Poverty Reduction in Vietnam: Remarkable Progress, Emerging Challenges

January 24, 2013

Vietnam's poverty rate has fallen from nearly 60 percent to 20 percent in the past two decades, but challenges remain. Let's follow a story of two brothers born in a poor family, one living in the mountainous area, one migrating to the city, to respond to the question: What will it take to end poverty in Vietnam?

World Bank Group

  • The poverty headcount in Vietnam fell from nearly 60 percent to 20.7 percent in the past 20 years.
  • However, macro instability, external shocks and inequality have created new challenges
  • It is critical to make growth more inclusive, by expanding investments in rural areas, in manufacturing and small and medium enterprises.

Thanh Thi Thach, 41, a farmer in Tra Vinh Province in southern Vietnam remembers how her family only used to harvest one crop per year. The lack of water for irrigation and electricity prevented them from growing more crops.

“Life was very hard back then,” Thach said. “Now the productivity has been raised, thanks to new varieties and state-funded canals, which enable us to grow two or three crops of rice per year.”

Thach is among an estimated 30 million Vietnamese people who have been lifted out of poverty in the past 20 years.

The poverty headcount in Vietnam fell from nearly 60 percent in the early 1990s to 20.7(*) percent in 2010, according to a new World Bank report titled "Well Begun, Not Yet Done:  Vietnam’s Remarkable Progress on Poverty Reduction and the Emerging Challenges".

The country has also made remarkable progress in education. Primary and secondary enrollments for the poor have reached more than 90 percent and 70 percent respectively.

Thach has never been to school, but she hopes that her grandchildren will finish high school and get better jobs with sustainable incomes.

“More knowledge, higher pay,” she expressed.

Rising levels of education and diversification into off-farm activities, such as working in construction sites, factories or domestic housework have also contributed to reducing poverty in the country.

“These achievements are very impressive,” said Valerie Kozel, Senior Economist for the World Bank and lead author of the newly released report. “But growth has slowed in recent years due to macro instability and external shocks, inequality is rising, and ethnic minority poverty remains persistently high. The remaining poor are harder to reach; they face difficult challenges—of isolation, limited assets, low levels of education, poor health conditions.”

The report emphasizes that the prevailing poverty of the ethnic minority in the country is of particular concern. Although Vietnam’s 53 ethnic minority groups make up less than 15 percent of the population, they accounted for nearly 50 percent of the poor in 2010. Most minorities continue to reside in more isolated and less productive upland regions of Vietnam.

" Life was very hard back then. Now the productivity has been raised, thanks to new varieties and state-funded canals, which enable us to grow two or three crops of rice per year. "

Thach Thi Thanh

A farmer in Tra Vinh Pronvince, Vietnam

Rapid economic transformation and growth have meanwhile contributed to rising inequality in income and opportunities. Some of the poor, especially those living in rural areas or small cities, have limited access to high quality education and health services, or to good jobs.

With the rapid pace of urbanization, the urban poor also pose a new challenge in Vietnam, according to the report. A growing number of workers from rural areas are migrating to the cities to work in private industry and services, and many of these jobs are informal and lack employment benefits such as health insurance and pension.

“In the coming years, poverty reduction in Vietnam will be more challenging, requiring more efforts from the government, the society, and the poor themselves,” Huong Thi Lan Nguyen, Director General of the Institute of Labor, Science and Social Affairs, Ministry of Labor, Invalids and Social Affairs. 

 “Vietnam needs to move forward in a number of important areas,” said Kozel. “Growth has been the main driver of poverty reduction and Vietnam needs to take measures to promote macroeconomic stability, reduce inflation, and ensure growth is sustainable in the future.” 

The World Bank senior economist added that it is critical to make growth more inclusive, by expanding investments in rural areas and promoting higher productivity in agriculture, supporting labor-intensive manufacturing and small and medium enterprises. She also noted the need to make sure that workers have the knowledge and skills to move to new regions and new industries when jobs become available.

Vietnam should also improve its poverty reduction and social protection programs so that more poor households will benefit from them. For now, only 50 percent of the poorest households are eligible to receive benefits from the government’s poverty reduction program, and the level of benefits received is generally very low. 

(*) A new poverty line was estimated for 2010 by the General Statistical Office and World Bank that better reflects living conditions of the poor. Based on the new poverty line (equal to VND 653,000/person/month or $2.25/person/day, PPP 2005) and updated monitoring system, the national poverty rate in 2010 is 20.7 percent vs. an official poverty rate of 14.2 percent in 2010 using official MOLISA urban and rural poverty lines of VND 500,000/person/month and VND 400,000/person/month, respectively.