IBDP Economics SL – The global economy – Sustainable development -Paper 2 Exam Style Practice Questions
Sustainable development Paper 2?
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Exam Style Question for Sustainable development -Paper 2
Text A — Bangladesh: the economic role of women
- Bangladesh is a densely populated country in Asia. Its currency is the Bangladeshi taka (BDT). The annual rate of growth of gross domestic product (GDP) has steadily increased from 5.6% in 2010 to 8.1% in 2019. Absolute poverty has declined, but inequality has risen, partly due to higher unemployment rates for women than men. Moreover, the labour force participation rate for women is much lower than the rate for men. Over 80% of the women’s jobs are in the informal economy, and these jobs are low paid and insecure. Women need regular paid work, which not only raises household income but also improves economic well-being in terms of education and health.
- The structure of the economy is changing. The growth of cities is due to the expansion of the manufacturing sector, which now contributes a larger share to GDP than the agricultural sector. These changes have increased the number of women in the labour force. In particular, the growth of the ready-made garments (RMG) industry (mass-produced clothing) has given women the opportunity to move into formal employment. The RMG industry provides jobs for almost 4 million low-skilled and semi-skilled workers, accounting for over 40% of total manufacturing employment. The majority of these jobs are being filled by women, with the result that the gap between the wages of men and women is gradually being reduced.
- There are concerns about working and safety conditions in the RMG factories. After an accident in a factory in 2013, reforms are being implemented, partly in response to criticisms from overseas retailers and consumers who purchase the garments. The minimum wage has been increased, inspections are carried out, and there are fewer small, unsafe factories.
- While working conditions are improving, such reforms raise the costs of manufacturing garments. Furthermore, the international garment market is becoming more competitive, putting pressure on Bangladeshi factories to reduce costs.
- The overseas demand for Bangladeshi garments had been rising strongly until 2019. However, demand has recently fallen, reducing firms’ revenue. The reduction in revenue and the need to lower costs have forced certain firms to reduce the size of their labour force by dismissing some of their female workers.
- The number of ethically and environmentally concerned consumers is increasing globally. Rather than trying to lower costs, firms can be more successful if they produce “green ready-made garments” by implementing sustainable practices. About 100 garment factories in Bangladesh have already been certified as producers that meet specified environmental standards. In addition, global retailers and fashion brands are supporting recycling initiatives through the Circular Fashion Partnership.
Text B — Trade prospects for exports of ready-made garments (RMG)
- Exports of RMG account for over 84% of Bangladesh’s total exports. At present, Bangladesh is the world’s second largest garment exporter after China. Bangladeshi exports could further increase as Chinese garments become more expensive due to rising wages in China.
- Bangladesh is designated as an Economically Least Developed Country (ELDC) and is therefore able to sell goods in Europe and China without any quotas or tariffs being imposed. However, Bangladesh will graduate from ELDC status by 2026 and will then no longer be eligible for preferential trade agreements. Moreover, the USA, which is the largest export market for Bangladeshi garments, has applied a 15% tariff on imports from Bangladesh since 2013, citing concerns about working conditions in factories.
Text C — Role of foreign direct investment in the RMG sector
- Vietnam and Myanmar have significantly increased their garment exports to China due to foreign direct investment (FDI) from China. Chinese investors have set up factories that import raw materials from China and re-export the finished goods back to China.
- Consequently, to compete successfully in the huge Chinese market, Bangladesh needs to attract more FDI from China. Bangladesh is developing the required infrastructure, such as transport links. It is also necessary to diversify into expensive high-end fashion, market more aggressively, and use branding strategies.
- The funds from additional FDI would be helpful, because the relative contribution of Official Development Assistance (ODA) to Bangladesh’s budget is declining. Furthermore, the foreign exchange obtained from foreign investors assists in financing the current account deficit.
Question
Using information from the text/data and your knowledge of economics, discuss the extent to which the ready-made garments (RMG) sector in Bangladesh contributes to achieving the Sustainable Development Goal: “Promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all”.
▶️Answer/Explanation
Answers may include:
- Definition of sustainable economic growth
- Definition of full (and productive) employment
- An explanation of the links between growth and inclusivity/equality
- Diagrams (e.g. AD/AS, poverty cycle…)
Positive consequences of the RGM sector towards achieving SDG #8 may include:
- Provides opportunities for women to get employment (Text A, paragraph [2]; Table 2)
- Reduces the wage gap between men and women (Text A, paragraph [2])
- Both the above will lead to more equality and result in better health and education for families (Text A, paragraph [1]; Table 2)
- Facilitates the movement of the economy towards the manufacturing sector, which promotes growth and reduces poverty (Text A, paragraph [2]; Table 2)
- Despite high GDP growth and rising GNI per capita, unemployment is increasing due to the rising labour force (which is rising faster than the population). Therefore, the sector is needed to provide jobs (Table 1)
- Can take advantage of preferential trade agreements because Bangladesh is a designated Economically Least Developed Country (ELDC) (Text B, paragraph [2])
- Rising exports will increase AD and real GDP (Text B, paragraphs [1] and [2]; Table 1)
- As wages in China increase, there is the possibility that exports, providing revenue and foreign exchange, will increase significantly (Text B, paragraph [1])
- Could attract FDI from China, which will provide funds, possibly helping to break the poverty cycle (Text C, paragraph [2])
- FDI will provide foreign exchange to buy imports, which exceed exports and are growing faster than exports. Imports (e.g. of capital and raw materials) are essential for growth (Text C, paragraph [3]; Table 1)
- As more “green” firms are established, they will improve the environment and promote more exports (Text A, paragraph [6])
- If the sector can market itself more effectively (eg with more branding) and diversify, it can compete better globally (Text C, paragraph [2]).
Negative consequences of the RGM sector towards achieving SDG #8 may include:
- Workers are sometimes exploited and work in unsafe conditions (Text A, paragraph [3])
- Job security is low and the need to reduce costs may make it lower (Text A, paragraph [5])
- The bigger firms (possibly MNCs) and stricter safety regulations are driving out the smaller firms which may lead to reduced competition as large firms may dominate the market. This may result in higher profits for the larger firms (and thus lead to inequality) and labour being exploited (Text A, paragraph [3])
- Exports are too specialized, which raises risks if demand or supply conditions change. Therefore, need to diversify to keep growth sustained (Text A, paragraph [5]; Text B, paragraph [1]; Text C, paragraph [2])
- There is a lot of competition from other countries, which puts pressure on firms (Text A, paragraph [4]; Text C, paragraph [1])
- When Bangladesh is no longer eligible for preferential trade agreements as an ELDC, export earnings may decrease (Text B, paragraph [2]) and therefore growth may not be sustained
- More FDI may lead to more worker exploitation and/or damage to the environment (Text C, paragraph [2])
- More manufacturing leads to increasing urbanization, which may cause negative externalities of production, such as congestion and pollution (Table 2) and therefore growth may be unsustainable.