Shanghai reaps spoils of success as expo pays off

PUBLISHED : Wednesday, 03 November, 2010, 12:00am
UPDATED : Wednesday, 03 November, 2010, 12:00am

Shanghai officials are popping champagne corks as they relish the economic success of the World Expo, with its attendance of more than 73 million.

The organisers have published a slew of record-shattering numbers - from cultural performances to the number of reporters who covered the world's most extravagant fair - after the six-month-long event closed on Sunday.

The question uppermost in residents' minds is whether the multibillion-dollar investment for the dazzling show paid off. But whether the money is reflected on the balance sheet of the expo itself or was made and spent on the perimeter, it's clear that hundreds of billions of yuan were involved.

All signs point to a net profit.

Two officials with the Shanghai Expo Bureau told the South China Morning Post the event was successful in business terms, though they were unable to tell exactly if the bottom line would show a profit or a loss.

'I would say it would be a small profit,' an Expo Bureau official dealing with media accreditation said. 'The cost control proved efficient, and the bigger-than-expected crowds certainly helped the organisers operate at a profit.'

Municipal Communist Party boss Yu Zhengsheng said before the opening of the expo that the government aimed to break even, as box-office sales, rent from retailers and restaurants, income from the sale of toys and expo-related products as well as proceeds from the sponsors were projected as adequate to offset the multibillion-yuan construction and operational costs.

So on May 1, Shanghai opened the gates after spending 18 billion yuan (HK$20.9 billion) on the construction of the 5.28 sq km site and earmarking 10.6 billion yuan for the expo's operation until October 31.

The organisers have yet to unveil the balance sheet for the expo, but some figures are available.

According to the media accreditation official, organisers were under strict budget control, to the extent of not being allowed to spend a single extra coin.

Call it the famous 'thriftiness' or 'stinginess' of the Shanghainese - depending on your viewpoint - but one example of the tight cost control was when the organisers messed up the production of hundreds of journalist passes before the official opening due to rigid bureaucracy and chaotic management. Even so, they refused to spend extra money to produce the plastic cards again.

Ticket sales alone amounted to an estimated 12 billion yuan, based on 160 yuan a ticket during ordinary days and 200 yuan for special days.

The Economic Observer reported that the sales of premium products topped 30 billion yuan as of the end of last month, and that figure will increase as sales of products continue.

The income from rent collected from retailers inside the expo has not been revealed, and the proceeds from the sponsors are confidential.

Professor Chen Xinkang, head of an institute focusing on studying the World Expo at the Shanghai University of Finance and Economics, was quoted by the Jiefang Daily as saying that total revenue could be about 80 billion yuan if attendance exceeded 70 million.

Chen added that, beyond expo-related revenues and expenses, 13 sectors - including hotels, traffic and telecommunications - would also get a much-needed boost.

Certainly, tourism did. The National Tourism Administration said the expo generated an additional 80 billion yuan of income, with hotels, aviation companies and retailers the top beneficiaries.

The municipal government also benefited by raking in billions of yuan in tax revenue, and 627,000 jobs were created. There seems little doubt, then, that the expo will boost Shanghai's gross domestic product (growth last year was 8.2 per cent).

And yet, the true story of the expo economy can't always be told with statistics.

For example, the box office was largely bolstered by extra spending by the state-owned companies. Employees of state-owned enterprises reported that nearly every worker was granted at least three free tickets, part of the strategy to boost the gate numbers. One employee of China Mobile received 20 free tickets from the company last month.

Several government officials from other parts of the country told the South China Morning Post that they were encouraged to travel to Shanghai and visit the expo. Those costs won't show up in statistics, either.

Also, off-balance-sheet costs amount to a big sum that won't be reflected on the expo balance sheet. The thousands of security guards hired to police the crowds standing in queues to visit pavilions were paid by the district government, not the Expo Bureau. What's more, many officials at the co-ordination bureau were on loan to the organisers, most of whom were on their state-owned employers' payrolls.

And the host city will have its own balance sheet.

When municipal officials talked about mega projects such as the breakneck expansion of Shanghai's subway system to 420 kilometres, economists raised questions about whether the big-ticket spending on infrastructure outside the expo area would be worth it.

Yu, the party boss, admitted that Shanghai had shelled out at least 300 billion yuan to build infrastructure for the expo, which would exceed the US$40 billion investment for the 2008 Beijing Olympics.

Jones Lang LaSalle's estimate of the investment for the expo projects was even higher - US$95 billion.

But whatever the figure is, Shanghai expects to get it all back - and then some - when it auctions off the land on the expo site. And based on the current price in the city's prime areas, analysts expect the city to rake in about one trillion yuan.

One executive with a Shanghai-based developer credited the city's expo strategy as being better, monetarily speaking, than the one Beijing officials had for the Olympics.

'The stadiums for the Olympics turned into white elephants because of the limited use of the sport venues and facilities [afterwards],' he said. 'The redevelopment of the expo site will generate tonnes more money for Shanghai.'

Shanghai surprise

Beyond the economic figures, the World Expo set an attendance record with visitors numbering more than: 73m