The very principles on which Vietnam's highly decentralized, community-based assistance and safety net system is built are threatened by the country's emerging market economy. Increasing household mobility, without which the market system cannot function, especially dictates a rethinking of the foundation of Vietnam's community-based safety net.
Under Vietnam's former command economy, lack of household mobility ensured close community and family solidarity, and households belonged to local cooperatives that provided for the welfare of their members. Developing a reliable, effective system of redistributive transfers and safety nets to replace such faltering local institutions will be important if Vietnam is to make a successful transition to a market economy.
Van de Walle uses Vietnam as a case study in rapidly assessing the strengths and weaknesses of an existing safety net when data and ex post evaluations are weak. She provides a broad qualitative assessment, identifying key issues on which knowledge must improve.
Vietnam's poverty reduction program and safety net would improve, she concludes, through a strengthening of institutional structures and policies, including:
The government's new Hunger Eradication and Poverty Reduction Program—primarily an effort to coordinate policy efforts and resources to improve the safety net's performance and cost-effectiveness—could help improve social protection by focusing on these five areas.
Increasing household mobility, without which the market system cannot function, especially dictates a rethinking of the foundation of Vietnam's community-based assistance and safety net system. Household mobility makes it difficult to target the poor and mobilize community resources to help them. Heavy decentralization inhibits Vietnam's ability to provide adequate protection from covariate risks that are rising because of environmental destruction. Addressing this problem will require more national risk pooling and overcoming likely political hurdles to a reallocation of resources to Vietnam's poor and vulnerable.
This paper—a product of Public Economics, Development Research Group—is part of a larger effort in the group to improve social protection policies. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Cynthia Bernardo, room MC2-501, telephone 202-473-1148, fax 202-522-1154, Internet address cbernardo@worldbank.org. The author may be contacted at dvandewalle@worldbank.org. (39 pages)
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