As commentators say in cricket, ‘against the run of play’, Pakistan summited cricket ratings to become the top-ranked team in the world after four successive victories against touring New Zealand. This is no mean feat and Babar Azam and his men deserve all the applause.
Cricket in Pakistan may not be as popular as it is in neighbouring India, where cricket stars like Sachin Tendulkar are thought of as mythical characters descended on India to bring nothing but only happiness and pride to the Indian people.
Pakistan’s national game is hockey, but one wouldn’t rate Pakistani cricket fans much beneath India’s if it’s a question about mad love for the game and how desperately they want to see their team win.
This love for cricket has put into oblivion all other sports and denied these two countries the opportunity to diversify their sports economies into sports, some of which, like football, attract bigger crowds, are more scalable and thus, larger sources of revenue for countries where they dominate the sports culture.
The government should diversify away from cricket towards sports like football which have a much larger international market
The size of the global sports economy that compressed during Covid is likely to rebound and expand in the next five years, providing a significant opportunity to countries with younger populations. Indian and Pakistani economies are good candidates to do this, provided that their leaders express the vision to take their nations in that direction.
The size of the global sports economy measured in terms of revenue was around $355 billion in 2021, which is expected to rise sharply to $501.43bn in 2022 and undergo an exponential growth trend afterwards until 2026 when global sports revenues will stand close to $707bn.
The sports market has very peculiar characteristics in the sense that it’s a deeply segmented market with distinct segments that have little interconnectivity but contribute largely to the overall revenues of the sports economy. The two largest segments are sports equipment and apparel.
Pakistan is part of the global equipment value chain with a strong comparative advantage in producing footballs in Sialkot but is operating outside the global supply chains when it comes to apparel.
Sports apparel in Pakistan faces similar issues of productivity and cost uncompetitiveness as does the non-sports textiles and hence much of the share that Pakistan has in the global sports industry can be credited to the equipment sector alone.
According to one estimate, the global sports equipment market is estimated to stand at approximately $15bn by 2023 and the global sports apparel market at around $200bn.
Pakistan annually earns $1bn from sports goods exports, including $350-$500 million from footballs alone, making Pakistan’s local sports economy depend entirely on one sport, cricket, and the sports export market reduced to just one commodity, footballs.
Pakistan produces 1.5-2m footballs per day. Most of these sports goods are exported and there is little local consumption in the case of sports other than cricket.
India has very similar sports economy characteristics. However, given that 60 per cent of Pakistanis are under the age of 30, there is immense potential to leverage sports as means of employing the youth and to ensure that there is ample local consumption to support the sports apparel industry, which hasn’t grown at the pace at which the sports equipment industry has grown.
Then there is a third variant, small in size but with the potential to grow big in the near future. This is the digital sports apps industry which is around a billion dollars but is expected to double in size in the next few years. There is little to no share of the less developed economies in this market segment.
The size of the sports economy, at $354bn, is almost the size of Pakistan’s economy itself. It is projected to add another Pakistan into it by 2026, which will open up new avenues for exporting countries that will have the opportunity to become part of the global sports value chains and networks.
Countries that have younger populations are better poised to do this, but given the technological divide and how deeply entrenched the advanced economies are in the global value chains and export markets, they would continue to have a comparative advantage which will put them ahead of many less developed nations with much larger natural resource endowments.
However, given the non-technical production processes involved in producing sports goods, barriers to entry will be low for countries that want to enter into new sports markets and start producing innovative types of goods. The technological divide will thus be real but will not really impact the revenue and export outcomes that less developed countries can achieve.
Pakistan’s government must plan ahead and seize this opportunity by diversifying into other scalable sports like football which have a much larger international market, by building enabling infrastructure and systems that can provide social safety, equipment and good facilities to young players interested in playing non-traditional sports. There is little reason why Pakistan cannot have a sports economy of $10bn with significant export potential in the next four to five years.
The writer is an economist trained in Canada. He tweets @asadaijaz
Published in Dawn, The Business and Finance Weekly, May 8th, 2023