HCI H2 ECONS P1

© Hwa Chong Institution 2015 9732 /01/A/C2 Prelim 2015 HWA CHONG INSTITUTION C2 Preliminary Examinations Higher 2 CANDIDATE NAME CT GROUP 14 CENTRE NUMBER INDEX NUMBER ECONOMICS Paper 1 Case Study Questions Additional Materials: Answer Paper 9732/01 28 August 2015 2 hours 15 minutes READ THESE INSTRUCTIONS FIRST Write your name, CT group, Centre and Index numbers clearly in the spaces at the top of this page and on every page you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid and tape. Answer all questions. Begin each question on a fresh sheet of writing paper. At the end of the examinat ion, fasten your answers to Question 1 and Question 2 separately with the two cover pages provided. The number of marks is given in brackets [ ] at the end of each question or part question. You are advised to spend several minutes reading through the questions before you begin writing your answers. You are reminded of the need for good English and clear presentation in your answers. This document consists of 8 printed pages. [Turn over

© Hwa Chong Institution 2015 9732 /01/A/C2 Prelim 2015 2 Answer all questions Question 1: Singapore Maritime Industry - Future Challenges and Prospects Table 1: Total Cargo Tonnage through Singapore, 2008-2013 2008 2009 2010 2011 2012 2013 Cargo tonnage* (in million tonnes) 515.4 472.3 503.3 531.2 538.0 560.9 Annual Change in cargo tonnage (%) 6.6 -8.4 6.6 5.5 1.3 4.3 *Note: Cargoes that are carried on shipping vessels are genera lly bulk items such as cars, machineries and furniture, and raw materials such as oil, chemicals, iron, steel and cement. Source: Maritime Port Authority, Singapore Table 2: Growth in World Gross Domestic Product (GDP), 2008-2013 2008 2009 2010 2011 2012 2013 Real GDP growth (%) 3.1 -0.7 4.9 3.7 3.0 2.9 Source: CIA World Factbook Extract 1: The melting ice cap and the Singapore port Last week, news broke that Singapore had gained admission as permanent observer into an exclusive club in the cold north, the Arctic Council. At first glance, it may seem odd for a tiny republic on the equator to be joining a council whose members ring around the North Pole and focus on issues facing their territories, especially on the melting polar ice cap. The Arctic's vast covering of sea ice has rendered it mostly inaccessible to commerce throughout the year. But that looks set to change. With the melting of the Arctic ice cap, the Northern Sea Route (NSR) is predicted to have up to 125 days per year suitable for nav igation by 2050. By some estimates, it could be as early as 2030. The new route via the North Pole can cut the time taken by ships from Europe to reach the East by almost half. It has the potential to divert Southern Sea Route (SSR) shipping traffic that has gone via the Suez Canal and the Malacca and Singapore Straits. In 2009, only 2 vessels with a combined load of about 40,000 tonnes used the NSR. In 2012, a staggering 46 vessels with a cargo load of 1.26 million tonnes sailed through the same route. This would threaten Singapore, which is one of the world's busiest ports, in time to come. However, an important consideration for shipping firms lies with the fact that global economic hotspots such as the powerhouses of the rich Arabian states, India and Southeast Asia are within the SSR. A vessel would normally have a few stopovers to offload and reload t he cargo, rather than merely commuting between two destinations. In addition, using the NSR may not be as straightforward as it seems. They would have to consider paying additional allowances for workers due to harsher climate and a higher insurance premium. Even during summer months, ice breaker ships are hired to clear the route. Source: Adapted from the Straits Times, 21 May 2013

© Hwa Chong Institution 2015 9732 /01/A/C2 Prelim 2015 3 Table 3: Selected Indicators for a Container Vessel from Rotterdam (Netherlands) to Pusan (South Korea), 2013 Northern Sea Route (NSR)* Southern Sea Route (SSR) # Distance (nautical miles) 6857 10754 Length of Journey (in days) 11 18 Fuel Consumption (ton MFO@) 2695 4410 *NSR is a new shipping lane that links the Europe and Asia Pacific via the Russian Arctic Sea. # SSR is the traditional shipping lane that links Europe and Asia Pacific via Suez Canal (Egypt), the Indian Ocean, the Straits of Malacca and the South China Sea. @Marine Fuel Oil Source: Korea Maritime Institute Extract 2: Singapore’s port losing its lustre? Since the founding of Singapore, its free port has always been instrumental in developing the country to a first world economy. In 2013, it takes up 7% of Singapore's GDP and employs more than 170,000 people. In 2010, Shanghai overtook Singapore as the world’s busiest port for containers shipping due to China's rapid economic growth, and is set to widen the gap. Indeed, if the Chinese economy continues expanding at its current pace, it is almost certain that several other Chinese ports, including Shenzhen and Guangzhou will overtake Singapore as well during the next decade or so. The Singapore port operator, PSA, likes to point out that although Shanghai's overtaking of Singapore looks impressive, it conceals the fact that the two ports are quite different in how they operate. Shanghai is overwhelmingly a “through port”, where raw materials come in to be assembled or manufactured and then leave as televisions or plastic toys. Singapore, in cont rast, is a trans-shipment port, where containers arrive to be transferred to other vessels to continue their onward voyage. Singapore’s port activities revolve around connecting oil and cargo markets to the West (Europe, Africa, Middle East, and South Asia) with that of East Asia, while China’s ports mainly serve its domestic market. In the long run, Singapore’s port should welcome its Shanghai counterpart’s growth. Some of Singapore’s trans-shipment traffic depends on China. Shipping lines are increasingly forced to explore the cheapest cost options which in turn impose downward pressure on the port charges. For instance, the attractiveness of neighbouring Johor’s Port of Tanjong Pelapas’ (PTP) port price, which is some 30% lower than that of PSA’s, becomes apparent. So far, PSA is reluctant to give way to lower price demand. To keep its nose ahead, PSA Singapore is also investing in the soft power of maritime supremacy as much as the hard power of container metal boxes. The city is becoming a centre of maritime architecture and green maritime technology to complement its lead in terms of the legal and financial aspects of maritime technology. Realising also the need to diversify, PSA has gone beyond its own shores by venturing into port management in other countries. In 2013, PSA International, the overseas arm of PSA, was involved in the management of 26 ports in 15 countries. It has consistently been voted as the top port operator in the world. Since 2006, PSA International combined overseas operations moved more containers than were handled in Singapore. The Singapore government is also set to build a new mega container terminal for PSA in Tuas by 2027 which will double the existing handling capacity. What is important is that Singapore is able to manage its port resources effectively - providing maximum connectivity at lowest possible cost. It is more important that Singapore remains a vital global hub for logistics and get these policies correct. Once that is done, shipment volumes and economic activity will follow. Source: Vari