Racing off with S$500,000,000

UPDATE (25th June 2009): Mr. Mosley, one of the chief instigators behind the possible split, has stepped down from his position as FIA president. Though this ends all threat to Singapore’s stake in F1, this whole episode is still a timely reminder on Singapore’s frailty.

In the papers yesterday it was announced that the feud between F1 and its teams hit a new turn when the FOTA teams announced that it would form its own breakaway racing series, due to unhappiness with the competition’s new entry conditions. And in case anybody was wondering how serious the FOTA were about their threat:

“The teams cannot continue to compromise on the fundamental values of the sport and have declined to alter their original conditional entries to the 2010 World Championship,” said a statement issued by FOTA after the meeting.

“These teams therefore have no alternative other than to commence the preparation for a new Championship which reflects the values of its participants and partners.” (from autosport.com)

Ouch. Just as we thought things couldn’t get any worse for us, this happens. Since the start of the financial crisis around October last year, there’s really been little reprieve for Singapore, and this new development will really put our government’s grand plan of making us a regional “tourism hub” to the test.

According to a report last year by the BBC, its estimated that bringing the F1 here cost an annual fee of about S$100 million, so given that its a 5-year contract, that would mean we paid about half a billion Singapore dollars for the whole venture. This amount probably doesn’t include upkeep and infrastructure costs, but it should be pretty accurate.

Last year, when F1 still had its superstar list of teams and racing celebrities, it helped to generate about something of 168 million dollars of tourism revenue for us, a handsome profit. Now, should this breakaway series become a reality, its probably going to be hard to maintain that figure for the next four years, with serious financial losses imminent.

A poor investment?

With all the flak that the government’s drawn over the last few months about poor investments (e.g. Temasek, Town Council funds etc.) and the loss of precious taxpayer money, this new development will probably raise more eyebrows. Though most of the costs were probably shouldered by Singtel, the F1’s chief sponsor here, a fair amount of taxpayer money must have been went toward  infrastructure and marketing hype. So was this another case of poor investing skills by our government?

Another investment gone sour

The answer is quite clear: no, its not right. Even if the worse case scenario happens and the F1 project doesn’t meet financial targets, its definitely unfair to point the finger at them this time round. Unlike Temasek’s poor timing with its investment in Bank of America shares, this development in F1 was chiefly a political and not a financial one – and hence blame should not be made in the same capacity. If anything, F1 just reflects the truth of Singapore’s vulnerability – that at the whims of a few dissatisfied ang mohs, a whole multimillion dollar project can turn sour.

This having been said though, what I really want to see is how everything adds up to in the end — the final bill on all these projects we’ve been splurging on. As usual, our government’s been pretty opaque about how its been using our funds for all these projects. When Las Vegas Sands went underwater earlier this year, our government had to fork out a guarantee to ensure the IR’s conclusion by 2010; so similarly, if the F1 doesn’t work out in the next 5 years, I think its important we’re told how much we’re costs shouldering in the end.

Of course, there’s always the possibility that things don’t turn out so bad. F1 is really a smaller picture of our government’s grand gamble to market itself as the Dubai of Asia. It might work out, it might not – all we need is a little bit of luck I guess, for the fruits to spin our away. If not, it’d be another sum of money squandered, and a serious dent in our government’s popularity.