Poverty Reduction Remains A Daunting Challenge

Former Deputy Minister Vu Khoan has been deeply concerned about the disparity between social equity and economic efficiency. If the Government focuses solely on growth and neglects equity issues, instability will ensue. However, emphasis on social welfare at the expense of growth may breed stagnation. Khoan once asked Lee Kuan Yew, a former prime minister of Singapore, for insights into this issue, but did not receive a satisfactory answer. Khoan’s concerns are backed by the economic crisis currently sweeping through Western countries. What growth recipe will be the most enticing for Vietnam, which needs to revamp its flawed development strategies urgently? This question, which Khoan has grappled with for a long time, was also the discussion theme of a seminar recently held by the National Assembly’s Economic Commission and the National Economics University.

Social matters

Dr. Pham Hong Chuong and his colleagues at the National Economics University acknowledge that striking a balance between growth and equity is easier said and done. So far, Vietnam has tried to boost growth at all costs. This tactic has engendered numerous problems. A study conducted by Chuong and his colleagues estimated the number of unemployed people in Vietnam at over 10 million, or 4.6% and 20% of the labor force in urban and rural areas respectively, which amounts to a severe waste of the country’s human resources. The battle against poverty is as daunting as ever. The percentage of poor households in Vietnam will climb to 20% under the new poverty line, up from some 11% under the previous benchmark. This figure will rise further when the world’s benchmark of $1.25 per capita per day is used, Chuong’s research team argues. The team also cites several statistics from the International Monetary Fund, which indicate that Vietnam’s gross domestic product (GDP) per capita in 2010 stood at $1,061 (adjusted for exchange rates) and $2,948 (adjusted for purchasing power parity), far below average figures both in the region and throughout the world. While Vietnam has turned into a middle-income country, there is still much room for improvement, especially sustainable growth. If the current trend remains, it will be hugely difficult for the country to catch up with China and many other regional economies. VuKhoan notes the emergence of serious problems such as people who have risen to affluence not by merits, but by dubious means. On another note, Nguyen Duc Kien, a former vice chairman of the National Assembly, highlights three consumption trends that have helped Vietnam avoid severe stagnation. First, Vietnam does not rely on imported food. Second, the Vietnamese are likely to save. Third, many rural and urban dwellers share intricate ties and can help one another when the economy is not in good shape. “Vietnam’s decent growth in this tumultuous period is underpinned partly by these attributes and is not entirely the outcome of good governance,” he says. Chuong’s research team cites another study, which shows that in Vietnam, the rich benefit much more from economic growth than the poor do. While economic growth has reduced poverty, the income gap has widened since the fruit of development is not shared equally. There is a trade-off between growth and equity, a problem arising from Vietnam’s increasing dependence on capital-intensive industries and on the exploitation of natural resources.

What the future holds

The Government continues to intervene excessively in Vietnam’s economy, which is in the nascent stage of embracing market forces. Public investment is still channeled into completing tasks that the private sector can fulfill. Many State-owned enterprises, including incompetent ones, continue to enjoy privileges and the State keeps playing the role of a ruler rather than a servant of the populace. Chuong’s research team proposes cutting public investment and providing more opportunities for private companies to flourish. Kien hopes for more accountability, so that government officials will share both gains and pains. Vo Dai Luoc, an expert, urges Vietnam to speed up institutional reforms and tap into technology and human resources to foster healthy growth. Luoc stresses the need to improve governance and the legal framework. At present, it makes little sense that land laws have been ineffective in reducing the number of disputes and investment regulations have failed to phase out inefficient use of capital. He believes Vietnam should learn from other countries, which offer many useful lessons for reform. Luoc adds that such barriers as low salaries have deterred capable individuals from working for the Government. “These obstacles make it difficult to ensure good policies and effective governance in Vietnam. It comes as no surprise that we have found many worthy goals hard to attain,” he says. These insights are scarcely new. While they have been included in an official report to the National Assembly’s Economic Commission, the extent to which they will translate into concrete action remains unclear. Chuong says that nobody has taken responsibility for problems currently plaguing Vietnam’s economy. Truong Dinh Tuyen, a former minister of trade, adds that those endowed with the power to address these issues are probably too busy to attend the seminar. (thesaigontimes.vn April 17)