2013 TPJC H1 Econs Answers

1   H1 Economics Tampines Junior College Preliminary Examination Suggested Answers Section A Question 1 The Rise of Singapore’s Integrated Resorts Extract 1: As Casino Begins, Watch for its Social Impacts From the inception of the idea for the first casino in 2004, it has met with much resistance among concerned citizens. Several groups, including the Muslim and Christian communities and social activists, expressed their disapproval to the casinos — a move that is both peculiar and noteworthy in apathetic Singapore society. Despite public worries over the negative social impact of casino gambling as well as opening of doors to undesirable activities including money laundering, prostitution, and organised crime, Prime Minister Lee Hsien Loong announced in April 2005: 'After weighing the matter carefully, the Cabinet has collectively concluded that we had no choice but to proceed with the (Integrated Resorts) IRs.' As a social safeguard to combat excessive gambling, the gambling levy was put in place, together with the setting up of the National Council on Problem Gambling and measures such as ‘casino exclusion’, to stop problem gamblers and those in financial difficulties from entering the casinos in Singapore. Already, the crimes are rolling in along with the chips that the casino is raking in. It is inevitable. When you want to open something like a casino, you are really opening a can of worms. Hopefully, somehow, the money the casinos make and the shot in the arm for the tourism industry will be more than enough to cover the social costs. But how high a price can society afford to pay? Adapted from www.globalissues.org, 9 March 2010 Extract 2: Sin Galore Since opening last April the Marina Bay Sands (MBS) casino has become perhaps the most profitable in the world. Together with Resorts World Sentosa (RWS), another casino complex opened in Singapore and both are close to out-grossing the entire Las Vegas strip. Singapore seems to have gone from strait-laced container port to gambling mecca in one bound. Yet no one is bragging about it. The entrance to the MBS casino is curiously hard to find, tucked away in the basement. Neither casino is advertised anywhere in Singapore. For decades Singapore's government resisted pressure to allow casinos at all, fearful of the crime and social ills they might breed. When it finally relented, it insisted that access to the casinos by Singaporeans should be controlled. Foreign tourists enter free but locals must pay a hefty S$100. Also, the casinos must be part of larger entertainment complexes.

2   MBS, which is owned by America's Las Vegas Sands, markets itself as a business and convention centre. Its 57th-floor “skypod”, which seems to balance precariously atop three curving towers, is widely admired. Its infinity “skypool” is now the go-to destination for starlets who wish to splash around in bikinis for the cameras. It also has the world's biggest ballroom and a perfectly humungous shopping centre. RWS, owned by Malaysia's Genting, projects itself as a family resort: it boasts a large Universal Studios set, as well as the obligatory fun rides. An estimated 85-90% of the resorts' takings come from gambling. And those takings are sweet: Aaron Fischer, an analyst at CLSA, a broker, estimates that the two resorts raked in about $5 billion in their first year—more than triple what some people expected. Mr Fischer predicts that this year they will take $6.5 billion. That would be close to Las Vegas but well behind Macau, the only place in China where casinos are allowed, and which has more than 30. Thanks to low corporate taxes—roughly 17% compared with Macau's 39%—Singapore's casinos are fabulously profitable. Mr Fischer reckons that RWS will earn $2 billion this year, enough to pay back the costs of building the entire 47-hectare site in little more than two years. Between April and November last year the two resorts paid S$420m in taxes. This year the island's economy is expected to grow by 6-7%, of which the resorts will account for a quarter. Source: The Economist, 24 Feb 2011 Extract 3: One year On Just one year after opening its first casino, Singapore has emerged as Asia's hottest new gambling capital with a revamped cityscape and billions of dollars pouring into the economy. "Singapore has made a dramatic entry to the casino gaming market," financial consultancy PricewaterhouseCoopers said in a report estimating the city-state's casino gaming market at US$2.8 billion (S$3.57 billion) in 2010. The first casino opened in Malaysian-controlled Resorts World Sentosa on February 14, 2010, with US-based Las Vegas Sands following two months later as the world economy was still clawing itself out of recession. Due to the casino complexes, tourist arrivals in Singapore last year hit 11.6 million, breaking by far the previous record of 10.3 million set in 2007. Most of the visitors came from the Asia-Pacific region, with mainland China, Australia, Indonesia and India together accounting for 53%. Tourist spending helped fuel Singapore's 14.7% gross domestic product (GDP) growth in 2010, making it Asia's fastest-growing economy, after a 1.3% contraction in 2009. PricewaterhouseCoopers predicted that Singapore would overtake South Korea and Australia this year to become the second-largest Asia-Pacific casino market behind traditional leader Macau. "In 2011, with a full year's operation for both resorts, we expect revenues to reach US$5.5 billion, growing to US$8.3 billion by 2014," it said. But the resorts have also created thousands of new jobs for Singaporeans, and tourists rave over non-gambling attractions like Universal Studios. "Visitor arrivals have really come in stronger and I think that's a direct spinoff from having the IRs on shore," said Barclays Capital senior regional economist Leong Wai

3   Ho. The resorts were contributing in the region of 0.3 to 0.4 percent of GDP, with the potential for that to increase to 0.7 percent in the near future. "That's only when both casinos, both IRs are up and running fully, so we're not there yet actually. Contributions to date have been significant, but I think the potential is for more to come," he said. Source: www.oneasianews.org, 13 February 2011 Table 1: Economic Indicators of Singapore 2007 2008 2009 2010 2011 2012 GDP (At Current Market Prices, S$million dollars) 268,062.2 269,658.1 274,655.3 315,921.2 334,092.7 345,560.5 GDP (At 2005 Market Prices, S$million dollars) 247,218.4 251,538.9 249,559.8 286,446.7 301,228.4 305,201.5 Population (millions) 4.58 4.84 4.99 5.08 5.18 5.31 Inflation Rate (%) 2.1 6.6 0.6 2.8 5.2 4.6 Unemployment (%) 2.1 2.2 3.0 2.2 2.0 2.0 Source: Singapore Department of Statistics, 2012 Answers a) i) Compare between the real and nominal GDP of Singapore from 2007 to 2012. Note: ‘At 2005 market prices’ refers to real GDP. ‘At current market prices’ refers to nominal GDP. Similarity: Both real GDP and nominal GDP have been facing an increasing trend from 2007 to 2012. Difference: Nominal GDP has been increasing at a faster rate compared to real GDP. OR Nominal GDP is consistently on a upward trend but real GDP faces a slight variation between 2007 to 2009 before continuing its upward trend. [2]

4   ii) Describe the trend in real GDP per capita from 2007 to 2011. [2] Real GDP per capita = Real GDP / Population 2007 2008 2009 2010 2011 Real GDP per capita 53,977.82 51,970.85 50,001.98 56,387.15 58,152.80 General Trend: Generally, real GDP per capita has been on an increasing trend from 2007 to 2011. Refinement: Real GDP per capita has been falling from 2007 to 2009 before the reversal takes place. b) How far can the concept of price elasticity of demand be used to explain the success of the operators of the Integrated Resorts in Singapore? [6] The success of the casin