4.7 Sustainable Development Questionbank

Over the past decade, Iceland’s economy has experienced both rapid growth and sudden declines. Tourism surged from fewer than 1 million visitors in 2012 to over 2 million visitors in 2019. However, fishing remains one of Iceland’s most significant export sectors, accounting for around 20% of national exports. The COVID-19 pandemic and associated travel restrictions led to a sharp decrease in tourism revenues and posed challenges for Iceland’s open economy.

Although Iceland has one of the lowest levels of income inequality among OECD countries, its policymakers remain vigilant about potential inequalities. Corporate and personal income taxes help fund a comprehensive social welfare system. Indirect taxes, such as a value-added tax (VAT) of 24%, also contribute significantly to government revenue. Recent exchange rate fluctuations have influenced the competitiveness of Icelandic fish products abroad.

Table 1: Real GDP in Iceland

Table 2: Hypothetical Demand for Icelandic Cod Exports

Table 3: Income Distribution in Iceland (2020)

Figure 1 (not to scale) illustrates the growth in tourist arrivals in Iceland from 2017 to 2020:
• 2017: 2.2 million visitors
• 2018: 2.3 million visitors
• 2019: 2.0 million visitors
• 2020: 0.5 million visitors

Additionally, Iceland’s current corporate income tax rate is 20%. Personal income taxes range from 20% to 31%, depending on income brackets. VAT on goods such as tourism-related services is 11%, while it is 24% for most other goods. Policymakers in Iceland are debating how to sustain economic growth in the post-pandemic period by encouraging both a more diversified export sector and a stronger tourism industry.

Nepal is a landlocked country in South Asia with a population of approximately 29.3 million people. Agriculture remains crucial, contributing about 27% of gross domestic product (GDP). Tourism and remittance inflows (estimated at around 24% of GDP) are also major components of Nepal’s economy. Nepal’s main trading partner is India, accounting for the largest share of both exports and imports. Nepal’s government applies a 13% Value Added Tax (VAT) on many goods and services, including coffee sales in the domestic market.

Table 1: Key Macroeconomic Indicators for Nepal (2019–2021)

Table 2: Labour Market Data for Nepal (2021)

Table 3: Income Distribution (Nepal and Selected Countries)

Figure 1: Market for Nepali Coffee

• In 2021, the price of coffee in Nepal was 400 NPR/kg, and daily quantity demanded was 3000 kg.
• In 2022, the price rose to 440 NPR/kg, and daily quantity demanded fell to 2800 kg.
• The Government of Nepal imposes a 13% VAT on coffee. In 2022, total revenue from coffee sales in the domestic market was 1,232,000 NPR.

Vietnam is one of the fastest-growing economies in Southeast Asia. Over the past two decades, it has transformed from a primarily agrarian society to a bustling hub for manufacturing and high-tech industries. Despite this rapid growth, Vietnam’s economy still depends heavily on primary commodities such as coffee and rice for foreign exchange earnings. Global coffee prices, fluctuations in supply, and shifts in consumer preferences affect Vietnam’s farmers and exporters significantly.

At the same time, Vietnam has made considerable progress in reducing poverty. Yet income inequality has been gradually rising, posing new challenges for policymakers. The government is also reviewing its tax policies and infrastructure expenditure. Part of the government’s long-term strategy includes upgrading road networks to facilitate trade and encouraging domestic firms to move into higher value-added segments.

Below are several tables presenting data on Vietnam’s coffee market, its macroeconomic performance, and its tax system.

Table 1: Vietnam’s Coffee Market

• Note: 1 US dollar is approximately 24,000 Vietnamese đồng (VND) in 2022.

Table 2: Macroeconomic Indicators for Vietnam (2019–2022)

• Real GDP figures are calculated in constant 2015 US$.
• The Gini coefficient ranges from 0 (perfect equality) to 1.0 (perfect inequality).

Table 3: Vietnam’s Current Tax Rates

Recently, a domestic firm in Ho Chi Minh City purchased manufacturing equipment for 220,000 VND (the price paid, inclusive of VAT, at the standard 10% rate). Vietnam’s government has also announced major highway construction projects in the central and southern regions to improve the flow of goods and workers.

Meanwhile, economists note that an increase in the concentration of coffee exports in Vietnam’s revenue mix may expose the economy to volatility in global commodity prices. Measures to move into higher-value agricultural products, processing and branding, and improved farmer education are considered as long-term strategies to reduce reliance on primary commodities.

Ghana’s economy has experienced relatively high levels of economic growth over the past decade, largely driven by the export of primary commodities, such as cocoa and gold, and an expanding services sector. Ghana is one of the world’s largest exporters of cocoa, and cocoa alone contributes a significant share of the country’s export earnings. Despite these gains, Ghana has faced macroeconomic challenges in recent years, including rising inflation and fiscal deficits.

The government has attempted to diversify the economy away from its reliance on primary commodities, investing in infrastructure and seeking to encourage more value-added activities to boost productivity and employment. However, issues such as income inequality and limited access to finance in rural areas persist and may limit the potential for inclusive growth.

Below are some data tables about Ghana’s economy.

Table 1: Selected Macroeconomic Indicators for Ghana (2022)

Table 2: Cocoa Market Data (2022 estimates)

Table 3: Income Tax Rates in Ghana

Additional information: • The marginal propensity to consume (MPC) in Ghana is estimated at 0.8.
• Government tax revenue from cocoa exports is calculated as 10 % of the value of cocoa exported.
• The government aims to reduce inflation by tightening monetary policy and improving the efficiency of its tax collection system.

Indonesia’s Path to Economic Reform

Indonesia is undergoing a period of economic transformation, with ambitious reforms aimed at fostering long-term growth. The government has prioritized infrastructure expansion, streamlining regulations, and reducing corruption to attract investment. Additionally, tax incentives are being introduced to boost emerging industries such as transportation, telecommunications, metal production, and agricultural processing.

To fund infrastructure projects, which are projected to cost USD 22 billion, the government has reduced fuel subsidies, despite their role in making energy affordable for low-income households. While this move is expected to free up government funds, it has contributed to inflation, which has surged to 7.26%, exceeding the central bank’s target of 3–5%.

Indonesia’s economy also faces external challenges. Falling global prices of coal, gold, and palm oil, its major exports, have put downward pressure on export revenue. Meanwhile, economic growth has slowed, leading to declining consumer confidence. The Gini coefficient, which measures income inequality, has risen in recent years, reflecting concerns about income distribution.

To strengthen its economic foundation, the government is focusing on education and vocational training, aiming to reduce unemployment by upskilling its youthful workforce. Moreover, efforts to support small businesses include expanding access to micro-credit and making loans more accessible to entrepreneurs.

In response to economic pressures, Indonesia has also introduced trade protection measures, including tariffs and import restrictions, to shield domestic industries and encourage local production. However, critics argue that such policies may reduce efficiency and competitiveness in the long run.

Figure 1: Indonesian Development Statistics

Figure 2: Indonesia’s Economic Growth and Trade Statistics

Austria is a landlocked country in Central Europe with a population of approximately 9 million. It has a high-income economy, diversified across manufacturing, services, and a thriving tourism sector. During 2022, tourism alone contributed about 15% of Austria’s gross domestic product (GDP), fueled by both winter sports and year-round cultural tourism.

Austria’s real GDP growth rate moderately improved between 2019 and 2022, assisted by strong consumer demand, increasing trade with neighboring economies (most notably Germany), and an expansionary fiscal stance. Government spending on infrastructure has grown, although policy makers closely watch any inflationary pressures that could arise from such fiscal expansion.

Despite relatively low inequality levels compared to many other developed nations, Austria’s Gini coefficient has inched upward from 0.26 a decade ago to around 0.28 in 2022. Debates on whether to reform personal income tax rates or strengthen social welfare programs have gained attention.

In terms of taxation, Austria uses a progressive personal income tax system with a top marginal rate of 55%. Corporate income taxes for resident firms currently stand at 25%, although there have been proposals to reduce this rate to 22%. To stimulate the economy further, the government allocated €5 billion in 2022 toward infrastructure projects, anticipating that the Keynesian multiplier would raise overall economic activity significantly.

Table 1 below shows simplified data on the Austrian ski package market, while Tables 2–4 provide additional macroeconomic and distribution information that will be referred to in the questions.

Table 1: The Market for Austrian Ski Packages (2021–2022)

Table 2: Nominal GDP and Price Index in Austria (2019–2022)

Table 3: Selected Economic Indicators (2022)

Table 4: Income Distribution Data in Austria (2022)

Inequality in China

As China’s economy first began to use market-oriented policies in the 1970s, it was famously suggested that some citizens, particularly through hard work, “should be allowed to get rich before others”. The government still plays a dominant role in the allocation of resources and benefits, keeping most of the gains for itself and its employees. Civil servants, who are assigned government housing, have benefited more and accumulated more wealth than the private sector employees.

Income inequality is a politically sensitive issue in China and the government has not reported on it for 26 years. In 1988, the Gini coefficient was 0.38 and the next set of figures released in 2014 give a value of 0.47.

According to research by the China Reform Foundation (CRF), “hidden income” amounts to more than US$1.4 trillion, or the equivalent of Australia’s annual gross domestic product (GDP). “Hidden incomes” refer to money gained from bribery or other corrupt behaviour, for example, bribes for officials or corrupt payments for doctors.

Low-income households are stuck with an outdated tax system that fails to address the inequality issue. They carry the burden of tax payments while the rich and powerful operate largely outside the tax system. Low-income households also have difficulty accessing credit.

Although the Chinese government expenditure is high, there tends to be inadequate spending on social protection programmes relating to health and old age. The lack of social protection has resulted in a high marginal propensity to save (MPS) amongst the low-income households as they put money away to provide for future health, education and retirement needs. The high savings result in a low marginal propensity to consume at 37 % of household income (compared to an average of more than 50 % of household income in more developed-market economies). The low marginal propensity to consume and the associated high savings rate have received significant attention in domestic and international policy circles and are viewed as a key barrier to China’s continuing road to development.

Table 1: Gini Coefficient and Marginal Propensity to Consume (MPC) for Low-Income Households in China (1988-2014)

Table 2: Income, Tax Payments, and Marginal Propensity to Save (MPS) for Low and High-Income Groups in China

Dominica is a small island nation in the Eastern Caribbean, with a population of approximately 72 000 people. Known as the “Nature Isle of the Caribbean,” its economy depends heavily on ecotourism, banana exports, and foreign investment. Having experienced significant hurricane damage in recent years (notably Hurricane Maria in 2017), Dominica has been focusing on rebuilding infrastructure, encouraging sustainable agriculture, and diversifying tourism activities to boost economic resilience.

In 2021, tourism made up around 25 % of GDP while bananas continued to be a key export crop. The government has been working to modernize the banana industry by providing subsidies for more climate-resilient farming methods, hoping to maintain Dominica’s main export market in the region. However, fluctuations in global banana prices have affected farmers’ incomes.

Dominica’s tax system includes corporate tax at 25 %, a progressive personal income tax with top rates close to 35 %, and a value-added tax (VAT) of 15 % on most goods and services (some basic food items are zero-rated). Small firms often struggle with compliance, contributing to lower-than-expected government tax revenues.

Dominica’s income distribution shows moderate inequality, which the government aims to address by expanding social safety nets and creating job-training programs. Nonetheless, the authorities have considered further policy measures to make growth more inclusive and resilient.

Below are three tables containing recent data useful for understanding economic performance and key markets in Dominica.

Table 1: Macroeconomic Indicators for Dominica (2018–2021)

Table 2: Banana Market Data (2021)

Table 3: Income Distribution, Taxation, and Other Indicators (2021)

Thailand is an upper-middle-income country in Southeast Asia with a population of approximately 69.8 million. Historically, the Thai economy has relied heavily on exports, tourism, and agriculture. Tourism directly contributed around 12% of GDP in 2019; however, following global economic challenges, this contribution fell to an estimated 6% in 2020. The government forecasts economic recovery with modest improvements in various sectors including agriculture, manufacturing, and services.

Agriculture remains a key feature of Thailand’s economy, especially in rural provinces. Rice is Thailand’s most famous agricultural export, alongside rubber, sugar, and seafood products. Within Thailand, rubber has become a significant export earner, especially for the southern provinces. The government has looked for ways to diversify its economy beyond primary products and tourism, focusing on new manufacturing and digital industries.

In terms of macroeconomic indicators, Thailand experienced an average annual GDP growth of 4.2% between 2015 and 2019. Growth declined to -6.2% in 2020 due to the global pandemic, then recovered to 2.8% in 2021. Analysts predict growth of 3.5% in 2022 as industries continue to rebound.

Income inequality remains a challenge in Thailand. The Gini coefficient, while improved compared to previous decades, still indicates disparities in income distribution. Taxation remains an important tool for government revenue, largely comprised of value-added tax (VAT), corporate income tax, and personal income tax. Recently, various ministries have explored expanding progressive taxation to reduce income disparities and fund social programs.

To stimulate growth, Thailand’s government increased expenditures on infrastructure projects, particularly in transportation and digital connectivity. Economists suggest that with strong fiscal multipliers, government spending could have a multiplied effect on real GDP. However, critics argue that potential crowding out effects and inefficiencies in spending may undermine these positive impacts.

Below are several tables and figures with data related to Thailand’s economy.

TABLE 1: THAILAND’S RUBBER MARKET (2020–2021)

Note: Values are approximations. Quantity demanded refers to global demand for Thai rubber.

TABLE 2: THAILAND’S MACROECONOMIC DATA (2019–2021)

Note: The GDP Deflator (2019=100) is used for calculating real GDP.

TABLE 3: TAXATION IN THAILAND (SELECTED RATES)

TABLE 4: INCOME INEQUALITY AND GOVERNMENT SPENDING

Economists believe that every 1 US$ spent on infrastructure could lead to an additional 1.4 US$ in national income (Keynesian multiplier effect), but this remains debated among policymakers.

FIGURE 1: RICE SUPPLY AND WORLD DEMAND FOR THAI RICE (SIMPLIFIED)

    Price (US$/ton)
     |
P₁=400|------ S (Thai Rice)
     |       S
     |       S       D (World)
     |       S--------------->  Quantity
     |____________________________________

In 2021, the average price of Thai rice was US$400 per ton, while world demand remained strong despite increased competition from Vietnam and India.

Text A: The Coffee Market in Country Z

Country Z is a major producer of coffee beans, contributing significantly to its export revenues. However, due to a global oversupply of coffee, prices have fallen dramatically, impacting the incomes of local farmers. To support farmers, the government introduced a price floor above the equilibrium price. While this has stabilized farmer incomes, it has resulted in surplus production and increased government spending on storing unsold coffee.

In response to environmental concerns, Country Z has also introduced subsidies for farmers who adopt sustainable farming methods. Critics argue that while these measures aim to support farmers, they distort market efficiency and divert resources from other sectors of the economy.

Table 1: Coffee Production and Government Intervention

Text B: Regional Economic Cooperation in Country Y

Country Y recently joined a regional trade bloc that promotes free trade and economic integration. This has resulted in the removal of tariffs on agricultural and industrial goods traded within the bloc. The government hopes the trade bloc will help diversify the economy, currently reliant on exports of low-value-added agricultural products.

However, small-scale farmers in Country Y have struggled to compete with larger, more efficient producers from neighboring countries. To address this, the government is providing subsidies to small-scale farmers to improve productivity. Critics warn that the focus on agricultural subsidies may hinder the country’s transition to a more industrialized economy.

Table 2: Trade Performance in Country Y