With only five years to go before the Millennium Development Goals (MDG) deadline of 2015, Vietnam is well positioned to meet the first of these goals: eradicating extreme poverty and hunger. Recent estimates place the incidence of consumption-based poverty in Vietnam at around 14 per cent of the total population, down from 58.1 per cent in the early 1990s. The proportion of Vietnamese people living on less that $1 per day in PPP terms fell from 39.9 to 4.9 per cent between 1993 and 2006, whilst income inequality, as measured by the GINI coefficient, has only slightly increased from 0.34 in 1993 to 0.36 in 2006.

The challenge for Vietnam now lies in consolidating these poverty reduction gains, and making them permanent. As the Vietnamese economy is about to enter the group of middle-income countries, two aspects emerge as being of particular importance: first, ensuring that people who have come out of poverty in recent years do not fall back into it, and second, improving living conditions in those communities where poverty has become a chronic problem, namely within ethnic minority communities and in remote mountainous regions.

International experience from countries such as Indonesia, the Philippines and Argentina shows that poverty reduction achieved over many decades can be easily negated in a short period of time when a large share of the non-poor live just above the poverty line. These people are typically referred to as the “near poor” or “working poor” and are often found living in and around urban areas, earning wage incomes and working in the services, light manufacturing and informal sectors. Women and children are disproportionately represented in this group. For these people, a rapid change in macroeconomic or sectoral conditions or simply a sudden change in personal or family circumstances (e.g. due to sickness or disability or other shocks) can easily plunge them back into poverty.

Although there is no precise definition for this poverty category, the little robust data that exists suggests that the number of Vietnamese men and women that can be considered as being near poor is significant.

Furthermore, the number of people living on $2 or less per day in PPP terms has fallen at a much slower rate than extreme poverty levels, and still accounted in 2006 for a sizeable 48.4 per cent of the total population.

Non-income measures of poverty aimed at capturing other dimensions of human deprivation, including access to social services in health in education, such as the multidimensional Child Poverty Rate (CPR), also suggest there are large pockets on the Vietnamese population that, whilst not poor in monetary terms, do suffer from considerable deprivation and lack access to basic services. In the case of children, it is estimated that one in three Vietnamese children are multi-dimensionally poor, which can have lifelong impacts and perpetuate the intergenerational cycle of poverty.

At a macroeconomic level, it is critical to keep inflation and, especially, food prices, under control, to stop it from eroding real income earnings. The inflation surge that hit Vietnam in 2008 has left general price levels almost 30 per cent higher than they were in early 2008, with food prices 53.5 per cent higher than in 2008.

Whilst incomes, including wage incomes, have also increased, they have not done so at the same pace. For instance, the minimum wage set by the government for the private sector, which is the wage of reference for up to 9.5 million Vietnamese workers, many of them working poor, has only increased by around 20 per cent since early 2008, from VND540,000 to VND650,000. In the longer term, it is important to ensure an adequate supply and low cost of wage-goods, such as food, housing, public transportation and basic utilities.

Another area in which considerable gains can be made is the informal sector, where many of the near poor make a living. In Vietnam, non-agricultural informal activities are estimated to employ around 23 per cent of the workforce. Up to 60 per cent of people working in the informal sector lack any form of contract, and less than 1 per cent benefits from social security. This leaves informal workers especially vulnerable to external shocks. Women make up the majority of workers in the temporary, low-skilled and informal sectors, hence, it is women who are most vulnerable to such shocks and, as a corollary, their children. Efforts to reduce the level of informalisation of the Vietnamese economy are necessary in order to contribute to improving the living conditions of this group of workers and their families.

Raising the general living conditions of the near poor will also require increasing their income earnings, for instance by providing them with better paid jobs or with more profitable and productive income generating opportunities. Whilst considerable progress has been made in increasing education achievements at primary and secondary levels, there is still scope for improvements in higher education and technical and vocational training. Even in primary and secondary education, there are still major shortfalls in terms of enrolment, retention and completion rates amongst ethnic minority girls and boys, and those living in remote mountainous areas, and concerns remain about the quality of education.

As Vietnam finalises its national Social Protection Strategy, it is critical to consider extending social protection systems in order to protect the poor and near-poor from the risk of (further) impoverishment. Investing in social protection is thus essential not only to support progress towards many of the MDGs but also to reduce the vulnerability of the poor to both global and local shocks.  

In order to extend social security coverage, flexibility is needed in terms of accessing social security, for example by waiving registration requirements to allow access for migrants in urban areas and progressively eliminating “socialisation” fees with regards to health and education. At the same time, it is equally urgent to increase the coverage of social services such as health, water and education, which presently are significantly under-represented in rural and remote mountainous areas. 

In remote mountainous areas, in some ethnic minority communities, there are significantly higher poverty rates, malnutrition rates, and mortality rates for women and children - and this has remained the case for decades despite poverty reduction efforts. The poverty rate for ethnic minorities was 49.8 per cent in 2008, compared to 8.5 per cent for the Kinh/Hoa. The proportion of under-five children who were severely stunted in the northwest region in 2006 was 55 per cent, compared to the national average of 36 per cent. Maternal mortality rates are almost four times higher in remote mountainous areas compared to the national average.

Thus, while the country has achieved remarkable success with its poverty reduction efforts overall, there is a group of entrenched poor who have not seen any significant improvement in their living standards. Now, as Vietnam moves into middle-income status, innovative, even courageous, efforts are needed to eliminate this kind of poverty.

New approaches are needed to understand and measure poverty. Expanding the understanding of poverty to include looking at deprivation in different areas, such as health, education, shelter, water, and social inclusion will allow a more complete picture of poverty to emerge in these regions, and will also help the identification of the most appropriate policy responses across these areas. Such an approach will necessitate multi-sectoral responses across all agencies of government and will thus require stronger coordination.

With regard to poverty amongst ethnic minority groups, there is a need to shift the paradigm from “poverty reduction” to “ethnic minority development”. The former assumes that the problem is primarily poverty, and its reduction. The latter focuses on supporting the social and economic well-being, including livelihoods, of ethnic minority communities in a more comprehensive way. Such a shift in approach gives rise to more locally-driven and -owned strategies for socio-economic development.