Define the term relative poverty indicated in bold in the text (paragraph [2]).

Define the term economies of scale indicated in bold in the text (paragraph [3]).

Using an externalities diagram, explain why “business pollution” is leading to market failure in STP (paragraph [5]).

Using information from the text/data and your knowledge of economics, discuss the role of aid in achieving economic development in STP.

Candidates who incorrectly label diagrams can be awarded a maximum of [3].

The y axis may be labelled price but could be costs or benefits and the x axis labelled quantity.

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Do not award beyond Level 2 if the answer does not contain reference to the information provided.

Command term
“Discuss” requires candidates to offer a considered and balanced review that includes a range of arguments, factors or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence.

Answers may include:

• Definitions of aid, economic development.

Economic analysis may include:

• poverty cycle
• AD/AS diagram
• PPC curve
• Lorenz curve.

To discuss:
Role of aid in achieving economic development:

• Taiwanese aid before 2016 would have contributed to economic development through public health (paragraph [4])
  
  • increases human capital – leads to greater opportunity for breaking out of the poverty cycle
  • citizens can access higher income, more employment due to increased productivity, leads to increase living standards
  • businesses may benefit from healthier workforce. Encouraging economic growth which may lead to further economic development, if widespread.
• Chinese aid (paragraph [4])
  • targets economic development challenges (paragraph [1]); insufficient infrastructure, limited range of export products and markets could be overcome through deep-sea port and airport improvements (paragraph [4])
  • deep-sea port and airport spending may help overcome STP’s remoteness and high transport costs (paragraph [3]), this supports expanding export markets (paragraph [3]), which may offer employment and growth opportunities leading to higher incomes and increased standard of living
  • economic growth rate is insufficient to have an impact on poverty rate (paragraph [2]), targeted aid spending on areas to support increasing exports may encourage higher economic growth, so it is sufficient to start translating into economic development and having an impact on the poverty rate
  • airport work supports exploiting the high value-added and comparative advantage of tourism (paragraph [4]). More employment opportunities and economic growth.

Aid in general has been very important in supporting the economy:

• 57 % of GDP and 93 % of public investments – needed for health and education spending.
• Limited access to credit (paragraph [1]), has meant that aid could be used to bridge the savings gap to help break poverty cycle.
• Nutritional needs of the people are a concern and aid could help improve this (paragraph [5]). Significant aspect to support improving human capital.
• Aid could help with setting up institutional support/good governance/transparency (paragraph [1] and paragraph [3]), to help develop trade and management of revenue from oil at the onset (paragraph [3]). This may help with the income equality as it avoids mismanagement or misappropriation of funds/revenues.
• Decrease reliance on cocoa (paragraph [3]) needs new industry, which can be supported by aid in short term (infant industry support – new export products/tourism), to help support long term diversification. Significant argument considering 80 % of exports are from cocoa (paragraph [3]).
• Aid can be used to help deal with climate change issues (paragraph [1] and paragraph [5]). Important area as it is an island and has limited resources to solve these issues.
• Cannot develop without the finance from economic growth to spend on infrastructure (paragraph [1]), human capital (paragraph [1]), health/nutrition/water issues (paragraph [5]).

Aid might not support economic development:

• Intentions – China may be promoting own export routes to Africa with deep-sea port.
• Corruption/misallocation due to poor governance (paragraph [1]), may mean that areas in need have not received the funds needed to decrease poverty.
• Changing donors may change projects and focus – Nutrition is an issue (paragraph [5]), and was being helped with Taiwan, but may not have that focus with China (paragraph [4]).
• High level of dependence with poor governance (paragraph [1]) may mean that it could be difficult to break the level of dependency or seek other methods to support economic development.
• Aid is often tied to specific projects or to spending on machines or goods from the donor country – China on deep sea port/airport (paragraph [4]).
• Aid (concessional loans) from the IMF has come with conditions – decreasing government spending (paragraph [4]), this may mean some areas involving economic development may suffer, AD decrease and lower economic growth will not help meet the 6 % needed to elevate the poverty rate (paragraph [2]).

Any reasonable discussion.

To reach level 3, students must show awareness of the ways in which aid will impact upon economic development (not simply discuss the advantages and disadvantages of aid and trade in general). This means to link the evaluation to how it will reduce poverty, increase living standards, reduce income inequalities and increase employment opportunities, improve health and education indicators.

There were few accurate definitions. Too many confused "relative poverty" with "absolute poverty".

Surprisingly few candidates gave an accurate definition of the term as few recognised that it is a long run concept, referring to a fall in ATC or costs.

Again, well answered overall. Diagrams were generally accurate and well explained. In some responses the diagram confused negative externalities of consumption and production, and on occasion there was inaccurate labelling that spoiled an otherwise good answer. It was pleasing to see that more candidates, than in the past, indicated welfare loss on their diagram. Some students lost marks by not mentioning the type of pollution mentioned in the text and the effect on third parties/society.

There was a tendency to repeat/paraphrase the text and many struggled to provide analysis linked to development. There was often too much focus on economic growth and a minimum of evaluation. The poverty cycle diagram was often drawn without reference to it in the text. PPC and AD/AS diagrams were also used, showing higher economic growth only.

Too many candidates were unclear as to the nature of aid, confusing aid with commercial loans and even a few arguing that FOi by MNCs was a form of aid. As occurs too often in (d) answers, some provided a generic response, with little reference to the text.