EJC 2023 JC2 H2 Econs Prelim P1 Suggested answers for sharing

[Turn over EUNOIA JUNIOR COLLEGE JC2 Preliminary Examination 2023 General Certificate of Education Advanced Level Higher 2 ECONOMICS Paper 1 9570/01 30 August 2023 2 hours 30 minutes Additional Materials: Answer Booklet READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. Please note that Paper 1 takes up 40% of the total score.

2 9570/01 [Turn over This document consists of 8 printed pages. Answer all questions Question 1: Developments in the maritime industry Figure 1: Global container freight rate, January 2019 to July 2022 (in U.S. dollars) Source: Statista, July 2023 Extract 1: Suez Canal set to be blocked for weeks by stranded ship The blockage of the Suez Canal is wreaking havoc in the global seaborne trade. About 12 per cent of global trade goes through The Suez Canal, which is one of the world's busiest shipping channels for oil and refined fuels, grain and other trade linking Asia and Europe. The blocking of the waterway is creating another setback for global supply chains already strained by the e-commerce boom linked to the COVID-19 pandemic. “A global shortage of con tainer capacity and low service reliability from global container shipping companies... has made supply chains highly vulnerable to even the smallest of external shocks,” analysts from Moody’s Investors Service said. On Thursday, 238 vessels were queued up. It's tough to come up with a single figure for how much the epic traffic jam in the canal is costing. The cost to ship a 40-foot container from China to Europe has climbed to about US$8,000, almost quadruple the figure a year ago. Two liquefied natural gas tankers bound for Asian markets appear to have changed course and are now making the long trip around Africa to avoid gri dlock in the Suez waterway. Hapag-Lloyd is considering sending ships along the same route. Tor m A/S, a Danish owner of tankers, said its customers have asked about the cost of options to divert. "The longer the Canal is closed, the larger the queue of vessels that will be caught up in jams and the bigger the losses for shipping and, ultimately, consumers of the goods which we transport," he said. Source: The Straits Times , 26 March 202

3 9570/01 [Turn over Extract 2: Hapag-Lloyd acquires Africa carrier NileDutch Hapag-Lloyd successfully closed the acquisition of the Dutch container shipping company Nile Dutch Investments B.V. (NileDutch) after antitrust authorities approved the transaction. “With roughly 350 employees from NileDutch joining our company, Hapag-Lloyd is noticeably increasing the number of employees on the ground in Africa”, Rolf Habben Jans en, CEO of Hapag- Lloyd, said. Hapag-Lloyd and NileDutch are aiming to integrate major parts of their businesses in the later part of 2021 to offer the full benefits of the combined network to their customers. NileDutch is one of the leading shipping companies along the West African coast. Headquartered in Rotterdam, NileDutch is present in 85 locations and has 16 offices across the w orld, including Singapore. The company brings with it 10 liner services, around 35,000 TEU (twenty-foot equivalent unit) of transport capacity, and a container fleet with a capacity of around 80,000 TEU. Source: CNBC Africa , 8 July 2021 Extract 3: Realities of nearshoring Few supply chains emerged unscathed after COVID-19 disruptions. “The globalisation of production has also made supply chains more vulnerable to disruption,” warns a 2022 U.S. Council of Economic Advisers report. The limits of geography have become evident for companies’ distribution netw orks. Moving some supplier sources closer to home offers a way of reducing risk. As business leaders in North America and Europe anticipate the future impact of trade wars, geopolitical turmoil, fac tory shutdowns, logjammed ports, and demand volatility, the appeal of nearshoring (moving sources of supply closer to HQ or end customers) has crystalised. Nearshoring can enable greater control and more frequent site visits, fewer cultural barriers, and better communication. Reductions in logistics costs and lead times c an also free up working capital that is tied up in cash outlays to suppliers and inventory in transit. Nevertheless, some companies and sectors may not have the infrastruc ture necessary to support immediate nearshoring. Industry consolidation in some sectors, such as semiconductors, means that sourcing is limited to a handful of suppliers and even fewer geographies. A report by Bank of America indicates that the total cost for U.S. and European companies to shift all export-related manufacturing not intended for Chinese consumption out of China would be $1 trillion over five years. Availability of talent is another concern. Companies have spent decades moving capabilities and knowledge offshore, and they can’t bring that back overnight. “Operations are increas ingly more automated and leverage new technologies, which requires less people but with higher specialisation in areas like AI and Internet of Things (IoT). And there’s a talent gap acros s the globe that can limit organisations on their ability to pivot at scale.” says Michel Roger, managing director in Accenture. Nearshoring is a long-term move. Making a decision based solely on the most recent supply or demand shock or current geopolitical turmoil is a bad idea. Source: Richard Howells and Stephanie Overby, SAP.com

4 9570/01 [Turn over Extract 4: Tuas Port – A smarter and greener port Defined for two centuries by its status as one of the busiest and most strategically important maritime hubs, Singapore, which sits on the trade route between Asia and Europe, is busy reinventing itself as a global centre for excellence in electronics, manufacturing, energy, chemicals and financial services. In 2019, the maritime industry accounted for 7% of Singapore’s GDP and 170,000 jobs. Upon completion, the new Tuas Port will be the world’s largest container terminal, with a total capacity of up to 65 million TEUs, compared with the combined 50 million TEUs c apacity of their five current port terminals. “The Singapore Government is investing ahead to cater for future growt h in container-handling demand to meet the needs of shipping mega-alliances. The consolidation of five te rminals into one mega-terminal will help achieve greater economies of scale, which will in turn enable container lines and cargo owners to save time and reduce operating costs” says Er Tham Wai W ah, chief engineer and senior director, Maritime and Port Authority of Singapore (MPA). Tuas Port will be an automated, intelligent, and sustainable port. To dri ve the adoption of digital technologies, MPA is developing the digitalPORT@SGTM to enhance effici ency of port operations and reduce turnaround time of ships. Within Tuas Port, automated guided ve hicles (AGVs) will be used to transport containers between the yard and the wharf. These port operations will be managed remotely from the Tuas Port Control Centre, freeing up resources while c reating more higher value and good jobs for Singaporeans. However, while efficient ports are vital to economic development, shipping has an environmental impact both in ports, as well as in the immediate vicinity of the ports. Examples are noise from ship engines and machinery used for loading an