Study how F1 brought in RM950mil, say experts

There must be an in-depth study to determine how the recent F1 Bahrain Grand Prix in Sepang generated RM950 million in economic activity before Putrajaya makes it a regular event, experts say.

Sunway University economist Yeah Kim Leng said Malaysia must first determine how much of the money spent during the Oct 2-4 race weekend came from foreign visitors who travelled specifically to attend the F1 race.

He pointed out that part of the economic contribution would have come from Malaysians who would otherwise have spent their money elsewhere, whether on holidays or other leisure activities.

Universiti Teknologi Mara tourism management lecturer Hafiz Hanafiah said the spending that really counts is that by foreign visitors.

To illustrate his point, Hafiz used the analogy of a bathtub.

“Think of the Malaysian economy as a bathtub,” he told FMT. He explained that the amount of water in the bathtub only increases when more water is poured into it.

“If a Malaysian skips a trip to Langkawi to buy an F1 ticket, he is just moving the water from one end of the tub to the other. It may look busy, but the water level doesn’t rise,” he said.

On that score alone, he added, spending by foreigners would be needed to give the Malaysian economy a boost.

Last week, youth and sports minister Taufik Johari announced that the Bahrain F1 generated US$232 million — the equivalent of RM950 million — for Malaysia.

A total of 261,000 spectators filled the stands over the three days. In addition, Taufik said, the event attracted more than 50,000 foreign visitors to Malaysia.

He added that the government was considering the prospect of hosting F1 races every few years in partnership with another country, rather than holding such events annually.

However, he said the proposal was still “at an early stage” and that a report on the costs and benefits was expected by the end of November.

Hafiz also pointed out that even if Malaysia played host only once every few years, each event would have to generate at least RM300 million in additional revenue from foreign tourists to justify the effort.

Even so, that amount would only cover the hosting fee payable to Liberty Media, which holds the F1 commercial rights.

For the recent F1 race in Sepang, Bahrain paid the hosting fee, allowing Malaysia to benefit from tourism spending without any upfront financial outlay. In return, Hafiz pointed out, Bahrain collected all the ticket revenue.

Yeah pointed out that this arrangement would not apply to future events if Malaysia decided to play host again.

Rope in private sector, extend duration

Hafiz said the government could bring in private businesses to sponsor the event and defray the cost of hosting the F1, as Singapore had done.

He also suggested extending F1-related events over a 10-day period and taking them to other parts of the country to encourage tourists to stay longer and, consequently, spend more.

But Yeah also offered a word of caution. He said Putrajaya should first determine whether the RM300 million needed to host the race would be better spent on other public needs, such as schools and hospitals.

“The same funds could address more immediate economic priorities,” he said.

Yeah said hosting the race occasionally rather than annually would reduce government spending while keeping public interest high. However, money would still have to be spent on the regular maintenance of the Sepang International Circuit.

According to Hafiz, that sum could be as high as RM10 million a year to maintain the circuit at F1 standards.

Subscribe to our newsletter and get news delivered to your mailbox.