The Australian state of Victoria withdrew as hosts after citing concerns about increasing costs, which could rise to more than A$7 billion (RM21.7 billion) from a budgeted A$2.6 billion.
Kuala Lumpur, one of six original bidders for the 2026 Games, is now being touted as a contender, with a Cabinet decision expected soon on whether the city will host the event for the second time after 1998.
Afzanizam Rashid, chief economist at Bank Muamalat Malaysia Bhd, said the Games could be promising for economic growth, and played up the potential for infrastructure development, especially in upgrading existing facilities.
But while he suggested that well-planned promotional campaigns could “create a buzz” and attract tourists, Afzanizam said the government needed to be mindful about how it managed its spending, especially the risk of cost overruns.
“They also need to be cognisant that our current account surplus balance dwindled to 1.2% of gross domestic product (GDP) in 2023,” he said, referring to the lowest balance in 26 years.
“Therefore, the government needs to be mindful of the impact that the Games may have in respect to the balance of payments, especially on imports of big ticket items such as machinery and equipment, as well as building materials and foreign labour.”
Yeah Kim Leng of Sunway University said the £100 million (RM600 million) the Commonwealth Games Federation is offering for any potential host would inject spending equivalent to 0.03% of Malaysia’s GDP.
He also highlighted the strong multiplier effect that increased indirect spending would have in industries such as hospitality, food and beverage, transport, logistics, entertainment and tourism.
Yeah said that while the Games could be “financially loss-making”, the direct and indirect economic benefits of spending, upgraded sports facilities and amenities, as well as enhanced global visibility and tourism prospects, could boost its economic viability.
“A proper costing and estimation of the economic benefits, together with assurance of efficient spending and good management, will be needed to fully assess the financial implications,” he said.
Geoffrey Williams of the Malaysia University of Science and Technology said the best way to gauge the economic impact of the Games would be to look at previous editions, such as the last one in Birmingham, England, which leveraged private and public investment and made use of existing facilities, including those from the 2012 London Olympics.
Williams said the total short-term impact of the 2022 Games was estimated at £870 million (RM5.2 billion) or a net amount of £765 million (RM4.6 billion), with cumulative long-term impacts – especially in terms of employment and infrastructure investments.
“Malaysia does not have the facilities in place and would have to build and renovate quickly. Also the ‘government should’ attitude will crowd out private investment. Wastage, leakage and corruption will be obvious risks, too,” he said.
“For Victoria, the cost was estimated at A$7 billion and it would be similar in Malaysia. The estimated returns from the Birmingham example would not cover that, and the management and governance issues in Malaysia make this idea a non-starter, unfortunately.”
While the 2022 edition of the Games was a resounding success, the Birmingham City Council was effectively declared bankrupt last September just a year after hosting the multi-sport tournament.