of the main sources benefits from sporting events.
In the case of Ukraine it will be difficult, though, the report warned. The level of services is still far below global standards and the imprisonment of former Prime Minister Yulia Tymoshenko, currently serving a seven-year prison term, will cast a shadow on the country.
This will be somewhat tempered by showing Ukraine as a co-host with European Union member Poland, a sign of Ukraine’s strategic objectives, it adds.
In a poll of Ukrainians by the Kyiv International Institute of Sociology, just over 60 percent said they expected the tournament to be carried out positively or rather positively. Almost 29 percent of respondents indicated a boost to Ukraine’s prestige as the prime benefit of hosting the Euro 2012.
Yet media coverage of Ukraine has been particularly unflattering in recent weeks, highlighting political oppression, corruption and rampant racism. Justified or not, this will no doubt tarnish the image of Ukraine, balancing out of the benefits of those shiny new roads.
Kyiv Post staff writer Jakub Parusinski can be reached at [email protected].
