Assignment #1

THE SETTING

Country X is blessed with large reserves of natural resources, a spectacular physical landscape and a moderate climate. It is inhabited by a well educated and industrious workforce and has a parliamentary form of democracy.

The people in the country enjoy an impressive standard of living. Some concerns have however emerged in the recent times about the current state of the economy (Annexure 1 provides select information about broad economic settings for the country). The main factors that seem to have contributed to these concerns include: excessive reliance on primary commodities; perceptible shifts in international trade patterns - from primary commodities to high value-added products and services, low business and consumer confidence, low personal savings, inadequate productive investments, large national debt, disproportionately high imports, and a global economic downturn. The future economic prospects for the country do not look promising unless some concerted measures are taken to rectify the situation.

While several such measures (let us call them ‘proposals') are presently being considered by the government, a general consensus appears to be building around two proposals - Proposal A and Proposal B. Both proposals relate to investing in the infrastructure sector. Each of these proposals is likely to cost $40bn (2011 prices). Further, the government has decided that while the money for the project will be mobilized by the government, the projects will be implemented (i.e., built and operated) by the private sector. The underlying argument in support of these investment proposals is that they will stimulate economic activity and affect economic outcome in a multiplicative manner.

These proposals have generated considerable community-wide interest. Rightly so. The investments are large and their economic and societal implications are likely to be significant too. A careful evaluation of these proposals is therefore necessary. In view of the renown of UTS MEM graduates, you have been invited to evaluate these proposals.

You, of course, accept the invitation!

Task

Your task is simply to summarize (in your own hand-writing) the results of your analysis in the answer-sheet provided separately (you would be pleasantly surprised to discover how elegantly you are still able to write!).