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BPL: A freakonomic or an economic benefit?

News Published: Sunday, Mar 18, 2012

BPL: A freakonomic or an economic benefit?

Friday, March 16, 2012
Rafi Hossain and Sandip Kumar Sureka

The Bangladesh Premier League (BPL), a professional league for 20-20 cricket

competition in Bangladesh initiated by the Bangladesh Cricket Board (BCB), has brought a festive mood in the country's mindset. The beginning of the year could not have been better than this.

The specialised infrastructure and operating expenses required to host the BPL, however, is extremely costly, and it is not at all clear that either the long or short-term benefits of the games are anywhere nearly large enough to cover the economic costs. Bangladesh, a country with a staggering 160 million population strives for achieving the middle income country status by 2021. With this in mind and despite numerous economic shocks of external and domestic origin along with inflationary pressure and other monetary management problem, is the country ready to host such a major event within the country? 

Academic consensus seems to be that money splashed in sports events can hardly ever be defended or justified on economic grounds, and that the evidence for their contribution to the promotional objectives of the host cities is not concrete. In specific cases if only the event can assist in poverty reduction, as well as promote community and infrastructure developments, in the urban and rural areas, then the event will be a success as in the case of South Africa when it hosted the 2010 Federation of International Football Association (FIFA) World Cup. 

The BPL is a domestic cricket competition, but the major attraction is that cricketing superstars from across the globe showcase their talent alongside with the domestic stars. A bucketful of money has been splashed on cricketers through this league. The 20-20 cricket has become increasingly popular in Bangladesh since neighbouring India launched the Indian Premier League (IPL) four years back. Like the IPL, the BPL has become popular among politicians, players, actors, businessmen, cricketers and cricket lovers. Interestingly, while all of them make millions, we in the gallery end up in losing. 

Among the seven divisions in Bangladesh, six were chosen (with the exception of Rangpur division) as the franchise teams to participate in the tournament. $6.49 million has been spent to buy these six franchises. It is comparatively a low price with a base price set at $1.0 million for each team. Chittagong was the most expensive franchise at $1.2 million and Barisal the least at $1.01 million.

The BCB expected a massive demand for these franchises while it was not predicted at all that the highest price to reach for a franchise would only be a $200,000 bump from the base price. Foreign buyers were welcomed to take part in the bidding war but none came forward. So that was something the country should be sad about. It could have brought some foreign direct investment (FDI) in the country. As a least developed country Bangladesh needs FDI for its enduring development process. We can only wish ourselves good luck for the near future when some more new franchises will be in the market or some of the franchisees owned by local conglomerates will be sold to foreign companies. 

sportsGame on Sports Management (GOSM), an Indian management company, will run the tournament after winning the bid from the BCB for six years for $44.33 million. GOSM contract with the BCB is such that all revenue from sale of franchisees, tickets, title sponsorship of the teams and TV rights will be pocketed by the GOSM. They will share the 40 per cent of profit in the first year with the franchisees. The BCB's move was risk averse and hence they have assigned the GOSM to manage the event and secure them with a fixed income over a period of six years. It might be suggested that if a domestic company could have organised this massive event, then it could have been a positive externality for Bangladesh.  An event like the BPL can promote the country as a whole. This publicity will be good publicity only if BPL is managed properly.  It is notable that no Bangladeshi company participated in the tender to bid in order to manage this event. So either domestic companies do not have sufficient resources to manage such an event or they were sceptical about the success of the event. However, this kind of tournament should be commercially viable but the distribution of profit (between the BCB and the GOSM) remains questionable. Only time will tell on which side of the boat we are in. 

Apart from the financial viability there are many issues which should be kept in mind when we evaluate such an event. A lot of money circulates in the BPL and hence it is a place where corruption can have a bite. We have seen this to happen in the IPL, where corruption and conflict of interest led to the resignation of a minister and chief of the IPL. So every transaction should be transparent and the BCB should be concerned. Already some irregularities have been reported in the press and scepticism has been expressed by some stakeholders. More than two million dollars of tax revenue have been estimated by the National Board of Revenue (NBR).  A good lesson for the BCB should be to monitor that all transactions by the franchises are transparent in the future seasons which will also ensure proper tax collection and will be appreciated by the NBR. 

Per capita consumption of electricity in Bangladesh was only 170 Kwh in FY 2010 which was much lower than the BRICS (Brazil, Russia, India, China and South Africa) countries and there is still a serious energy crisis. Only 49 per cent of the total population has access to electricity. Based on current income elasticity, with an average economic growth of 6.0 per cent, the capacity for electricity generation would need to double every six years. Due to the failure in the last few years to increase electricity generation capacity proportionately to the demand, a serious supply shortage has emerged. 

And, as a large number of cricket-crazy fans throughout the country sat for long hours in front of the television with the air conditioners on, power consumption in the city leapt a lot (in Chennai, power consumption soar by 200MW since the IPL started).  

Given the BPL context in which more than half of the matches are played at night, it is no secret that these matches need lighting arrangements consuming hundreds of kilowatts of power. This, in turn, has many issues that we all need to look into. Electricity in Bangladesh is subsidised; hence these matches under the floodlight put an added pressure on the government

Now, many questions can be raised including ethical, moral and social aspects. In all of these, we are trying to make the people aware of various relevant issues. The question we are trying to address is: should the sports be played at night which compels to use floodlight? 

First issue is a social question. Should the matches be played at night? When the city is struggling with power shortages, is it right for the sports management to conduct matches at night which requires the consumption of a huge amount of energy resources? Second is a moral question. When every other citizen is waking up and pitching for energy conservation, is it not a time for all of us, including the sports management, to say "No" to matches at night? Third is an ethical question. What is the source of electricity that is supplied at the stadiums? Is it being provided from the public energy grids/corporations? If yes, what is the pricing criterion? If not and if it is from the stadiums' own generating arrangements, then what about the source of the fuel and the price they for? Going forward, all these issues and questions should be of concern to the government of Bangladesh. 

Looking from another perspective, the BPL was a scope for local superstars to earn a handsome amount of cash. Social benefits coming along with this event cannot be measured. It was a dream coming true for sports lovers throughout the country to be able to enjoy such an internationally recognised sporting event being organised in their home country. Some more negative aspects, including the ones discussed above, come alongside the positive externalities. Dhaka, along with its metropolitan area, lives with a population of over 16 million, making it the largest city in Bangladesh. Worsening situation of traffic congestion in the streets and sufferings of the inhabitants from vehicle emissions is a common scenario in Dhaka's everyday life. The majority of matches being hosted in this city, the BPL is just adding to this problem. The BPL matches could have been hosted in all the six divisions around the country. In this way the whole nation would have had the chance to be part of this hallmark event and take the pressure off Dhaka city dwellers. 

The BCB should take all the above-mentioned issues into account before hosting the next season of the BPL.  The government of Bangladesh should keep in mind that the eco-system created by this BPL should not, like the IPL, be promoting the fact that the money of the rich is more important than the lives of a common man. 

Rafi Hossain is an economist and Sandip Kumar Sureka is a Senior Research Associate in the Policy Research Institute of Bangladesh.
E-mail: mdrafihossain@yahoo.co.uk