How to End Poverty in Vietnam
Current State of Poverty in Vietnam
For decades, the world only knew about Vietnam as a war-torn country, devastated by continuous bombing, deadly militant combats, destruction of economy and loss of valuable natural and human resources. However, since 1986, with the launch of Doi Moi, a reform initiative which opened up Vietnam’s state-controlled economy and gradually developed Vietnam’s economy into a market-oriented one, Vietnam has achieved miraculous economic progresses, considerably transforming the country and allowing it to move from the rank of low-income country to low middle-income country with a GDP per capita of USD 2,111 in 2015.
Despite those achievements, poverty still remains prevalent among some population groups and regions in the country. Walking along the streets of major cities in Vietnam such as Hanoi or Ho Chi Minh City, it is easy to notice how big the income gap is when seeing people who drive around in Lamborghini, Mercedes, or BMW cars, wearing Louis Vuitton bags and Burberry clothes, eating in fine-dining restaurants, blending with beggars, street vendors who carry all of their fortune on their shoulders, making just a few dollars a day. Although according to World Bank, the poverty rate in Vietnam has dropped dramatically from 49.2% in 1992 to 3.2% in 2012, the country still faces challenges when it comes down to further alleviating poverty.
Poverty Trend (by International Standards): People Living on Less Than $1.90 a Day in Vietnam
Challenges to Poverty Reduction and Hunger Eradication in Vietnam
First, though income has risen in Vietnam over the past two decades, income growth is not distributed evenly across the population. In fact, the gap between the rich and the poor has widened more than ever before and income inequality poses a huge threat to Vietnam’s sustainable development and social and political stability. On the one hand, the Wealth Report 2015 by the London-based Knight Frank company estimated that in 2014, Vietnam had roughly 116 super-rich people, those who had assets of USD 30 million or more, and that number was expected to increase by 159% by 2030. The rise of the upper-income class is also evidenced by the jump in the consumption of luxurious goods in Vietnam. For example, in 2015, Mercedes-Benz Vietnam reported to have sold 3,600 cars, up 50% compared with the previous years, and Lexus sold 960 products in 2015, tripling the car sales in 2014. On the other hand, many people in Vietnam still lived in extreme poverty, and of 6.5 million children under 5 years old in Vietnam in 2014, approximately 1.7 million were malnourished and stunted. World Bank statistics revealed that the 10% highest-income people in Vietnam held about 30% of total national gross income, whereas the 10% lowest-income people held only 2.59% (2012).
Second, for some groups of people, the chance of getting out of chronic poverty is much dimmer. While making up less than 15% of the total population, the minority ethnicity groups accounted for roughly half of the total poor population in Vietnam. Since most of them lived in remote and mountainous areas with very limited access to modern infrastructure, education and government and international aids, the prospects seemed even more daunting. Another group that is more vulnerable is people living in rural areas prone to adverse natural disasters. These people tended to depend on low-yielding agriculture to make their living and often have large family with many children, which made it harder for them to escape poverty. Some of them try to migrate to big cities to find jobs, but due to their lack of education and related experiences, they could only find low-paying jobs with harsh working conditions and little chance of having any pay raise. Women and people with disabilities are also more likely to live below the poverty line since the social welfare system in Vietnam is still very underdeveloped.
Third, the widespread corruption and the prevailing issue of favoritism in Vietnam trapped economically-disadvantaged people perpetually in destitution. Without connection and money to bribe officials, it is almost impossible to sustain any kind of business, even such businesses as selling food on the street or opening a small street restaurant. To make the matter worse, some foreign governments and international organizations declared to withdraw financial support for Vietnam due to rampant corruption and inefficient handling of the fund.
What do you think is the best strategy to reduce poverty?
How to End Poverty in Vietnam
How to end poverty is a challenging question faced by the entire human beings for centuries, not just Vietnamese people or government. In Vietnam, as per capita income along with living standards rises, people have more resources and incentives to donate and support their fellow poor people. Many newspapers in Vietnam run a charity fund, publishing articles about people with extreme needs and collecting donations from readers. Pagodas, churches, schools and other organizations also run charitable programs to provide technical and financial aids to people in need. These compassionate acts certainly help to reduce poverty and ease the difficulties for many individuals and their families. However, long-term solution to poverty requires an appropriate combination of infrastructure development, legal framework and policies, sustainable economic development and financial support and individual empowerment through education.
Infrastructure plays an important role in driving economic growth and eliminating poverty. First, infrastructure construction and development, especially in fast-growing economy like Vietnam, is a lucrative business itself which can create jobs for tens of thousands of low-skill and high-skill workers and contribute to the country’s GDP. Second, better infrastructure allows people to have access to necessary services such as transportation, electricity, water, communication and so on. In 2014, a video published by Tuoitre News shocked not only Vietnamese people but also the world when showing how children from the mountainous Sam Lang Village in Dien Bien province had to cross the river in full flood in plastic bags to go to school. In Dak Ang and Dak Nong Communes in the Central Highlands province of Kon Tum, people, children and adults alike, had to risk their lives to go to school, workplaces and markets by sliding across a self-invented 150-meter-long cable over a river. For these people, building a bridge or another road can tremendously improve both their life expectancy and future prospects!
Using Plastic Bags to Cross the River to go to School
According to a research by Transparency International organization, corruption hits poor people the hardest. A bribe demanded by a corrupted police officer means a street vendor loses one day or even one week of profit, demanded by a teacher before allowing a child to get into school means a family loses one month of income, and demanded by local company registration office before issuing a business license means a new enterprise is off to a bad start. Moreover, many charitable programs designed to help the poor such as building new infrastructure, schools, hospitals, etc. are also susceptible to corruption, resulting in low-quality products and inferior services. Vietnam is also rife with stories about government officials embezzling money intended to help poor people, and only a small percentage of those cases are ever brought to court. In addition, corruption, unclear administrative procedures and bureaucracy also discourage foreign government, NGOs, and foreign investors to invest and provide financial support for Vietnam, thus further hamper economic growth and poverty reduction efforts in the country. Therefore, if Vietnamese government is truly committed to eradicating poverty, it needs to take measures to improve the country’s legal framework to allow more transparency.
Access to Microfinance
Most poor people, from farmers living in rural areas, small street vendors to small shop owners, need loans for working capitals, investment and consumption. However, this group of low-income people has very few choices when it comes to loan providers. According to a survey by the Diplomat among Hanoi’s poor people, the urban poor had very limited access to financial services and 73.9% of them had to take private loans from friends and family when they needed credits.
Microfinance is a powerful tool to empower the poor to improve their livelihood since it provides them with the needed capital to start and grow their business. Unfortunately, microfinance sector is still in its infantry in Vietnam with only three leading lending institutions including Vietnam Bank for Agriculture and Rural Development, the People’s Credit Fund System, and the Bank for Social Policies, microfinance programs managed by social organizations and NGOs, and some other informal providers. Additionally, currently, there is no comprehensive legal framework regulating microfinance sector in Vietnam, and some microfinance activities, especially by semi-formal and informal providers, fall outside of existing law. The lack of a legal framework limits microfinance programs’ access to funds and makes it difficult to mobilize public savings.
Despite the challenges, the Vietnamese government and microfinance organizations take the initiative to improve their microfinance services such as providing subsidized credits to targeted low-income groups, lending credit without collateral and more emphasis on savings mobilization, providing original financial products, such as emergency loans, flexible savings or insurance and so on. With more efforts and reforms in the future, Vietnam is hopeful to use microcredit schemes as a tool to help people to break out of poverty and create new livelihoods.
Access to Better Education
Education lies in the very heart of sustainable economic growth since it empowers individuals to gain valuable knowledge and skills to increase their productivity and move up the value chain. While Vietnam boasts one of the highest literacy rates of in the world, 94%, access to education is not equal to everyone. Poor children living in rural and mountainous areas are more likely to drop out of school or receive lower-quality education, and so are children of minority ethnic groups. Besides, educational reform is also a must in Vietnam since the current general curriculum is outdated and shows signs of inefficiency. Hence, Vietnamese government needs to revamp its educational system and implement policies to encourage poor children to go to school and help children in remote areas to have easier access to education.