REGIONAL POVERTY DISPARITY IN VIETNAM Vu Tuan Anh Socio-Economic Development Centre Hanoi, Vietnam Vietnam has 82 million inhabitants, living in different regions, which have different geographical, climate, economical and social characteristics. Economic growth, livelihood, income, living conditions and poverty of population are varried by regions. Vietnam has made cosiderable progress in poverty reduction. The poverty rate in the whole country has halved after less than ten years. However, speed of poverty reduction is still low in some regions. Identification of regional disparities of multidimensional poverty provides background for right targeting to the poor and elaboration of appropriate poverty policies in each specific region. In some last years, the Vietnamese CBMS project has co-operated with local partners in 5 provinces to conduct poverty studies. These 5 provinces are located in 5 different regions. This paper presents results of CBMS implementation in Vietnam's localities and using CBMS data for analysis of regional disparities of poverty. The main objective of the analysis is to find out the possible explanatory factors affecting the disparity. Based on results of analysis of regional disparity in poverty, some poverty alleviation policies and proposal of application of a multidimensional poverty index are recommended. This paper consists of three parts. The first part gives an overview of poverty reduction and regional poverty disparity in Vietnam. The second part examines regional disparity in multi-dimenssional aspects of poverty, basing on analysis of CBMS data. The third part suggests a regional poverty index, which might be used for regional poverty comparison. I. Economic Growth and Regional Poverty Disparity Economic growth is first and essential factor for improvement in the living standards of the population and to reduce absolute poverty. Where there is fast and stable econonomic growth, poverty is less and easierly alleviated. It is through the process of direct economic impacts on population's employment and income generation, and the process of trickle down that growth benefits percolate to the lowest strata of the society. The increased disparities in the distribution of living benefits both across social strata and between different regions, which are widely experienced in many developing countries reflect the failure of distribution policies, inappropriate social and political institutions. Regional disparity in living standard is used to be measured by difference of income, expenditure of population in different regions. It is measured also by indicators of specific aspects of welfare, such as education, health, etc. Regional disparity in poverty is measured by difference of poverty rates of regions. In the 1990s, Vietnam witnessed acceleration in the growth rate of GDP. It registered an average annual growth rate of GDP of 7.6% in the last 16 years (1990-2006). During this period, Vietnam’s population was increased 118 %, GDP grew to 322%. This caused GDP per capita to grow to 253% or 6% annually. Vietnam’s per capita GDP was US$288 in 1995, $639 in 2005, and $835 in 2007. Thank the stable economic growth, poverty rate has reduced significantly. The poverty rate measured by Vietnam Living Standard Surveys reduced continuerly from 58.1% in 1993 to 16,0% in 2006. Poverty rate in 2002 has halved, comparing to that in 1993, and poverty rate in 2006 has also halved, comparing to that in 1998. In average poverty rate halved in every 8-9 years. This means the first goal of MDGs is completed. Vietnam is considered as a successful case of poverty reduction among developing countries. Figure 1: GDP and poverty rate in 1993-2006 60 70 50 58.1 60 55 50 40 37.4 45.5 40 30 28.9 30 20 19.5 27.1 35.1 16 20 10 10 13.2 0 0 1993 1998 2002 2004 2006 GDP (bill. US$) Poverty rate (%) Sources: General Statistical Office, Vietnam Statistic Yearbooks. 2 The Human Poverty Index for developing countries (HPI-1) developed by UNDP is an indication of the standard of living in a country . It is a measure of the extent to which people in a country are not benefitting from development. While Human Development Index consists of three essential dimensions of human life: longevity, knowledge and standard of living, and assesses these components as development; HPI assesses the same three components from an opposite point of view to take into account factors that HDI does not include1. HPI of Vietnam has significantly reduced in the last decade (Table 1). Table 1: Human Poverty Index (HPI-1) of some Asian countries HPI Rank 1998 2005 1998 2005 Malaysia 14.0 8.3 18 16 Thailand 18.7 10.0 29 24 China 19.0 11.7 30 29 Vietnam 28.2 15.2 47 36 Philippines 16.1 15.3 22 37 Indonesia 27.7 18.2 46 47 India 34.6 31.3 58 62 Source: UNDP - Human Development Reports 2000, 2007/08. Despite of these successes, poverty reduction faces certain limitations and remains a major concern for Vietnamese society, namely: - Poverty reduction is still fragile, unsustainable. A large proportion of people has low income, which closed to poverty line; therefore they easily fell to poverty when natual disasters, economic crisises happen, or even when a member in their families get serious sick. The probability of falling again into poverty is still common. - The disparity in income and living standard between rural and urban areas, between different strata, between the poor and the rich provinces tends to increase. The income gap 1 Three components of HPI are following: 1) Longevity - measured by the proportion of the population not expected to survive to the age of 40 years. 2) Knowledge - measured by the adult illiteracy rate. 3) Standard of living - a composite value measured by the proportion of the population without access to clean water, health services, and the proportion of children under the age of 5 years who are underweight. 3 between the richest quintile and the poorest quintile doubled in 15 years (According to living standard survey of Vietnam's General Statistical Office, it was 4.2 in 1990 and 8.37 in 2006). The Gini index based on income indicator grew up from 0.35 in 1994 to 0.42 in 2006, while Gini index based on expenditure indicator was 0.34 in 1993, but only 0.37 in 20062. There are two opposite tendences: in one hand the poverty reduces, but in other hand the inequality increases. - Regional poverty disparity is extending despite of reduction of poverty rates in all regions of the country. This paper will study more deeply on this tendence. Regional poverty disparity is reflected through some following features. First, poverty has declined significantly in all major regions in the country, but at different rates. According to division of the General Map 1: Vietnam's 8 regions Statistical Office, there are 8 main geo-economic regions: 1. Red River Delta (11 provinces, population 18.4 mil.) 2. Northeast Mountains (11 provinces, population 9.5 mil.) 3. Northwest Mountains (4 provinces, population 2.7 mil.) 4. North Central Coat (6 provinces, population 10.7 mil.) 5. South Central Coast (6 provinces, population 7.2 mil.) 6. Central Highlands (5 provinces, population 4.9 mil.) 7. Southeast Region (8 provinces, population 14.2 mil.) 8. Mekong River Delta (13 provinces, provinces, population 17.5 mil.) Among these 8 regions, four regions Northwest, Northeast, North Central Coat and Central Highlands are less developed in term of economic level. They are uplands and most of 2 General Statistical Office, Statistics Yeabook 2007. Hanoi 2008. 4 ethnic minority population lives there. They face many constrains in development process, including a difficult physical environment, hinders access to infrastructure and low educational level of population. The poverty rate areas is still high in these regions: - The Northwest Region has though small population, but the highest poverty rate. During the 8-year period of 1998-2006, it fell by 24.4 percentage points (from 73.4% in 1998 to 49.0% in 2006). - The Northeast was the second poor region in 1998, but in 2006 it ranked at the fourth place. The poverty incidence fell by 37.0 percentage points (from 62% to 25%). - The Central Highland region was the third poor in 1998 and did not changed it's rank in 2006, despite it's poverty fell 23.8 percentage points (from 52.4% to 28.6%). - The North Central Coast was in 1998 at the fourth rank, but it became the second poor region in 2006. The poverty incidence has declined by 19 percentage points (from 48.1% to 29.1%). The rest four regions have reduced their poverty at different rates: the Red River Delta declines by 20.5% percentage points, the Mekong Delta by 26.6 percentage points, the South Central Coast by 21.9% percentage points, and the Southeast by only 6.4 percentage points, but it's original poverty rate was already low 12.2% in 1998. (Table 1) Second, as results of the different speeds of poverty reduction, there exists a big diffenrence between poverty incidences of regions and this gap is widening for the poorest regions. The gap of poverty incidence has been reduced in most of regions, except three of the above four poorest regions. Compared to the lowest poverty rate in Southeast region, the poverty difference of the Northwest incresed from 6.0 times in 1998 to 8.4 times in 2006; the North Central Coast from 3.9 to 5.0 and the Central Highlands from 4.3 to 4.9 times. In the same time, the difference of Northeast has decreased from 5.1 to 4.3.