4.7 Sustainable Development Questionbank

Nepal is a landlocked country in South Asia with an estimated population of 29 million. Agriculture remains central to the economy, accounting for about 27% of gross domestic product (GDP) and employing a sizeable proportion of the workforce. However, the country also relies heavily on tourism and remittances from migrant workers abroad, which make up more than 25% of Nepal’s total GDP. Nepal has been seeking to diversify its economy through foreign direct investment (FDI) in energy, infrastructure, and services.

In 2020, Nepal’s GDP stood at US$29.3 billion. By 2021, it had increased to US$30.5 billion, partly due to post-pandemic economic recovery and continued growth in the tourism sector. Official unemployment figures in Nepal are relatively low, but underemployment remains a major issue, especially in rural areas. The country’s Gini coefficient is estimated at 0.32, indicating moderate income inequality, though rural–urban disparities still persist. Nepal’s tax system includes both direct and indirect taxes; the highest marginal rate for personal income tax is approximately 30%.

The tourism sector is vital. Trekking permits, especially for the Annapurna, Everest, and Langtang regions, represent a key source of government revenue. Due to recent changes in permit fees and fluctuations in tourism numbers, local businesses have experienced varying levels of income from trekking-related services.

Table 1: Labour market data in Nepal (2021)

Table 2: Trekking permit data for Nepal

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.

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)

Country Q, a developing economy, has been experiencing significant economic challenges over the past decade. With a GDP per capita of $4,000 and a relatively low Human Development Index (HDI), the government has been focusing on policies to improve living standards, increase economic growth, and boost international trade.

Table 1: Key Economic Indicators (2022)

Table 2: Demand and Supply Data for Wheat Market in Country Q

Table 3: Income Distribution and Tax Revenue

Figure 1: Government Expenditure Breakdown (US$ Billion)

Education: 10

Healthcare: 15

Infrastructure: 12

Welfare: 8

Other: 5

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