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Exam (elaborations) ECS3707 - Development Economics (ECS3707) Exam Pack For OCT/NOV 2021 Exams
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Exam (elaborations) ECS3707 - Development Economics (ECS3707)
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ECS3707DEVELOPMENT ECONOMICS
PAST EXAM QUESTION PAPERS &
RESPONSES
NOV 2017 TO JUNE 2021
SPECIFIC FOR OCT/NOV 2021
EXAMS
,ECS3707 DEVELOPMENT ECONOMICS
JANUARY 2021 SUPLLEMENTARY EXAM MEMO
QUESTION 1
1.1 Speaking at the African Union Summit in Addis Ababa, Ethiopia, then UN Secretary-General Ban
Ki-moon called on the continent's leaders to boost efforts to lift millions out of poverty and end
recurrent cycles of violence to accelerate development in the region. Discuss how far South Africa
has progressed in achieving sustainable development goals. (10)
Statistics South Africa (Stats SA) launched a new online data portal to enable tracking of the
Sustainable Development Goals (SDGS) on 2 December 2019 at ISIbalo House in Pretoria. As the
country’s supplier of official statistics, Stats SA is continuously working towards finding new and
inventive ways of making data accessible to stakeholders, government and the general public.
In 2015, the 2030 Agenda for Sustainable Development was adopted by South Africa and 192 other
countries at the Sustainable Development Summit. The new agenda, entitled “Transforming Our
World: The 2030 Agenda for Sustainable Development”, was agreed upon by the 193 member states
of the United Nations, and includes 17 Sustainable Development Goals (SDGs) and 169 targets.
South Africa produced a SDG Baseline report in 2017 and a Country Report in 2019, which contain all
available indicators, using official and other statistics. The Goal Tracker platform presents the data in
these reports in a visual format.
The Goal Tracker platform will give citizens, government and policymakers a means to track progress
made towards achieving the SDGs, identify gaps and ultimately detect areas where greater action is
needed. With Goal Tracker, SDG data will be accessible and publicly available in an interactive format
for those who want or need to use it.
Goal Tracker will enable stakeholders to learn more about policies related to achieving the SDGs by
2030; give easier access to data ensuring increased transparency; and provide improved tools for
decision-making, resource allocation and enhanced collaboration between all stakeholders, national,
regional and international, and the broader SDG community.
The portal uses easy-to-understand visualisations, where large datasets are transformed into
actionable information useful for evidence-based decision-making, and ensures greater openness and
accountability around the implementation of the Global Goals and targets.
The new Goal Tracker will be kept up to date with the most recent data and SDG developments
through to the end of the 2030 Agenda.
1.2 Are the development policies of South Africa in line with those suggested by the Washington
Consensus or not? Briefly substantiate your answer. (7)
The Washington Consensus is a set of ten economic policy prescriptions considered to constitute the
"standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.-
based institutions such as the International Monetary Fund (IMF), World Bank and United States
Department of the Treasury.
The term “Washington Consensus” comes from a simple set of ten recommendations identified by
economist John Williamson in 1989: 1) fiscal discipline; 2) redirecting public expenditure; 3) tax
reform; 4) financial liberalization; 5) adoption of a single, competitive exchange rate; 6) trade
liberalization; 7) elimination of barriers to foreign direct investment; 8) privatization of state owned
enterprises; 9) deregulation of market entry and competition; and 10) secure property rights. The
reference to “consensus” meant that this list was premised on the ideas shared at the time by power
circles in Washington, including the US Congress and Administration, on the one hand, and
international institutions such as the Washington-based IMF and the World Bank, on the other,
supported by a range of think tanks and influential economists.
,Washington Consensus policies were applied for more than two decades in such diverse contexts as
Africa, Latin America and Asia, as well as in countries emerging from real socialism in Eastern Europe
and Central Asia. There were usually two major stages of intervention: the first focused on
macroeconomic stability and structural adjustment programs, and the second included such
objectives as improving institutions, reducing corruption or dealing with infrastructure inefficiency
(Naim, 1999). The conditionality exercised by the Bretton Woods institutions and wealthy countries
played a crucial role in indebted countries’ decisions to push through macroeconomic stabilization
reforms and structural adjustment programs. The debt crisis that first affected a number of Latin
American countries and then African and Asian countries, in the 1970s and 1980s, further increased
their dependence on external loans, leaving them no other option than to follow the prescriptions
that enabled them to access financing.
Therefore it can be concluded that South Africa is in line with the Washington consensus
1.3 Compare the Republic of the Congo (DRC) and South Africa's per capita income over the past
ten years and propose an economic view of the possible causes of the disparity. (8)
With a surface area equivalent to that of Western Europe, the Democratic Republic of Congo (DRC) is
the largest country in Sub-Saharan Africa. While its poverty rate has fallen slightly over the past two
decades, particularly in rural areas, the DRC nonetheless remains one of the poorest countries in the
world. In 2018, 72% of the population, especially in the North West and Kasaï regions, was living in
extreme poverty on less than $1.90 a day.
The DRC is still recovering from a series of conflicts that broke out in the 1990s. After several
postponements of the presidential elections, Félix Antoine Tshisekedi Tshilombo the son of Etienne
Tshisekedi, the country’s longstanding opposition leader won the December 2018 election,
succeeding Joseph Kabila who had been at the country’s helm for 18 years.
After reaching 5.8% in 2018, economic growth slowed to 4.4% in 2019, owing to the drop in
commodity prices, particularly for cobalt and copper, which account for over 80% of the country’s
exports.
The coronavirus pandemic (COVID-19) is expected to trigger an economic recession (-2.2%) in 2020,
stemming from weaker exports caused by the global economic downturn. However, the gradual
recovery of global economic activity and the start of production at the Kamoa-Kakula mine should
pave the way for a rebound in economic growth to 4.5% in 2022.
Higher spending and revenue stagnation widened the fiscal deficit from close to balance in 2018 to a
deficit of 2% of GDP in 2019. Additional public expenditures covered mainly civil service salary
increases, free basic education, and infrastructure projects. Declining tax revenues are attributable in
part to low corporate income tax collection, especially in the mining sector.
The latest sustainability estimates show that the debt risk remains moderate. However, fairly weak
revenues are limiting the government’s flexibility to implement fiscal policies aimed at tackling the
COVID-19 pandemic.
The current account deficit widened to 4.2% of GDP in 2019 (against 3.6% of GDP in 2018), owing to
the deterioration in the terms of trade and lower export volumes. Capital inflows and other financial
flows in 2019, including foreign direct investments (FDI), have helped protect official reserves, limit
the depreciation of the Congolese franc, and curb inflation.
Although the DRC initiated reforms aimed at strengthening governance in the management of natural
resources and improving the business climate, the country is ranked 184 out of 190 countries in the
Doing Business 2019 report on business regulations and must address a host of challenges if it hopes
to attract investors in key sectors.
, QUESTION 2
2.1 Explain and discuss the emergence of industrial districts and clusters in China. (5)
Industrial clusters are widely discussed in the literature. This notion is really widespread in industrial
organization, but sometimes it is not properly used, referring also to other industrial policy tools.
Clusters supporting policies in China cannot be easily distinguished from more general SMEs
supporting tools. In fact, many the most common cluster policies, such as the supply of services,
consultancy and training to firms, the improvement of SMEs specialization and cooperation, the
technological upgrade and the approach to the international market, are summed up in the law on
SMEs stated in the 2002.
Nonetheless, these tools are also combined to other ones with a definitely deeper economic and
social impact, such as urban planning and direct creation of industrial development conditions. For
this reason, it is important to clearly state what an industrial cluster is, particularly coping with a case
study like China. In fact, local industrial agglomerations are still frequently adopted as development
tools in China more than in other Developing Countries, driving growth in wide areas. In this
framework, attention has to be paid mainly to the distinction between special economic zones (SEZs),
science parks and industrial clusters.
SEZs are defined as geographically delimited areas “with a single management or administration and a
separate customs area (often duty free), where streamlined business procedures are applied and
where firms physically located within the zone are eligible for certain benefits”. These benefits are
essentially fiscal and financial, but usually firms have also access to better infrastructure and services
and also laws and regulations use to be more market friendly. These differences were higher
especially at the beginning of the Chinese reform process. Today, instead, differences are much lower
as demonstrated by the fact that foreign firms often prefer not to invest or to invest less in SEZs than
in other areas of the country. In China, SEZs generally refer to some specific areas as Shenzhen,
Zhuhai, Shantou, Xiamen, Hainan, Shanghai Pudong New Area, and Tianjin Binhai New Area.
2.2 Critically discuss the possible impact of economic growth on the incidence of poverty. (5)
Economic growth reduces poverty because growth has little impact on income inequality. In the data
set income inequality rises on average less than 1.0 percent a year. Since income distributions are
relatively stable over time, economic growth tends to raise incomes for all members of society,
including the poor.
Strong economic growth therefore advances human development, which, in turn, promotes economic
growth.The extent to which growth reduces poverty depends on the degree to which the poor
participate in the growth process and share in its proceeds. Thus, both the pace and pattern of
growth matter for reducing poverty.
2.3 The debate on whether a high population is good or bad for economic growth and development
is still not resolved. Discuss the consensus reached on the issue of population growth that can be
used for policy formulation. (15)
Unsustainable population growth and lack of access to reproductive health care also puts pressure on
human communities, exacerbating food and water shortages, reducing resilience in the face of
climate change, and making it harder for the most vulnerable communities to rise out of
intergenerational poverty.
The Malthusian Theory of Population is the theory of exponential population and arithmetic food
supply growth. The theory was proposed by Thomas Robert Malthus. He believed that a balance
between population growth and food supply can be established through preventive and positive
checks.
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