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Thursday, June 2, 2011

German business has vested interest in Qatar's 2022 World Cup


German business stands to lose substantially if questions about Qatar's World Cup bid campaign were to lead to the Gulf state being deprived of the right to host the 2022 tournament.

Allegations of bribery by Qatar have been swirling around for months and are at the heart of the corruption crisis that has engulfed world soccer body FIFA.

Suspended Asian Football Confederation president Mohammed Bin Hammam, a Qatari national with close ties to the country' ruling family, is under investigation for having bought votes for his FIFA presidential election campaign. Mr. Bin Hammam, who withdrew his candidacy earlier this week, was closely associated with Qatar's World Cuo bid campaign.

German business is likely to have cringed when German soccer federation Theo Zwanziger called Wednesday for FIFA to re-examine how Qatar won the Cup.

"There is a considerable degree of suspicion that one cannot simply sweep aside, and I must expect that awarding this World Cup under these conditions needs to be examined anew," Zwanziger told German television.

The stakes are high for German companies.

Qatar has allocated on average 40 percent of its annual budget to infrastructure for the next five years and German companies have or expect a significant chunk of the associated business.

Much of the infrastructure, including a $11 billion airport, and a $5.5 billion deep water seaport will be built irrespective of the World Cup.

Bank of America Merrill Lynch estimates nonetheless that Qatar will spend some $65 billion on the tournament, including nine new stadiums and renovating three existing ones.

Eight of those stadiums expected to have futuristic designs, introduced revolutionary cooling technology to cope with Qatar's scorching summer temperatures and be dismantable so that they can be donated to poorer nations after the World Cup were designed by German architecture firm Albert Speer & Partner GmbH (AS&P).

German railways, Deutsche Bahn, is building a $ 24 billion, 320-km  train system in Doha, the Qatari capital. The project, one of the biggest foreign deals in German industrial history, will link the World Cup stadiums and is scheduled to be completed in 2026, four years after the Cup.

Germany's largest builder Hochtief is expected to build Qatar's $467 million flagship project, Lusail City. The development, named for a desert flower, will transform a desert sand mountain into a verdant 38-sq km city 200,000 people, including a separate rail network with 27 train stations, as well as an 8.5 kilometer shopping arcade with 600 new retail units, 1,300 residential units and offices.

Hochtief is also involved in the planning for  a 40-kilometer that would link Qatar to the Gulf island of Bahrain.

Hochtief is likely to bid for the construction of the new stadiums once tenders have been issued.

German conglomerate Siemens and steel group ThyssenKrupp are also expected to do well out of Qatar's World Cup preparations.

Qatar has long been building close ties to German business. Qatar has a joint venture with Deutsche Bahn to develop the metro and national rail network. The country's sovereign wealth fund has a 10 percent stake in Hochtief.

German Chancellor Gerhard Schroeder's 2005 visit to Qatar created the basis of their relationship with Qatar's $9.89 billion purchase of a 10 percent stake in Porsche Automobil Holding four years later.

The relationship has paid off for Germany in different ways.

When Spain's largest building firm Actividades de Construccion y Servicios, S.A. (ACS) launched a hostile takeover bid for Hochtief last year, German Chancellor Angela Merkel arranged for a senior Hochtief executive to be introduced to Qatar's economy minister at a reception hosted by Germany's President Christian Wulff.

Qatar's sovereign wealth fund bought its 10 percent stake soon after, diluting ACS' stake and holding off a takeover.

For Qatar, the acquisition could as yet produce soccer dividends.

ACS, headed by Real Madrid soccer club President Florentino Perez, continues to acquire stakes in Hochtief. ACS already holds 30 percent of Hochtief's share and expects to this month increase its stake above 50 percent.

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