Courtesy: AP
The local organizing committee of the postponed Tokyo Olympics unveiled its new budget on Tuesday. It mentioned that the official cost of the event has now increased by 22 percent.
It will take USD 15.4 billion to pull off the Olympics, the organizers said in an online news conference. It has increased from the last year’s budget which was USD 12.6 billion.
The one-year delay has resulted in an added USD 2.8 billion. Factors like renegotiating contracts and measures to tackle the Covid-19 pandemic counts for the extra expenses.
While the Olympics are scheduled to start on July 23, 2021, the Paralympics will begin one month later on August 24.
Audits by the Japanese government over the last few years, however, show the costs are higher than officially stated and are at least USD 25 billion.
When the IOC awarded the games in 2013, Tokyo said that the Olympics would cost about $7.5 billion. Tokyo is also the most expensive summer Olympics on record according to a University of Oxford study earlier this year.
Except for USD 6.7 billion in a privately-funded operating budget, Japanese government entities are responsible for all of the costs.
“The IOC and TOCOG (Tokyo organising committee) want the public budget to appear as small as possible not only to guard against public criticism, but also to not discourage future candidate cities,” Franz Waldenberger, director of the German Institute for Japanese Studies in Tokyo, wrote in a recent paper examining Olympic costs.
According to Waldenberger, the Olympics is used by the Tokyo city government and branches of the central government as “a window of opportunity to obtain additional” funding.
Cost reductions of USD 280 million were announced by the organizers in October, cutting out frills including hospitality offerings. However, no cuts have been made to the sports program with a full complement of 11,000 athletes and tens of thousands of officials, judges, and sponsors expected to attend.
Questions on whether fans will be allowed or not and what preventive measures will be taken for the pandemic will be answered in 2021.
Japan has controlled COVID-19 better than most countries with just over 2,800 deaths attributed to the virus. But new cases have been rising for a month, adding to public skepticism about the Olympics.
In a telephone poll of 1,200 published this month by Japanese broadcaster NHK, 63 per cent said the Olympics should be postponed or cancelled. On the opposite side, 27 per cent said the Games should be held. The poll was conducted between December 11-13.
The IOC and local organisers have said the Olympics will be cancelled if they cannot be held this time.
Local organisers are trying to recover some of the rising costs by coaxing more revenue from domestic sponsors. About 70 sponsors have already contributed a record of USD 3.3 billion, driven by Dentsu Inc., the marketing agent for the Tokyo Olympics.
The Nikkei newspaper reported last week, citing unnamed sources “familiar with the matter,” that 15 top-tier domestic sponsors will add an estimated USD 150 million to their contributions. It said Japan Airlines, the airline ANA, and the Tobu Skytower were considering contributions.
Nikkei is also a Tokyo Olympic sponsor along with Japan’s other leading newspapers Yomiuri, Mainichi, and Asahi. Several regional papers are also sponsors.
“We would like to increase revenue more than expected although it is challenging,” Gakuji Ito, the organising committee’s chief financial officer, said.
Ito said insurance coverage might pay out up to $500 million to help cover increased costs.
All expenses that the organising committee cannot cover will fall to the Tokyo Metropolitan Government, Ito said.
The budget shows the Switzerland-based International Olympic Committee is contributing USD 1.3 billion to cover costs of the games. Its contribution to Tokyo will not increase, Ito said. When asked if he would seek more money from the IOC, he replied, “No, we are not thinking about it.”
The IOC’s finances are stressed. It generates 91 per cent of its income from selling broadcast rights and sponsorships. The postponement of the Tokyo Olympics has stalled its revenue flow, increasing the importance of staging the Olympics in Tokyo.
The Beijing Winter Olympics are open six month after Tokyo closes, on February 4, 2022.
The IOC is also under pressure to support national Olympic committees and international sports federations, many of which rely heavily on IOC contributions.