Question 22N.2.SL.TZ0.1
| Date | November 2022 | Marks available | [Maximum mark: 40] | Reference code | 22N.2.SL.TZ0.1 |
| Level | SL | Paper | 2 | Time zone | TZ0 |
| Command term | Calculate, Define, Discuss, Explain, State | Question number | 1 | Adapted from | N/A |
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.
Table 1: Economic data for Bangladesh
Table 2: Development data for Bangladesh
* estimate
[Source: Text A Bossavie, Laurent; Cho, Yoonyoung; Heath, Rachel. 2019. The Effects of International Scrutiny on Manufacturing
Workers : Evidence from the Rana Plaza Collapse in Bangladesh. Policy Research Working Paper; No. 9065.
World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/32674
License: CC BY 3.0 IGO.
Text B The Daily Star, 2018. Bangladesh faces stiffest tariff in US [online] Available at: https://www.thedailystar.net/
business/bangladesh-faces-stiffest-tariff-us-1560022 [Accessed 29 September 2021]. Source adapted.
Table 1 The World Bank [online] Available at: https://databank.worldbank.org/source/world-development-indicators
[Accessed 29 September 2021].
Table 2 The World Bank [online] Available at: https://databank.worldbank.org/source/world-development-indicators
[Accessed 29 September 2021].]
Define the term absolute poverty indicated in bold in the text (Text A, paragraph [1]).
[2]
Absolute poverty was often more precisely defined than informal economy. Many candidates had some idea that activities in the informal sector were not recorded but could not provide a second meaningful point to achieve 2 marks.
Define the term informal economy indicated in bold in the text (Text A, paragraph [1]).
[2]
Using information from Table 1, calculate the unemployment rate for Bangladesh in 2019.
[2]
Unemployment Rate [1]
= 4.22% OR 0.04 [1]
An answer of 4.22% or 0.04 without working is sufficient for [1].
For full marks to be awarded, the response must provide valid working and include correct units.
The quantitative questions did not seem to pose candidates problems. A few used the total population instead of the labour force as the denominator when calculating the unemployment rate. Some incorrectly identified the change in exchange rate as an appreciation although they often could calculate (b)(ii) correctly.
Assume a shirt was made in Bangladesh and priced at 400 Bangladeshi taka (BDT400). This was equivalent to a price of US$5.75 in 2010.
Using information from Table 1, calculate the price of this shirt in US$ in 2019.
[2]
US dollar price = [1]
Price in 2019 = ($) 4.73 [1]
An answer of 4.73 without working is sufficient for [1].
For full marks to be awarded, the response must provide valid working.
Units ($) need not be provided since they are stated in the question.
State whether the Bangladeshi exchange rate depreciated or appreciated between 2010 and 2019.
[1]
(The exchange rate has) depreciated. [1]
Using a demand and supply diagram, explain why falling demand will reduce Bangladeshi firms’ revenue (Text A, paragraph [5]).
[4]
Candidates who incorrectly label diagrams can be awarded a maximum of [3].
For a demand and supply diagram, the vertical axis should be price or P. The horizontal axis should be quantity or Q. A title is not necessary.
Candidates may indicate the decrease in (total) revenue with shaded areas or numbers/letters in the diagram (e.g. a loss of total revenue of P1Q1-P2Q2 on the diagram below).
Responses often included a correctly drawn diagram with both price and quantity decreasing. However, many candidates could not be awarded full marks as they did not identify the precise area(s) for revenue — which could be done either through shading or reference in the explanation (e.g. stating P1Q1 and P2Q2 as old and new revenue areas).
Using an international trade diagram for the US market, explain how the imposition of a 15% tariff on imported garments from Bangladesh would affect the revenue earned by Bangladeshi producers (Text B, paragraph [2]).
[4]
Candidates who incorrectly label diagrams can be awarded a maximum of [3].
The use of P and Q on the axes is sufficient for an international trade diagram.
The world supply curve must be labelled Sw, or Sworld or SBangladesh, Pworld Pw or PBangladesh or any similar label indicating the horizontal line is the world (Bangadesh) price/supply. A title is not necessary.
Candidates may indicate the fall in revenue through either:
-
a reference to the revenue dropping from ABQdQs to CDQd2Qs2
OR - a reference to imports (exports) decreasing from QsQd to Qs2Qd2
Similarly, diagrams were often fully and correctly labelled but candidates often did not identify/explain the change in revenue. It seems that those candidates were treating this question as the 'common' tariff question which requires to identify the impact of the trade protection on imports. Candidates need to be reminded to clearly identify the exact demands of each question/section. They need to answer the question set rather than a question which they prepared for.
Using an exchange rate diagram, explain how the change in imports of goods and services from 2010 to 2019 is likely to have affected the exchange rate of the Bangladeshi taka (Table 1).
[4]
Candidates who incorrectly label diagrams can be awarded a maximum of [3].
For an exchange rate diagram, the vertical axis may be exchange rate, price (or P) of taka in other currencies, other currency/taka or other currency per taka. The horizontal axis should be quantity or Q or quantity of taka. A title is not necessary.
Other than the occasional mislabelling of the vertical axis and incorrect shift of curves, this question was usually well done. Some explanations were incomplete because they only stated that increased imports would shift the supply curve to the right without explaining that it is necessary to sell the BDT in order to acquire foreign currency to pay for imports.
Using a Lorenz curve diagram, explain what happened to the distribution of income in Bangladesh between 2010 and 2019 (Table 2).
[4]
Candidates who incorrectly label diagrams can be awarded a maximum of [3].
For the vertical axis, the label may be cumulative percentage of income or percentage of income (GDP and GNI are valid alternatives to income, but wealth is not acceptable). For the horizontal axis, the label may be cumulative percentage of population/people/households or percentage of population/people/households. The diagonal line need not be labelled. A title is not necessary.
The shift of the Lorenz curve can be shown by labelling each curve (e.g. ‘2010’ and ‘2019) or by an arrow.
A common reason for candidates not achieving full marks on this question was the inadequate labelling of axes. Many limited their labels to just 'income' and 'population'. A number misinterpreted the increase in the Gini coefficient as a reduction in income inequality.
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”.
[15]
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
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:
- 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.
This proved to be a challenging question for many candidates who failed to address the specific dimensions/components of SDG#8 and instead limited their response to the impact of the ready-made garments sector on economic growth and development only (no consideration for inclusive growth, sustained growth, employment and/or sustainable growth). It is possible that candidates were responding to the 'typical' discussion/evaluation question on growth and development. Candidates need to be prepared to apply concepts learnt as part of the IB course to answer questions which may be phrased or presented differently and always identify the specific demands of the question. The best answers considered the impact the sector had on at least 3 of the dimensions/components (often sustainable growth, employment and inclusiveness) mentioned in the SDG and took each of those in turn, using information from the texts and tables to support their arguments.
