Sunday, June 18, 2006

Structural Flaws in Egyptian Soccer







Egyptian soccer has a fundamental flaw.


What is the relationship between a social club like Al-Ahli and having a soccer team? How are the skills of managing one synergistic with the skills with managing the other? The answer is there is no relationship.


I don't see how managing a social club and making sure that members are happy, get their shawrma and shisha at good prices and quality, is related to managing a competitive sports team!

I was aghast at a member of the Egyptian soccer federation forcefully ruling out on TV the notion of regulation, saying that they cannot regulate professional soccer in Egypt because this will constitute reverting back to socialism! I think this guy would think American is a socialist country then!


Unregulated Markets = Jungle

Egypt has instituted official professional sports more than 15 years ago now. Egypt has a peculiar dynamics. Egypt is a centralized country with the center of power located in Cairo. Except for random rarities, Cairo clubs dominates all competitions. Even worse, the biggest club in Cairo dominates 90% of all competitions. That is not really competition. This is called monopoly. The biggest club and team wins more and attracts more supporters and the matter becomes worse and worse. A-Ahli wins more now than it used to in the 70s and more in the 70s than it used to in the 60s and more in the 60s than it used to in the 40s. The lack of competitiveness gets worse and worse. Amateur sports were regulating that to a degree. Reason is people were shy about buying a player. Now, it is easy. It is a matter of money and when it comes to money the stronger, wealthier, and most powerful becomes even stronger and wealthier and more powerful.


So, What Do We Do

This all needs to be regulated.
1- Teams should become companies as they are in the rest of the world with independent board of director, a CEO, and a management team. Al-Ahli social club can own shares of the Al-Ahli team but cannot manage both together. Al-Ahli sports team can be floated on the Egyptian stock market -- with the side effect of boosting the stock market. A more direct effect is that the independent and accountable management will make the team more efficient, more transparent, less dependent on government. Al-Ahli company can have its revenue from ticket sales and from TV broadcasting. These team-companies will also be able to get bank loans on the promise of winning and having a plan for that -- not on the whims of supporters and the likes and dislikes of the Egyptian government.

2- The government cannot dominate broadcasting matches. This has to be left to independent companies. As a matter of fact, government should exit the entertainment business all together. This doesn't mean not regulating it -- which is a more appropriate role for a government.

3- The total price of a certain team at the beginning of a given season should not be more than say 20% of the total price of all teams in the first league. For example, if Al-Ahli wins a title and all of his players increase in price so the total value of Al-Ahli team now exceeds 20% of the rest of the league teams, then Al-Ahli has to trade or give up some of its players to be compliant. This levelizes the playing field between the different teams, creates competition, and makes players able to move around with ease rather than the currently restricting contracts. Selling or trading these winning players also generate revenues that only come when the team wins which becomes a major incentive. As we were taught in economics, people respond to economics.

Final Thought

By the way, I used to be a fan of Al-Ahli. Now, my only wish is to see Egypt competitive. Strong national competition is one of the necessary elements for international competitiveness.

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