POVERTY REDUCTION IN VIET NAM: DISHARMONIES BEHIND THE IMPRESSIVE ACHIEVEMENTS By

The economy of Viet Nam is considered in two versions. First, in the simple presentation, the households are all pooled together and only monetary values are considered. In such a presentation, Viet Nam’s economic growth and the progress in poverty reduction since 1993 is really impressive. After twelve years, poverty incidence cut down by nearly two thirds, while the inequality, measured by GINI coefficient, changed only slightly. Secondly, when new dimensions of household characteristics such as regional, rural/urban, and ethnic are added in an extended version, however, we see some cause for concern. That is the systematic correlation between the division into the poor/non-poor and those in regional, rural versus urban, and ethnic dimensions. Working with household panel data from the surveys in 2002 and 2004, we study the characterization of the poor and varieties of gaps. Among the findings, the rates of returns on the education of the ethnic minorities are estimated to be lower than that to the Kinh/Chinese majority. The latter group, in addition, more successfully takes the advantage of roads to commune centers. These differences may be factors that hold on the ethnic gap, unless remedying measures to be taken decisively. The poor/non-poor division, if strongly correlated with the geographical and cultural divisions, can foster isolation and deepen the gaps between population groups. Ethnic gap in poverty can lead to social and political instability and market can’t prevent it from happening. The government should mobilize substantial resources for the poor communes to ensure an inclusive development