Assessing the economic impact arising from sport related investment in Malta

Abstract

Sports and sport events have changed from merely recreation activities to key economic events, by increasing tourism and other business activities within the regions that host these events However, the economic gain of such hosting regions cannot be seen in isolation, the cost accrued by the region in order to invest in sports facilities has to accounted for. In this dissertation the economic literature on sports economics has been reviewed and substantiated by a Cost-Benefit Analysis of a sport related investment. The investment cost and operating costs have been analysed in relation to the benefits arising from such a project. In this study both the financial net present value and the economic net present value were estimated in order to determine the costs and benefits of the sport facility from the entrepreneurial aspect and from society's aspect. The results of this study indicate that the financial aspect of the sport facility investment is rather poor and yields a negative financial net present value. However, when accounting for the economic aspect of the sport facility, the investment yields a positive economic net present value. This gain to society results from the externalities created by the facility that are not captured and accounted for in the financial analysis since they accrue to society and not to the investor. This warrants policy consideration from government so that sport facilities are aided and sport participation is encouraged.