Economic Effects of the Asian Games

The 18th edition of the Asian games is being held in Indonesia, in the cities of Jakarta and Palembang. With almost 45 nations participating, there is a lot of limelight on the Asian games and consequently on the country of Indonesia. However, hosting an international event of such high magnitude has a lot of short and long term economic consequences on the nation.

Firstly, with the Asian games occurring, there would be greater investment in the nation which can result into the multiplier effect. Greater expenditure would occur to create amenities that would facilitate the Asian games. There would be an increase in both local and international investment in the nation to develop infrastructure which is economically productive for the nation. With more investments, income of people would increase as more money in the economy means greater purchases of goods and services, which increases the income of the suppliers of these products. The suppliers would then spend a portion of their income for consumption of other goods, services and investments and so on. Consequently, more investments would lead to exponential increase in the income of the population which would raise the standard of living of the people in Indonesia.

Secondly, Indonesia would face a greater influx of tourism and this would result in various consequences. People all around the world will flock to Indonesia to witness the iconic 18th Asian games. This means that the country profile will be enhanced due to the recognition. Tourists who come to Jakarta to witness the games may come back to visit the rest of the country as may be in the case of the athletes with their families. More tourism means that local businesses would prosper. Hotels would be booked, restaurants would see an increase in customers and shops would see an increase in customer footfall, purchases of goods and commodities. This means that income of the local residents would increase; there will be an increase in employment to facilitate the increased demand of goods and services therefore levels of unemployment in the country would decrease. There will be higher GDP growth for the nation because of the increased demand of goods and services by greater number of people brought into the country by the Asian games. Indonesian foreign exchange earnings of the country will increase because of  greater tourism levels. These are some of the effects of increased tourism in the country brought on because of the Asian games.

Also with the occurrence of the Asian games, certain socio-cultural benefits can occur which can be extrapolated into an economic context. There can be enhanced social cohesion and greater opportunity for local residents to improve their skills due to interaction with people from various cultures and exposures to the international event of the Asian games. The economic angle comes because domestic human labor would improve certain skill sets, for instance language. The Indonesian population can become proficient in many languages because of intermingling with tourists from various cultures. Consequently post the Asian games, the Indonesian people would be able to interact with other people, this could increase number of consumers which could increase the total output.

The Asian games bring about a lot of economic advantages in terms of greater earning and lower unemployment levels, however, there are also economic disadvantages that can occur. Firstly, with the increase in tourism, there will be an effect on the environment. Tourism can cause significant pressure on the environment; it can result in a strain on the natural resources of the country, increased pollution levels and possible degradation of ecosystems. More tourism means greater demand for goods and services which means there is scope for exploitation of natural resources. Factories aiming to meet increased demand of goods and services would try to increase production output which can be done by exploitation of resources, or ways to minimize costs of production.  Ecosystems and natural resources can be destroyed because of construction and maintenance of tourist infrastructure. Local residents could face a degraded environment to live in because of tourists, in the sense, there may be greater noise, destruction of aesthetic beauty of nature, excessive construction etc. These are the negative external effects of tourism. Negative externalities are unpriced costs accruing to a third party because of a transaction between two parties: buyers and sellers. The third party is not involved in the market transaction between buyers and sellers. In this case, the buyers are tourists and sellers are producers selling goods to tourists. The pollution levels that occur from creation of these goods affect people living in the environment near the factory or area where the good is produced. The price of the good sold does not take into consideration the pollution effects, therefore a negative externality is present. The negative externality is the damage to health of the people because of the increased pollution levels that result from production of the goods.

In conclusion, the Asian games brought about certain economic advantages and disadvantages for the host nation, Indonesia. Economic Advantages include greater publicity of the nation, higher tourism and revenue from tourism, infrastructure development, lower unemployment rate and a more productive labor force. Disadvantages include degradation of the environment and natural resources and destruction of ecosystems. Hosting international events like the Asian games, brings about a plethora of economic advantages and disadvantages to the nation. The advantages are more significant than the disadvantages which explain why there is great competition to host international events like the Asian Games.

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